Bank Commissioners v. James Bank — 9 Paige Ch. 457

Majority

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The Bank Commissioners vs. The James Bank.

Headnote

To authorize the bank commissioners to proceed against a banking association for a forfeiture of its charter and banking privileges, it is slot sufficient that its circulating notes should have been once presented to its agent for payment 4 but such notes must either be left at the agency for twenty days, or must be presented a second time for payment at or after the expiration of twenty days from the time of their first presentation.

Where the circulating notes of a banking association are not paid immediately upon their first presentation to the agent of the association for payment, the holder of such notes may sue the association, to recover the amount thereof and the twenty per cent interest, without waiting twenty days. To enable the holder of the circulating bills of a banking association to apply to the comptroller for payment, or to subject the association to a forfeiture for non-payment for twenty days after demand of payment at the agency, it is not necessary that such holder should present the second time such bills for payment, at the last moment of the business hours on the twentieth day after they were first presented, or even on that day. But the association which has once made default in paying its bills at the agency, must at its peril provide its agent with funds to redeem those bills whenever they are again presented for payment, at or after the end of the twenty days from the time of their first presentment.

March 15.

This was an application by the bank commissioners for an injunction for the appointment of a receiver of the property and effects of the James Bank, an association organized under the provisions of the general banking law, and located in the town of Greenfield in the county of Saratoga, The petition of the commissioners, after stating the organization of the association and that in pursuance of the provisions of the act, of the 4th of May, 1840, relative to the redemption of bank notes, the association appointed the Albany Exchange Bank its agent for the redemption of all circulating notes of the James Bank which should be presented to such agent for redemption or payment, alleged upon the information and belief of the petitioners, that in the month of November, 1841, and on or before the 30th of that month, a parcel of the circulating notes of the James Bank were presented at the office of the Albany Exchange Bank, as such agent, for redemption; that the

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last mentioned bank, as such agent, refused and neglected to redeem the same; and that the same had not been redeemed on the 5th of January, 1842, when the affidavit annexed to the petition was made. The petitioners therefore, charged that the agent of the James Bank had neglected and refused to redeem its circulating notes on demand, and that such redemption had not been made by the agent at its office in Albany within twenty days after such circulating notes were presented there for payment. The petition also stated, upon information and belief, the presentment of circulating notes of the association for payment at its place of business, and a similar refusal to redeem, and that such notes remained unredeemed. To the petition was annexed an affidavit of the cashier of the Albany Exchange Bank, stating the presentment of the parcel of bills at the agency for redemption, in November, 1841, and that such agent neglected and refused to redeem them, and that the same had not since that time been redeemed by such agent.

An order to show cause why a receiver should not be appointed, and an injunction granted, having been entered and served, together with a copy of the petition and accompanying affidavit, the president of the bank appeared and showed cause. He did not deny, either upon his belief or otherwise, the allegation in the petition and affidavit that the circulating bills of the bank had been presented at the agency,and the redemption thereof refused, and that the bills had not been paid by the agent, for more than twenty days. But he stated, upon his belief, that for some months previous to the presenting of the petition in this matter, all the circulating notes which had been presented at the banking house of the association were duly paid and redeemed on presentment. He also produced the affidavit of the cashier of the association, who swore positively that all its circulating notes which had been presented at its banking house for payment since the month of August, 1841, had been paid and redeemed at par. An explanatory affidavit of the cashier of the agency bank at Albany was also produced, stating that he did not know that any of the package

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or parcel of the circulating notes of the James Bank, alluded to in his affidavit annexed to the petition of the bank commissioners, had been presented a second time at the agency for redemption.

■A. Taber., for the Bank Commissioners.

8. 3. Cowen, for the James Bank.

Upon a careful examination of the provisions of the act of 1840, relative to the redemption of bank notes by the agents of banks and of banking associations, I have arrived at the conclusion that the counsel for the defendants is right, in this case, in supposing that it is necessary to leave the circulating notes at the agency until the termination of the twenty days from their first presentment for payment, or to present them a second time, at or after the expiration of that period, in order to render a neglect to redeem such bills at the agency and to pay the extra interest thereon, an absolute forfeiture of the charter of the bank, or of the franchises of the banking association. The whole question arises under the fifth section of the act. (Laws of 1840, p. 155.) The first clause of this section is remedial, and gives to the bill holder, who makes a demand of payment at the agency, interest at the rate of twenty per cent per annum, from the time of the demand and refusal of payment. He may, therefore, immediately sue the bank, or association, and may recover the amount due him upon the bills together with the extra interest given by the statute. Or he may wait the twenty days and then again demand the payment of such bills, with interest, for the purpose of subjecting the bank to a forfeiture of its privileges if such payment is again refused ; and to enable him to apply to the comptroller for payment, under the last clause of this section, if his demand is against an association organized under the general banking law.

The second and third clauses of this section, however, are highly penal; the second rendering the bank liable to

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be proceeded against by the bank commissioners for a forfeiture of its charter, and the third absolutely prohibiting such bank from ever again putting in circulation any of its bills or notes after default in payment at the agency has continued for more than twenty days. This part of the section, therefore, must be construed with some degree of strictness; or at least in such a mannér as to enable the bank to save the forfeiture by redeeming the particular bills at its agency, and paying the interest thereon, before it shall be subjected to such serious consequences. And I do not see how this can be done without requiring the holder of the bills to leave them with the agent bank for the twenty days, or to present them again at the agency, at or after the expiration of that period. It cannot, however, be necessary that the holder of the bills should present them the second time at the last moment of business hours on the twentieth day, or even on that day. For the bank which is in default in not paying its bills at the agency when they were first presented for redemption, must at its peril provide its agent with funds to redeem such bills whenever they are again presented for payment at or after the end of the twenty days from the time of their first presentment.

It is not stated in the petition in this case who presented the bills which wrere not paid at the agency ■ nor are the numbers or the amount of the bills presented, nor any other description of them given, so as to enable the defendant to ascertain whether they have not been redeemed at the banking house in Greenfield, where it is sworn the bank has continued to redeem its bills without interruption since August last. But as the petition is founded upon the affidavit of the cashier of the agent bank, it is not the fault of the bank commissioners that the agent of the defendant has not. furnished the officers of the James Bank the necessary infer mation to enable them to determine whether the package referred to in the petition was not presented and paid at the banking house of the association, at Greenfield, within the twenty days. I think there is very little reason to

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doubt that the bills which were presented at the agency were not in fact redeemed within the twenty days; and what is most probable that many parcels were presented for payment and refused, and were not redeemed either there or elsewhere within twenty days after they were thus presented at the agency. But I am obliged to refuse this application, upon .the construction of the statute that it must be satisfactorily shown that the bills were at the agency for redemption at the end of the twenty days, or were presented there for payment afterwards, so as to enable the defendant to redeem them at that place ; though I do not> in fact believe the bills in this case would have been redeemed if they had been thus presented the second time at the agency.

The order to show cause must be discharged and the petition dismissed, and the temporary injunction is of course dissolved ; but without prejudice to the right of the petitioners to renew their application, if they shall think proper to do so, upon a new state of facts.