above the place where it flowed through the reservation, and that this location of water right was sanctioned by the laws of the United States. It was besides averred that during the years 1894 and 1895 "one Peter Sonna, and his associates, whose names are unknown to this defendant, without defendant's consent, diverted a large amount of the waters of said stream from the head waters thereof and above the point on said stream where plaintiff alleges this defendant has ob387]structed and diverted the same, and led the same through pipes to a reservoir, on said military post, and that said military post, the officers and troops thereon stationed, have used the waters so stored in part, and have permitted large quantities thereof to pass across said reservation and to be used by the said Peter Sonna for mechanical and other purposes.'

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ly known as "2-inch pipe,' down the mountains to the reservoir before mentioned as located above the officers' quarters on the reservation. The reservoir has a capacity of about 570,000 gallons. The waters so gathered and conducted were and now are stored in said reservoir, and distributed therefrom from time to time as hereafter shown. A portion of the waters from the springs, if not diverted, would eventually flow into Cottonwood creek above defendant's point of diversion.

"The waters stored in the Sonna reservoir aforesaid are used for fire purposes only on the reservation, and, are also conveyed through mains about three-quarters mile into Boisé City, where they are used in the running of a passenger elevator in one of the largest office buildings of the city, for drinking and closet purposes therein and for domestic [uses] in several city residences, and, in case of danger, for fire purposes, through hydrants located along the line of said

The lower court concluded that, as the stream was not navigable and was wholly on the public domain, the defendant had no right to appropriate any of the waters as against the United States, and therefore enjoined the taking by him of any water from the stream above the reservation except to the extent that license to do so might be given by the commandant of the post.

A stipulation was entered into between the parties containing an agreed statement of facts, which showed substantially this: That the reservation in question was estab-main." lished prior to the initiation by the defendant of his alleged water right; that "in 1877 the defendant located for agricultural, irrigation, and other and domestic and useful purposes, 500 inches of the waters flowing in Cottonwood creek, and diverted them up on the lands adjacent and in the vicinity of the easterly and southeasterly side of the military reservation, and has continuously used, and is now using, such waters, or portions thereof, for agricultural and irrigating purposes ever since that time upon such lands. His lands consist of a homestead of 160 acres, a desert entry of 160 acres, and his wife's desert of about 70 acres; he has expended between $8,000 and $10,000 in the construction of necessary ditches, flumes, reservoirs, laterals, and other improvements necessary for the reclamation of such lands, which were all desert in character, and of a class known as 'arid lands,' incapable of producing crops of fruit without the application of water. By means of the use of this water and the rights claimed under such location, he and his grantee have acquired title to said desert lands, and have been enabled to cultivate large annual crops of farm produce annually, and to propagate large orchards, which without the water they could not have done."

The statement, moreover, indicated the mode in which the reservation drew its supply of water from the stream, some of it being taken above the point where the defendant's water right was located, and contained the following:

The circuit court of appeals, to which the cause was taken, referring to Atchison v. Peterson, 20 Wall. 507, 512 [22: 414, 416]; Basey v. Gallagher, 20 Wall. 682 [22: 454]; Broder v. The Natoma Water & Min. Company, 101 U. S. 274 [25: 790]; and Sturr v. Beck, 133 U. S. 541 [33: 761], concluded that the defendant had acquired a valid water right, even as against the United States, and therefore reversed the judgment of the trial court, and remanded the cause to that court for further proceedings in accordance with the views expresed in its opinion. The opinion of the court, after stating the right of the defendant to acquire a water privi-[389] lege, on public lands of the United States, even as against the United States, declared as follows:

"His [the defendant's] appropriation was, of course, subject to the prior appropriation and use of the waters of the stream made by the government officials for the purpose of the military post reservation, which consisted of 640 acres of land, and was located on the stream in question below the point of the appellant's diversion.".

