Summary
In City National Bank of Poughkeepsie v. Phelps (97 N Y 44) the question was whether a continuing guaranty of credit given to the City Bank while a State institution inured to the benefit of the same institution after it had become a National bank.
Summary of this case from McElwain Co. v. PrimaveraOpinion
Submitted May 8, 1884
Decided October 7, 1884
Edward S. Clinch for appellant.
H.A. Nelson and W. Farrington for respondent.
On the former appeal in this case ( 86 N.Y. 484), we decided that the plaintiff was entitled to recover of the defendant so much of the indebtedness of Woodruff to the City Bank, as was incurred before that bank reorganized as the City National Bank, and as remained unpaid. The same points were raised on that appeal, which are now urged by the appellant, so far as the indebtedness above referred to is concerned, and in that respect there was no material change in the facts on the second trial.
The question of the liability of the defendant for indebtedness incurred by Woodruff after the City Bank reorganized as a National bank was not decided, nor necessarily involved, on the former appeal. The judgment then under review was one of nonsuit, and if the plaintiff had a right of action for any part of his demand, that was sufficient to require a reversal without regard to the amount recoverable. The case was, therefore, decided on the ground that even if it should be conceded for the time that the City National Bank could not make fresh advances to Woodruff and hold the defendant liable on the guaranty, he was liable at all events for the sums advanced by the City Bank, the obligations for which had been renewed, with the defendant's consent, by the City National Bank which succeeded to all the rights of the City Bank.
On the present appeal, the point which was thus left undecided is distinctly and directly presented. On the second trial the plaintiff recovered the amount of three notes given by Woodruff to the City National Bank, viz., one of $500, one of $250 and one of $1,400. The first two, amounting to $750, were shown to have been given for a balance remaining unpaid, of the original advances made to Woodruff by the City Bank under the guaranty, and they consequently are covered by the decision in the former case. But the origin of the $1,400 note was not thus traced, and the evidence was to the effect that it was given for a balance remaining unpaid on a note for $2,000 discounted for Woodruff by the City National Bank July 26, 1869, after the reorganization, which had been reduced by payments, and renewed from time to time down to January 17, 1876, when the last renewal was given for $1,400, payable four months after date. In respect to this note, the judge on the trial charged the jury that the guaranty of Phelps Kingman, which was a continuing guaranty, continued, and that the bank had a right to advance upon it to the extent of $5,000, so long as the firm of Phelps Kingman existed, or so long as the bank holding the guaranty and acting upon it had no notice of the dissolution of this firm. And he further charged that when the change was made from the City Bank to the City National Bank, whatever debt was due upon that guaranty, vested in the City National Bank. Thus far the charge conformed to the decision of this court before referred to; but the judge went on to charge further that the guaranty continued so that the City National Bank could continue to advance upon it so long as it had no notice of the dissolution of the firm of Phelps Kingman. If this position is sustained, the $1,400 note stands upon the same footing as the notes of $500 and $250, and the reorganization of the City Bank in pursuance of the National Banking Act, becomes immaterial to the present controversy.
In regard to this point FOLGER, J., in his opinion in the former appeal, says ( 86 N.Y. 490): "As we view the case we need not pass upon the full scope of the point that the City National Bank cannot hold the defendant upon the obligation to the City Bank. The point, in its extent, rests upon the proposition that the plaintiff is a distinct corporation from the State City Bank; that they are distinct parties, and that the obligation of a surety to one party may not be availed of by another party. That this proposition applies to the change made by the City Bank from State to Federal jurisdiction, is not so easy of concession or refutation as it may seem at first sight."
The question was thus left open, and the case disposed of without regard to it. But it now becomes necessary to determine it, and, on consideration, we have come to the conclusion that it should be determined in accordance with the view expressed by the judge upon the trial, and by GILBERT, J., in his opinion in this case at General Term (16 Hun, 158). The general scheme of the National Banking Act is that State banks may avail themselves of its privileges and subject themselves to its liabilities, without abandoning their corporate existence, without any change in the organization, officers, stockholders, or property, and without interruption of their pending business or contracts. All property and rights which they held before organizing as National banks are continued to be vested in them under their new status. Great inconveniences might result if this saving of their existing assets did not include pending executory contracts, and pending guarantees, as well as vested rights of property. Although, in form, their property and rights as State banks, purport to be transferred to them in their new status of National banks, yet in substance there is no actual transfer from one body to another, but a continuation of the same body, under a changed jurisdiction. As between it and those who have contracted with it, it retains its identity, notwithstanding its acceptance of the privilege of organizing under the National Banking Act.
The defendant Phelps in his letter of October 6, 1875, appears to have acted in accordance with this view. The guaranty was given to the City Bank in February, 1861. The organization as a National bank was in 1865. Woodruff appears to have gone on renewing the notes discounted for him by the City Bank, and also the note discounted for him by the City National Bank in 1869, down to the time the letter was written, October 6, 1875. Phelps then addresses the cashier of the City National Bank treating it as identical with the City Bank and speaking of the guaranty as an obligation given to "your bank," stating that he regarded the guaranty as good when given, and that he believes it "just as good now as it was then," showing his understanding that it continued to run in favor of the City National Bank. He continues, "so that I do not see the slightest advantage in having it renewed." This was in response to a request on the part of the bank to renew the guaranty. After the receipt of that letter and a verbal request from Phelps to continue business under the guaranty and to renew the notes, the bank went on renewing the paper of Woodruff, which it then held, down to April, 1876, soon after which date Woodruff failed.
A point is made by the defendant that, at the time of the verbal request above referred to, Phelps said that Woodruff would pay $500 on the notes on each renewal, but that the bank allowed the renewals on payment of a smaller sum. On this point we concur with the learned judge who delivered the opinion at General Term, in holding that this proposed payment was not a condition of Phelps' consent to the renewal, but was held out by him as an inducement to the bank to accede to his request to give indulgence to Woodruff.
We do not think that the judge erred in submitting to the jury the question whether the plaintiff had notice of the dissolution of the firm of Phelps Kingman when it discounted the note of July 26, 1869.
The judgment should be affirmed.
All concur.
Judgment affirmed.