EA.STERN TOWNSmpS BANK
v. VERMONT NA.T. and another.
BANK OF ST. ALBANS
(Uircuit (hurt, D. Vermont.
October 22, 1884.)
BANKS AND BANKTNG-LOAN-FAILURE OF BANK-PAYMENT.
A., the presid'llllt of defendant, a national bank in Vermont, applied to th(t plaintiff, a banking corporation in Canada, for a loan for his railroad of $50,000, which he had been unable to obtain from defendant. Plaintiff's manager told him the money could not be loaned as an individual loan, as its individual loans were too near the limit allowed by law, but that it would deposit that amount with defendant if desired. A. assented, and they agreed the deposit should draw interest at 6 per cent. while it remained, and that bonds should be deposited as security. Plaintiff drew two drafts for the amount on a Boston bank, delivered them to defendant and received the collaterals, and entered the transaction on its books as a loan to defendant. Defendant indorsed the drafts, forwarded them to the Boston bank, from which it received credit for them, and has always retained their avails. About a year afterwards defendant failed, and a receiver was appointed, who rejected the claim Of plaintiff when presented for payment, and defendant brought suit. Held, that the transaction was not a loan to A. individually, but to defendant; that plaintifi was entitled to a judgment, to be paid by the comptroller from the assets ratahly with other claims; and that the amount due should be adjusted as of the time when the receiver was appointed, and so certified by the receiver to the comptroller, to be paid in due course of administration.
At Law. Edwards, Dickerman rf Young and George F. Edmunds, for plaintiff. George W. Hendee and Luke P. Poland, for defendant. WHEELER, J. rrhis cause has,on stipulation of the parties in writing, beeu tried by the court. The plaintiff is a corporation located and doing banking business at Sherbrooke, Canada. The defendant was organized as a national bank under the laws of the United States, located at St. Albans, Vermont. It had seven directors, one of whom resided in Montreal, Canada, and took no active part in its business. Its president owned about three-fourths of its capital stock, and was largely interested as owner of stocks and bonds in several railroads in Canada and the United States. These railroad companies were largely indebted to the defendant on paper iqdorsed by him, and he was individually so indebted on his own paper. As the railroad enterprises turned, the railroad companies, the president, and the defendant were badly insolvent. As was within fair expectation, they were solvent, and were supposed to be so. The president wanted $50,000 to use, and could not be accommodated with that amount by the defendant. He applied to the manager of the plain. tiff, at its banking.house in Sherbrooke, for a loan of that amount, and proposed to put tip bonds of one of the railroads as collateral, and probably stated that defendant had not funds from which to make the loan as a reason for applying to the plaintiff. The manager of the plaintiff told him that it had funds sufficient from which
EASTERN TOWNSHIPS BANK ". VERMONT NAT. BA.NE.
to make the loan, and would do so, but that the individual loans were so large in proportion to its deposits in other banks, and so near the limit allowed, that the loan to him could not be made; that it could deposit in one bank as well as another, and would deposit that amount with the defendant if he desired. He assented to this proposal, and they agreed that the deposit, while it remained, should draw interest at 6 per cent., and that the same collaterals should deposited as security. Thereupon the manager of the plaintiff drew two drafts of $25,000 each in favor of the defendant on the National Exchange Bank of Boston, delivered them to the president of the defendant, and received the collaterals, and entered the transaction in the plaintiff's books as a loan to the defendant. The president made the transaction known to the Montreal director, who made no question about it,. and took the drafts to the banking.house of the defendant, in St. Albans, and delivered them to the cashier in the presence of the vice-president, who were directors, and acquainted them with the transaction, to which neither made any objection, and they received the drafts into the assets of the defendant, and credited the amount as a deposit to the plaintiff in the books of the No other such loan was ever made by the defendant; no vote of the directors was ever taken authorizing or ratifying it; and no conference was ever had among them concerning it, except as stated, and no objection was ever made by any of them to it. The drafts were indorsed in the usual course by the officers of the defendant, and forwarded to its correspondent in Boston, from which it received credit for them, and it has always retained their avails. It is claimed that in reality this was a loan to the president of the defendant, individually, and not to the defendant, and that it was put in the form it was to avoid the limit upon individual loans by the plaintiff. But it is f9und, as a matter of fact, from the evidence, that the loan to the plaintiff was refused because of that limit; that the loan was made to the defendant upon its own credit as a real transaction between the two banks, and not as a cover for any other transaction, and that it was proposed by the manager and assented to by the president, and carried out between them, because it would accommodate the defendant and enable it to accommodate the president. This result was accomplished to some extent, but no loan or advancement of this amount, or of any amounts aggregating this amount, or near this amount, was made by the defendant to the president. It was enabled to accommodate him more by means of this deposit, and did so, but made no particular l!>dvance to him because he procured the deposit to be made. He was endeavoring to promote the interests of all his enterprises, including the defendant as one of them, withont intending to sacrifice that to any of the others; the plain. tiff's manager was intending to ml;1ke what would be for it a proper loan to or deposit witli the defendant. The defendant twice paid interest to the plaintiff on the loan, bringing it up to May 21, 1883,