Reconstruction Finance Corp. v. Central Republic T. Co.

• Decision Date: 07 November 1936
• Docket Number: No. 14189.,14189.
• Citation: 17 F. Supp. 263
• Parties: RECONSTRUCTION FINANCE CORPORATION v. CENTRAL REPUBLIC TRUST CO. et al.
• Court: U.S. District Court — Northern District of Illinois

17 F. Supp. 263

RECONSTRUCTION FINANCE CORPORATION v. CENTRAL REPUBLIC TRUST CO. et al.

No. 14189.

District Court, N. D. Illinois, E. D.

November 7, 1936.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John L. Hopkins, O. John Rogge, James A. Sprowl, George F. James, Jr., Floyd M. Rett, and George E. McMurray, all of Chicago, Ill., and James B. Alley, Max O'Rell Truitt, Harold Rosenwald, and Hans A. Klagsbrunn, all of Washington, D. C., for plaintiff.

Henry J. & Charles Aaron, Ader & Ader, Maurice Alschuler, Altheimer, Mayer, Woods & Smith, Amberg, Ott, Dahlin & Livingston, George S. Anderson, Leonard A. Ash, Ashcraft & Ashcraft, Norman Asher, Baldwin & Rugen, Maurice A. Barancik, and John Potts Barnes, all of Chicago, Ill., F. W. Barrett, of Springfield, Mo., and K. B. Barrett, William C. Bausch, Alfred W. Bays, Beach, Fathchild & Scofield, Alfred Beck, Bell, Boyd & Marshall, Albert Belshe, Berger & Newmark, Russell T. Berry, E. A. Biggs, Sr., George E. Billett, Bither & Bither, Guy M. Blake, Arthur E. Boroughf, George G. Both, L. M. Bowden, Preston Boyden, Boyle, Murphy & Nelson, Brelin, Britton & Landon, Brewer, Smith & Farrell, Bernard J. Brown, Isidore Brown, Bryant, Roberts, Hwass & Lewe, Geo. T. Buckingham, John C. Bulger, Burke, Jackson & Burke, D. F. Bustin, Butler, Pope, Ballard & Elting, Butz von Ammon & Marx, August J. Calcagno, Cameron & Heath, Campbell, Clithero & Fischer, Irving B. Campbell, Carnahan, Slusser & Mitchell, Castle, Williams & McCarthy, Cattell & Waldron, Chadwick & Johnson, Chapman & Cutler, Joseph Chavkin, Wm. T. Church, Ernest W. Clark, H. J. Clark, Charles L. Cobb, Cohen, Tomas & Cohen, Meyer Cohn, Seymour N. Cohen, Concannon & Dillon, Alfred M. Cordell, Cummings & Wyman, Cummins, Hagenah & Flynn, Cutting, Moore & Sidley, Dankowski & Dankowski, Percy B. Davis, Decker, Golden & Perlman, Thomas G. Deering, Defrees, Buckingham, Jones & Hoffman, Dent, Weichelt & Hampton, Donald B. Dodd, Homer A. Dodge, Dunbar & Rich, Eckert & Peterson, Ellis & Hackett, Mark H. Ellis, Samuel A. & Leonard B. Ettelson, Herman Fabry, Harold A. Fein, Fischel, Kahn & Heart, Thomas H. Fisher, William J. Flaherty, A. L. Flynn, Lee J. Frank, Bernard Allen Fried, Robert Friedlander, Herbert J. Friedman, Albert W. Froehde, A. S. & E. W. Froehlich, Gallagher, Rinaker, Wilkinson & Hall, Charles J. Gallagher, Gann, Secord & Stead, Gardner, Carton & Douglas, A. R. Gates, Demetrius A. Geroulis, J. T. Gilbert, George Gillette, James R. Glass, Harold M. Goldstein, Ivan B. Goode, Gordon, Pierce & Edmonds, George A. Gordon, Henry L. Graf, Charles F. Grimes, Grossman & Edelstein, Samuel P. Gurman, J. Milton Guy, Jr., Nathan Haffenberg, Albert E. Hallett, Jr., Jacob G. Hamer, Walter Hamilton, Oscar Wycliff Harman, Heile, Cavender, Milchrist & Kaiser, Heineman & Langsett, Ernest J. Hewitt, Richard Hill, Jr., Charles S. Hirsch, Harold H. Hollowick, Samuel C. Horwitz, Arthur J. Hughes, John E. Hughes, Harry D. Irwin, Jacobson, Merrick, Nierman & Silbert, M. A. Jersild, Johnson, Johnson & Johnson, Johnson, Swanstrom, Wiles & Clawson, John E. Johnson, Samuel E. Johnson, William R. Jordan, Bernard F. Johnston, Roy Juul, Kamfner, Halligan & Marks, I. J. Karlin, Samuel Kassel, G. A. Kelly, H. E. Kelly & Wm. M. Kelly, Kerner, Jaros & Tittle, Kirkland, Fleming, Green, Martin & Ellis, Kirkland, Tollkuehn, Finn & Smith, Knapp, Beye, Allen & Cushing, Morris Kompel, Edward H. Kubitz, Edward K. LaTocha, Urban A. Lavery, Samuel T. Lawton, Lederer, Livingston, Kahn, Adler & Adsit, John M. Lee, Morris Leibman, Levinson, Becker, Gilbert, Peebles & Swiren, A. C. Lewis, I. P. Lewis, Isaac B. Lipson, Litsinger, Healy, Reid & Bye, Lord, Lloyd & Bissell, Harry J. Lurie, Luster & Luster, MacChesney, Becker & Wells, Daniel L. Madden, John Mann, Wm. Mannhardt, George S. Marks, F. E. Matthews, K. L. Karr, J. Warren McCaffrey, McCarthy & Toomey, Joseph McCormack, Arthur F. McCormick, Walter E. McCornack, McDonald & Taylor, McNab, Holmes & Long, Joseph Mendelsohn, Benjamin S. Mesirow, Creighton S. Miller, Miller, Zeiss, Bengel & Lavery, Matthew Mills, Charles J. Monahan, Montgomery, Hart, Pritchard & Herriott, Meyer Morton, Moses, Kennedy, Stein & Bachrach, Walter E. Moss, William B. Moulton, Thomas R. Mulroy, Arthur O. Graves, Nash & Ahern, H. Leo Neiburger, Arthur Wm. Nelson, Newby, Rathbun & Burditt, C. E. Newton, Nicholson, Snyder, Chadwell & Fagerburg, Sidney C. Nierman, Leslie M. O'Connor, David Olshan, Sanford Olson, Pam & Hurd, Dennis F. Parsons, Henry Perlman, Elbridge Bancroft Pierce, Pines, Stein & Beber, Pomeroy & Martin, Poppenhusen, Johnston, Thompson & Raymond, Millard R. Powers, Jess S. Raban, Hyman Reeder, William S. Riegelhaupt, Joseph Rolnick, H. J. Rosenberg, Myer N. Rosengard, Rosenthal, Hamill & Wormser, Ross & Watts, Isaac S. Rothschild, Julian C. Ryer, Julius Ruben, Rubenstein & Becker, Joseph S. Rubenstein, Sanders, Childs, Bobb & Westcott, Edgar J. Schoen, Schuyler, Weinfeld & Hennessy, Schwartz, Welfeld & Perlman, A. A. Schwarzbach, Scott, MacLeish & Falk, Seago, Bradley & McRoy, Julius H. Selinger, Seyfarth & Atwood, Lester B. Shafton, Shulman, Shulman & Abrams, Joseph G. Slottow, Ben M. Smith, Socrates, Davis & Cohen, Sonnenschein, Berkson, Lautmann, Levinson & Morse, Spencer & Bryan, S. Sidney Stein, Silber, Isaacs, Clausen & Woley, Lewis A. Stebbins, Stebbins, McKinley & Price, Oscar D. Stern, Stephen J. Sullivan, Sims & Stransky, Felix J. Streyckmans, Swanson, Dodge & Bremner, Peter J. Tatooles, Clarence C. Taylor, Taylor, Miller, Busch & Boyden, Tenney, Harding, Sherman & Rogers, H. M. Tenny, Sidney Z. Tepper, Theodore J. Isaacs, C. M. Thomson, Townley, Wild, Campbell & Clark, C. E. Tripp, Gerald Turnbull, Frank L. Tuttle, Ungaro & Sherwood, John E. Van Natta, Albert H. & Henry Veeder, Wadsworth Watts, Herman Waldman, Watkins & Ten Hoor, Weber, Miller & Deffenbaugh, Leonard A. Weinberg, Maurice Weissman, Wetten, Pegler & Dale, Leslie H. Whipp, White & Hawxhurst, Walter E. Wiles, Wilhartz, Hirsch & Schanfarber, William H. Winslow, Jr., Wilson & McIlvaine, Winston, Strawn & Shaw, C. V. Wisner, Jr., S. R. Wittelle, F. Philip Young, and Zane, Morse, Zimmerman & Norman, all of Chicago, Ill., James E. Burke, of Joliet, Ill., Healy & Beverly, of Elgin, Ill., Perkins & Battle, of Charlottesville, Va., and Alphonse G. Riesenberg, of Cincinnati, Ohio, for defendants.

