The Seattle
170 F. 284
9th Cir.
1909
Check Treatment
GILBERT, Circuit Judge

(after stating the facts as above). The appellant claims priority for its mortgage, first, because, the appellee’s bill of sale not having been duly recorded as a chattel mortgage, the record thereof was not constructive notice to appellant’s assignor, 'Watt; and, second, it was not shown that. Watt ever had actual notice thereof. In view of.the contract of December 12, 1899, as we construe it, it is not material to this question of the priority of the liens whether the mortgage to the appellee was duly recorded, or was ever recorded. The provisions o'f that contract, to which Watt was a party, import to him notice of the mortgage to the bank and of its terms and conditions. Watt "did not appear as a witness in the case, and his *287whereabouts could not be ascertained. There is but little testimony in the record as to actual notice to him of the mortgage to the bank; but it is enough to say that the mortgage was expressly authorized by him by the terms of the contract above referred to. He knew that the other parties to that contract, who were to furnish the money to build the dredger, were to obtain the money for that purpose upon a mortgage. He expressly authorized them to obtain it in that manner. He knew that the dredger was constructed, and that it was used upon the contract for which it was to be con Articled, for he had charge of the work. What additional knowledge did he need to possess?

But it is said that Watt expressly authorized the other turo parties to the contract to execute th.e mortgage, and that when it was signed his name was attached by one of them only, and for that reason the power which he gave to mortgage the property was not lawfully exercised, and his interest in the dredger was never subjected to the mortgage. This argument ignores the nature of the contract under which the mortgage was given. That contract was not a simple power of attorney to the other parties thereto to act for Watt. It was the grant of an express power to the bridge company to incumber the property as their own act to effectuate a right vested in them — -a power coupled with an interest. They were to borrow the money to build the dredger and to mortgage it. It was a power not subject to revocation. It was not a personal right, to be exercised only by the particular persons who were then parties to the contract; but it was a right which belonged to the copartnership, which owned an interest in the vessel, and there is nothing to show that Watt ever questioned the validity of the mortgage, or objected to the manner in which the power was executed. It would have been good between the parties, and binding upon Watt, if liis signature had not been attached at all.

The paid-up capital stock of the hank was but $150.000, and under section .“200 of the Revised Statutes (U. S. Comp. St. 1901, p. 3494) the bank was forbidden to loan to a single borrower an amount greater than one-ienth of the capital stock actually paid in. It is not contended that because, in violation of this statute, the bank loaned to the bridge company an amount greater than $15,000, the debt was not enforceable against the borrower; but it is contended that Watt had the right to assume that the bank would loan the bridge company no more than was permissible under the statute, and that therefore the appellee should he limited in its participation in the fund in the registry of the court to the amount which the bank was authorized to loan. We do not see upon what principle this proposition can be sustained. The law has imposed no penalty upon a national bank for its failure to obey the restriction, unless it be that its charter thereby becomes subject to forfeiture under section 5239. A court may not inflict penalties other than those which are imposed by statute. The bridge company could have made no defense in the present case on the ground that the bank had violated the statute. Gold Mining Co. v. National Bank, 96 U. S. 640, 24 L. Ed. 048. Wherein is the appellant in a better situation? Watt expressly authorized the bridge company to pledge his interest in the dredger to secure money to build the same and to carry *288out the dredging contract. There is positive and direct and uncontra-dicted testimony in the record that Watt knew that the bank was financing the building- of the dredger. He must have known that the amount necessary for that purpose would largely exceed $15,000; for it is not disputed that it was understood, at the time of entering into the contract on December 12, 1899, that the cost of building the dredger then contemplated would be $60,000, and that the plans were subsequently changed, and a larger and more expensive dredger was constructed. -From the very nature of the circumstances, if there were no other proof, knowledge must be imputed to Watt of the extent of the indebtedness 'incurred under his contract with the bridge company and of the bank to which it was owing.

The principal question is whether the appellee’s mortgage shall be held to cover advances made by the bank after the date of the appellant’s mortgage. The mortgage to the bank is in the form of a bill of sale, and is given “in consideration of the money heretofore advanced * * * for the construction of the dredge hereinafter mentioned, and such further advances as may hereafter be made.” Neither the amount so advanced, nor the amount thereafter to be advanced, is stated in the instrument. If Watt had not been a party to that bill of sale, and were not chargeable with full notice of the sum which had been advanced by the bank, very different questions might be presented ; but he is to be' charged with notice that at that date the bank had advanced $50,517.35, and, although the limit of future advances was not fixed, there can be no question that, so far as the rights of Watt as a second incumbrancer are concerned, the mortgage was sufficiently definite to protect the bank on its account with the bridge company, on which, from time to time, credits and debits were made, up to the amount which was due the bank at the time when the mortgage was made. Except in one or two states, where it is prohibited,, a mortgage may be made to secure future advances to the mortgagor, which shall become a first lien for the amount actually loaned, although a part or all thereof be not advanced until after a subsequent lien shall have attached; and such is the law in the state of Washington. Home Savings & Loan Ass’n v. Burton, 20 Wash. 688, 56 Pac. 940. But where, by the terms of the first mortgage, as in this case, it is made optional with the mortgagee whether tp make or refuse future advances, there is some diversity of decision on the question whether he will be protected beyond the sum which he shall have actually loaned or advanced at the date when a junior lien is placed of record. By the decided weight of authority, however, and we so hold, such future advances, although optional, are within the lien of the mortgage, and prior to that of a second mortgage, if they were made without actual notice of the second incumbrance, and the recording of a second mortgage does not import notice to the first mortgagee. Ackerman v. Hunsicker, 85 N. Y. 43, 39 Am. Rep. 621; Shirras v. Caig, 7 Cranch, 34, 3 L. Ed. 260; Tapia v. Demartini, 77 Cal. 383, 19 Pac. 641, 11 Am. St. Rep. 288; Savings & L. Society v. Burnett, 106 Cal. 514, 39 Pac. 922; Davis v. Carlisle, 142 Fed. 106, 73 C. C. A. 330; Heintze v. Bentley, 34 N. J. Eq. 562; Rowan v. Sharp’s Rifle Mfg. Co., 29 Conn. 282; McDaniels v. Colvin, 16 Vt. 300, 42 Am. Dec. 512; Frye v. Bank of Il*289linois, 11 Ill. 367; Ripley v. Harris, 3 Biss. 199, Fed. Cas. No. 11,853; Anderson v. Liston, 69 Minn. 82, 72 N. W. 52; Schmidt et al. v. Zahrndt, 148 Ind. 447, 452, 47 N. E. 335, and cases there cited.

There is no proof in the record, and it is not claimed by the appellant, that the bank ever had actual notice of the mortgage to Watt. The record shows, moreover, that when the appellant purchased his mortg-age he had actual knowledge of the first incumbrance. In view of these facts, and the law applicable thereto, we find no error in the decree of the court below.

The decree is affirmed.