delivered the opinion of the court.
The Circuit Court held that Cavaroc & Son had pledged the bonds to Sehuchardt & Sons as security for any unpaid balance of account due from the- New Orleans Bank, with a limitation to $100,000 on the amount for which the bonds should be held liable. The unpaid balance was ultimately placed at $195,315.63. The larger part of this balance resulted from charging back the drafts on Seignouret Préres & Co., Honorat & Co., and Dutfoy & Co., which amounted, damages included, to over $180,000. The inquiry therefore presents itself, on this branch of the case, whether Sehuchardt & Sons had a lien upon the bonds to secure these drafts in virtue of an agreement to that effect with Cavaroc & Son.
*382 "When Schuchardt & Sons, on the 9th of October; 1873, refused to deliver the bonds on the order of Cavaroc & Son, they placed their refusal, upon the ground that “ according to your written authority we hold New Orleans city bonds, as collateral security against bank of New Orleans,” and. Wells, a member of the firm, testifies that the only written authority was the letter of Cavaroc of Fehru'ary 15, 1873. ■ The letter thus appealed to as embodying the authority relied on must. be examined in the light of the correspondence of which it-forms so important a part; As early as December, 1871, Schuchardt & Sons had by letter authorized the bank to draw upon • them “ in advance of remittances' to the extent of $100,000, (one hundred thousand dollars,) with the understanding that such drafts are to represent exchange bought and paid for,” and in February, 1873, when the bank asked “are we still authorized to draw d découvert, $100,000, (one hundred thousand dollars,) against purchases of exchange advised by wire,” the„answer was, “ the credit of $100,000, (one hundred thousand dollars,) d découvert was predicated upon the deposit of New Orleans' city bonds, and on their withdrawal we, of course, supposed the agreement cancelled.”
This assertion as- to the deposit of bonds was denied by the cashier, and he then referred Schuchardt & Sons to a letter from the president, and that letter is the one in question. After quoting from Schuchardt’s letter of February 11, their statement that the one hundred thousand dollar credit was predicated on the deposit of New Orleans city bonds, Cavaroc thus proceeds: “.You know that exchange at New Orleans is purchased by making advances until the drafts are delivered, and' it was in order to -accelerate our transactions that we requested that credit of you at that time. In view of your suggestion,. there is nothing to be said, except to authorize you, in case you are uncovered, to treat as collateral security a portion of the bonds in your possession belonging to my firm.” 1 And *383 to this Schuchardt .& Sons responded to the bank, that, “in accordance with the terms therein stated,” (i.e., in Cavaroc’s letter,) the bank might value on them “ ‘ á découvert,’ for a sum not exceeding as maximum $100,000 (one hundred thousand dollars) against exchange purchases.-” Thus the written authority relied on was in no respect different from the understanding in the beginning, as shown by the letter of 1871, that the drafts to be drawn by the bank on the Schuchardts were “ to represent exchange bought and paid for,” and the bonds were to be held under the letters of February, 1873, as collateral to advances by the Schuchardts before remittances of the exchange. And as late as September 19th, 1873, "Wells wrote that Schuchardt & Sons still authorized the bank “to draw against purchases of exchange, and in advance of the remittances, to the extent of $100,000, on the conditions specified in the letter of Mr. Cavaroc of 15th February last.”
“ Exchange bought and paid for ” meant bills drawn against shipments, and purchased by advances made to the shippers upon the strength of documents to be furnished by them with the bills, to repay the advances so made. It was to enable the bank to make such .advances in New Orleans that Schuchardt &■ Sons on their part advanced to the bank, and, to assist the bank, Cavaroc & Son were willing to and did pledge the bonds as collateral, to a maximum of $100,000. The understanding was that the bonds should be held as collateral while Schuchardt & Sons were uncovered, that is to say, not covered by the remittance of exchange purchased, the bonds thus being used to bridge the interval between making the advances and the receipt of the drafts with bills of lading attached by Schuchardt & Sons.
The transactions between Schuchardt & Sons and the bank, were very large, reaching, it is true, only about $700,000, during thé month of September, but amounting to millions during the year; in fact, Wells testifies that sometimes the bank sent “ over a million in one day.”
*384 The parties were dealing in exchange to their mutual profit, and all that Schuchardt & Sons stipulated for, and all that Cavaroc & Son agreed to, was that the bonds should be held as security while the merchandise was being purchased and shipped, and drafts against the shipments transmitted to Schuchardt & Sons in liquidation of their advances.
