Smith v. The Exchange Bank of Pittsburg.

bill of exchange, or other evidence of debt, interest at the rate allowed by the State or Territory where the bank is located, and no more," etc. It also declares that "the knowingly taking, receiving, or reserving, or charging a rate greater than aforesaid, shall be held and adjudged a forfeiture of the entire interest which the note, bill or other evidence of debt carries with it, or which has been agreed to be paid thereon." The section also contains a provision, that in case a greater rate of interest has been paid, the person or persons paying the same may recover back twice the amount of the interest thus paid.

Now, manifestly, this section has reference to the agreement or transaction between the bank and its customer. It is the party with whom the bank had the usurious transaction to whom the forfeiture of the entire interest is to be adjudged, and who, in case it has been paid, is authorized to recover back twice the amount. The rights and liabilities of antecedent parties cannot be affected by the usurious character of a transaction in which they did not participate.

In the present case, if the indorsers to the bank, Harbaugh, Matthias & Owens, should take up the bill, under their indorsement, their right to recover the full amount from the drawer and the acceptors would be unaffected by the fact as to whether they had or had not asserted against the bank their rights growing out of the usurious transactions.

The remaining objection is to the action of the court in rendering a separate judgment against the plaintiff in error, and continuing the case as to the other defendants.

The liability of the drawer of a bill of exchange is a several liability, and at common law was required to be enforced by a separate action. The Code, by allowing all the parties to the bill to be joined in one action, does not require a joint judgment against all. Section 371 expressly provides that, "in an action against several defendants, the court may, in its discretion, render judgment against one or more of them, leaving the action to proceed against the others, whenever a several judgment may be proper." Where a separate action might have been maintained against a party, a separate judgment under this provision of the Code is certainly proper.

What effect the fact that the drawer is also one of the firm who

The Venango National Bank v. Taylor.

accepted the bill may have on the right of the plaintiff to take a future judgment against the acceptors, we are not called on now to consider. Leave refused.

MCILVAINE, C. J., WELCH, REX and GILMORE, JJ., concurred.

THE VENANGO NATIONAL BANK V. TAYLOR.

(56 Pennsylvania State, 14.)

Deposits in National bank — Offset of, against debt due bank.

A National bank having become insolvent, a depositor therein assigned his deposit to a debtor of the bank. Held, that the latter could not offset such deposit against his debt in an action thereon.*

THE

HE following facts appeared in a case stated, agreed upon by the parties:

On the 14th of April, 1865, Taylor gave to the bank his bond for $65,000, with warrant of attorney to confess judgment, and at the same time deposited with the bank $31,000 of United States bonds as collateral security for the bond. The bank sold the bonds in June, 1865, with the understanding that their proceeds were to be credited on Taylor's bond. These proceeds, with interest, amounted to $32,000, but the credit was not given.

One John Rynd had to his credit on deposit in the bank, on the 27th of March, 1866, $43,743.25. On that day the bank closed its doors and suspended payment, being then and ever since insolvent; and on the same day suit was brought by Rynd to the use of Taylor to recover his deposit. The writ was served the same day. On the 28th of March, Rynd assigned his deposit to Taylor, and afterward, on the same day, the bank entered judgment against Taylor on his above-mentioned bond.

On the 23d of April, judgment was entered for the plaintiff in the suit Rynd to the use of Taylor against the bank, for want of an affidavit of defense; the judgment, on the 12th of May, was liquidated at $44,071.23.

*See Platt v. Bentley, ante, p. 758.

The Venango National Bank v. Taylor.

On the 1st of May, the judgment of the bank against Taylor was opened, and Taylor let into a defense on the above-stated facts. On the 8th of May a receiver was appointed, who has the bank in charge.

"On these facts the defendant claims a credit of, first, of the $32,000, and next by way of set-off of so much of the Rynd judgment as will satisfy the residue of the bank judgment, and if the court is of the opinion that he is entitled to it, judgment to be entered in his favor; or, if he is entitled to a credit for the $32,000, but not to a set-off of the Rynd judgment, then judgment to be entered for the bank for $35,024; and if he is not entitled to a credit of either, judgment to be entered for the plaintiff for $65,000, with interest from April 14th, 1865."

The court (GORDON, A. J.) entered judgment generally for the defendant, and this is the error assigned in the Supreme Court.

D. Derrickson, for plaintiff.

Taylor & Mackey and A. H. M. Miller, for defendant.

