Record and brief — John G. Blount vs. R. C. Windley

Supreme Court of the United States.

OCTOBER THR™M, 1876.

No. 19.

JOHN G. BLOUNT vs. R. C. WINDLEY.

BRIEF FOR THE DEFENDANT.

S. F. PHILwips,

For Defendant in Error.

Judd & Detweiler, Printers.

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Supreme Court of the Anited States.

OCTOBER THRM, 1876.

No. 19.

JOHN G. BLOUNT vs. R. C. WINDLEY.

BRIEF FOR THE DEFENDANT.

The case upon the record is—

In March, 1866, the State of North Carolina passed an

act (see Brief for Plaintiff in Error, p. 4) authorizing banks

to go into liquidation, by means of a petition in equity, filed

by their stockholders, under which a commissioner was to

be appointed by the court to take the assets and administer

them in trust for such creditors as, within a time to be

designated by the court, should prove their claims, and

after they should be satisfied, then in trust, as to the resi-

due, for the stockholders. Thereupon, in September, 1866,

a petition was duly filed on behalf of the Bank of Wash-

ington, and the plaintiff appointed commissioner in trust for

all creditors who should prove their debts within twelve

months thereafter. At September term, 1867, of the same

court, the plaintiff, as commissioner, obtained a judgment

against the defendant as surety upon a promissory note given

to the bank prior to May Ist, 1865. On the 13th of Decem-

ber, 1869, the State of North Carolina passed an act allow-

ing defendants in judgments obtained as above to pay and

satisfy the same (excepting costs) with bills of the bank to

which the note was originally payable. (See. Brief for

Plaintiff, p. 9, bottom.) Upon motion, in March, 1872, the

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defendant was allowed to satisfy the judgment obtained as

above, with bills of the Bank of Washington; and upon

appeal this order was approved by the Supreme Court of

North Carolina.

Thereupon this writ of error was sued out, and for error

various matters were assigned, all however depending upon

the suggestion that the above act of 1869, and the conse-

quent judgment by the Supreme Court of North Caro-

lina, impaired the obligation of the contract between the

defendant and the plaintiff as representative of the bank.

It is submitted that such contract has not been impaired.

The plaintiff was to hold in trust not for all creditors, but

for wes as should prove within twelve months from Sep-

tember, 1866, and as to there sidue for the stockholders.

The record does not show that any creditors proved their claims

as required to make them cestuyg que trusts. The method (ratio)

of considering this case, then, is to suppose that there are

no such cestuyg que trusts : De non apparentibus et non existenti-

bus, fc. As the case stands, the only persons interested in

the trusts are the stockholders.

The opinion of the learned court below goes further than

this, but it is sufficient that the record presents the point

just taken, which renders it unnecessary to consider all the

positions taken in that opinion. It will also be observed

that the record shows that at the time when the order com-

plained of was made, the defendant was a creditor of the

bank; not indeed a cestuy que trust under the act, but still

« creditor by virtue of bills of the bank held by him; and it

nowhere appears but that he was then its only existing creditor ;

or if not such, that there was not an abundance of assets .

otherwise to satisfy them. However, it is here submitted

that the record shows the existence of no other creditors.

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The question then upon the writ of error resolves itself

into this: Can a State legislate upon a fund in court be-

longing to the stockholders of an insolvent bank, so as to

give the creditors, or (here) the creditor, of such bank a short

remedy to appropriate that fund to the satisfaction of his

claim? Does such legislation impair the obligation of any

contract? If so, what contract, and with whom ?

It will be borne in mind that this is the case of a bank in-

process of liquidation, whose bills had ceased to be currency.

It will be admitted that the act of 1866, together with

the order in this case limiting proof by creditors to a period

of twelve months, was no contract with the stockholders,

forbidding either the Legislature or the court to enlarge

that period, even after it had lapsed.

The stockholders held their pending (secondary) interests

in the fund, subject to any order that the Legislature might

choose to make in behalf of those who once had a primary

interest therein, subsequently lost by non-compliance with

a rule of administration previously adopted by the Legisla-

ture.

Such statutory rules of administration are universally

liable to amendment or repeal, until some right in third

persons vests thereunder.

