office the salary or annual compensation attacbeq to which. to the sum of two thousand five hundred dQllafs." , :It is further ,contended that ,section of the appropriation act ispr013pective QI\lY, and doe!t ,pot affect persons in office when it was supportin P.eoplev. Green, 58, N. Y. 295; but that point-need not be here discussed. Mr. in t4e case at. bar. Shi,eld$,shoul(}pl'(),(feed as
iroircuit Court of
ADAMS et aI. October 12, 1894,)
bank organlzed 1a trust and deposit COm-
IN80LV,EN.T BANKS-+LuBILITIlt8 ...... ORGANIZATION 011' TRUST AND DEPOSIT COMp,url: ,TO ElfBLIC. .: i ·
of the lat;ter were as belonging to the bank, and were abstracted from time to time to III:eet its nec.essities. Held, that the organiand use IIllide of tlte' trust company 'was a plain fraud on the public, and, on·: the failure of both institutions, the trust company was to be' treated .· as ,it creditor 'of. the bank ,to the amount of the funds so
1laJl.k, owned aU. the trust company's stock, and the deposits and securi-
Pauy to "aid 'the bank in itssttuggle for exililtence." The two institntionshad the same officel'l'l,lmd did business in the same building. The
Appeal from: the OircuitOourt of the United States for the Eastern District of Pennsylvania. Thi'S was an action by Josiah R. Adams, receiver of the Penn Safe Deposit & Trust Oompany,and others, against Benjamin F. Fisher, as receiver of the Spring Garden National Bank, and against the bank itself, to establish a liability on the Jlart of the bank for certain funds of the trust and deposit company, which were used for its benefit The circuit court entered a decree for complainants, and respondents appealed. cloh,n R. W. Pettit, and H. B. Gill, for appellants. M. E;ampton Todd, Samuel B. Huey, and Thomas R. Elcock, for appellees. Before AOHESON, OircuitJudge, and BUTLER and GREEN, Distriet Judges. BUTLER, District Judge. The Spring Garden National Bank and· the Penn: Safe, Deposit. & Trust Oompany were substantially one concern. .The latter was organized as an adjunct to the former. Its stock was oWlledby the'bank, held in the names of the bank's directors, its business was conducted in t;hesame building as the bank"s,and the; officers of each were tbe, same. F. W. Kennedy the president of both, after . describing the manner of organizing' the trust company and the purpose it was intended to serve, says it
"Radone purpose, and that was to aid the bank in its struggle for exThere was I mUde use of the trust company as
mi instrument to that Jud. If it had tor the stringency and the carrying out of this plan of to receive deposits in the trust company, these deposits would have been made by the different individuals in the bank, and would now be among the liabilities of· the Dank, and the loans transferred would now be' the assets of the bank. .. * * . "I looked upon it as OriEl' and the same institutlon, and also I looked upon these transfers as a temporary matter, which would be undone as soon as business resumed its normal condition. It was a temporary matter to bridge over the financial stringency and panic, but the 'Keystone Bank failure and Bardsley trouble coming increased thll panic, and there was nothing for me to do but to' let the bank go down. * * * . "Q. Then, if 1 understand you correctly, in dealing with the assets of the bank and the assets of the trust company in borrowing money and receiving deposits, you dealt with them as if they belonged to one and the same institution? "A. Yes; I clearly did. "Q. And that one institution was the national bank? "A. Yes. "Q. The other being merely an adjunct or instrument? ·'A.·Yes."