STRONG, J. The only question in this case is, whether the defendant is entitled to use, as a defense to his bond, the deposit assigned to him by John Rynd. The bank became insolvent on the 27th day of March, 1866. On that day it closed its doors and suspended payment, and on the 8th of May next following a receiver was appointed by the Comptroller of the Currency in accordance with the provisions of the act of Congress of June 3d, 1864. The receiver still has the assets of the bank in charge. On the 28th of March, 1866, Rynd had to his credit for deposits made in the bank the sum of $43,743.25, and on that day he assigned the deposit to Taylor, the defendant. It is this deposit, thus assigned, for which judgment was subsequently recovered, that the defendant claims a right to set off against a claim of the bank against him on his bond for $65,000, given April 14th, 1865.

It is plain that, if he can use his equitable title to the deposit made by Rynd as a defense against the legal claim of the bank, a preference of one creditor of the bank over others is wrought out and secured after the act of insolvency.

But this is the very thing which, in our opinion, the act of Congress aimed to prevent. The bank is a creature of the act,

The Venango National Bank v. Taylor.

dependent upon it for all its powers, and controlled by all the restrictions which the act imposes. And creditors dealing with the bank can obtain only such rights as it is authorized to give.

In seeking for the meaning of the act of Congress we are to note its spirit as well as its letter, and its general intent is not difficult to discover.

It provides a system for closing the affairs of an insolvent bank, the clear design of which is to place all creditors, except the government and note-holders, on an equal footing. Its purpose is to disallow preference of one creditor over another, and it denies the power to make such preference at any time after an act of insolvency. The 50th section provides that after such an act a receiver may be appointed who shall take possession of the assets of every description, collect all debts, sell all real and personal property, and pay over all money so made into the treasury of the United States, subject to the order of the Comptroller of the Currency.

The section then provides for a ratable division of the money among the creditors after paying the government for the redemption of the circulating notes outstanding. The 52d section enacts "that all transfers of the notes, bonds, bills of exchange and other evidence of debt owing to any association (bank),' or of deposit 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 things 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 (that is, ratably), or with the view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void."

This section is too plain to be misunderstood; read in connection with the 50th section it admits of no doubt that the purpose of Congress was to secure all the assets of the bank existing at the time of its act of insolvency for ratable distribution.

We cannot assent to the argument that it was intended for no more than to avoid all acts of the bank itself, all voluntary transfers by it of its notes, bonds, deposits, etc., with a view to giving preferences. Its language is general, as applicable to legal as to voluntary transfers.

The Venango National Bank v. Taylor.

But if the deposit made by John Rynd can be set off against the bond debt due by Taylor to the bank, what is it but a transfer of the bond debt to the satisfaction of a creditor, thus giving him a preference? It is not contended that the bank was not prohibited from doing this, but it is insisted the transfer may be accomplished by an adversary proceeding at the suit of Rynd for the use of Taylor. It is not denied that Rynd, had he made no assignment of his claim, could not have obtained payment of the debt due him by calling upon the bank after the 27th day of March, 1866, when its doors were closed, and when it suspended payments. The bank, it is conceded, was not at liberty to transfer to him either their claim against Taylor or any of their assets, or to pay him any money; and if so, can the thing be secured by a hostile proceeding? Will the law compel a payment or a transfer which the law prohibits a debtor from making? A bank after an act of insolvency has no more right to pay a judgment or an execution than it has to pay a debt before it has passed into judgment. But if Rynd could in no way have obtained payment of the deposit due him after the 27th day of March, 1866, except through the Comptroller of the Currency, how could he give to Taylor, by his assignment of the deposit, any right which he did not himself possess ? In this case the assignment was only an equitable one. It did not pass the legal ownership. Taylor had but an equity, and strictly must have gone into equity to obtain any benefit from the transfer. Yet had a chancellor been called upon to enforce the equity, it is plain he would not have enforced it at the expense of other creditors who had a right to a ratable proportion of the assets of the insolvent banking association. Much less would he have compelled the bank to do what the act of Congress had denied it power to do. It may be conceded, as was insisted in the argument, that there is nothing in the act of Congress which declares that the assets of a bank vest in the receiver immediately from and after an act of insolvency, or that the appointment of the receiver relates back to such act. Indeed at no time does the property in those assets vest in the receiver. The difficulty of the defendant does not lie here, but it is found in the prohibition of any transfer or disposition of the assets until after a receiver has been appointed, coupled with the manifest purpose for which the prohibition was made. The bank's property is placed by the act under the immediate potential control of the government. It is noticeable that the