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three promissory notes, each for five thou- | maturity, at the rate of ten per cent per sand dollars, payable four months after date, annum, until paid. with interest at the rate of ten per cent per annum from maturity until paid. Said Brown and Allis afterwards indorsed and delivered said notes to the defendant First National Bank, and said bank before maturity and for a valuable consideration indorsed, rediscounted, and delivered said notes to plaintiff. That on December 7, 1892, the McCarthy & Joyce Company, a corporation resident in the city of Little Rock, Pulaski County, Arkansas, and organized and doing business under the laws of Arkansas, executed and delivered to James Joyce, a citizen of the state of Missouri, its two promissory notes, each for five thousand dollars, payable to his order at four and five months respectively after date, with interest from maturity at the rate of ten per cent per annum until paid. Said Joyce afterwards indorsed said notes to the defendant First National Bank, and said bank before maturity and for a valuable consideration indorsed, rediscounted, and delivered said notes to plaintiff. Said notes were each at maturity presented at the First National [127]Bank in Little Rock, Arkansas,*for payment, and payment being refused, they were each duly protested for nonpayment, the fees for which, amounting to twenty-five dollars, were paid by plaintiff. Copies of said notes, with the indorsements thereon, are hereto attached, marked 1 to 5 inclusive, and made part hereof. No part of said notes has been paid, and the same have been presented to the receiver of said bank for allowance, which he has refused to do."

Judgment was prayed for the debt and

other relief.

Three of said notes are in the following form:

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The following indorsement appears each: "Geo. R. Brown, H. G. Allis, First National Bank, Little Rock, Arkansas; H. G. Allis, P't."

Two of the notes were in the following form:

$5,000.

McCarthy & Joyce Co.

Geo. Mandlebaum, Sec'y & Treas.
A, 73477. No. 2. Due Ap'l 7-10, '93.

They were indorsed as follows: "James Joyce, H. G. Allis, First National Bank, Little Rock, Ar.; H. G. Allis, P't."

*The receiver only answered, and his an-[128] swer as finally amended denied that "either of the notes described in the plaintiff's complaint was ever indorsed and delivered to the First National Bank; he denies that either of said notes was ever the property of or in the possession of said bank; and denies that the said bank ever indorsed or delivered either of said notes to the plaintiff; he denies that said bank ever received any consideration from said plaintiff or any indorsement or delivery of said notes to it;" and averred "that the name of the defendant bank was indorsed on said notes by H. G. Allis for his personal benefit without authority from said bank; that the said Allis, assuming to act for defendant bank, procured the plaintiff to advance or loan upon said notes a large sum of money, which he appropriated to his own use; that said Allis had no authority from said bank to negotiate said loan or to act for it in any way in said transaction; if said transaction created an indebtedness against the defendant bank, then the total liability of said defendant bank to the plaintiff by virtue thereof exceeded one tenth of the plaintiff's capital stock, and the total liability of the defendant bank thereby exceeded the amount of its capital stock actually paid in; that the plaintiff knowingly permitted its officers to make such excessive loan under the circumstances aforesaid; that the transaction aforesaid was not in the usual course of banking business which either the plaintiff or the defendant bank was authorized to carry on; that the plaintiff is not an innocent holder of either of said notes; that the defendant bank received no benefit from said transaction; that it had no knowledge thereof until a few days prior to its suspension; that no notice of the dishonor of said notes was ever given to the defendant bank." Also that "at the date of the suspension of the First National Bank the United States National Bank was indebted to it in the sum of $467.86, that sum then being on deposit in the said United States National Bank to the credit of the First National Bank of Little Rock; and that the same has never been paid."

The receiver prayed that "he be discharged from all liability upon the notes sued on herein, and that he have judgment against[129] the plaintiff for the said sum of $467.86, and interest from the 1st day of February, 1893."

The plaintiff bank denied the indebtedness of $467.86, and averred "that at the time said First National Bank failed it was indebted to plaintiff in a large amount, to wit, the notes sued upon herein, and plaintiff applied said $467.86 as a credit upon said

34128.

Little Rock, Ark., Dec. 7, 1892. Four months after date we, or either of us, promise to pay to the order of James Joyce five thousand dollars, for value received, negotiable and payable, without defalcation or discount, at the First National Bank of Lit-indebtedness." tle Rock, Arkansas, with interest from The issues thus made up were brought to

trial before a jury. Upon the conclusion of | per cent. Money rates are little firmer. An-
the testimony the court, at the request of swer if wanted.
U. S. Nat. Bank.
the plaintiff bank, instructed the jury to
Little Rock, Ark., July 6, 1892.
find a verdict for it, which the court did, and United States Nat. Bank, N. Y.:
denied certain instructions requested by the We can use fifty thousand additional at
defendant. The jury found for the plaintiff, five per cent; will send bills to-morrow.
as instructed, for the full amount of the
First Nat. Bank.
notes sued, less the amount of the set-off,

and judgment was entered in accordance

therewith.

A writ of error was sued out to the circuit court of appeals, which affirmed the judgment, and the case was brought here.

