No. 5 | 3rd Cir. | Nov 2, 1894
By this suit the receiver of the Spring Garden National Bank sought to compel Simons Bros. & Co. to pay a promissory note for $5,000, dated February 13, 1891, and payable three months after date, made by them to their own order, and by them indorsed, for which they had received no consideration, and
The Spring Garden National Bank was a member of the Philadelphia Clearing-House Association. By a rule of that institution, each member thereof was required to keep on deposit at the clearing house collateral security for the payment of its daily' balances upon exchanges. The note in suit was procured from the makers by Francis W. Kennedy, the president of the Bpring Garden National Bank, avowedly for use by tin; bank as a deposit at the clearing house to secure its daily bill ¡mees, and it was actually so used by the bank. By uncontradicted evidence if was shown that, by 1he settled course of the business of the bank, its president, Mr. Kennedy, was permitted to borrow money for the bank. Indeed, it appeared that he was in the constant habit of thus borrowing money for the use of the bank. Furthermore, it was distinctly shown that in the actual management of the hank he exercised entire control by the sufferance of the directors. The proof was complete that in all the affairs of the bank he was allowed to act in Its behalf according to his own discretion. In the fall of the year 1890, at a time of general financial stringency, Mr. Kennedy borrowed for the bank, from Bimons Bros. & Go., their four promissory notes, each for the sum of §5,000, for use by the hank as collateral security in the clearing house1, and gave them a receipt signed by him as president, stating that the notes were for the user of, and were to be paid by, the bank. At that; time he stated to Millions Bros. & Co. that, the bank had plenty of “small business paper,” which he would not “care to offer in the clearing house,” and for their protection he promised “to set aside twenty thousand dollars of that paper.” The good faith of Bimons Bros. & Co. in the transaction is conceded. The note in suit was a renewal of one of the four above-mentioned notes. Two others thereof were returned to the makers before the bank was dosed. One of tin1 four, or a note given) in reneiva.1 thereof, was held by the clearing house when the bank failed; and it the makers settled, paying the money to the edearing- house!. The “Offering Book” eel' the bank, under date of November 21, 1890, had an entry indicating that thee original note, of which the onee in suit was a renewal, was discounted as upem the offer of Bimons Breis. & Co. But it appears that on the previous day, by the direction e>f the presídeme, 3,ir. Kemnedy, the proceeds of discount ha el be'en eiarried to his individual e.-redit. lie did not, however, draw out the money, and the hank was not damnified eitherwise than by this entry of eweelit in the president's ovetrelrawn account.
rpon the indisputable fads, it seems to us that neither the bank nor íes receiver earn be esteemed a bema, fide befideu* of the; note; in suit, as against, the makers. The ree:eiver has no distinct title erf his own, but is edenhed with the rights emiy of the hank. Scott v. Armstrong, 148 U. S. 499, 13 Sup. Ct. 148; Morris’ Appeal, 88 Pa. St. 368. Now, we eeannerf separate the hank from its president without violas big established principle's, and eleiing rank injustice to innocent
“His authority may be by parol and collected from circumstances. It may be inferred from the general manner in which, for a period sufficiently long to establish a settled course of business, he has been allowed, without interference, to conduct the affairs of the bank. It may be implied from the conduct or acquiescence of the corporation, as represented by the board of directors. When, during a series of years, or in numerous business transactions, he has been permitted, without objection, and in his official capacity, to pursue a particular course of conduct, it may be presumed, as between the bank and those who, in good faith, deal with it upon the basis of his authority to represent the corporation, that he has acted in conformity with instructions received from those who have the right to control its operations.”
These views are applicable here, and, we think, are controlling. It will be perceived that it was part of the arrangement between the bank, through its president, and Simons Bros. & Co., that other, smaller notes were to be set aside by the bank for the protection of Simons Bros. & Co. Had this actually been done, it could not have been contended with any show of reason that the transaction was impeachable. But why should the failure of the bank to fulfill its obligation prejudice the defendants? The note was borrowed for legitimate use at the clearing house, and the arrangement, as a whole, was open to no valid objection. We are not, then, disposed to lend a ready ear to an argument based on supposed public policy and the doctrine of ultra vires. The bank has had the full benefit of the arrangement, and it cannot now be repudiated without grievous wrong to the defendants. It has been more than once authoritatively declared that a national bank cannot set up its want of legal capacity to escape a just responsibility. Bank v. Case, 99 U.S. 628" court="SCOTUS" date_filed="1879-04-21" href="https://app.midpage.ai/document/national-bank-v-case-89992?utm_source=webapp" opinion_id="89992">99 U. S. 628; Bank v. Graham, 100 U.S. 699" court="SCOTUS" date_filed="1880-03-22" href="https://app.midpage.ai/document/national-bank-v-graham-90082?utm_source=webapp" opinion_id="90082">100 U. S. 699.
Our conclusion is entirely consistent with the ruling in the case of Bank v. Armstrong, 152 U.S. 346" court="SCOTUS" date_filed="1894-03-12" href="https://app.midpage.ai/document/western-national-bank-v-armstrong-93837?utm_source=webapp" opinion_id="93837">152 U. S. 346, 14 Sup. Ct. 572. In their facts the two cases are essentially different. In the case referred to, the vice president, without any authority whatever, undertook to borrow an enormous sum in the name of his bank. The transaction was out of the ordinary course of business, and the bank received no advantage therefrom. The judgment of the circuit court is affirmed.