We do not understand that Schuchardt & Sons were doing business absolutely without risk, nor that Cavaroc ' & Son, in view of the course of business, were regarded as called upon to guarantee Schuchardt & Sons at all events. The latter had the drawers, the drawees, the indorsers and the- merchandise itself to rely on, and there is nothing in the letters or the testimony t'o indicate that, in addition to all this, they demanded, as to such drafts, other security. If a draft had gone forward with bill of lading attached, and the drawees refused to receive the consignment and accept the draft, and were otherwise under no obligation to do so,- and the proceeds of the shipment' sold for less than the amount of the draft, or if the acceptors became insolvent and loss was thereby occasioned, Schuchardt & Sons, though they might, if such was the course of business, charge back the difference to the bank, could not, upon this evidence, claim that these bonds were security to make good a deficiency so created, and, even if they could, no such deficiency is shown'to have occurred.
Upon what basis then can it be held that drafts drawn by the bank directly on Seignouret Fréres & Co., Bordeaux, Honorat & Co., Marseilles, and Dutfoy & Co., Paris, “ unaccompanied by documents,” were secured by the bonds of Cavaroc & Son- and Dumont & Co. by “written authority.”
The drafts on Seignouret Fréres & Co. appear to have been drawn September 17th, 1873, for, with damages, $56,410.26, but the dates of the other drafts are not given,- and the account. between the bank and Schuchardt. & Sons)<5prior to the first of October, 1873, is not before us. The drafts on Dutfoy & Co., amounting, with damages, to $90,256.41, were protested November 29th, December 10th, 13th and ‘19th. The drafts on Honorat & Co.-were protested October 28. No evidence is adduced on behalf of Schuchardt & Sons’ trustee in bank *385 ruptcy as to the length of time on which, these drafts were drawn., We believe we are justified, then, in assuming that it was after the interview between Cavaroc, Jr., ap'd-Wells, placed by the latter as transpiring the last of August or.first of September, when it was agreed that the amounts Of business paper, that is, according to, Wells, “bills of exchange drawn against shipments,” which they would take, Schuchardt- & Sons might limit, and the limitation was directly, imposed of “not more, than £10 | M per- week On Hambre,” and “not more than-fr. 200 | M on first bankers of Paris;” and, further,’that when the bank sent “the,drafts of the bank On. third parties (Havre, Bordeaux, Marseilles, etc., etc.) it must put in the.hands of-Messrs. C.-C. & Son, in’ trust, a de-' posit of securities, there to remain until the acceptance Or- the payment, if we deem, proper to await the payment.”- This was an arrangement made by Schuchardt & Sons and evidenced by a memorandum-prepared, not by Cavaroc, but by Wells. It was not Cavaroc & Son, acting with reference to the bonds, who sought this agreement, but Schuchardt & Sons, acting for their own protection in reference to transactions other than those with w'hich the bonds were connected. The.drafts of the bank on third parties were not exchange bought and paid for, nor were drafts drawn by the bank on Schuchardt & Sons against these bills drawn by it directly on Europe, advances, made by Schuchardt & Sons against “ purchases of - exchange advised by telegraph.” Schuchardt & Sons could have had' no expectation of receiving another set of bills drawn against shipments to repay advances made to the bank on these “ clean ” bills already.in their hands. They must have relied, as to the^e bills, upon the credit of the bank, the indorsers and the draW; ees, and other securities deposited in the hands of Cavaroc & Son; and when Schuchardt, who appears .to,have been out of town, returned, and it was concluded to limit their' opera: - tions, Wells writes -to Cavaroc that they had “ determined to request the bank to limit its exchange business with us to the forwarding of such drafts made by third parties as it shall deem proper to purchase.” There is no intimation up to the 19th of -September that Schuchardt & Sons regarded-the *386 ■bonds as pledged for anything except'the remittance of. exchange created by drafts against shipments. The transactions in purchasing such exchange,, and transactions in the way of accommodation to the bank, ■ or of the purchase of its own drafts on Europe, were kept perfectly distinct, so far as appears. Cavaroc, Jr., testifies that in his interview with Wells, late in August or the first of September, when it was agreed -that if the bank sent its own drafts there must be a deposit of securities to insure their acceptance or payment, no agreement was made, verbal or otherwise, in reference to these bonds, and nothing said about them, other than perhaps a casual remark. Wells does not deny this, although he says he feels “ quite confident they were alluded to.” But for -a resolution purporting to have been passed by the directors of the bank on the 20th of September, there would be absolutely no evidence in this record that the bonds were to be or had ever been held as security for drafts by the bank directly. These bonds did not belong to the bank. They were largely owned by Dumont & Co. They had never been used except upon a direct order, from Cavaroc & Son. A distinct agreement with the latter that they should be held for the debts of the bank must be shown in order to the maintenance of a lien upon them. The resolution does say that the bank, in order to secure its president against “ any eventual loss ” of the bonds “ belonging to the firm of C. Cavaroc & Son, and actually pledged to F. Schuchardt & Sons, agents of the bank at New York, as collateral security for the' payment of all foreign exchange bills sent them for negotiation, and by them indorsed,” thereby authorizes him “ to select as guarantee from the portfolio of the bank such papers as he may think proper, to the extent of (100,000) one hundred thousand, dollars,” and that statement may be inconsistent with the. theory that all the bonds were pledged, for was simply until remittances of exchange actually bought and paid for were made; but when we consider the circumstances under which Cavaroc was situated, that resolution, under which securities to the amount of $100,000 were to be put into his hands, which might be held to secure drafts drawn by' the bank itself, in' accordance with *387 the agreement with Schuchardt & Sons of the last of August or first of September, does not appear to us to overcome the written and other evidence as to the actual transaction'.
