Pelham v. Adams

By the Court, Pakker, J.

It was clearly lawful for the Hew-York State Bank to receive deposits and to agree to pay interest on them. By the deposit, the relation of debtor and creditor was created. If it had been a deposit without interest, the transaction would have been, in the language of Judge Cowen, (Com. Bank of Albany v. Hughes, 17 Wend. 100,) “ a gratuitous loanbut being a deposit on interest it stood upon the same footing as any other loan upon interest. The transaction itself, then, standing alone, was a lawful one. Did it become unlawful, as contended by the defendant’s counsel, because of the issuing of the certificate of deposit 1

The certificate was no necessary part of the transaction. It was not an element in the creation of the indebtedness. It was given only as evidence of the transaction. The plaintiff would have had just as good a claim to recover back his money, if he had depended upon the bank books for evidence of the transaction, instead of taking the certificate.

But it is insisted, against the right of the plaintiff to recover, that the issuing of the certificate was a violation of the act of 1840, ch. 363, § 4, (Laws of 1840, p. 306,) which declares that “ no banking association or individual banker, as such, shall issue or put in circulation any bill or note of said association or individual banker, unless the same shall be made payable on demand, and without interest.” No case has gone so far as to hold that an instrument like that in question, and issued for such an object only, falls within the prohibition of the statute. In Leavitt v. Palmer, (3 Comst. R. 19,) the paper declared void, though called a certificate of deposit in an accompanying deed of trust, was a promise to pay to the order of W. R. Cooke, twelve months after date, with interest, for value received; and it was plain, from the nature of the transaction, that the notes were designed for circulation, and were,.within the language of the statute, an issue of the bank. In that case, forty-eight notes of £1000 each were issued and covered by other securities.

So also the case of Swift v. Beers, (3 Denio, 70,) was a promise by the North American Trust and Banking Company to pay, sixty days after date, to the order of Messrs. Swift & Co., for value received, with interest, and the note was guarantied by the defendant; and it was held void, as a violation of the clause of the 4th section above quoted.

In the case of The Bank of Orleans v. Merrill, Pres’t, the Clinton Bank had issued a certificate of deposit, payable to the order of S. B., at six months, with interest, of which the plaintiff was the indorsee, and it was held to be, in effect, a negotiable promissory note, and a violation of the statute. Safford v. Wyckoff, (1 Hill, 11,) and Smith v. Strong, (2 Hill, 241,) were both cases of negotiable bills of exchange on time, and were held also to be violations of the statute. In all these cases the instruments were negotiable paper, and evidently issued for circulation. In the present case, the certificate of deposit was merely given as the more convenient, evidence of a legal transaction.

[Albany General Term, December 5, 1853.

Parker, Wright and Harris, Justices.]

But the question is not, in this ease, as it was in all the others, I have cited, whether an action could be maintained on the certificate. This suit is not brought on the certificate, but on the deposit of the money, and the certificate is brought into court for the purpose of being canceled. It is not the depositing of the money on interest, or the loan of money, which is prohibited; but the “subsequent issue of a note or bill on interest.” A legal transaction was performed and complete, before the act which is claimed to be illegal was commenced. If the prohibibition in the statute applies to a certificate like this, given for no other purpose except as evidence of an agreement, it is such evidence only which is prohibited. If, therefore, the issuing of the certificate was illegal, which I by no means concede, the previous transaction being legal, can be enforced. In Leavitt v. Palmer, above cited, Bronson, J., said {page 34,) “ the legal liability, on account of which the notes were issued, still remains ; but the notes themselves are void.”

I think the plaintiff was entitled to recover the money deposited, and interest from the date of the deposit; but as interest was only claimed from the time of the demand, and the verdict was taken according to such computation, the plaintiff will take judgment according to the verdict.