WILKERSON, District Judge.

Findings of Fact.

The court finds the facts as follows:

Plaintiff was incorporated by Act of January 22, 1932 (chapter 8, 47 Stat. 5, see 15 U.S.C.A. § 601 et seq.).

Defendant bank was organized under Illinois law on July 25, 1931, with paid up capital stock of $14,000,000, divided into 140,000 shares of the par value of $100 per share.

The condition of the bank on July 25, 1931, was as follows: Loans, $154,243,421.45; cash, including amounts due from other banks, $62,839,335.08; deposits, $240,746,647.25. The condition of the bank on June 25, 1932, was as follows: Loans, $101,016,512.33; cash, $18,620,916.84; deposits, $127,686,092.82.

During the month of June, 1932, defendant bank lost deposits at a rapidly increasing rate. From the close of business on June 1, 1932, to the close of business on June 25, 1932, deposits decreased from $147,688,097.62 to $127,686,092.82. From the close of business on June 20, 1932, to the close of business on June 25, 1932, deposits decreased from $141,238,322.88 to $127,686,092.82. On June 25, 1932, deposits decreased in the amount of $4,618,523.15.

Charles G. Dawes became a member of plaintiff's board of directors on February 2, 1932. He tendered his resignation as director on June 6, 1932, and on June 8, 1932, the resignation was accepted effective at the close of business on June 15, 1932.

Shortly prior to June 25, 1932, defendant bank applied to plaintiff for a loan of $16,000,000. Plaintiff sent examiners to make an examination of the collateral to be offered as security for the loan, and the examiners commenced to make the examination. It became apparent, however, that a larger loan would be required, and the examination was temporarily discontinued. The investigation of collateral by the examiners was not completed until after July 7, 1932.

On June 25, 1932, plaintiff's board of directors by resolution approved a loan of $16,000,000 to the bank. The loan was to be payable six months from date, with interest at 5? per cent. per annum, payable at maturity, on the note of the bank in the form prescribed by the corporation, and upon delivery to the Federal Reserve Bank of Chicago, as custodian, of collateral valued at $31,099,000.

On June 27, 1932, at 1 a. m., there was a meeting of the stockholders of defendant bank, at which Charles G. Dawes was elected a director. There was a special meeting of the board of directors at 1:15 a. m. on the same day at which Charles G. Dawes was elected chairman of the board. The chairman stated that it was desirable and in the interests of the bank, its depositors and stockholders, to apply for a loan from the Reconstruction Finance Corporation, and explained fully the reasons for such action. The board adopted resolutions authorizing the officers of the bank, among other things, to borrow from plaintiff or others, a sum not to exceed $95,000,000, and to pledge with plaintiff any collateral which might be required as security for the loan.

On June 27, 1932, between 2:30 and 4 a. m., the bank executed and delivered to plaintiff an application for a loan of not more than $95,000,000, in the form prescribed by the plaintiff and submitted by it to the board of the bank.¹

Defendant bank delivered with the application to plaintiff its note, dated June 27, 1932, for $95,000,000, payable to plaintiff's order on or before December 24, 1932, at the Federal Reserve Bank of Chicago, with interest at 5? per cent. per annum.

The note contains provisions pledging collateral, authorizing its sale and the application of the proceeds to the payment of the...