There is no element of estoppel about it, and it is a mere . question whether a resolution of that kind, passed when both Cavaroc & Son and the bank were on the brink of bankruptcy, should be taken as evidence of such cogency as to overthrow all the correspondence and testimony .to the contrary. It may go to the credibility of Cavaroc, it is true. He may have told •one story on the stand under oath, and may have told his directors another story in the bank, although it does not appear that he drew the resolution or was consulted as to the particular language in which it should be couched. The facts as we hold them to be were, that the- bonds had been pledged, to the extent of $100,000, as collateral to the remittance of exchange, and that it had been agreed with Schuchardt & Sons, by Cavaroc, on behalf of the bank, that, in relation to drafts drawn by the bank directly," other securities should be put in the hands of Cavaroc & Son to secure such last-named drafts. Cavaroc therefore needed to have .a, resolution of the bank that he might take from its portfolio those additional securities, and the fact that the language of the resolution is broader than the terms of the pledge, or that it was inartificially drawn, or that it misrepresented the ownership of the bonds, does not entitle it to the weight attributed to it on the argument. As against third parties, the terms of a resolution, of the directors of a national banking association, when the exigencies of a financial crisis are upon them, in the attempt to prefer one of the bank’s officers, cannot properly be regarded as decisive upon the question of the facts actually existing in respect to such third parties in a given case, and Dumont & Co. and-the general creditors of Cavaroc & Son ought not to be foreclosed by Cavaroc’s presence when this resolution was passed. Besides, it is not inconsistent with the terms of the resolution, to confine the reference to foreign bills to all exchange actually purchased, in which view the resolution would, simply assert that the pledge was designed to secure, not only the remittance, but the ultimate payment of such exchange, *388 but'could not be stretched to cover “clean” bills drawn by the bank itself. '
The learned judge of-tfi'e. Circuit Court' says : “In short, it is evident from the relations of the parties,* their course of business, the correspondence between them, and the construction placed upon the transactions by Cavaroc himself, that the bonds were pledged to secure Schuchardt & Sons for any overdrafts of the banking association, to the extent of $100,000, which might from time to time arise.. . Such overdrafts were the credit á. déeouveri contemplated by the parties, and constitute the unpaid balance of account due from the banking ássociation to Schuchardt '& Sons.” , •
The relations- of, the parties were that both were dealers in exchange and making money out of it.' The course of business was, advances by the bank to shippers, advances- by Schuchardt & Sons to the bank to enable it to- make -those advances to the shippers, the use of the money by the shippers in the purchase of merchandise, and the remittance of drafts drawn against shipments to Schuchardt & Sons, in return for their, advances. The correspondence between the parties from the first limited the transactions with which the bonds were concerned to exchange actually bought and paid for. This was the construction placed upon those transactions by both of the parties, unless this resolution of the directors of the bank is to be held as conclusive to the contrary. The indebtedness of the bank was not the result of losses- upon any drafts pur-, chased in the regular course of business, but was the result of charging back unpaid drafts, whieh had been drawn by the bank directly upon parties in Europe, without' any accompanying bills of lading. These drafts were discounted by Schuchardt & Sons, apparently in reliance not simply upon the credit of-the bank and the credit of Cavaroc & Son, if they indorsed - such drafts, but .upon the deposit of securities, as against them, in the hands of Cavaroc & Son at New Orleans; and the evidence of Casey;'shows that Cavaroc did undertake to get--and. hold securities for Schuchardt & Sons, as against drafts so situated. . And this- explains -the telegram of -Schuchardt & Sons .to Cavaroc & ' Son of October 9: “Ve insist on yoiir delivering to Keynes the bills receivable held by you in- trust.” •
*389 This drawing by the bank directly on • Europe was either a recent course of proceeding or it was not. If not, it is clear that the bonds had no relation to such prior action. If of recent occurrence, it is equally clear that it was independent of the regular dealings in exchange, in respect to which the bonds were held as security to the extent and under the circumstances defined in the correspondence.
