Oneida Bank v. Ontario Bank

The counsel for the defendant insisted, in the court below, and he has also claimed in this

It seems, that he kept a continuous account at the-bank, which ivas good, on each occasion when he drew his checks, for the sums of money represented in the several drafts; for each check, which,when ^'charged to him, transferred so much of his funds to the bank, he received a draft. The transactions, certainly, had all the forms of a loan, there being, on the one side, an actual advance of money, and, on the other, the issuing-of a post-dated security therefor. I think, also, that the supremo court, in making its record of the facts, intended to be understood as saying that these dealings were loans from Perry to the defendant, not in form, merely, but according to the actual meaning' of the parties. The language of the record is explicit, that the plaintiff discounted the drafts for Perry, and loaned to. him the funds parted with, and did not loan the same, or any part thereof, to the defendant, for its use or benefit. Finding no room for any other interpretation of the statement, I shall assume, that the drafts in question were issued by the defendant’s bank, in consideration of an-

Proceeding now to the questions of law which arise in the case, upon this understanding of the facts, it is claimed, ■on the part of the defendant, that the drafts were illegal and void, because they were issued in violation of the .statute of 1840 against time-bills and notes, Avliich declares, that “ no banking association or individual banker, ¡as such, shall issue, or put in circulation, any bill or note ■of such association or individual banker, uidess the same .shall be made payable on demand, and Avitliout interest.” ■(Stat. of 1840, p. 306, § 4.) In an opinion Avliich I prepared" upon this case, after the first argument, during the last year, I came to the conclusion, for Avliich my reasons Avere stated at some length, that a post-dated draft taking effect by delivery, Avas a time-draft, and avus Avithin the intent and policy of the prohibition declared by this ¡statute. I am still of that opinion; but avo do not pass upon the question, because the result of the present controversy does not depend upon the correctness or. incorrectness of that conclusion.

Assuming that these drafts do fall within the prohibition of that statute, it is next contended, that they arc, for that reason, null and void, so that no holder, having, as *^le P^11^ inust *have had, notice of their true character, can maintain an action upon them. For all the purposes of the case, the soundness of this position Avill also be assumed, upon the direct authority of Leavitt v. Palmer ( 3 N. Y. 19 ), decided in this court. If the question Avere now a new one, I should entertain the opinion, certainly Avith diffidence, that the decision here referred to AVent far beyond the intention of the legislature. After the prohibitory Avords of the statute above quoted, the same section proceeds to declare, that •“ every violation-of this section, by any officer or member ■of a banking association, or by any individual banker,

There is, no doubt, a principle of common law, that illegal and prohibited contracts are void, without being so.expressly declared by any statute. But there is also another principle, equally well ascertained, and more beneficent in its results, that no party shall set up his own illegality or wrong, to the prejudice of an innocent person. He can set it up, when the legislative power not only forbids to make the contract, but declares it to be void; but the logic of the law, and certainly its morality, are not opposed to the doctrine, that the legislature may prohibit the contract and punish the guilty parties, and yet leave the contract to stand, in favor of innocent persons not included in the terms of the prohibition. This, I think, is a just result from the decision of this court in Tracy v. Tallmadge ( 14 N. Y. 162 ), and of the principles which underlie that decision.

In regard to the statute now in question, reading the whole of the prohibitory section, it seems to me, the intention of the legislature was, to forbid bankers, and officers and members of banking associations, to issue contracts of a certain description, and to punish them, if they violated the law, but not to enable them to take advantage of their own wrong, by repudiating their own obligations. There is no present occasion to pursue this subject further, because, in the view which we take of the questions jmt to be considered, the plaintiff’s rights do not necessarily depend on the validity of the drafts.