If creditors had proved under the act, it may be that the

act of 1869 could not, as against them, have changed the

scheme laid down by the act of 1866. This last-named act

may have been a contract as to them; but as to the stock-

holders, considered in relation to the original obligations of

the bank, the case is ditferent. It was competent for the

Legislature to open the original statute at any time, so long

as the proceedings in liquidation were pending, and to re-

store the original priority due to obligations by the bank, no

matter in whose hands found.

I tezard this question as turning virtually upon the rela-

tion to the act of 1866, held by those beneficially interested

under the assignment made in consequence thereof,

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It seems that such must be the test of the question sub-

mitted by the plaintiff.

As regards Blount, the statute and assignment of 1866

created no contract. He was merely a piece of legal ma-

chinery liable to be dispensed with at any moment, with the

result that such removal did not affect persons for whom he

was trustee. His interests in the judgment are measured

by theirs. lis case is not that of one holding for value,

except to the extent that the trusts upon which he held con-

stituted value. [lis appointment did not at all affect the righty.

(Story, Eq. Jur., § 851.)

In order. therefore, to decide whether the legislation in

question, so far as regards this case, is a mere matter of

competent administration, or is a violation of contract, 1t 1s

necessary to analyze the situation of the persons for whom

slount, upon the record, was trustee. It is, in substance,

their rights, not Ais, that are concerned.

So soon as the bank went into liquidation it was no longer

necessary to make demand in order to bring suit upon its

notes. The method of subjecting the assets under adminis-

tration, was defined by the act (including all competent

amendments) of which the bank had availed itself. It seems

that it is competent for legislation to provide that one

indebted to a bank may offset such indebtedness by its re-

eiprocal debt to him, and that the principle by which this is

competent extends to all sorts of choses in action, including

judgments. <A State which had no statute of set-off might

enact one applicable to debts contracted previously, and this

is so even if such debt were due by judgment. The obli-

gation of a contract by jadgment does not bind the debtor

to a payinent a specie a whit more than previously did the

promissory note upon which (say) it was obtained. The

latter of these contracts binds to a payment in specie to all

intents and purposes that the former does. If A and B

mutually owe one hundred dollars in a State having no

statute of set-off, it would be no violation of the obligation

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of B to A if under certain circumstances a court of equity

refused to allow the latter to use his credit (even when in

form of a judgment) for any other end than to satisfy his

reciprocal debt. If in such case the legislature intervened

to pass a statute of set-off, it seems upon fundamental prin-

ciples that such proceeding would be competent. Particu-

larly would this be true where the creditor was (in law) dead,

and it did not appear that he owed any debt excepting the

one tendered in set-off.

In his learned, acute, and elaborate argument the counsel

for Blount has omitted to consider the Bank as being a

debtor of Windley at the time that the order was obtained.

That argument is confined to a consideration of his rights

as creditor. As creditor it is said that he had a constitu-

tional right to payment in specie.

Suppose, however, that, as here, whilst the judgment re-

mained unsatisfied its owner became also debtor in an equal

amount to the party against whom he had judgment, could

not the legislature provide festinum remedium by which such

mutual relation night be ascertained and satisfaction made

to both parties. In such ease, in point of fact, there 1s

neither debtor nor credit r, and the speediest way of estab-

lishing this fact is the best.

The case so supposed is not varied by the circumstance

that the debtor to the defendant in the judgment is, as here,

merely sole cestui que trust of such judgments, its nominal

owner being a bare trustee. The legislature in such case

would violate no rights by brushing aside all technical cob-

webs, and treating with such beneficiary alone. (Crawford

vs. The Bank, 7 How., 279. See Morse vs. Chapman, 24

Georgia, 249.) |

This, as if seems, would be proper between any parties,

but there is a peculiar propriety in such legislation when @

ink and its stockholders are the only beneficiaries in the

judgment, and the sole reason why the judgment debtor

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brings bank-bills instead of specie to satisfy the same is that

the bank has previously violated its contract to give him

specie for such notes. The question is to be adjudged not

upon appearances in the last scene, but upon a consideration

of the whole drama.

A creditor-debtor has a right to exact specie from his

debtor-creditor only for the difterence between the claims,

and the time at which and the means by which such differ-

ence is to be ascertained is a matter affecting remedy and not

right.