As the bonds in large part did not belong to Cavaroc & Son, it is due to the latter to suppose that they had no intention of subjecting them to the risks now insisted upon; and the intimacy between Cavaroc & Son and Schuchardt & Sons, and' the fact that the bonds were paid for- by drafts on Dumont & Co., whose acceptances for a considerable part of the cost were 'held by Schuchardt & Sons, render the inference a not unreasonable one, that Schuchardt & Sons knew that Cavaroc & Son had peculiar reasons for - not treating the Bonds with the same freedom as other securities; and this is confirmed by their levy -of an attachment against Dumont & Co. upon the bonds, as belonging in whole or in part to the latter.
"We do not concur, therefore, in the view that Schuchardt & Sons had, by special agreement, a lien upon these bonds to secure the drafts drawn on Seignouret Eréres & Co., Honorat & Co.', and Dutfoy & Co.
The bonds were, however, pledged to secure the remittance by the bank of exchange actually bought and paid for. The letter of February -15th authorizes Schuchardt & Sons to treat “ a portion ” of the bonds as such security, to a maximum of one hundred thousand dollars, but what portion is not defined, and "it is evident that Schuchardt & Sons considered all of them as so pledged. There is nothing unreasonable in this, for although the bonds had cost $189,360, yet in the' fluctua-' tions of the market all of them might not have represented a reliable guaranty for more than $100,000.
The answer of Fry sets up that they “ were deposited with-the said Frederick Schuchardt & Sons, as security for any indebtedness or balances Of account which at any time might or could arise in the course of their aforesaid dealings in their *390 aforesaid character with the said Charles Cavaroc & Son and the said New Orleans Banking Association.”
The decree adjudges that Schuchardt & Sons had a lien upon the bonds for the balance of the account of Cavaroc & Son with them, and “ also ” that they held them, to the extent of one hundred thousand dollars, “by virtue of a pledge or hypothecation ” to secure the indebtedness of the bank.
The Circuit Court said, (13 Fed. Kep. 428:) “The bonds having been left by Cavaroc & Son with Schuchardt & Sons, without any special agreement, except the pledge of a portion of them for the New Oiieans Banking Association, those not thus pledged are subject to the banker’s lien of Schuchardt & Sons.” And again, (18 Fed. Kep. 578:) “The terms of the pledge were that the bonds then in the possession of the Schuchardts should be held by them as security for any advance or overdraft which might ultimately exist in the dealings of. the parties, to the extent of $100,000.”
But if the bonds were liable by express' contract for the obligations of the bank,, could they also be made to respond to the indebtedness of Cavaroc & Son, in .the absence of express agreement, by. force of a lien implied from the usage of the business ?
In our judgment, the bonds, being in effect all pledged to guarantee the remittance by the bank of exchange purchased, could not be held by implication' as security for the indebtedness of Cavaroc & Son on a balance of account. The specific pledge withdrew 'them from the operation of the alleged banker’s lien, for it was inconsistent with the presumed intention of .the parties. And, applying the principles Apon which such a lien rests, it is doubtful whether it ever existed in favor of Schuchardt A Sons. Undoubtedly while “ a general lien for a balance of accounts is founded on custom, and is not favored, and j't requires strong -evidence of a settled and uniform usage,- or of a particular mode of dealing between the parties, to establish it,” and “ general liens are looked at with jealousy, because they encroach, upon the common law, and disturb the equal distribution of the debtor’s estaté among his creditors,”-(2 Kent Com. *636,) yet a general lien does arise in favor *391 of a bank or banker out of contract expressed, or implied from the usage of the business, in the absence of anything to show a contrary intention. It does not arise upon securities .accidentally in the possession of the bank, or not in its possession in the course .of its business as such, nor where the securities áre in its hands under circumstances, .or where there is á particular mode of dealing, inconsistent with such' general lien, Brandaō v. Barnett (Common Pleas), 1 Man. & Gr. 908; S. C. (Exch. Chamb. In error), 6 Man. & Gr. 630 ; S. C. (House of Lords), 3 C. B. 519, 532 and also 12 Cl. & Fin. 787, 806; Bock v. Gorissen, 2 De G., F. & J. 434, 443. In this latter case the foreign correspondents of a London firm directed the firm to purchase for them Mexican bonds to a specified amount at a specified price, .and to hold the bonds at the disposal of the correspondents.' The London firm made the purchase and wrote the correspondents that they would, until further order, retain the bonds for safe custody, and it was held that the letters constituted a special contract sufficient to exclude a general lien on the part of the London firm, if they would' otherwise have been entitled to any.