It is charged in the assignment of errors "On or about the year 1894 one Peter that the decision of the court of appeals was Sonna and his associates, without the con- erroneous, first, because it recognized the sent of the defendant, went upon the head right of the defendant to acquire a water waters of said 'Five-Mile Gulch,' one of the right as against the United States; and, secmain tributaries of Cottonwood Gulch, and ond, because it held that the water right of [388]at sundry points gathered and *appropriated the defendant, which originated after the esthe waters of large and flowing springs there tablishment of the reservation, could deprive situated, and which are supply springs of the reservation of water necessary for its said 'Five-Mile Gulch,' and the stream there purposes. This is asserted to be the conse situated, and about four miles above the quence of the decree, because it is argued point of the defendant's diversion, and con- it may be construed as depriving the govern veyed the waters of said springs by means ment of the right to use but a quantity of of pipes and mains, the latter being common-water which had been previously actually ap


propriated for the use of the reservation, would be obliged, as did the court of appeals, thus preventing it from enjoying the water to remand the case to the trial court for furessential for the purposes of the post, and ther proceedings. The gravamen of the comrendered necessary by its expansion and de- plaint was that the alleged water right of velopment. To the first question the argu- the defendant had deprived the reservation ment at bar was principally addressed. of water required for its purposes. Certain-[391] Before considering the assignments, how-ly if on a further trial the proof should esever, we are met on the threshold of the case tablish that the deficiency of supply at the with the question whether the record is prop-reservation arose, not from the drawing off erly here, because of the want of finality of by the defendant of water covered by his wathe judgment rendered by the circuit court ter right, but from the act of those who, subof appeals. On its face the decree of that sequent to the location of the defendant's ascourt is obviously not a final judgment, since serted water right, tapped the sources of the it did not dispose definitely of the issues pre- supply of the stream and carried the water sented, but simply determined one of the le- to the reservation, whence it was distributed gal questions arising on the record, and re- to Boisé City, a very different condition of manded the case to the lower court for fur-fact from that stated in the complaint would ther proceedings. When the state of the rec- be presented. It follows, from these concluord, upon which the state of appeals passed, sions, that the judgment below was not final, is considered in the light of the pleadings and the appeal taken therefrom must be, and and agreed statement of facts, it becomes it is, dismissed for want of jurisdiction. obvious that the decree by that court rendered was not only not in form, but also was not in substance, a final disposition of the controversy. The cause of action al[890]leged in the complaint was the diversion of

CE M. ISRAEL, Piff. in Err.,


F. GALE, as Receiver of the El-
mira National Bank.

water by the defendant from the stream, to CHARI
the detriment of the requirements of the res-
ervation, by a water right acquired by the
defendant after the establishment of the res-
ervation. The agreed statement of facts, al-
though it made it unquestioned that the de-
fendant's asserted water right had been lo-
cated on the stream above the reservation,
after its establishment, also made it equally
clear that after such location, above the
point where the defendant's water right was
fixed, water had been drawn off and carried
to the reservation, and there retained in a
reservoir and supplied in part, at least, to
Boisé City for purposes wholly foreign to the
military post. There was nothing whatever
in the agreed statements of facts by which
it could be determined whether the amount
of water thus drawn and carried to the post
and used for purposes foreign to its wants
would, if used for the purposes of the post
alone, not have been entirely adequate to sup-
ply every present or potential need. Con-
cluding on the general question of law that
the defendant could acquire a water right, Argued April 25, 26, 1899.
as against the United States, subject to the
paramount and previous appropriation of the

(See S. C. Reporter's ed. 391-397.)

Diversion of an accommodation note from its
proper use consideration for its discount.

