Bird's Executors v. Cockrem.

BIRD'S EXECUTORS V. COCKREM.

(2 Woods, 32.)

Actions against receivers of National banks-Removal of, to United States courts.

Receivers of National banks have not the privilege in all cases of being sued in the Federal courts, and are not entitled to remove causes against them from the State to the United States courts.*

(Circuit Court, Fifth Circuit.)

A

CTION against Cockrem, receiver of the New Orleans National Banking Association, for not surrendering property alleged to belong to the plaintiff.

The cause was heard upon the motion of defendant to vacate the order removing the case from the Fifth District Court of the Parish of Orleans.

Messrs. J. Ad. Rosier and Geo. W. Race, for plaintiff.

Mr. J. D. Rouse, for defendant.

BRADLEY, Circuit Justice. It is unnecessary to decide the question raised by counsel, whether the act of July 27th, 1868 (Rev. Stat., § 640), allows all corporations, or only corporations of the United States, when sued, to remove their causes into the United States courts, since banks of the United States are excepted in any case; and, also, since this is not a case against a corporation, but against a receiver, and the case is not within the 57th section of the National Banking Act (13 Stat. 116), which gives State courts concurrent jurisdiction with the courts of the United States, in suits against any association under the act, inasmuch as this is not a suit against the association. It is simply a suit against the receiver for not surrendering property alleged to belong to the plaintiffs. Now, unless a receiver, as such, has the privilege in all cases of being sued in the United States courts, I can see no ground for the removal of this cause from the State court. I am not aware of any such prerogative which a receiver of a National

*As to removal of causes by National banks, see Chatham National Bank v. Merchants' National Bank, 4 Thomp. & C. 196, post.

Casey v. La Societé de Credit Mobilier de Paris.

bank has over other persons. Officers and agents acting under authority of the United States, in making arrests, seizures, etc., during the war, may remove all suits brought against them for such cause, into the United States courts. But this is not one of that class of cases.

The order for removal must be vacated, and the cause remanded to the State court.

CASEY V. LA SOCIETÉ DE CREDIT MOBILIER DE PARIS.

(2 Woods, 77.)

Transfers of bank property in contemplation of insolvency

Rights of receiver

Contracts ultra vires - When bank estopped from repudiating

To render a transfer by a National bank made after an act of insolvency, or in contemplation of insolvency, void, under section 52 of the act of 1864 (R. S., § 5242), it must have been made either with a view to prevent the application of the assets in the manner prescribed by the National Banking Act, or with a view to the preference of one creditor to another. The preference of one creditor to another, mentioned in section 52 of the act of 1864, is a preference given to an existing creditor for a pre-existing debt; and does not refer to a case where one makes a loan to a bank and receives a concurrent transfer of property as security therefor.

The receiver of a National bank holds the same title to the assets of the bank that the bank itself held; and he has no greater rights in enforcing their recovery than the bank itself would have had.

A bank, being in an embarrassed financial condition, received a loan of money from defendant upon depositing with a certain commercial firm a portion of its assets as security. Held, that the fact that one of the members of such firm was president of the bank did not render the transaction illegal; and that the bank could not escape liability for such loan on the ground that the president had no authority to effect it where it appeared that it was effected with the knowledge of the directors, and the money was received and used by the bank.

A National bank which entered into a contract not authorized by its charter cannot repudiate the contract and at the same time retain its fruits.

BILL

ILL in equity by Casey, receiver of the New Orleans Banking Association, to have certain transfers of the property of said bank declared void, and such property decreed to be surrendered up for administration.

Casey v. La Societé de Credit Mobilier de Paris.

The case as presented by the pleadings and proofs was substantially as follows: On the 12th of July, 1873, the New Orleans National Banking Association, a corporate body organized under the National Banking Act, June 3, 1864 (13 Stat. 99), was engaged in the banking business in the City of New Orleans, and continued to carry on business until the 4th day of October, 1873, when it suspended payment. On the said 12th day of July, 1873, the defendant," Societé de Credit Mobilier," of Paris, entered into an arrangement with the said banking association through Charles Cavaroc, Sr., its president, whereby the "societé" agreed on its part to accept bills of exchange to be drawn by the banking association, payable ninety days after sight, to the amount of one million francs, and the association agreed to place with the societé ten days before the maturity of said bills the amount thereof. The banking association further agreed to deposit securities in the hands of the commercial firm of C. Cavaroc & Son, of which said Charles Cavoroc, Sr., was a member, for the purpose of securing the societé against loss from the failure of the association to place the amount required to meet said bills at maturity. The said firm of C. Cavaroc & Son was constituted by the societé its agent to receive and hold said securities.

