Mayor, etc., of New York v. Tenth National Bank. proof whatever that he acted in bad faith in making the advances upon the checks. He ought to have known that the commissioners had no authority to take these advances upon the credit of the county. But the knowledge which the law imputes to him of their want of authority has no bearing whatever upon the question of his good faith. He used due diligence. He consulted the comptroller and the mayor, who was also a lawyer, and was assured that the arrangement which the commissioners proposed to make with him was right and proper, and it was not an unusual arrangement, as the city banks were much in the custom of advancing moneys to the various departments and commissioners of the city in anticipation of appropriations to be made. But it is claimed that knowledge of the conspiracy and fraud must be imputed to the bank, because three of the conspirators, Ingersoll, Tweed and Connolly, were directors of the bank, and hence that the bank could not claim the benefit of good faith. But none of these directors represented the bank in these transactions and in no way acted for the bank in them Connolly was consulted as comptroller, and Ingersoll acted for the commissioners. Neither of them was present at any meeting of the directors when any action was taken in reference to the advances. The sole agent and representative of the bank was Bliss, its president, and he was entirely innocent of any wrong. The knowledge these conspirators had while engaged in their fraud for their own benefit could not therefore be attributed to the bank; and to this effect are all the decisions. Bank of U. S. v. Davis, 2 Hill, 451; President, etc. v. Cornen, 37 N. Y. 320; Holden v. N. Y. & Erie Bank, 72 id. 291; Atlantic Bank v. Savery, 82 id. 291; Craige v. Hadley, 99 id. 131; Custer v. Tompkins Co. Bank, 9 Penn. St. 27; President, etc. v. Lewis, 22 Pick. 24; Farmers & Citizens' Bank v. Payne, 25 Conn. 444. The question now remains whether these advances made by the defendant were subsequently ratified by competent legislative action. Before September, 1871, the appropriations made for the various city departments and commissions had been exhausted, and in that month and October and November of the same years certain banks, trust companies and insurance companies advanced to the comptroller of the city or the departments and Mayor, etc., of New York v. Tenth National Bank. commissions large sums of money for the purpose of paying the expenditures of such departments and commissions during those months and the month of December, and they took as security for the moneys so advanced assignments of the claims to pay which the moneys were borrowed. Those moneys were advanced without authority of law to meet an emergency with the expectation that subsequent legislative action would ratify them. On the 30th day of January,.1872, in section 2 of the act, chapter 9 of the laws of that year, it was provided that the comptroller, out of the proceeds of bonds authorized to be issued by that act, should be authorized and required to pay back to the "various banks, insurance and trust companies of the city of New York all moneys which have been advanced by said banks, insurance and trust companies, or any of them, prior to the 31st day of December, 1871, to or for the use of any of the departments or commissions of the city or county of New York." These advances made by the defendant are plainly embraced within the language of this act. They were advances made by a city bank to and for the use of county commissioners. The claim for these advances was before the passage of the act as well known to the comptroller as the claims of the other corporations which had advanced moneys. We may assume that the act was drawn under the supervision, or at the instigation, of the comptroller, the financial officer of the city and county, and if it had not been intended to provide for these advances the language would have been such as to include them. It appears, too, that the court-house commissioners were the only county commissioners, strictly speaking, to which the act could apply, and there was no other claim for advances made to the county presented under the act. It is true that these advances were illegal and so were all the other advances referred to. These advances were made in good faith and all the moneys advanced were used for the county, except the sum of $45,000, fraudulently diverted by the conspirators. The fact that the conspirators were among the directors of the bank did not deprive its innocent directors, stockholders and creditors of all claim to just consideration and did not make it an outlaw without rights, a caput lupinum, entitled to no protection. Mayor, etc., of New York v. Tenth National Bank. While the Legislature may not always be held to have had full knowledge of all the facts and consequences involved in its action, its ignorance cannot be presumed for the purpose of nullifying the plain meaning of its language. But we have no right to assume that if the Legislature had known the precise facts as they now appear in this record, it would have refused to ratify a claim for moneys thus advanced in accordance with a common practice, in good faith, a small portion of which only was misappropriated by the trusted agents of the county. As the plain language embraces these advances, they should not by construction be taken out of the statute, except we can clearly perceive a legislative intention that they should not be embraced; and that upon a consideration of all the facts we are unable to perceive. It is further claimed that the Legislature was not competent to ratify these advances and make them a binding obligation on the