1. An accommodation note is not shown to have
been diverted from the use for which it was
given, by discounting it at a bank at which
It was made payable, merely because the per-
son who obtained it told the maker that he
wanted it for the purpose of a building he
was putting up.

reservation, the court manifestly, from the

state of the record, was not in a position to adjudge the rights of the parties without further proof as to exactly what would be the situation if water had not, subsequent to the establishment of the water right of the defendant, been taken from the sources of supply above his location and carried to the reservation and there distributed for other than reservation purposes. This condition of things rendered it therefore essential to ren and the cause in order that the exact situation might be ascertained before the rights of the parties were finally passed upon. The fact that the decree appealed from was not final is moreover conclusively demonstrated by considering that if on the present appeal we should conclude that the judgment of the court of appeals was correct, we would be unable to dispose of the controversy, and we


A bank which discounts an accommodation note cannot be said to have given no consideration for it because of a large overdraft of the account of the person from whom it was taken, when the overdraft was the same day substantially covered by other credits and more than the amount of the accommodation note was subsequently paid out on the same account.

[No. 265]

15, 1899.

Decided May

Court of Appeals for the Second Circuit to review a judgment of that court affirming the judgment of the Circuit Court of the United States for the Southern District of New York in favor of the plaintiff, Charles F. Gale, as receiver of the Elmira National Bank, against the defendant, George M. Israel, for the amount of a promissory note. Affirmed.

'N ERROR to the United States Circuit

See same case below, 45 U. S. App. 219,
77 Fed. Rep. 532, 23 C. C. A. 274.

The facts are stated in the opinion.
Mr. Frank Sullivan Smith, for plain-
tiff in error:

Robinson's transaction with the bank did
not bind the maker of the note.

The note in suit was without consideration and never had a legal inception. Daniel, Neg. Inst. § 174; Wilson v. Ells

which it is unnecessary to detail, the bank was charged with such notice as to the diversion of the note by Robinson as prevented the bank from being protected as an innocent third holder for value.

worth, 25 Neb. 246; Eastman v. Shaw, 65, as well as from many other circumstances
N. Y. 522; Arden v. Watkins, 3 East, 317;
Willis v. Freeman, 12 East, 656; Second
Nat. Bank v. Howe, 40 Minn. 390; Spear v.
Myers, 6 Barb. 445; White v. Springfield
Bank, 1 Barb. 225; Stewart v. Small, 2
Barb. 559; Youngs v. Lee, 18 Barb. 187;
Phoenix Ins. Co. v. Church, 81 N. Y. 225, 37
Am. Rep. 494; Atlantic Nat. Bank v. Frank-contemplated by the drawer, the bank was
lin, 55 N. Y. 235.

The question of the bona fides of the bank was for the jury.

Canajoharie Nat. Bank v. Diefendorf, 123 N. Y. 191, 10 L. R. A. 676; Vosburgh v. Diefendorf, 119 N. Y. 357; Kavanagh v. Wilson, 70 N. Y. 177; Joy v. Diefendorf, 130 N. Y. 6; Farmers' & C. Nat. Bank v. Noxon, 45 N. Y. 762.

The note having been obtained through fraud and without consideration, the onus was upon the holder of showing that the bank acquired the same in good faith.

American Exch. Nat. Bank v. New York Belting & Pkg. Co. 148 N. Y. 698; Grant v. Walsh, 145 N. Y. 502; Nickerson v. Ruger, 76 N. Y. 282; Ocean Nat. Bank v. Carll, 55 N. Y. 441; First Nat. Bank v. Green, 43 N. Y. 298.

Whether the notice of fraud to the bank, through its cashier, was actual or constructive, it is equally antagonistic to the claim of good faith.

Angle v. North Western Mut. L. Ins. Co. 92 U. S. 342, 23 L. ed. 560; Witter v. Sowles, 32 Fed. Rep. 762; Loring v. Brodie, 134 Mass. 453; People's Nat. Bank v. Clayton, 66 Vt. 541; Palmer v. Field, 76 Hun, 230; Garfield Nat. Bank v. Colwell, 57 Hun, 169; Produce Bank v. Bache, 30 Hun, 351; Re Carew, 31 Beav. 39.

The bank is chargeable with knowledge of its cashier.

First Nat. Bank v. Blake, 60 Fed. Rep. 78; Third Nat. Bank v. Harrison, 10 Fed. Rep. 243; Merchants' Nat. Bank v. Tracy, 77 Hun, 443.

