
    People of the State of New York, Plaintiff, v. The Bank of Staten Island, Defendant. In the Matter of the Contested Claim of Rubsam & Horrmann Brewing Company.
    (Supreme Court, Albany Special Term,
    February, 1911.)
    Banking associations and corporations — Insolvency of banks — Preference of creditors — Payment of checks through clearing house after close of bank.
    Where the Superintendent of Banks closes a bank and takes possession of its assets, the relation which all its depositors bear to the fund is then fixed and determined,
    
      A depositor having money on deposit in such a bank, whose checks, already drawn, are afterward paid through the clearing house, is not entitled to be paid any dividend in the course of the administration of the assets of the bank until the other depositors have received as large a percentage of their respective deposits as he has received of his deposit by the payment of such checks.
    Motion to confirm the report of the referee and for judgment in accordance therewith.
    Jellenik & Stern, for John S. Davenport, Receiver, Bank of Staten Island.
    Holt, Warner & Gaillard, for claimant.
   Rudd, J.

The Superintendent of Banks took possession under the law on the 31st day of December, 1903, of the Bank of Staten Island. An action was subsequently commenced by the Attorney-General in the name of the People. Final judgment was entered in February, 1904.

Among the creditors of the institution was the claimant herein, Bubsam & Hor'rmann Brewing Company. The claimant had on deposit to its credit with the Bank of ■ Staten Island on the 31st day of December, 1903, at eleven o’clock in the forenoon, the sum of $4,647.69.

On the next business day, which was January 2, 1904, the ¡National Bank of Commerce, in Hew York, which was the clearing bank in the Clearing House Association for the Bank of Staten Island, paid checks drawn by the Bubsam & Horrmann Brewing Company on the Bank of Staten Island amounting to $2,789.56.

The claimant here, therefore, subsequently to the closing of the bank, received the sum of $2,789.56 upon the account of the moneys due on deposit to its credit with the Bank of Staten Island, and there is still owing to it the sum of $1,858.13, for which this claim has been filed.

All of the creditors of the Bank of Staten Island have been paid a dividend of thirty per cent, excepting, such creditors as received payment through the Hational Bank of Commerce subsequently to the closing of the Bank of Staten Island, where the payment so received by said depositors exceeded the per cent, of dividend paid depositors who had not received any payment through the National Bank of Commerce.

The claimant here having received a sum in excess of the dividend declared, no dividend has been paid to the claimant by the receiver.

The referee has found that this claim should be disallowed as a general'claim against the Bank of Staten Island, and that it should only be allowed as a valid claim against any fund which may remain in the hands of the receiver after depositors other than those similarly situated with reference to the fund, as is the claimant, herein, shall have received in dividends a percentage of their claims equal to the percentage of their whole deposit received by Rubsam & Horrmann Brewing Company through the National Bank of Commerce.

The relation which all depositors in the Bank of Staten Island bear to the fund which has been, or is to be, distributed, by direction of the court, was fixed and determined as of the 31st day of December, 1903, at eleven o’clock in the forenoon; in other words, at the exact time when the Superintendent closed the bank and took possession of its assets.

No question here arises as to the absolute good faith of the claimant in drawing the checks which were subsequently paid through the clearing house. They were drawn in the ordinary, course of business, and without anticipation, by the claimant here, of the situation which developed subsequently to the drawing of the checks.

The payment of the checks through the clearing house gave to the claimant whose checks Avere thus paid a preference over the other depositors * in the distribution of the fund, if the theory of the claimant here is to be sustained.

This action is one in equity. Every step taken and each result reached should indicate a recognition of the equitable relations which do and must exist.

It was proper for the National Bank of Commerce to recognize the checks drawn by the claimant on funds deposited with the Bank of Staten Island.

Such agreements must be had. Commercial transactions in great volume can only be had through such agreements and by such methods. The claimant should not have, in the distribution of the avails of the bankrupt institution, an advantage over the other depositors having funds in the bank at the time its business was suspended.

This claimant who has already participated in the assets by the payment of its checks through the clearing house had no preferential right to the assets at the time the Superintendent took possession.

The assets of the Bank of Staten Island in the hands of the clearing house agent were not pledged to secure these depositors, but it was only to save harmless the Bank of Commerce from damages under its contract to clear.

The claimant here is entitled only to the same percentage on its whole claim as are the creditors who drew no checks, and the distribution of the assets of the bank through this receivership should relate back, as has been heretofore intimated, and be determined as of the day when the Superintendent took possession; and in that way only can equity be done between these parties.

An order may be entered disallowing the claim of the Rubsam & Horrmann Brewing Company, or postponing the payment of any dividend upon such claim until such time as the creditors of the bank, who did not receive payment through the National Bank of Commerce subsequently to the closing of the B,ank of Staten Island, shall have received a percentage upon their claims equal in amount to the percentage of the claim of the Rubsam & Horrmann Brewing Company, which it received subsequently to the closing of the Bank of Staten Island by the payment of its checks through the clearing house by the National Bank of Commerce.

Ordered accordingly.  