There had been two other trials. The rulings in which and the action of the circuit court of appeals are reported in 27 U. S. App. 605, and 49 U. S. App. 67.

The defendant assigns as error the action of the circuit court in instructing the jury to find for the plaintiff bank and in refusing the instructions requested by the defendant. The latter were nineteen in number, and present every aspect of the defendant's defense and contentions. They are necessarily involved in the consideration of the peremptory instruction of the court, and their explicit statement is therefore not necessary.

The evidence shows that the New York bank solicited the business of the Little

Rock bank by a letter written by its second assistant cashier, directed to the cashier of the Little Rock bank, and dated June 21,

1892.

Among other things the letter stated: "If you will send on $50,000 of your good, shorttime, well-rated bills receivable, we will be pleased to place them to your credit at 4 per

cent."

The reply from the Little Rock bank came, not from its cashier, but from its president, H. G. Allis, who accepted the offer and inclosed notes amounting to $50,728, among 1280] which were three of the City Electric Railway Company, the maker of three of the notes in controversy. When first forwarded they were not indorsed, and had to be returned for indorsement. They were indorsed, and the letter returning them was signed by Allis. To the letter forwarding them the New York bank replied as follows:

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made and accepted, H. G. Allis, as president,
In accordance with the proposition thus
wrote on the 9th of July, 1892, to the New
nominated "prime paper, amounting to $50,-
York bank a letter, inclosing what he de-
301.88," and requested proceeds to be placed
"to our credit and advise." These notes
proceeds, less discount, amounted to $49,-
were discounted and acknowledged. Their

641.68.

On July 26, 1892, the New York bank telegraphed:

*New York, July 26th, 1892. [131] First National Bank, Little Rock, Ark.: Can take fifty thousand more of your wellrated bills discounted at five per cent.

U. S. Nat. Bank. To this H. G. Allis, as president, answered as follows:

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The next communication was about the ber 25, 1892, and was signed by W. C. Dennotes in controversy. It was dated Novemthe notes was sent by H. G. Allis, as presiney, cashier. The letter, however, inclosing dent. The correspondence is as follows:

New York, July 6th, 1892. First National Bank, Little Rock, Ark.: The First National Bank of Little Rock, Ark. Will give you additional fifty thousand on Nov. 25, 1892. short time, well rated bills discounted at five United States National Bank, New York City. 922 174 U.S.

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Gentlemen: Kindly advise us if you can give us $25,000 more *in discounts. We have not decided whether we will make further discounts this year, although it is more than probable that we will have to, as our cotton men do not want to sell at present.

We believe the advance in price will cover shortage of crop, and that our collections will be equal to those of last year. If our cotton men continue to hold their cotton, it will be necessary for us to make further rediscounts, and we want to know what we can do in case they refuse to sell.

If you can grant us this favor, kindly let us know what rate of interest you will want. Your immediate reply is requested.

Yours very truly,

W. C. Denney, Cashier.

New York, Nov. 28, 1892.

Mr. W. C. Denney, Cashier, Little Rock, Ark. Dear Sir: Yours of the 25th is to hand. We will give you the additional discounts

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New York, December 17, 1892.

as requested. You may send on your paper, First National Bank, Little Rock, Arkansas: and we will put same to your credit at 6 per

cent.

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Little Rock, Ark., Dec. 13, 1892. United States Nat. Bank, New York City. Gentlemen: In accordance with our letter of the 25th ult., and your reply of the 28th ult., we find that we shall need some more money, as our cotton men are not shipping out any cotton. It seems to be the inclination of all of them to hold for a better price, and we are now carrying $175,000 in demand loans on cotton, which we may have to carry two or three months longer.

We inclose herein paper as scheduled below. Kindly wire us proceeds to our credit, and oblige,

Yours very truly,

H. G. Allis, President.

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City Electric St. R'y Co.,

due

April 10

5,000 00

McCarthy

& Joyce Co., due

May 10.

McCarthy

April 10

& Joyce Co., due

5,000 00

5,000 00

$32,500 00 We hold all collaterals recited subjected to your order and for your account.

New York, Dec. 16th, 1892. H. G. Allis, Esq., Pres't, Little Rock, Ark. Dear Sir: We have this day discounted

174 U.S.

Letter thirteen received notes discounted proceeds credited account.

United States National Bank.

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Henry C. Hopkins, cashier of the New York bank, was called as a witness in its behalf, and after explaining the letters and telegrams which were sent by the banks, and the transactions which they detailed, testified that the dealings between the banks were such as take place between banks carrying on legitimate banking business, in the usual course of business, and that the notes were not discounted in any other way, and that the bank had no notice or intimation that the notes had not been regularly received by

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the First National Bank or offered by it in the banks at Little Rock to rediscount the regular course of business or for the bene- through their presidents and cashiers until fit of any person other than the bank or in- after a decision in the National Bank case of terested in the proceeds, and that the United Cincinnati in January, 1893; after that it States National Bank in its correspondence was done by resolution of the board of diand dealings did not recognize H. G. Allis, rectors, and the banks of New York and other W. C. Denney, or S. S. Smith personally or commercial cities commonly require that now. in any capacity than as representing the By a witness who was cashier of the LitFirst National Bank; and that the transac- tle Rock bank from November, 1890, to Octions were solely with the First National tober, 1891, Allis then being president, it was Bank; and that the correspondence and trans-shown that it was the custom of the bank as actions were usual for the president and to rediscounting notes for the cashier or as[185]cashier of a United States *national bank to sistant cashier to refer them to the president, carry on; and that the proceeds of the vari- and the president generally directed what ous discounted notes were withdrawn by the amount and where to send them. Whether Little Rock bank in the regular course of they were referred to the board of directors, business by its officers. the witness was unable to say.

