Rosenback v. Manufacturers & Builders' Bank — 17 N.Y. Sup. Ct. 148

Majority

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SAMUEL ROSENBACK v. THE MANUFACTURERS AND BUILDERS’ BANK.

Headnote

Deposits made by savings banks — preference in payment of, given by § 48, chajp. 871 of 1875 — Receiver cf bank — when estopped, from, questioning acts of officer's of.

Section 48 of chapter 371 of 1875, providing that all the assets of any insolvent bank shall, after the payment of its circulating notes, be applied to the payment of any moneys deposited with it by any savings corporation, applies only to deposits, properly so called, and not to any other form of indebtedness.

The receiver of an insolvent savings bank applied, under said section, for an order directing the receiver of the M. and B. Bank to pay over a sum of money, the amount of a call loan alleged to have been made by the unauthorized acts of the officers of the savings bank in converting a deposit for that amount into a loan to the M. and B. Bank. Held, that as the savings bank had received collateral security for the loan, and payments on account of the principal and interest thereof from theM. and B. Bank, the receiver could not now repudiate the whole transaction and treat the loan as a deposit within the meaning of said section.

Appeal from an order made at the Special Term denying an application made by the receiver of the German Up-town Savings Bank, under section 48 of chapter 371 of 1875, to compel the receiver of the Manufacturers and Builders’ Bank to pay over to him the sum of $28,887.42, alleged to be the balance of a deposit made by the savings bank.

Mam, <& Pa/rsons, for the appellant.

Flcmaga/n c§ Bright, for the respondent.

Herman Uhl, as receiver of the German Up-town Savings Bank,

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applied by petition to tbe court below for an order directing 'William A. Butler, receiver of tbe Manufacturers and Builders’ Bank, to pay to him $28,887.42, the balance of an alleged deposit made by tbe savings bank in tbe Manufacturers and Builders’ Bank. Tbis apphcation was made under section 48 of chapter 371 of tbe Laws of 1875 (Session Laws of 1875, pp. 404, 415).

That section provides that “ all tbe assets of any bank or banking association, now or hereafter organized, that shall become insolvent, shall, after providing for tbe payment of its circulating notes, if it shall have any, be applied by tbe directors, assignee or receiver thereof, in tbe first place to tbe payment in full of any sum or sums of money deposited therewith by any savings corporation.”

It is obvious that tbe provision of tbis section is applicable only to deposits properly so called, and not to any other form of indebtedness between tbe corporations named.

Tbe receiver of tbe Manufacturers and Builders’ Bank, in answer to tbe petition, alleged in substance that all deposits made in such bank by tbe German Up-town Savings Bank bad been paid in full by him out of the- assets that came into bis bands, and that tbe amount mentioned in tbe petition was not a deposit, but was tbe balance of a call loan of $40,000 made by tbe savings bank to tbe Manufacturers and Builders’ Bank, for which collaterals w;ere deposited with tbe savings bank.

Two questions are presented in tbe case. Tbe first is one of fact, to wit: whether tbe sum demanded .by tbe petitioner was a deposit made in tbe usual way by tbe savings bank, or a call loan secured by collaterals, as alleged by tbe receiver of tbe Manufacturers and Builders’ Bank.

The second is a question of law, arising upon tbe alleged unauthorized acts of tbe officers of tbe savings bank in changing tbe deposit to a call loan. Tbe court below found that tbe transaction was in fact a call loan, as tbe transaction was made between tbe officers of tbe two banks as a call loan, and was intended to be a loan upon seven per cent interest, seemed by collaterals deposited with tbe savings bank, and payable on demand. Tbe evidence certainly justified this finding. Tbe books of both banks treated tbe transaction as a call loan.

A payment of $5,000 upon it was made by a check of tbe Manu

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facturera and. Builders’ Bank (an unusual mode, certainly, of paying deposits), which, described the indebtedness for which it was given as a call loan. All their acts in relation, to the transaction before the insolvency of the respective banks treat it as a call loan.

But it is claimed that this was effected by changing the amount from a deposit in the bank to a loan, by the unauthorized act of certain officers of the savings bank.

The precise mode in which this was done does not appear very clearly in the papers; but it does appear that the $40,000 was deposited by the officers of the savings bank in the Chatham Bank, to the credit of the Manufacturers and Builders’ Bank, and that this sum was placed by the officers of the latter bank in its loan account to the credit of the savings bank.

If it be true that this was a mere change of a deposit of the savings bank in the Manufacturers and Builders’ Bank, to a call loan, it, nevertheless, whether authorized or not, in point of fact reduced the deposit of the savings bank, and changed the amount withdrawn therefrom, into a call loan. The question of the legal right or authority of the officers of the savings bank to make this transaction, does not seem to be an important one, because by their acts they have changed the deposits into a loan, as completely and effectually as though clothed with full authority.

The savings bank received the advantages of the collateral securities ; of the increased interest, and of the payment made upon the call loan; and it is too late after the insolvency of both banks has occurred, for the petitioner to overhaul and repudiate the transaction for the purpose of converting the loan back to a deposit, on the ground of want of authority in the officers of the savings bank, and thereby securing the statutory preference over all the other creditors of the Manuf acturers and Builders’ Bank; whatever remedy he may have against such officers for the abuse of their powers, or •against the officers of both banks for any fraudulent arrangements to the prejudice of the creditors of the savings bank, he cannot, we ' think, go so far as to insist that a call loan illegally made, shall be deemed a deposit within the meaning of the forty-eighth section of the act above referred to.

"We think that the court below arrived at a correct conclusion in

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this case, and that the order should be affirmed, with teu dollars costs and disbursements.

Beaut and Daniels, JJ., concurred.

Order affirmed, with ten dollars costs and disbursements.