Basehore v. Rhodes

Chief Justice Agnew

delivered the opinion of the court, Juno 25th 1877.

The plaintiffs in this bill claim to pay a judgment in favor of the Farmers’ and Mechanics’ Bank upon a note in the hands of the assignees of that bank, with a protested draft drawn by the bank in favor of the First National Bank of Shippensburg upon the Union Banking Company of Philadelphia; and by the National Bank of Shippensburg sold to the plaintiffs after the judgment had been obtained by the assignees upon the note against the plaintiffs. This claim to pay the judgment with the draft is founded on the proviso in the 27th section of the General Banking Act of April 16th 1850 : Brightly 144, pi. 101. The proviso is in these words: “ Provided, however, that the said assignees shall receive in payment of debts due to said bank, its own notes and obligations and the checks of its depositors at par.”

Is the draft before mentioned an obligation within the meaning of this proviso ? This is the question presented. That it is not is clearly seen by a comparison of several sections of the Act of 1850. In the first place it is to be noticed that the 27th section containing this proviso is that which prescribes the proceeding taken to enforce the forfeiture of the charter of a bank, upon its refusal to pay its notes, obligations and certificates of deposit, in specie. The provisions as to this refusal to redeem in gold or silver coin, are found in the three preceding sections, the 24th, 25th and 26th. The debts thus refused to be redeemed in coin are described in the 25th section, viz.: “ Any bill, note or obligation issued by such banks,” and “ any moneys received in such bank on deposit.” The section then allows twelve per cent, interest, and requires the bill, obligation or certificate to be endorsed by the cashier, setting forth the demand of coin and the time it was made. The history of this provision in the legislation of the state shows that it is intended to compel specie payment of those bills and notes which constitute the circulation of the bank.

But we need hot resort to the history of such legislation, for the 14th clause of the 10th section of the Act of 1850 is the best interpreter of its meaning. Turning to that clause we find that it provides for two distinct kinds of bills or notes, which are to constitute its circulating obligations. This clause enacts that the “ bills obligatory and of credit, under the seal of such corporations, which shall be made to any person or persons,- shall be assignable by endorsement thereupon, under the hand or hands of such person or persons, and Of his, her or their assignee or assignees, so as absolutely to transfer and invest the property and legal title thereof in each and' every assignee or assignees successively, and enable such assignee or assignees to bring and maintain an action thereupon in his, her or their own name or names; and bills or notes which may be issued by order of any of the said corporations, signed by the president and countersigned by the cashier thereof, promising payment of money to any person or persons, his, her or their order, or to bearer, though not under seal of such corporation, shall be binding and obligatory upon the same in like manner and with like force and effect as upon any private person or persons if issued by him or them, in his, her or their private capacity or capacities, and shall be assignable and negotiable in like manner as if they were so issued by such private person or persons,” &c. These are the liabilities for which provision in subsequent sections is made for their redemption in coin. It is evident that drafts or orders drawn on others are not bills, obligations or notes such as are mentioned in the 14th clause of the 10th section. This is made more plain by a reference to the sections providing for specie payment. The 24th section requires redemption of the notes of the bank in coin, and declares a forfeiture of the charter as a consequence of a failure to do so on demand. The 25th describes the mode of making demand and prescribes the duty of the cashier to make endorsement of the time of demand, and declares the consequence as a liability to pay twelve per cent, interest. The language of this section is precisely descriptive of the bills and notes mentioned in the 14th clause of the 10th section, thus : “ and if any of the said banks shall at any time refuse or neglect to pay on demand in gold or silver any bill, note or obligation issued by such banks according to the contract, promise or undertaking therein expressed,” &c.

These provisions indicate clearly the reason for the proviso in the 27th section, that the assignees shall receive in payment of the debts due to the bank, its own notes, obligations and the checks of depositors at par. In the 25th section, deposits are also required to be paid in coin; and by the 39th section are placed in the second class, for distribution of the assets of the bank. When we reach the 39th section, the intention of the act becomes manifest. It declares, for the purpose of distribution, that the debts of the bank shall be divided into three classes: 1st, notes, which includes both kinds, bills or obligations under seal and notes not under seal; 2d, deposits ; 3d, all other debts except the stock of the bank. Thus, it becomes clear that the obligations and notes required by the 27th section to be received in payment at par, are those contained in the first class, it being the policy of the state to secure payment of the circulation of the bank and thus to protect her citizens against failure. This renders it certain that drafts, orders, contracts and other debts, not falling within the description of the bills obligatory and notes mentioned in 14th clause of the 10th section, must take their place in the 3d class, and consequently are not to be accepted by the assignees in payment of debts at par. If they were, the course of distribution intended by the legislature would fail entirely, for any one might purchase the drafts or orders of a broken bank at any discount and tender them in payment to the assignees. This is not the true interpretation of the law.

The decree of the Court of Common Pleas is affirmed, and the appellants are ordered to pay the costs, and the appeal is dismissed.