From time to time, as the bank's necessities required, the funds and securities of the trust company were transferred to the bank, so that when the receiver 'took possession he found little in its vaults.. He therefore brought this suit to have the bank declared responsible for the property so transferred. After testimony had been heard the defendant admitted liability for the principal part of the claim; whereupon the following decree was entered:
"And now. November 21. 1893, this cause having been heard on bill answer and proofs. but upon agreement of counsel as to all matters hereby decreed, except as to so much of this deeroo as relates to 'note of Francis W. Kennedy, dated November 18, 1889, for ,the sum of $15,000,' and as to this latter matter the cause having been. now fully considered. it is "Ordered and decreed that Josiah R. Adams, as receiver of the PenD Safe Deposit and Trust Company is a creditor of the Spring Garden National Bank of the City of Philadelphia in the sum of one hundred and seventy-('ight thousand dollars, represented by the following obligations, namely: "Note of Nelson F. Evans, dated December 10, 1889, for the sum of $25,000. "Note of Van Gunden & Young, dated August 13, 1886, for the sum of
"Note of Van Gunden & Young, dated January 2, 1891, for the sum of
"Note of Francis W. Kennedy, dated April 9, 1891, for the sum of $37,500. "Note of Alfred C. Rex, dated October 23, 1890, for the sum of $37,500. "Note of Francis W. Kennedy, dated November 18, 1889, for the sum of $15,000; ttmounting in all to the sum of one hundred and seventy-eight thousand dollars; and it is further "Ordered that the plaintiffs shall deliver to the defendant B. F. Fisher, as receiver of the Spring Garden National Bank, the above set forth obligations together with the following collateral securities, namely; 465 shares of the capital stock of the Deiaware and New England Company, which is collateral to the note of Nelson F. Evans, for $25,500,. and 130 shares of the capital stock of the same company which is collateral security to the note of Francis W. Kennedy, for $15,000; and it is further "Ordered that the following collateral security, namely; 312 shares of the capital stock of the Hero Fruit Jar Company, as collateral security to .the note of Van Gunden & Young. for $37.500; 312 shares of the capital stock of the same company as collateral security to the note of Francis W. Kennedy, for $37,500, 312 shares of the capital stock of the same company, which is collateral security to the note of Alfred C. Rex, for $37,500, and 280 shares of the capital stock of the Delaware and New Company which is collateral security to the note of Van Gunden & Young, for $25,000, which
the hands Qf,B. Fisher. as receiver of the SI/ring, Garden National Bank, be retained and appUe<l J>y; him, as such receiver. "And It is further ordered, that the sl\.id J. R. Adams, as receiver as aforesaid rata distribution of the assets of ,the said Spring lsentltled to Gll.rden National Bank of the Citl, of }?hiladelphia, and the ;receiver of said national bank, will payaud; accordingly the amount ascertained toibeduethe Penn Safe DeposJt ,and' 'l'rust,Company by this decree, in addi· tion to the sum of thirty-four thousand, Jline hundred and three and seventyfOur one-hundredths doll8.l"s;which appeared as a deposit to the credit of the P6nn Safe Deposit and Trust Comp@.i on the books of the Spring Garden 'Natlrinal'Bank, which has ibten alrealiyproved and dividellds paid thereoll. "An"d, it, iS',fUrther or,d,e, '" al1d ,dec,ree, ,' that there is due alld OWillg from the ,d,,' SprfugGarden Natlonal (If of Philadelphia the sum of two hUndred' and twelve thousand, nille l\undred and three dollars apd seventyfbur eents;'belng the total of ifhe afori:!said sums of Olle hUlldred and seventy.eight thousand dollars for notes and thirty-four thousand nine hundred and three dollars and sevent:v:-four cents, ,for amount of deqt proved, together with Interest from April 9; 1891, amounting in all to the sum of two hundred and forty-four thousand nine hundred and three dollars, and seventy-four cents, unto Josiah R, Ad,ams,as receiver of the Penn Safe Deposit and Trust Company, plaintitr."
decree aD litRPf;!& was taken on behalf of the bank, and ,.errors, were asSigned. ,The only one pressed however, is that Which relates to much of the decree as renders the bank the abstrl:tction of $15,000 worth of stock deposited as secW:ity for Kennedy's worthless note, in that sum. , The this transl:tction do not differ materially from those respecting the other covered by the decree; and the batik was justly held responsible for it. The responsibility arises not only out of the fact that the stock was abstracted by its president for its benefit,and the proceeds applied to its use, but out of the circ1lUlstance that it was done in pursuance I\)f the bank's scheme in organizing the trust company and its practice in dealing with its funds, and that it must therefore be treated having been done with its knowledge and approbation. It is onimportant that Kennedy owed the bank money and that the amount raised from the stock was credited to him. The bank was in trouble and the sto,ck was taken for and applied to its relief, in pursuance of its design in organizing the trust company and its practice in dealing with it. The organization of the company and tht> made of it was a plain fraud on the public and depositors, for the consequence of which the decree justly makes the bank responsible. It is therefore affirmed. Fr0ni:
AMERICAN WOODEN-WARE CO. v. STEM at. at.
(Circuit Court, S. D. New' York.
WRITB-BERVIClIlQN FOREIGN CORPORATION.
July 14, 1894.)
Serviceoti toreign corporation by serving its secretary while temporarily in the state in attendance on a federal court to testify as a witness in' a cause to whiCh such corporation was a party, held invalid, it appearing ,that such corporation did no business in the state except selling goods thl'()ugh a traveling salesman, and In one instance buying a