Lander State Bank v. Putnam, State Bank Examiner

• Decision Date: 30 April 1929
• Docket Number: 1559
• Citation: 40 Wyo. 312,276 P. 926
• Parties: LANDER STATE BANK v. PUTNAM, STATE BANK EXAMINER
• Court: Wyoming Supreme Court

276 P. 926

40 Wyo. 312

LANDER STATE BANK v. PUTNAM, STATE BANK EXAMINER

No. 1559

Supreme Court of Wyoming

April 30, 1929

Rehearing Denied.

APPEAL from District Court, Fremont County; EDGAR H. FOURT, Judge.

Action by the Lander State Bank against A. L. Putnam, as State Bank Examiner, substituted for George Nottingham, as Special Deputy Examiner in charge of the liquidation of Shoshoni State Bank of Shoshoni. Judgment for plaintiff, and defendant appeals.

Modified and Affirmed.

For the appellant, there was a brief by William O. Wilson, Attorney General, James A. Greenwood, Deputy Attorney General, and Richard J. Jackson, Assistant Attorney general, and an oral argument by Mr. Jackson.

The transactions between Shad, Cashier of Shoshoni State Bank of Shoshoni, and Lander State Bank, were on the face thereof ultra vires. Bank v. Shawnee Bank, 95 U.S. 557; State Bank v. Natl. Bank, 66 F. 691; Natl. Bank v. Armstrong, 152 U.S. 346; Swofford Bros. v Bank, 81 Mo.App. 46; Bank v. Oskamp, 59 So 566; Bank v. Savings Bank, 149 S.W. 495; 1 Morse Bks. and Bkng. (6th Ed.) 472; 5148 C. S. The evidence is insufficient to sustain the judgment. Lander State Bank v. Nottingham, 37 Wyo. 50; Bank v. Lyons, Rec'r., 220 Mo. 538; Bank v. Natl. Bank, 229 P. 258; Bank v. Bank, 109 F. 421; Aldrich v. Bank, 176 U.S. 618; Farmers Bank v. Bluefield Bank, 11 Fed. (2nd) 83. The trial court erred in admitting evidence of prior transactions. Railway Co. v. Simons, (Ala.) 43 So. 731; Hamilton Co. v. Ingham, (Mich.) 47 N.W. 681. A cashier has no authority to bind a bank by a guaranty of his own notes, and persons dealing with him, are bound to inquire as to his authority. Savings Bank v. Shawnee Bank, supra; State Bank v. Newton Natl. Bank, supra; Natl. Bank v. Armstrong, supra; Swofford Bros. v. Bank, supra. The plaintiff stated a cause of action for money loaned. Lander State Bank v. Nottingham, supra. Plaintiff did not prove that the money had been loaned, or that the Shoshoni State Bank received the benefit of it, or that it had not been repaid, all of which were necessary to prove, to entitle plaintiff to recover. See cases above cited. Notice to Shad would not impart notice to the corporation under the circumstances. Wagner v. Security Co., 249 F. 145; Holmes v. Uvalde Natl. Bank, (Tex.) 222 S.W. 640. The trial court erred in admitting evidence of prior transactions. Railway Co. v. Simons, supra. The court erred in allowing 8% interest. 4133 C. S. as amended by the laws of 1923, Chap. 23. Plaintiff wholly failed to show that defendant benefited by the transaction. The judgment should be reversed.

For the respondent there was a brief by Durham and Bacheller of Casper, and oral argument by Mr. E. Paul Bacheller.

There is but one case cited in counsel's brief which even lends color to defendant's contention; that is the case of Bank v. Armstrong, 152 U.S. 346; but that decision has been generally discredited in later decisions from the same court; i. e. Savings Bank v. Parmalee, 95 U.S. 557; Citation of 1 Morse on Bks. and Bkng., 6th U.S. 472, does not relate to any question submitted by the record. The material point here is, whether the bank got the benefit of the transaction. Lander State Bank v. Nottingham, supra. The evidence clearly establishes the fact, that the bank did receive the benefit of the transaction. The immediate cause of the receivership was a fire, which destroyed the bank records. This resulted in confusion in liquidating the affairs of the bank. None of the money in the Lander bank could have been withdrawn by Shad, or any other officer of his bank, except by the drafts of his bank. Shad was practically the sole executive officer of the bank by consent of the directors, and it is too late now to question what he did. Martin v. Webb, 110 U.S. 15; Auten v. Bank, 174 U.S. 125. It was clearly established by the evidence of Melson, Vice President of plaintiff bank, that the money loaned was actually received, and used by the Shoshoni bank. The following cases sustain respondent's position. Hanson v. Bank & Trust Co., 167 P. 97; Flower v. Trust Co., 223 F. 318; Allis-Chalmers Mfg. Co. v. Bank, 3 Fed. (2nd) 316. The Lander Bank should receive the money due it from the liquidation of the Shoshoni bank.

