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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Record and brief
- **Published:** January 1, 1876

## Text

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.

——

FO I. “rere ee eng, OO

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Aper_scotus_john-g-blount-vs-r-c-windley_1876_19%3A0. Public record. Not legal advice.