Messrs. Martin Carey and Wilson 8. Bissell for defendant in error.

[391] *Mr. Justice White delivered the opinion of the court:

The receiver of the Elmira National Bank, duly appointed by the Comptroller of the Currency, sued George M. Israel, the plaintiff in error, on a promissory note for $17,000, dated New York, May 14, 1893, due on demand, and drawn by Israel to the order of the Elmira National Bank, and payable at that bank. The defenses to the action were in substance these:

Second. Even if the discount of the note was not a diversion thereof from the purpose

nevertheless subject to the equity arising from the want of consideration between Israel the drawer and Robinson, because, although the note may have been in form discounted by the bank, it had in reality only been taken by the bank for an antecedent debt due it by Robinson. And from this it is asserted that as the bank had not parted, on the faith of the note, with any actual consideration, it was not a holder for value, and was subject to the equitable defenses existing between the original persons.

At the trial the plaintiff offered in evidence the note, the signature and the discount thereof being in effect admitted, and then rested its case. The defendant thereupon offered testimony which it was deemed tended to sustain his defenses. At the close of the testimony the court, over the defendant's exception, instructed a verdict in favor of the plaintiff. On error to the court of appeals this action of the trial court was affirmed.

Both the assignments of error and the argument at bar but reiterate and expand in divers forms the defenses above stated and which it is asserted were supported by evidence competent to go to the jury, if the trial court had not prevented its consideration by the peremptory instruction which it gave.

The bill of exceptions contains the testimony offered at the trial, and the sole question which arises is, Did the court rightly[393] instruct a verdict for the plaintiff? From the evidence it undoubtedly resulted that the note was delivered by the maker to D. C. Robinson, by whom it was discounted at the Elmira National Bank. It also established that Robinson at the time of the discount was a director of the bank, had large and frequent dealings with it, that he bore close business and personal relations with the cashier, and occupied a position of confidence with the other officers and directors of the bank. The occasion for the giving of the note and the circumstances attending the same are thus shown by the testimony of the defendant:

"I reside in Brooklyn. I am forty-two years of age. I am at present engaged in the insurance business. In the months of April and May, 1893, I was employed in the banking house of I. B. Newcomb & Co., in Wall street, New York, as a stenographer and typewriter. I was not then and am not now a man of property. I know D. C. Robinson. At the time I made this note I did not receive any valuable thing or other con

First. That the note had been placed by [892]Israel, the maker, *in the hands of David C. Robinson, without any consideration, for a particular purpose, and that if it had been discounted by Robinson at the Elmira National Bank such action on his part constituted a diversion from the purposes for which the note had been drawn and deliv-sideration for the making of it; I have never ered; that from the form of the note (its being made payable to the bank), from the official connection of Robinson with the bank, he being one of its directors, and his personal relations with the cashier of the bank,

received any consideration for the making of the note. I had a conversation with D. C. Robinson at the time of the making of the note. He stated to me the object or purpose for which he desired the note. He said to

me that he desired some accommodation | we would give him these notes it would[395] notes, and he wanted us clerks to make them, and stated the amount. He said that the reason he wanted the accommodation note was that he had exceeded his line of discount and could not get any more accommodation; that he was building a power house up there (in Elmira) and needed some money to accomplish that purpose, and that it we would give him these notes it would enable him to accomplish that. He also added that we would not be put in any position of paying them at any time; that he would take care of them, and gave us positive assurance on that point, and naturally, knowing the man, and thinking that he was a millionaire, as he probably was at that time, we had no hesitation about going on the notes."

enable him to accomplish that." This, it is said, tended to show that the agreement on which the note was given was not that it should be discounted at the Elmira National Bank, but that it should be used by Robinson for obtaining money to build the power house. In other words, the assertion is that the mere statement, by Robinson, of the causes which rendered it necessary for him to obtain a note to be discounted at the Elmira National Bank had the effect of destroying the very purpose for which the note was confessedly given. When the real result of the contention is apprehended its unsoundness is at once demonstrated. Other portions of the record have been referred to, in argument, as tending to show that it could not have been the intention of the defendant, in giving the note, that Robinson should discount it, but on examining the matters thus relied upon we find they have no tendency whatever to contradict or change the plain result of the transaction as shown by the defendant's own testimony.