In pursuance of this arrangement, on or about the 12th of July, 1873, bills of exchange were drawn upon the societé by the banking association at ninety days' sight to the amount of one million francs, and the same were sold by the banking association, and the proceeds, amounting to $218,450.34, were appropriated by the banking association were credited on its books to the societé, and the bills were accepted by the societé.

On the day of the date of the drafts, or the day following, a list was made out of notes due the association, amounting to $220,021.43, and the notes named in the list were put in an envelope and handed to C. Cavaroc & Son, by direction of C. Cavaroc, Sr., the president of the association, to be held as security for the societé, to protect it from loss by reason of its acceptance of the drafts.

It was subsequently stipulated by C. Cavaroc, Sr., on behalf of the association, that as soon as any of said notes matured, they should be replaced by others of like amount. Some time subsequent to the 12th of July, C. Cavaroc, Sr., fearing that the notes already set apart would not be sufficient to secure the societé for its acceptance of said bills, caused another list of notes, amount

Casey v. La Societé de Credit Mobilier de Paris.

ing to about $100,000, to be made out, and the notes to be deposited with C. Cavaroc & Son, as additional security.

As notes matured and were paid or renewed, they were replaced by others, in pursuance of the agreement above stated.

The evidence showed that on the 12th of July the association was embarrassed, and that long before its suspension, on the 4th of October, it was insolvent.

When the banking association suspended payment, C. Cavaroc & Son claimed to hold all of said notes then in their hands, amounting to $325,011.26, to secure the societé for its acceptance of said bills.

After the suspension of the bank it was placed by the order of the Comptroller of the Currency, in the custody of John Cockrem, as receiver. Cockrem having resigned, the present complainant was appointed receiver in his stead.

The bill asks the court to adjudge and decree that all of the said notes held by C. Cavaroc & Son belong to and are the property of said banking association, and that the same, and all the proceeds thereof, be placed in the hands of complainant as receiver, to be administered and applied to the payment of the claims of the creditors of said association.

The bill is based upon the 52d section of the National Currency Act (Rev. Stat., § 5242), which declares as follows:

"That all transfers of the notes, bonds, bills of exchange and other evidences of debt to any association, or of deposits to its credit, all assignments of mortgages, securities on real estate, or of judgments or decrees in its favor, all deposits of money, bullion, or other valuable thing for its use or for the use of any of its shareholders or creditors, and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, with a view to prevent the application of its assets in the manner prescribed by this act, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void."

J. D. Rouse and J. R. Beckwith, for complainant.

Thomas Allen Clarke, Thomas L. Bayne and Henry Benshaw, Jr., for La Societé de Credit Mobilier, of Paris.

Edward C. Billings, John Finney and H. C. Miller, for various other defendants.

WOODS, Circuit Judge. The claim of the complainant is that the alleged transfer of the notes and assets of the banking associa

Casey v. La Societé de Credit Mobilier de Paris.

tion of C. Cavaroc & Son, to secure the societé for its acceptance of the bills of the association, was a transfer thereof in contemplation of insolvency, with a view to prevent the application of the assets in the manner prescribed by the National Currency Act, and with a view to the preference of one creditor to another; that such transfer is therefore null and void, and that said notes are still the property of the association, and applicable to the payment of its debts.

It has been held by this court that to make "transfers, assignments, deposits and payments" void under the 52d section of the Currency Act, it is only necessary that the insolvency should be in contemplation of the bank making the transfer, and not that it should be known to or contemplated by the party to whom they are made. Case, Receiver, v. The Citizens' Bank, ante, p. 276; Peckham, Assignee, v. Burroughs, 3 Story, 554.

The evidence in the case satisfies my mind that the banking association, at the time it made the arrangement already recited. with the societé, to wit: on the 12th of July, 1873, was in an exceedingly embarrassed condition, if not actually insolvent. Although C. Cavaroc, Sr., its president, testifies that he did not at that time think that the bank was insolvent, he had abundant reason to know soon after that date that it was embarrassed and in a critical situation. This is evidenced by his application for assistance to other banks of the city of New Orleans. In my judgment the evidence shows so much clearly, but it does not show more.

But conceding that C. Cavaroc, Sr., the president of the bank, at the time he transferred the notes to C. Cavaroc & Son, for the security of the society, knew that the association was insolvent, will that fact render the transfer made under the circumstances recited void?

That alone is not sufficient. One of two alternatives must exist: (1) It must be with a view to prevent the application of the assets in the manner prescribed by the Currency Act, or (2) with a view to the preference of one creditor to another.

Is it the meaning of the section of the Currency Act on which the bill is based, that after a National bank is in contemplation of insolvency, no person could do business with it except at the risk of having any means he may put under the control of the bank, no matter under what solemn contract for security, confiscated for the use of the general creditors of the bank? If this is the con