French v. O'Brien

Lawrence, J. Having given to the testimony in this case and to the very able briefs, filed by the learned counsel, the fullest consideration in my power, I have reached the following conclusions: First. That the resolution of September 29th, 1873, was not valid, for the reason, that in substance and effect it was an alteration of the by-laws of the bank, enlarging the general power and duties of the president, substituting his discretion and judgment for the discretion and judgment of the trustees and of the finance committee, and that such by-laws could only be amended after giving the notice and taking the steps required by article 15; and that there is no proof that such notice was given or steps taken. [398] Second. That the evidence does not establish a ratification by the trustees of the president’s act, in selling the bond and mortgage to the plaintiff, inasmuch as it does not appear that the trustees knew any thing about the transfer (Dabney agt. Stevens, 40 Howard, 341; Smith agt. Tracy, 36 N. Y., 79). Third. That the defendant was ignorant of the condition of the People’s Savings Bank, and whether the same was solvent or insolvent, and that in foreclosing the bond and mortgage he acted in good faith, and that his attorney, Mr. Thompson, relied upon the statement of Rodgers, the president of the bank, that he had authority to make such transfer. Fourth. That the People’s Savings Bank was, in point of fact, at the time said assignment was made, wholly insolvent and unable to meet its obligations and liabilities, and that such fact was known to the said Rogers and to the trustees of the bank, or to a majority of them. Fifth. That section 9 of article 1, of title 2 of chapter 18, part 1 of the Revised Statutes of this state, is suspended or superseded by the bankrupt law of the United States (Commonwealth agt. O'Hara, 6 American Law Register, p. 765; Griswold agt. Pratt, 9 Metc., 16; Shears agt. Solhinger, 10 Abb. [N. S], p. 288, and cases cited by Brady, J.; In re Eames, 2 Story, 322). Sixth. That the defendant is a bona fide holder of the bond and mortgage in question to the extent of $14,389.78, being the amount paid by checks or drafts on other savings banks at the time of the assignment of the said bond and mortgage, and that to that extent the defendant is entitled to a lien on said bond and mortgage, and to the repayment of said sum, with interest, before he should be compelled to reassign or reconvey said bond and mortgage to the plaintiff (Weaver agt. Barden, 49 N. Y., 286). Seventh. That to the extent of the aforesaid sum of $14,389.78, the said defendant is a purchaser of the said bond [399] and mortgage for a valuable consideration, and without notice within the meaning of section 8 of article 1 of title 2 of chapter 18, part 1 of the Eevised Statutes. Eighth. That as to the sum of $10,821.18, the amount represented in the pass-books of the defendant, and on the books of the said People’s Savings Bank, as due to the defendant from the said bank, the said defendant, by relinquishing to the said bank said pass-books, and consenting to the crediting of the said sum on the books of said bank as having been paid, did not thereby become, as against the plaintiff in this action, nor as against the other creditors of or depositors in said bank, a purchaser for value of said bond and mortgage; and that to the extent of $10,821.18 of the principal sum represented and secured by said bond and mortgage the defendant is not a bona fide purchaser, and that the part of the consideration paid in that manner does not avail the defendant in this action (Weaver agt. Barden, 49 N. Y., 286). Ninth. That the effect of the transaction between the defendant and Eodgers was to give to the defendant a preference over the other creditors and depositors of the People’s Savings Bank to the extent of his deposit, and that the plaintiff, as representing such creditors, has a superior equity to the defendant, so far as the consideration paid on the assignment of said bond and mortgage consisted of the crediting of the aforesaid sum of $10,821.18 upon the books of said bank as paid. Tenth. I do not regard this as an action at law, as is contended by the learned counsel for the plaintiff. The suit is brought to compel the defendant to account to the plaintiff for the bond and mortgage" and the value and proceeds thereof, and for an injunction restraining the defendant from assigning or creating any lien or incumbrance, either upon the bond and mortgage or the proceeds thereof; and it is prayed in the complaint that a receiver of the bond and mortgage be appointed. The suit, therefore, is of an equitable character, and such [400] as would in former times have been cognizable by the court of chancery. Eleventh. The action being of an equitable character, the principle that one who comes into a court of equity must come prepared to do equity, and to refund as much as he has received upon a transaction which is voidable or void, applies (Williams agt. Fitzhugh, 37 N. Y., 453, and cases cited; Town of Venice agt. Woodruff, 62 N. Y., 463). Nor do I understand that the claim that the plaintiff in such a ease should do equity by putting the defendant in the position in which he stood before the transaction was consummated is a set-off or counter-claim and therefore must be pleaded. It is not new matter constituting a defense or counter-claim in the language of the Code, but rather matter necessarily shown and proved as a part of the entire transaction which the plaintiff seeks to set aside. If this conclusion is incorrect, then I am of the opinion that, as all the facts have been proven, and as it does not appear that the plaintiff can claim that he has been surprised, if an amendment is necessary to enable the defendant to invoke the principle referred to, justice requires that the proper amendment should be granted. 1 Twelfth. The judgment in this case will therefore be, that the defendant assign the bond and mortgage to the plaintiff on receiving from him the sum of $14,389.78, with interest, and upon the plaintiff returning to the defendant the passbooks surrendered to Rodgers, and reinstating the defendant as a creditor upon the books of the People’s Savings Bank in the sum of $10,821.18. As I do not regard the ease as free from doubt, and as neither party has wholly succeeded, costs should not be allowed to either party. The findings may be settled on two days’ notice.