21 Ohio C.C. (n.s.) 245 | Ohio Ct. App. | 1913
The plaintiff, a national bank whose capital stock was $500,000, by virtue of the federal statutes took the necessary steps to increase its capital to $1,000,-000. The defendant became a subscriber for ten shares of its capital stock, purchased by him at the market price of $275 per share. The bank loaned him $2,750 to pay for this stock, and took the original promissory note .as evidence of that loan, crediting $2,750 as cash paid in on account of its capital stock. A certificate for ten shares of stock was made out in the name of G. E. McDonald, and instead of his endorsing a transfer in blank on this certificate, an irrevocable power of attorney was executed by him appointing The Second National Bank as his attorney to sell, assign, transfer and set over all or any part of said stock. This stock, with such power of attorney, was held as security for said loan.
Defendant paid twelve quarterly instalments of interest on said note, at five per cent., which were credited on the back of the note, the first instalment being credited February 1, 1909, and the last one on the original note November 1, 1911. There is also a credit on the note sued upon of $47.80, paid August 23, 1912. McDonald received dividends on this stock as declared by the bank.
The petition is the usual form on a note. Defend
Defendant alleges that said statements were not true and that he never received the stock, and the note was therefore without consideration; and he further pleads that the act of receiving said note in payment for stock subscription was ultra vires on the part of the bank. And by way of cross-petition defendant asks for a judgment against the bank for twelve quarterly payments of interest upon said note, of $41.25 each, amounting to $495.
The allegations of this answer were denied by a reply.
At the close of the evidence the court below refused plaintiff’s motion for an instructed verdict in its favor, but granted the motion of the defendant for an instructed verdict in his favor without finding any money due to him.
The evidence shows that Mr. McDonald, who was a building contractor, had erected the new bank building for plaintiff, in which it was doing busi
As stated above, McDonald knew that the dividend at the current rate would not quite pay the interest, and there would have to be a material increase in the rate of dividend to have it not only carry the interest but allow payments on the principal of his debt to the bank.
Defendants argue that the increase .of capital stock by the bank was illegal and therefore invalid, because a promissory note had been taken in payment of the stock when cash was required under Section 5142, Revised Statutes of the United States. This issue of capital stock was authorized by the comptroller of currency.' His action is conclusive and its legality cannot be questioned by defendant. Latimer v. Bard, 76 Fed. Rep., 536.
It is argued by defendant that this was virtually a loan made by the bank, taking its own stock as collateral, and that such a loan, being forbidden by law, was ultra vires and therefore cannot be collected back by the bank. Such a defense by one who has given a note and secured a loan for it will not be allowed. National Bank v. Stewart, 107 U. S., 676.
It is also argued that defendant received no consideration for the loan, as the stock was never in
It is argued that there is no individual account with McDonald shown in the books of the bank; that one should have been opened in which he should have been credited with the money loaned and debited for the amount paid for the stock, the entries offsetting each other end thus closing his account, these, in addition to the entry in the capital stock account, showing the receipt of cash in payment for the stock sold. This is a matter of bookkeeping at best, but it does not seem to us necessary to open any account with McDonald and have cross-entries therein balancing each other. From the evidence it was evidently treated as a cash loan to him, just as though the cash had been counted out to him when his note was taken and then counted back by him to pay for the stock. The entry crediting capital stock, given in evidence, seems to be all that Wás necessary in this transaction, in addition to the entries in bills receivable accounts.
As there is no valid defense to the note shown by the evidence, the court below was in error in instructing a verdict for the defense and refusing to grant plaintiff’s motion for an instructed verdict in its favor.
The judgment below is reversed, and judgment will be entered here for plaintiff.
Judgment reversed, and judgment for plaintiff.