As the discount of the note at the Elmira National Bank was not a diversion, but on the contrary was a mere fulfilment of the avowed object for which the note was asked and to consummate which it was delivered, it becomes irrelevant to consider the various circumstances which it is asserted tended to impute knowledge to the bank of the purpose for which the note was made and delivered. If the agreement authorized the discount of the note, it is impossible to conceive that knowledge of the agreement could have caused the discount to be a diversion, and that the mere knowledge that paper has been drawn for accommodation does not prevent one who has taken it for value from recovering thereon is too elementary to require citation of authority.

There was no testimony tending to refute these statements or in any way calculated to enlarge or to restrict them. [394] *The defense, then, amounts to this: That the form of the paper and Robinson's relation with the bank and its officers were such as to bring home to the bank the knowledge of the transaction from which the note arose, and that such knowledge prevents a recovery because Robinson, taking the transaction to be exactly as testified to by the defendant, was without authority to discount the note. Granting, arguendo, that the testimony tended to show such a condition of fact as to bring home to the bank a knowledge of the transaction, the contention rests upon a fallacy, since it assumes that the note was not given to Robinson to be discounted, and that his so using it amounted to a diversion from the purpose for which it was delivered to him. But this is in plain conflict with the avowed object for which the defendant testified the note was drawn and delivered, since he swore that he furnished the note because he was told by Robinson that he needed accommodation, that his line of discount on his own paper had been exceeded, and that if he could get the paper of the defendant he would overcome this obstacle; in other words, that he would be able successfully to discount the paper of another person when he could not further discount his own. This obvious import of the testimony is fortified, if not conclusively proved, by the form of the note itself, which, instead of being made to the order of Robinson, was to the order of the Elmira National Bank. The premise, then, upon which it is argued that there was proof tending to show that the discount of the note by Robinson at the Elmira National Bank was a diversion, is without foundation in fact. The only matters relied on to sus-out contradiction, that the note had been distain the proposition that there was testimony tending to establish that the note was diverted, because it was discounted at the bank to whose order it was payable, are un-time prior to the day of the discount his warranted inferences drawn from a portion of the conversation, above quoted, which the defendant states he had with Robinson when the note was drawn and delivered. The part of the conversation thus relied upon is the statement that Robinson said, when the note was given, "that he was building a power house up there (in Elmira) and needed some money to accomplish that purpose, and if

The contention that although it be conceded the note was not diverted by its discount, nevertheless the bank could not recover thereon because it took the note for an antecedent debt, hence without actual consideration, depends, first, upon a proposition of fact, that is, that there was testimony tending to so show, and, second, upon the legal assumption that even if there was such testimony it was adequate as a legal defense. *The latter proposition it is wholly unneces-[396] sary to consider, because the first is unsupported by the record. All the testimony on the subject of the discount of the note was introduced by the defendant in his effort to make out his defense. It was shown, with

counted by Robinson at the bank, and that
the proceeds were placed to his credit in ac-
count. It was also shown that for some

account with the bank, to the credit of which
the proceeds of the discount were placed, was
overdrawn. The exact state of the account
on the day the discount was made was stated
by the cashier and a bookkeeper of the bank,
and was moreover referred to by Robinson.
On the morning of the discount the debit to
the account of Robinson, by way of over-
draft, is fixed by the cashier at $35,400, and

by the bookkeeper at $35,000. Robinson | National Bank, plaintiff, against George G. made the following statement: "The amount Williams and John B. Dodd, stockholders of of other notes wiped out the overdraft and the bank, to recover the amount of certain Imade a balance." The bookkeeper's state- dividends received by them before the apment is as follows: pointment of a receiver. First question answered in the negative.