*1 proceed, therefore, next, to observe, that party dealing with one of these banks, and taking from it a security which the statute prohibits, can reject the security, if it be regarded as void, and recover the money or value which he advanced on receiving it. The general principles' involved in this proposition, have been more than once carefully considered in this court,

We are of opinion, that the case, in this respect, is indistinguishable from those refered ’to, and we consequently come to the conclusion, that if the

I think, the result may be reached, even by the most technical rules of reasoning. If the drafts had been valid, the plaintiff, as the indorsee, could declare or complain, on the money counts, against the defendant, as the drawer; the instruments would, of themselves, be evidence of money had and received by the drawer to the use of the indorsee. ( 17 Wend. 206 ; 16 Id. 659; 6 N. Y. 19 ; 1 Denio 105 .) Now, although they are void, because

*The question we are considering was, in effect, determined by this court in Tracy v. Tallmadge ( 14 N. Y. 192 ). In that case, the Morris Canal and Banking Company had received from one of these banking associations, post-notes, which were assumed to be void under the restraining laws, or some other statute of this state. The Morris Company then entered into a written agreement with the State of Indiana to transfer to that State those notes, to the amount of $196,000, and the transfer was made accordingly. The consideration on which the notes had been issued was certain -state stocks which the Morris Company had sold to the bank-' ing association; and one of the questions in the case was, whether Indiana was entitled to recover that consideration, the notes being considered void. There was no pretence that, in point of form, anything except the notes h id been transferred to the State; yet it was held by this court, and no doubt on the subject was then entertained, that the State became in equity the assignee of the- demand which the notes professed to represent, and, therefore, was entitled to recover the value of the stocks.

By way of answer to that authority, and to the principle of equit3r which it suggests, it has been said, that the proceeding there was strictly in equity, while this is a mere action at law. The reply to this is plain; remedies are not now embarrassed by any such distinction. Those who have read the Code of Procedure need not be informed, that the .old distinctions between suits at law and

conclude, therefore, that the plaintiff became the assignee of the right, which it has been shown Perry had, to demand and recover from the defendant the sums loaned by him, unless the objection next to be considered stands in the way of that conclnsion.

The drafts were payable in less than sixty-three days from the time when the plaintiff discounted them, that is ■to say, they were dated some thirty days forward of that 'time, and they were payable Avhen the day of their respective date should arrive; the plaintiff, in discounting them, deducted interest at the rate of seven per cent, per annum. The plaintiff is a banking corporation, subject to the provisions of the so-called “ Safety Fund Act” (Lravs of 1829, c. 94), the 33d section of Avhich declares, that, “on all bills or notes discounted or received in the ordinary course of business, Avhich shall become mature in sixty-three days from the time of such discount, the said moneyed corporations shall not take or receive more than at and after the rate of six per cent, per annum in adAumce.” This statute Avould seem to have been violated by the plaintiffs in the discount of these drafts.

But Ave do not see, in this feature of the case, any valid objection Avhich the defendant can take; and as- this point Avas scarcely insisted upon at the argument, in the vieiv of the case which Ave have so far taken, but little

In reference to the statute under consideration, it is a restriction upon banks, designed for the protection and benefit of those who borrow money or receive discounts from them. The defendants are not in that relation to the plaintiff; they became indebted to Perry, and they still owe that debt. They certainly have nothing to do

According to the principles we have bid down, the plaintiff is entitled to recover as the assignee and owner of the demand which Perry had for the moneys advanced by him to the defendant. Viewing the case in this light, the next position of the defendant’s counsel is, that no such cause of action was set forth in the complaint, or litigated at the trial, or considered by the supremo court. These objections will now be examined. The complaint is upon the drafts, and also for money lent and advanced by the plaintiff to the defendant. In setting forth the cause of action oiv.the drafts, they are averred to have been made on the days when they appear to bear date, and to have been then indorsed and negotiated by Perry to the plaintiff; those averments are followed by the usual statement of the presentment of the drafts, their non-payment, and notice thereof. The answer specifically denies the allegations of the complaint; it then proceeds *° aver that Lynch, the cashier, *made the drafts mentioned in the complaint, without authority from the defendant, and without any consideration received by the defendant. In this connection, it is denied, in substance, that the plaintiff is a bond fide holder. For a still further defence, it is stated, that the defendant is a banking corporation; that Lynch, the cashier, confederated with Perry to violate the laws against the issue of time bills and notes; that, with this intent, the drafts in the complaint set forth were made, before their respective dates, and delivered to Perry, without any consideration received from him, and that Perry indorsed them to the plaintiff; and that the plaintiff, in furtherance of the same illegal design, advanced the money upon them, receiving in advance the interest which would accrue before the times Avhen they severally boar date. In respect to the cause of action for money loaned, it is answered