It was held in In re Medewe, 26 Beavan, 588, that where a customer’s security was specifically stated to be “for the amount which shall or may- be found due on the balance of his account” it could not be held for a subsequent floating balance, but only for the then existing balance; and in Vanderzee v. Willis, 3 Bro. Ch. 21, that a- security"'specifically given for a contemporaneous advance of £1000 by the banker was not applicable against an independent' indebtedness of £500 afterwards arising upon an ordinary running account. ,
A bankers’ lien, said Mr. Justice -Matthews, speaking for the court in
National Bank
v.
Insurance Co.,
*392
In
Bank of the Metropolis
v.
New England Bank,
“ Here, then,” said Caton, J., in
Russell
v.
Hadduck,
In
Duncan
v. Brennan,
Subjected to the test of these well-settled- rules, the facts do .not admit of serious doubt as to the correct result.
The bonds were not lodged in the hands of the Schuchardts in the ordinary course of banking^ business. They were sent to'New York for. a specific purpose, and, when that purpose was accomplished, permitted to remain for “ safe-keeping,” and because New York was-a better market than New Orleans, and the express charges for their return very heavy, as is said on one side; and for convenience in procuring loans ■ as is asserted on the other. - But the lo'ans made were always specific loans, and the bonds were always otherwise subject to Cavaroe & Son’s call; and when the Schuchardts themselves loaned, as they did once or twice, it was upon an express pledge of á designáted number of the bonds as' security. Cavaroe & Son were bankers as well as .Schuchardt & Sons, and-the latter appear to have reposed implicit, confidence in them, yet there is no satisfactory evidence that' they extended to Cavaroe & Son any special indulgence in the way of general accommodation. Their cashier thinks he can''specify a case in which the billá of exchange sent by-Cavaroe to Schuchardt were-not-accompanied by bills of lading, but he does not do so, and the acceptances of Dumont &,Co. were on account of the purchase price' of ,the bonds. If, as argued by counsel, there is a presumption, as-between customer and banker, that the secur-' *394 ities or property of the customer, found in the possession of the banker, have been left with him to secure him generally against loss, this is not añ irrebuttable presumption, and each case stands upon, its own circumstances.
.And, since Schuchardt & §ons did not claim at the time of the failure that they had a general lien, but simply that they held the bonds by “ written authority,” “ as collateral security against the bank of New Orleans,” we can arrive at no other conclusion than that Schuchardt & Sons were not entitled to maintain a bankers’ lien against the bonds, for the ultimate debit balance of Cavaroc & Son.
¥e are asked to dispose of the case adversely to appellants upon the ground that they received the remaining bonds and money after the liens decreed in Fry’s favor were satisfied; but such receipt does not oust the jurisdiction. The acceptance by appellants of what was confessedly theirs cannot be construed into an admission that the decree they seek to reverse was not erroneous, nor does it take from appellees anything, on the reversal of the decree, to which they would otherwise be entitled.
Embry
v. Palmer,
The rule as statéd in 1 Daniell’s Chancery Practice, 555, 4th Am. ed., is, that if the.objection of want of jurisdiction in equity is not taken in proper time, namely, before the defendant enters into his defence at large, the court, having the general jurisdiction, will exercise it'; and in a noté on page 550, many cases are cited -to establish that “ if a defendant in a suit in equity answers and submits to the- jurisdiction of the court, it is too late for him to object that the plaintiff has a plain and adequate remedy at law. This objection should be, taken at.the earliest, opportunity. The above rule must be taken with the qualification, that it.is competent for the court ter grant the relief sought, and that it has jurisdiction of the subject matter.”.
In
Wylie
v.
Coxe,
It was held in
Lewis
v.
Cocks,
The decrees a/re-reversed at the cost of Fry,t/r.ustee, in this and the Circuit Court, and the cause remanded for further . proceedings in conformity with- this opini on.
Notes
“Vous savez que le change á New Orleans est acheté en faisant des avances jusqu’á ce que les traites soient livrées et c’est afin d’activer nos rapports que nous vous avions demandé á i’époque, ce découvert.
*383 “ Devant votre observation, il n’y a ríen á clire si ce n’est de vons autoriser a considérer comme sécurité collatérale une partie des 1 bonds ’ que vous . avez á jna niaison, en cas de découvert.”