"There was an overdraft of $35,000 against Mr. Robinson upon the books of the bank on the morning of May the 4th. There were Statement by Mr. Justice Peckham: items coming through the exchanges that This suit was commenced in the circuit amounted to about $73,000, and there was a court of the United States for the southern deposit made of $33,000 to make the over-district of New York. It was brought by draft good. These were to take up the items that came through the exchanges. I think that was the way of it. His account would have been overdrawn that night for about $50,000 if it had not been for the entry on the books of the proceeds of these notes."

No other testimony tending to contradict these statements, made by the defendant's own witnesses, is contained in the record. They manifestly show that, although at the date of the discount there was a debit to the account resulting from an overdraft, nearly the sum of the overdraft was covered by items of credit, irrespective of the note in controversy, and that subsequent to the credit arising from the note more than the entire sum of the discount was paid out for the account of Robinson, to whose credit the proceeds had been placed. With these uncontradicted facts in mind, proved by the testimony offered by the defendant, and with [397]no testimony tending the other way, it is obviously unnecessary to go further and point out the unsoundness of the legal contention relied upon. Affirmed.

the plaintiff, as receiver of the Capital Na-
tional Bank of Lincoln, Nebraska, for the pur-
pose of recovering from the defendants, who
were stockholders in the bank, the amount
of certain dividends received by them before
the appointment of a receiver.
Upon the trial of the case the circuit court
decreed in favor of the plaintiff for the re-
covery of a certain amount. The defendants
appealed from the decree, because it was not
in their favor, and the plaintiff appealed
from it, because the recovery provided for in
the decree was not as much as he claimed to
be entitled to. Upon the argument of the
appeal in the circuit court of appeals cer-
tain questions of law were presented as to
which that court desired the instruction of
this court for their proper decision.

It appears from the statement of facts made
by the court that the bank suspended pay-
ment in January, 1893, in a condition of
hopeless insolvency, the stockholders, includ-
ing the defendants, having been assessed to[398]
the full amount of their respective holdings,
but the money thus obtained, added to the
amount realized from the assets, will not be
sufficient even if all dividends paid during
the bank's existence were repaid to the re-

JOHN W. McDONALD, as Receiver, Appt., ceiver, to pay seventy-five per cent of the


GEORGE G. WILLIAMS and John B. Dodd.

(See S. C. Reporter's ed. 397-408.)

When receiver of national bank cannot recover back from a stockholder a dividend paid him out of the capital-U. 8. Rev. Stat. § 5204.

1. A receiver of a national bank cannot re


claims of the bank's creditors.

This suit was brought to compel the repayment of certain dividends paid by the bank to the defendants on that part of the capital of the bank represented by their stock of the par value of $5,000, on the ground alleged in the bill that each of said dividends was fraudulently declared and paid out of the capital of the bank, and not out of net profits.

A list of the dividends and the amount thereof paid by the bank from January, 1885, to July, 1892, both inclusive, is contained in the statement, and it is added that all dividends, except the last (July 12, 1892), were paid to the defendant Williams, a stockholder to the amount of $5,000, from the organization of the bank. The last dividend was paid to the defendant Dodd, who bought Williams's stock, and had the same transferred to his own name De§cember 16, 1891.

cover back from a stockholder a dividend paid
him, not out of the profits, but entirely out of
the capital, prior to the appointment of the
receiver, when such stockholder receiving such
dividends acted in good faith, believing the
same to be paid out of the profits made by
the bank, and when the bank, at the time such
dividend was declared and paid, was solvent.
The stockholder by the mere reception of
his proportionate part of such dividend, does
nct withdraw any of the capital of the bank
within the meaning of U. S. Rev. Stat.


[No. 257.]

When the dividend of January 6, 1889, was declared and paid, and when each subsequent dividend, down to and including July,

Argued April 21, 1899. Decided May 15, 1891, was declared and paid, there were no

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