Stewart v. Armstrong

• Decision Date: 05 June 1893
• Docket Number: 4,459.
• Citation: 56 F. 167
• Parties: STEWART v. ARMSTRONG.
• Court: U.S. District Court — Southern District of Ohio

56 F. 167

STEWART v. ARMSTRONG.

No. 4,459.

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

June 5, 1893

Statement by SAGE, District Judge:

On the 28th of February, 1887, Edward L. Harper, then vice president of the Fidelity National Bank of Cinciunati, mailed to the Chemical National Bank of New York a letter signed by himself, as vice president of the Fidelity National Bank asking for a loan of $300,000, and inclosing a certificate attesting that he had deposited that amount in the Fidelity Bank, to be returned on the surrender of the certificate indorsed by him. He also inclosed, as collateral for the loan requested, bills receivable aggregating $326,695.30. Harper did not then have on deposit in the Fidelity Bank $300,000 or any other sum, as the basis of the certificate of deposit forwarded. A large part of the collateral sent had been obtained by him for the purpose of raising money for his personal use. The certificate of deposit did not appear on the books of the Fidelity Bank. It had been torn out from the back part of the book of blank certificates of deposit owned and used by the bank. The letter in which it was sent was not copied in the letter book of the bank.

On March 2, 1887, the Chemical Bank made the loan of $300,000 upon the certificate of deposit and the collateral note, and credited the Fidelity Bank with that amount, and on the same day, through its cashier, so notified the cashier of the Fidelity Bank. At the end of the month the loan was stated in the account current sent by the Chemical Bank to the Fidelity Bank. As soon as notice was received by the Fidelity Bank that the loan had been made, the amount was, by Harper's order, placed to his individual credit. A corresponding charge was then made on the books of the Fidelity Bank against the Chemical Bank, so as to offset the credit received from the loan. The result was that the drafts by which the money was drawn out of the Chemical Bank, and which were officially signed on behalf of the Fidelity Bank, did not appear on the books of the Fidelity Bank.

On the 19th of May, 1887, the Fidelity Bank telegraphed the Chemical Bank for the return of part of the collaterals, offering to substitute other collaterals; and, on the same day, Harper over his signature as vice president of the Fidelity Bank, wrote to the cashier of the Chemical Bank to the same effect. On the 21st of May, Harper, over his signature as vice president, wrote to the Chemical Bank, inclosing collaterals for substitution aggregating $230,592.46, and requesting the return of 19 of the original collateral notes,--specifying them. This substituted collateral was accepted, and the collateral asked for returned to the Fidelity Bank. Of the collateral thus returned, notes aggregating $127,495.30 were the property of the Fidelity Bank. Among the substituted collaterals were 15 notes made by Whiteley, Fassler & Kelly, to the order of E. L. Harper & Co., amounting to $74,819.76, all negotiable, and bearing the indorsement of E. L. Harper & Co., and none of them then due. The firm of E. L. Harper & Co. received no consideration for the transfer or indorsement of those notes, and did not pay them at maturity. They were protested by the Chemical Bank for nonpayment. E. L. Harper & Co. and the Fidelity Bank went into insolvency in June, 1887. The complainant is their trustee. After protesting the notes for nonpayment the Chemical Bank presented its claim upon them to the complainant for the sum of $74,819.76, with interest, and also presented its claim against the defendant, the receiver of the Fidelity Bank, for the amount of said loan of $300,000, and the same, less the amount which had then been paid on it, was allowed. The loan not having been paid by the defendant, the complainant allowed the claim made against him by the Chemical Bank, as presented, and in March, 1891, under the order of the probate court of Hamilton county, Ohio, paid thereon, to the Chemical Bank, a dividend of 4 per cent., amounting to $2,917.12.

On the 15th of February, 1891, the complainant presented, in due form, the claim against the defendant, based upon said Whiteley, Fassler & Kelly notes, and for the amount thereof, with interest, as a liability of the Fidelity Bank to E. L. Harper & Co. The receiver, on the 21st of April, 1891, wholly rejected said claim. On the 13th of April, 1888, the defendant presented to the complainant a claim against E. L. Harper & Co., wholly distinct and apart from the matters hereinbefore mentioned, amounting to $173,219.32, and the same was allowed by the complainant as a valid claim against the estate of said firm, but no dividend has been paid upon it. E. L. Harper & Co. was a general partnership composed of E. L. Harper, George Clymer, and William H. Harper. This suit was brought to compel the defendant to allow the claim of the complainant upon the Whiteley, Fassler & Kelly note for $74,819.76, with interest.

Edward W. Strong, for complainant.

John W. Herron, for respondent.

SAGE, District Judge, (after stating the facts as above.)

The claim on behalf of complainant is that the $300,000 loan was from the Chemical Bank to the Fidelity Bank. The facts of the case are not in dispute. The transactions were between the proper officials of the two banks. As is claimed by counsel for the complainant, the Chemical Bank placed the amount of the loan to the credit of the Fidelity Bank, and so notified that bank. The money was drawn out of the account of the Fidelity Bank upon drafts duly signed by it. The Chemical Bank dealt with Harper as an officer of the Fidelity Bank and in no other capacity. As between the Chemical Bank and the Fidelity Bank, the transaction was, both in...