It is true, that the complaint does not, in terms, say that Perry lent or advanced money, but it does set forth the issuing- and delivery to him of certain drafts. That fact being taken to be true, as stated, it is a legal presumption, that the consideration was money. It would not affect the remedy, if, in point of fact, there was some other sufficient consideration; for remedial purposes, the presumption is conclusive. ( 6 N. Y. 19 ; 16 Wend 659 ; 1 Denio 107 .) It is also true, that the complaint has no averment that the plaintiff became the assignee of the consideration on which the drafts were based; but it does state that the plaintiff became the indorsee and holder; and we have shown, in the preceding discussion, that the indorsement and sale of the drafts ivas, in effect, -an assignment of whatever debt or demand they were intended to be the evidence of. Undoubtedly, it would have been a more precise description of the actual case, if the averments had been, that Perry lent money to the defendant and received therefor certain post-dated drafts, which were worthless and void; that he "::"afforwards sold and indorsed the drafts to the plaintiff for full value, and thereby made an assignment of the consideration on which they were founded. The pleader ■doubtless preferred not to concede the invalidity of the instruments, and therefore, he made a more general statement of the case. His theory of the law may have been quite different from ours; but in all fundamental respects, the facts of the case were truly averred.

It i i impossible to say, that the cause of action alleged was “ unproved in its entire scope and meaning.” (Code § 171.) At the trial, it appeared, that the drafts

But, if it be conceded, that our theory of the case might have been resisted at the trial, on the ground that the pleadings did not- present it, then the further difficulty to be now overcome is, that no such position was taken. On the contrary, it appears, that no question whatever was raised upon the sufficiency or insufficiency of the complaint to cover the whole ground of the litigation. At the close of the evidence, it "was conceded, that there "was no question of fact, and a verdict was taken for the plaintiff, subject to the opinion of the court on a case. Such was the course of the trial, and the meaning of it ■was, that the supreme court were to give judgment on the verdict, or else for the defendant, as the law should require upon the facts as proved.^ By this course, which was taken by consent, questions of mere form and varience were "waived, and the supreme court were asked to declare the law, as they should adjudge it *to be, upon a statement of tho controversy to be made for their consideration. If, upon that statement, the plaintiff was entitled to a judgment on the verdict, it could not rightfully be refused, on the ground that the complaint in the case did not allege all the facts necessary to such

It may well be. true, as we were told on the argument, that the plaintiff's counsel, both at the trial and in the supreme court, failed to urge the particular reasons which, we think, .entitled the plaintiff to recover. There is nothing in the record to show that such was the fact, and there is no law or rule of practice which required the points on either side to be stated. Nor is it material, whether the case was well presented to the court below, in the arguments addressed to it. It was the duty of the judges to ascertain and declare the whole law upon the undisputed facts spread before them; and it is our duty now, to give- such a judgment as they ought to have given. The amount due to the plaintiff, according to the principles of this Opinion, was correctly ascertained by the verdict of the jury; and we think that, upon the facts proved and contained in the statement returned upon this appeal, judgment should have been given accordingly.

The judgment appealed from must, therefore, be reversed, and final judgment for the plaintiff, according to the verdict, must be rendered.

Judgment accordingly.

Denio, J., dissented.