As there is upon the record here no allegation or sugges-

tion even that creditors of the bank had proved within the

time fixed by the order, I have not argued the case upon

such speculative ground. It is enough to say, as was said

by the supreme court of Illinois in Dunlap rs. Smith, (12

Tll., 399 :) “ The record discloses no such case, and it is not

for this court to make a case for the plaintiff.”’

In that case (which is exceptional for the eminence both of

the counsel and of the gentlemen who gave judgment, as

well below as above) the bank in liquidation appeared to

have creditors entitled to share under the proceedings, and so the

court notices the cireumstanece that the act which allowed

the judgment debtors to discharge such judgment in notes

of the bank had been passed before the making of the con-

tract upon which such judgment was founded. (See also

the arguments in King vs. Elliot, 5 Sm. & M., 428.)

In the Hallowell Bank vs. Howard, (13 Mass., 234,) it ap-

peared that the bank was a mere trustee for a bona fide pur-

chaser of the claim in suit, and soa motion to pay into court

its bills was denied. The court, however, speculated as to

the case, supposing there had been no assignment, and said

that even then the notes must have been reduced to judg-

ment before they could be paid into court as proposed. It

is clear that their being reduced to judgment was no com-

pliance with the constitutional provision giving the plain-

tift.a right to gold and silver. It was only a rule of dis-

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cretion to prevent mistakes by the court in passing upon

the genuineness of the paper offered, and such rule might

be modified by legislation allowing notes to be paid in before

Judgment taken upon them, especially where, as here, no

issue is raised upon their genuineness. Such legislation

would be only to give festinum remedium—that is, an ad-

vancement of remedy, and no violation of right.

So in Niagara Bank vs. Rosevelt, (9 Cow., 409,) it is said

that in general a bank is “ bound by law to accept its own

bills in payment.” The learned reporter appends a note to

the same effect, adding a query, if the bank be insolvent.

He means, of course, unable to pay its creditors, which does

not appear to be the case here.

Again, in Suffolk Bank vs. Lewiston Bank, (3 Mason, 1,)

the plaintiff had presented notes of the defendant to a large

amount at its counter for payment. The latter offered to

pay in bills —partly bills of the plaintiff—partly bills of other

banks. These were refused, and suit brought. Both banks

were still in business. It did not appear that demand had

been made upon the plaintiff for its bills so offered in dis-

charge ; and besides they amounted only toa part of the

debt due the plaintiff.

Judge Story said: “ Every bank is bound to pay specie

for its bills, and nothing else is a good tender. Every other

arrangement is a matter of courtesy, and not of right. The

Suffolk Bank was not bound even to have received its own

bills in payment, if such bills to the full amount had been

(and they were not) offered. It might have been unkind

and harsh treatment; but still the law does not compel the

Suffolk Bank to receive its own bills in payment of bills

which it holds of another bank, at least not under cireum-*

stances like the present.”” What is said here of a case in which

bills to the full amount of the debt demanded had been ten-

dered is, of course, only speculative, but is admitted to be

probably correct under what he speaks of as “ cireumstances

like the present,” by which I understand circumstances in

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which the plaintiff is still in regular business, and no due

demand of payment upon its bills had been made ;—circum-

stances therefore in which the defendant had no mutual right

of action against the plaintiff.

I have argued this case entirely upon the record, and this

contains the only statement of facts made before the court

below. It is true that the very able and learned Chief Jus-

tice of the Supreme Court of North Carolina has in his Opin-

ion discussed the case upon the supposition that creditors

had proved their claims in the proceedings in liquidation.

He argues that creditors so proving did not thereby increase

the original consideration of their contracts with the bank,

and therefore that the proceedings in liquidation were as

against even them lhable to any modification that might

seem best to the legislature, so that it left them where the

original act of 1866 found them. In order that the

Court may see this case as it appeared below, I append as

part of my brief, and, if it shall be necessary, of my argu-

ment, the report in 68 North Carolina Reports, (p. 1.)

It is proper to add that the defendant was not represented

at the second argument below.

S. F. Pures,

For Defendent in Lrror.

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