Hookway v. First Nat. Bank
| Decision Date | 11 November 1929 |
| Docket Number | No. 8415.,8415. |
| Parties | HOOKWAY v. FIRST NAT. BANK. |
| Court | U.S. Court of Appeals — Eighth Circuit |
W. F. Bruell and Bruell & Henderson, all of Redfield, S. D., and Price & Burnquist, of Ft. Dodge, Iowa (R. M. Henderson, of Redfield, S. D., and B. J. Price and B. B. Burnquist, both of Ft. Dodge, Iowa, on the brief), for appellant.
A. J. Burt, of Emmetsburg, Iowa, and Seth Thomas, of Ft. Dodge, Iowa, for appellee.
Before BOOTH, Circuit Judge, and SANBORN and DEWEY, District Judges.
This is an appeal from a judgment entered in favor of appellee, defendant below, hereafter called the Emmetsburg Bank, in an action at law brought by the receiver of the First National Bank of Frankfort, S. D., hereafter called the Frankfort Bank. Plaintiff in the action sought to recover the balance of deposits alleged to have been made by the Frankfort Bank in the Emmetsburg Bank, amounting to $9,887.75.
The defendant in its answer, in addition to a general denial, set up an affirmative defense, in substance, that the deposit account upon which plaintiff's suit was based was for the accommodation only of the Frankfort Bank, and was carried pursuant to a certain agreement and contract, partly in writing and partly oral, entered into between said banks by their respective officers; that said contract provided that the defendant bank should carry notes of the customers of the Frankfort Bank, and that at the same time said Frankfort Bank should carry a deposit with the defendant bank equal to or greater than the amount of the notes so carried by the defendant bank for the Frankfort Bank; that said deposit account should be inactive, that is, not subject to check or draft while said notes were so carried, so as to reduce said deposit below the amount of said notes; and that said deposit should be held by the defendant bank against said notes, all for the accommodation of the Frankfort Bank; that the banks thereafter acted upon the arrangement so made.
The answer further alleged that on the 8th day of April, 1926, there were in the possession of the defendant bank three renewal notes received from the Frankfort Bank which were unpaid and which were carried as accommodation for said bank against said inactive account; and that in accordance with the provisions of the contract aforesaid, the deposit account was applied to the payment of those three notes, and that no deposit balance was left in said accommodation account.
The reply denied that the deposit carried was an accommodation deposit; denied that it was to be or was inactive; denied any oral agreement between the banks; denied that the course of dealing between the banks was in conformity with the alleged oral agreement. The reply admitted the application of the balance to payment of said notes, but alleged that the application was without right or authority on the part of the Emmetsburg Bank. The reply further alleged that the transactions between the two banks were conducted by E. B. Soper, as representative of the Emmetsburg Bank, and that he was also a stockholder in the Frankfort Bank; that the transactions on the part of the Frankfort Bank were conducted by C. A. Kleppin, and that said action was the individual action of Mr. Kleppin without the knowledge, right, or authority to represent the Frankfort Bank in said transaction; and that Soper knew that Kleppin was acting in his individual capacity in said transactions without the right, knowledge, or authority so to do as a representative of said bank.
The cause came on for hearing on June 13, 1926, before the court and a jury. At the close of all the evidence both parties moved for a directed verdict. The court then said:
In addition to the findings by the court there are admissions of certain facts in the pleadings; and still other facts were stipulated by the parties. Gathering all of these facts together, and separating the court's findings into paragraphs, we have the following facts upon which the judgment was based.
1. In December, 1917, the First National Bank of Frankfort, S. D., was a national bank. A. B. Robinson was its president; C. A. Kleppin its cashier.
2. The First National Bank of Emmetsburg was a national bank at the time stated.
3. At that time the officers mentioned of the Frankfort Bank desired to borrow money and desired that certain customers of that bank should have opportunity to borrow money.
4. The borrowing capacity of the proposed borrowers was exhausted at the Frankfort Bank under the law.
5. These officers devised a scheme for the purpose of deviously procuring loans from the Frankfort Bank as follows: (a) One of these officers would communicate with the officials of the Emmetsburg Bank, and propose that they had certain customers entitled to further credit, but whose ability to borrow from the Frankfort Bank had been exhausted; (b) these officers of the Frankfort Bank would request of the president of the Emmetsburg Bank that it (Emmetsburg Bank) in form carry the proposed loans by consenting to the execution of promissory notes payable to that bank (Emmetsburg Bank), the same to be forwarded to the Emmetsburg Bank by these officers of the Frankfort Bank; (c) upon receipt of the notes the Emmetsburg Bank would credit the account of the Frankfort Bank an amount equal to the supposed proceeds of the notes, but the credit should remain inactive and not be checked against; (d) simultaneously a charge would be made upon the books of the Frankfort Bank against the Emmetsburg Bank; and (e) credits would be entered upon the books of the Frankfort Bank to the individual accounts of the proposed borrowers in their proportionate shares of the aggregate sum of the notes forwarded; (f) thereupon the proposed borrowers would be permitted to check their money out of the Frankfort Bank.
6. About December 17, 1917, three promissory notes were made — one by C. A. Kleppin for $5,500; one by A. B. Robinson; one by an elevator company, a customer of the Frankfort Bank.
7. On the making of those three notes, aggregating $13,250, a false entry was made on the books of the Frankfort Bank indicating that a deposit of money had been made in that bank that day, amounting to $13,250.
8. These notes were forwarded to the Emmetsburg Bank under the proposed scheme, with the intention that no proceeds should be remitted, but that a credit should be entered for an amount equal to the supposed proceeds on the books of the Emmetsburg Bank in favor of the Frankfort Bank, and that the credit should be inactive and in form only.
9. A charge was made against the Emmetsburg Bank on the books of the Frankfort Bank for a like amount of $13,250, which was also intended to be inactive and not used by the Frankfort Bank.
10. Either directly or by colorable transfer through another corporation, credits were entered to the accounts of the makers of the notes.
11. The proposed scheme was consummated by permitting the borrowers to check those accounts out of the Frankfort Bank, thereby misapplying the money of the Frankfort Bank.
12. These funds so credited were misapplied by the officers of the Frankfort Bank at the time of the original transaction more than 10 years ago (i. e. prior to the trial).
13. These transactions were intended to be a mere juggle with books and papers to deceive the bank examiner, and to enable the officers of the Frankfort Bank and others favored by them to illegally borrow money from the Frankfort Bank and cover the same up by this juggle of books and papers through the Emmetsburg Bank.
14. The present action is one brought to recover upon a deposit upon implied contract alleged. It is not an action sounding in tort.
15. No deposit was ever made in the Emmetsburg Bank by the Frankfort Bank so far as this matter is concerned.
16. The agreement under which the various notes were sent from time to time to the Emmetsburg Bank is contained in part in the following letters:
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