BLUME, Chief Justice. KIMBALL and RINER, JJ., concur.

OPINION

BLUME, Chief Justice.

This is an action by the Lander State Bank against A. L. Putnam, state examiner and liquidating agent of the Shoshoni State Bank, Putnam being substituted for Notingham, former liquidating agent. Judgment was rendered in favor of plaintiff, from which the defendant appeals.

The petition in this case is fully set forth in the case of Lander State Bank v. Nottingham, 37 Wyo. 50, 259 P. 181. The Shoshoni State Bank was a banking institution organized under the laws of the state of Wyoming and located at Shoshoni, in Fremont county, Wyoming. H. J. Shad owned 52% of the stock of the bank and was cashier and general manager thereof. The remaining officers, if any, and directors of the bank, seem to have paid no attention to the affairs of the bank, and it is doubtful if any meeting of the board of directors was held during the period hereinafter mentioned. The Lander State Bank is a banking corporation under the laws of this state, located at Lander, in Fremont county. The Shoshoni bank kept money on deposit at the Lander State Bank, drawing drafts against it from time to time. Commencing with February 1, 1923, Shad as cashier of the Shoshoni bank, desired to obtain credit at the hands of the Lander bank, and on February 3 made a loan of $ 3,000, which was placed to the credit of the Shoshoni bank. This loan, and several other loans during that year, were paid off. About October 1, 1923, Shad applied to the Lander bank for another loan of $ 3,000, evidently sending his own note, guaranteed by the Shoshoni State Bank, to the Lander bank, as evidence of or perhaps as collateral to the loan, in a manner similar to that shown by the transaction of December 5, 1924, mentioned in Bank v. Nottingham, supra. The loan was granted, and the sum of $ 3,000 was placed to the credit of the Shoshoni bank, as of date October 2, 1923. This money was withdrawn by the Shoshoni bank from time to time by means of drafts issued against the deposit in the regular course of business, the drafts being drawn by a duly authorized agent of the Shoshoni bank, and so far as the record discloses none of the money was appropriated by H. J. Shad personally. At the end of every month, the Lander bank sent a reconcilement sheet to the Shoshoni bank, that of the month of October, 1923 showing the deposit of $ 3,000 above mentioned. This loan has never been repaid. It was renewed from time to time, the last time on December 5, 1924, when Shad executed a note to himself, endorsed by himself, and sent to the Lander bank together with a guaranty of this note executed by the Shoshoni bank, as fully shown in the petition set forth in the Lander State Bank v. Nottingham, supra.

1. It seems to be contended by appellant that the evidence shows that the loan above mentioned was made to Shad personally. But the testimony is all the other way. It seems that Shad himself paid the interest on the loan from time to time. But that proves nothing. He had sent his own note to the Lander bank, to serve as collateral or evidence of the $ 3,000 loan, and while his various notes so made were probably nothing but accommodation notes, still so far as the Lander bank was concerned it was perfectly proper that he should keep up the interest on the notes which he had executed. It further appears that on December 5, 1924, when the loan of October 2, 1923, was renewed, the Shoshoni bank had a credit with the Lander bank of over $ 16,000, and it is, therefore, argued that the loan should have been charged to the account of the former bank. That may be true, but it may also be true that the cashier of the Shoshoni bank, anticipating future wants, had reason to keep a large account with the Lander bank, and the fact that the course mentioned was not pursued in no way negatives the good faith of the transaction, and certainly in no manner whatever shows that the loan of October 2, 1923, was not made, that the Shoshoni bank did not receive the benefit thereof or that it has been paid.

It is further argued that the guaranty of Shad's note was void, because it was Shad's own note. It might well be, that if the money in question had been turned over to Shad, for his benefit, the fact just mentioned might well have put the Lander bank upon inquiry. But that is not the fact, and hence it would seem that whether Shad's note or anyone else's note was used would make no difference. It is true, of course, that it is not within the ordinary function of a bank to become an accommodation endorser or guarantor. 7 C. J. 595. But that rule does not apply here, for the guaranty was made as an incidence to the disposal of the paper. It is held that a bank may become the guarantor if that is necessary for its protection, or where the guaranty relates to commercial paper and is an incidence to the purchase and sale thereof. 7 C. J. 596; Allis-Chalmers Mfg. Co. v. Citizens' Trust Company, 3 F.2d 316. We think that this rule, rather than the one previously stated, applies in this case, if either rule has any bearing in this case, even though the disposal of the note was not strictly a sale.

Attention however, is further called to Section 5148, W. C. S. 1920, which provides, among other things, that all notes, except bills of exchange discounted by a bank, shall be made payable directly to the bank, and shall not be assigned, except for rediscount and other purposes which are immaterial herein, and the conclusion is apparently drawn...