280 F. 879 | M.D. Ala. | 1922
Tlie plaintiff, the Portsmouth Cotton Oil Refining Corporation, sues the defendant, the Fourth National Bank of Montgomery; the complaint containing the common counts including the count for money had and received by the defendant to the use of tiie plaintiff, and also special counts whereby the plaintiff seeks to recover damages growing out of a transaction had between tlie plaintiff and the Montgomery Oil & Feed Company (hereafter named by its initials), m which tlie latter sold to the plaintiff a tank or quantity of oil represented and guaranteed to be of a certain grade or quality. The M. O. & F. Co. drew upon the plaintiff a draft therefor in the sum of $9,292.50 and attached the same to the bill of lading for the oil, and this draft was paid in due course and in advance of its receipt of the oil. The draft was payable to the Fourth National Bank of Montgomery, who indorsed and transmitted it for collection for its account. Plaintiff charges that the oil, when received, was inferior in grade and quality, that in consequence thereof it sustained the damages sued for, and the plaintiff insists further that the M. O. & F. Co. was merely a nominal party, and that tlie defendant, the Fourth National Bank, was
The M. O. & F. Co., on or about June 8, 1918, executed to the defendant bank its demand note in the sum of $7,000, which bears a credit on May 18, 1919, of $4,000, and on May 15, 1918, likewise its demand note in the sum of $30,000, which note bears a credit on May 8, 1919, of $10,000. Oh the organization of this corporation the management thereof was turned over by the representatives of the bank to one Stanton, who had general charge thereof during its operation. Stanton from time to time consulted with the president and also the vice president and the finance committée of the defendant bank with reference to the business affairs of the oil and feed company, and daily, made report of its operations to the president or vice president of the defendant bank. In the conduct of its business the M. O. & F. Co., on or about the 1st of May, 1919, sold and shipped to the plaintiff a tank of oil under a written contract or agreement, whereby the M. O. & F. Co. guaranteed the grade and quality of the oil. A draft was "drawn
This corporation, the M. O. & F. Co., was for a time operated in the manner which I have stated, and subsequently its property was leased to another concern- — a corporation organized by independent parties. The M. O. & F. Co. thereupon ceased business and became and is insolvent. The defendant, the Fourth National Bank, itself entered into the lease contract, and by the provisions thereof granted to the lessee an option to purchase the assets of the M. O. & F. Co. It does not appear that the M. O. & F. Co. really owned any assets other than those that formerly belonged to the Planters’ Cotton Oil Co. and that were transferred to the M. O. & F. Co. by the defendant bank.
It is manifest, upon a consideration of the whole evidence, that the defendant bank resorted to the device or plan of organizing the corporation and directing its management, in the effort to recoup the loss which it had sustained on account of the original indebtedness to it of the Planters’ Cotton Oil Co. The M. O. & F. Co., as I have stated, had no..assets or property, except that conveyed to it by the defendant bank, and no credit, except that which was supplied in its formation and subsequently by the defendant bank from time to time as occasion required, and it must be admitted that from the very beginning and afterwards such company was in fact a mere subsidiary of the defendant bank. It is not denied that the plaintiff has suffered the loss and damage resulting from the wrong done it in the sale of the oil, which the M. O. 8i F. Co. nominally sold, but the proceeds of which went to the defendant bank. Primarily, of course, the M. O. & F. Co. may be liable to the plaintiff for this damage, but the plaintiff has its election to pursue either that cornnany or the party who in reality is responsible for its obligations. Upon the receipt by the defendant bank of the proceeds of the draft drawn upon the plaintiff, the defendant bank credited the proceeds to certain past-due obligations of the M. O. & F. Co.; but in doing this it had full knowledge of all the facts and circumstances relating to the transaction, and in legal contemplation received the benefit thereof.
*882 __ “One of the defenses set up in the answer was that the contract between Nicholson and Perry, as representing the bank, was an agreement and transaction into which the bank could not enter, that it was ultra vires the bank, and that the bank is not liable for any of* its acts under that contract; and this is now relied upon. That this position cannot be maintained, where the proceeding is to recover moneys which have gotten into the hands of the bank but belong to the plaintiff, we need only to call attention to what is said in Louisiana v. Wood, 102 U. S. 294, 299, * * * and Citizens’ National Bank v. Appleton, 216 U. S. 196.”
And in the case of First National Bank of Aiken v. Mott Iron Works, 257 U. S., 42 Sup. Ct. 286, 66 L. Ed., the court said:
“In such circumstances, whether the contract is valid or not, the contractor is accountable to the contractee, up to the amount of its undertaking, for the proceeds coming to his hands from the contractee upon the inducement of the contract.” Cases cited.
In this case,: therefore, the plaintiff is entitled to recover the amount for which it has declared; and as the case has been fully tried upon the merits, the distinction between a recovery on the guaranty, as having been necessarily incident to the business of banking, and a recovery of the amount received on account of the guaranty becomes purely formal. To the same effect is the well-considered case by the Supreme Court of the United States in Citizens’ Central National Bank v. Appleton, Receiver, 216 U. S. 196, 30 Sup. Ct. 364, 54 L. Ed. 443.
It may be observed, however, that the conduct of the defendant bank in its efforts to recoup its losses by resorting to the organization of the M. O. & F. Co., in furnishing its entire capital and according to it a credit or checking account, calls for no sort of criticism; but the device and method employed cannot relieve the matter of its true legal aspect or character.
There are many cases decided by the Supreme Court of the United States and other federal and state courts to the effect that, while a corporation such as a national bank may not as amoriginal or independent enterprise organize and conduct the affairs of a separate corporation, yet it may do so for the bona fide purpose of recouping losses; and when it becomes such owner and proprietor that enterprise will be regarded as a mere trade-name, and the real owner and operator cannot escape liability on the ground that the transaction was in excess of the charter power.
None of the defenses presented here are tenable, and under the application of plain legal principles the plaintiff, in my opinion, is entitled to recover. Accordingly, the request of the plaintiff for a directed verdict in its behalf is granted.