county. It is said that it could not originally have authorized advances to be made to the conspirators for fraudulent division among themselves, and that hence it could not ratify such advances. This may be conceded. But here, these advances were made in good faith, not to be divided among the conspirators, but to and for the use of the county. This the Legislature could have authorized, and the county would have been bound, although the conspirators had misappropriated all the money, and what it could originally have authorized, it could ratify and confirm. Municipal corporations are creatures of the State and exist and act in subordination to its sovereign power. The Legislature may termine what moneys they may raise and expend, and what taxation for municipal purposes may be imposed, and it certainly does not exceed its constitutional authority when it compels a municipal corporation to pay a debt which has some meritorious basis to rest on. The provisions of this act are sanctioned by the principles of the following decisions: Town of Guilford v. Supervisors, 13 N. Y. 143; Brewster v. City of Syracuse, 19 id. 416; Darlington v. Mayor, 31 id. 164; Brown v. Mayor, 63 id. 239. de We therefore conclude that judgment allowing defendant's counter-claim was right and should be affirmed. All concur. Thompson v. St. Nicholas National Bank. THOMPSON V. ST. NICHOLAS NATIONAL BANK.* (113 N. Y. 325.) Negotiable instruments — pledge — application of payment — certification of checks. Where the holder of bonds payable to bearer transfers them to stock-brokers, to hold as margins on his individual stock transactions, and the brokers pledge them to a bank in the regular course of business, as security for current indebtedness, the bank acquires a valid title to them, and the owner cannot recover them, except by paying the amount for which they are pledged. Certain bonds were deposited by brokers with a bank, on the credit of which the bank, on the same day, certified and paid the broker's checks for a large amount. The brokers made cash deposits with the bank on the same day. On the morning of that day the brokers were indebted to the bank on a running account, which also the bonds were pledged to secure, but the securities were at all times insufficient to cover the entire indebtedness. Held, that in the absence of any express application of the cash deposits by the parties, the law applies them to the earliest items of the account, in preference to the indebtedness incurred by payment of the certified checks. A National bank agreed to honor a depositor's checks in consideration of collaterals, and subsequently certified such checks for the benefit of anticipated holders; held, that the validity of the debt created by paying the checks is not affected by U. S. R. S., § 5208, declaring it unlawful for National banks to certify any check unless the drawer have the amount thereof on deposit. A PPEAL from judgment of Supreme Court, General Term, First Department, in favor of defendant. Replevin to recover ninety-three bonds of $1,000 each, by executors of John B. Thompson. Lewis Sanders, for appellants. Wm. Allen Butler, for respondent. RUGER, C. J. The uncontroverted proof on the trial established the following facts, viz.: That on the 18th day of April, 1874, Capron & Merriam, stock-brokers in New York, deposited *Affirming 47 Hun, 621. Thompson v. St. Nicholas National Bank. with the defendant, a National bank, ninety-three coupon railroad bonds, payable to bearer, of the par value of $1,000 each, as security for any indebtedness which they then were or might become liable for to such bank, with authority to sell such securities, either at public or private sale, without advertisement or notice, and apply the proceeds in payment of such indebtedness. Upon the same day, and upon the faith of such deposit, the defendant promised to pay Capron & Merriam's checks in favor of third parties, to the amount of upwards of $236,000, and simultaneously certified checks to that amount, which were presented by and paid to the holders thereof during the same day. On Monday, the 20th of April, 1874, Capron & Merriam failed, owing the defendant a balance of account of about $72,000, arising out of the transactions of the 18th day of April, 1874. This sum was made up by charging Capron & Merriam with the amount of the checks certified and paid on the 18th of April, certain other checks, paid through the clearing-house on the morning of that day, and a balance of account remaining unpaid upon the transactions of the preceding day, and deducting therefrom the amount of their deposits, being about $211,000, made on April 18. On the 5th day of May, 1874, the plaintiffs' testator served a written notice upon the defendant to the effect that the bonds in question were his property, and forbidding them from parting with the same, except by his order, and demanding an account showing what lieu the defendant claimed to have on the bonds. Upon the trial the plaintiffs proved that their testator, previous to April 18, 1874, owned such bonds, and on that day, and the day previous, transferred them to Capron & Merriam, to be held as margins on his individual stock transactions. No payment upon the indebtedness of Capron & Merriam to the defendant was ever made, except some small sums received by way of interest, and the receipts from sales of the bonds in question and others held as security for it. Such receipts never amounted to the sum of the indebtedness. No offer to pay such indebtedness was ever made by the plaintiffs' testator, or request to redeem the bonds in suit, or admission of any right in the bonds by the defendant. The defendant never, in terms, refused to render an |