First Nat. Bank of Wellston v. Armstrong

• Decision Date: 12 April 1890
• Citation: 42 F. 193
• Parties: FIRST NAT. BANK OF WELLSTON v. ARMSTRONG.
• Court: U.S. District Court — Southern District of Ohio

42 F. 193

FIRST NAT. BANK OF WELLSTON v. ARMSTRONG.

United States Circuit Court, S.D. Ohio, Western Division.

April 12, 1890

John T Moore and David Davis, for plaintiff.

Kittredge & Wilby and John W. Herron, for defendant.

Before JACKSON and SAGE, JJ.

SAGE J.

This cause was submitted to the court upon an agreed statement of facts, from which it appears that on the 17th day of June 1887, the complainant mailed at Wellston, Jackson county Ohio, to the Fidelity National Bank at Cincinnati, checks and sight-drafts on various banks other than the Fidelity to the amount of $2,229.01. Each of said checks and drafts was indorsed as follows:

'Pay Fidelity National Bank of Cincinnati, Ohio, or order, for collection for First National Bank of Wellston, Ohio.

'J. H. SELLERS, Jr., Cashier.'

At the same time the complainant so charged the Fidelity Bank with the remittance, which was received by the Fidelity Bank on the 18th of June, and acknowledged by postal, mailed on the evening of that day, as follows:

'THE FIDELITY NATIONAL BANK.

'CINCINNATI, June 18, 1887.

'In reply to yours of the seventeenth, we credit, subject to payment, $2,229.01. AMMI BALDWIN, Cashier.'

On the same day credit was given accordingly by the Fidelity Bank to complainant. On the 18th day of June, 1887, the complainant mailed to the Fidelity National Bank the further sum of $3,284.54 in checks and sight-drafts on various banks other than the Fidelity, all of which were received by the Fidelity on the 20th of June, and receipt thereof acknowledged by postal of that date, signed by the cashier, and stating a credit, 'subject to payment,' of $3,284.54. It further appears that such credit was on that day given by the Fidelity Bank to the complainant. Each of the checks and drafts composing said remittance of $3,284.54 was indorsed by the complainant in the same form as the indorsements upon the checks and drafts remitted as first above. All the indorsements of both remittances were made by means of a stamp furnished by the Fidelity Bank to the complainant about the 1st of May, 1887, to be used by the complainant in indorsing commercial paper to the Fidelity for collection. The checks and drafts composing the last remittance were charged by the complainant to the Fidelity in the same manner as those composing the first remittance. It further appears from the agreed statement that Baldwin and Sellers were at the dates aforesaid cashiers of the Fidelity and of the Wellston Banks, respectively; also, that on the 17th of June the Fidelity Bank was insolvent, and so continued, and on the 20th of June, 1887, at the close of business hours, a national bank inspector or examiner, under orders of the comptroller of the currency, and by authority of the statutes of the United States, took possession of the Fidelity Bank, and afterwards the defendant Armstrong was appointed, and now is, the receiver thereof. The total amount of commercial paper remitted by the complainant to defendant was $5,513.55. Of this there was paid to the receiver, after the failure of the Fidelity Bank, the sum of $3,336.40. The residue of said remittances-- that is to say, the sum of $2,177.15-- was credited by various payors to the Fidelity Bank, and the Fidelity Bank had full benefit thereof in its accounts with the payors; but the money did not come into the hands of the receiver, and advice of the credits did not reach the Fidelity Bank until after the government had taken possession. Attached to the answer of the defendant are copies of two letters which it is admitted were written and received. The first is dated at Cincinnati, September 16, 1886, and addressed to H. S. Willard, Wellston, Ohio. Mr. Willard was afterwards president of the complainant bank. This letter was written and signed by E. L. Harper as vice-president of the Fidelity Bank. It refers to a letter received from Willard, which is not in evidence, nor set forth in the agreed statement of facts. Harper writes as follows:

'We are in receipt of your esteemed favor, and, replying, have to say that we will credit sight items on any point in the United States where there are banks at par, and make collections on same points, which, when paid, will credit at par, allowing you two and a half per cent. on daily balances, calculated when monthly statements are rendered, and will remit for your credit to New York, against your balances, at any time you may desire, without charge, or will ship you currency; express charges at your cost.'

On the 25th of September, 1886, Willard, upon a letter-head of the Milton Furnace & Coal Company of Wellston, of which he was president, addressed a letter to Harper as vice-president, signing it 'H. S. WILLARD Pt.,' accepting the offer contained in Harper's letter of the 24th, above quoted. These letters were written, mailed, and received several days before the complainant bank received its certificate of authorization, which was issued and bears date October 6, 1886. The complainant and the Fidelity Bank did business with each other in the usual way, each remitting to the other checks and drafts for collection, all of which were charged and credited, respectively, as above stated.

From and after about May 1, 1887, the balance was always in favor of the complainant, against which the complainant drew as occasion required, and sometimes ordered remittances made in exchange on New York. The complainant was allowed and received interest on the daily balances so in its favor at the rate of 2 1/2 per cent.; settlement of such interest being made monthly. No part of the several sums above mentioned has been paid to the complainant, either by the receiver or by any other person. The prayer of the bill is that the court find that the complainant's claim for $3,336.40, with interest from June 17, 1887, is a preferred claim against the estate in the hands of the receiver, and for a decree for its payment in full, and for general relief.

The claim of the defendant that the various checks and drafts referred to and set forth in the bill, were sent to the Fidelity Bank, and received by it, under and by virtue of the written agreement evidenced by the letters above quoted, is overcome by the fact that the last clause of section 5136 Rev. St. U.S., which relates to the corporate powers of banking associations, provides that 'no association shall transact any business except such as is incidental and necessarily preliminary to its organization, until it has been authorized by the comptroller of the currency to commence the business of banking. ' See Armstrong v. Bank, 38 F. 883. That correspondence was, however, admitted in evidence, and may properly be referred to in connection with the evidence relating to the transaction of business between complainant and the Fidelity Bank, as a circumstance to aid in determining what was the actual understanding between them. It does not appear, however, that the complainants ever did draw against its remittances before the proceeds of collections were...