There was a detailed statement of the transactions between the banks attached to Hopkins's deposition which is not in the record, but instead thereof there appears the following:

"The account current here referred to began June 27, 1892, and continued until the suspension of business of the First National Bank. It shows almost daily entries of debit and credit. It shows that the several notes discounted by the United States National Bank and referred to in the depositions of the officers of that bank, being forty-nine in number, were charged against the account of the First National Bank by the United States National Bank at the several dates of their maturity. In two thirds of the instances where such charges were made the balance to the credit of the First National Bank on the books of the United States National Bank was sufficient to cover the charge. In other instances the balance to the credit of the First National Bank was insufficient to meet the charge at the time of the entry, and in the other instances the account of the First National Bank was in overdraft as shown by the books of the United States National Bank at the time the charge was made.

"The account shows that at the time of the suspension of the First National Bank the latter bank had a credit of $467.86 upon the books of the United States National Bank. Against this balance the notes in suit with protest fees were charged on the account April 17 and May 15, 1893, making the account show a balance in favor of the United States National Bank of $24,558.03.

"This is the paper marked '77' referred to in the depositions of Henry C. Hopkins, James H. Parker, Joseph W. Harriman and John J. McAuliffe, hereto annexed."

The record also shows that "J. H. Parker, president, Joseph W. Harriman, second assistant cashier, and John J. McAuliffe, assistant cashier, each testified to identically the same facts in the identical language as Henry C. Hopkins, and it is agreed that the depositions of Hopkins shall be treated as [136]the deposition *of each of the said witnesses without the necessity of copying the deposition of each witness."

There was proof made of the protest of the notes.

There was testimony on the part of the plaintiff showing that it was the custom of

On cross-examination the witness testified that when the discounts were determined on, the cashier or assistant cashier transacted the business. He, however, only re membered sending off one lot of discounts, Mr. Denney, the assistant cashier, usually carrying on the correspondence. He did not remember that the president ever did any thing of that kind. "Either Mr. Denney or I would say to him that something of the kind was needed, and he would direct the quantity and what correspondents usually to send to."

There were introduced in evidence "the reports or statements by the bank to the Comptroller of the Currency, showing the rediscounts and business of the bank, of date May 17, 1892, and July 12, 1892, as follows: The report of May 17 was sworn to by W. C. Denney, cashier, and attested by James Joyce, E. J. Butler, and H. G. Allis, directors, and showed 'notes and bills rediscounted, $16,132.40.' The report of July 12th was sworn to by H. G. Allis, president, and attested by Charles T. Abeles, E. J. Butler, and John W. Goodwin, directors, and showed notes and bills rediscounted, $81,748.80."

The testimony on the part of the plaintiff in error showed (we quote from brief of de-[137] fendant in error) that "the notes never be longed to the First National Bank; that the three notes of the Electric Street Railway Company were executed to Brown and Allis for accommodation of Allis, and the two notes of McCarthy & Joyce Company were executed and delivered to Allis for the purpose of raising money for the company to be placed to its credit with the First National Bank, to which McCarthy & Joyce Company was indebted; that neither of the notes was ever passed upon by the discount board of the bank or appeared on the books of the

bank; that after the bank was notified that the notes had been discounted and placed to notes ($25,000) to be placed to his credit on its credit, Allis directed the proceeds of the the books of the bank, at which time there was an overdraft against him of $10.679.44; that Allis was at that time indebted to the Little Rock bank on individual notes for at least $50,000, and was continuously thereafter indebted to the bank until its failure."

As to the power of the president to direct rediscounts or to indorse the notes of the bank, E. J. Butler, N. Kupferle, and C. T. Abeles, who were directors of the bank at

the time of the transactions between it and the New York bank, testified respectively as follows:

(Butler): Was a pretty regular attendant at the board meetings during the yearat nearly all the meetings.

Q. Did Mr. Allis have authority to discount notes for the bank or to rediscount them?

A. Never that I knew of. I knew that when Colonel Roots was president he asked and received authority from the board to make rediscounts, but I do not know that Mr. Allis ever asked, and the board, when I was present he never was given any authority to make rediscounts for the bank.

Q. Did he have authority from the bank to indorse its papers for rediscount?

d. No, sir; never that I was aware of.

On cross-examination he testified that he did not recollect of Allis asking for authority; that the question never came before the board as to discounts. He knew that there [138]were discounts made, but did not recollect any particular ones, but in case there were he would suppose they were on the authority of the board, given in his absence, but did not remember that the question was brought up

at all.

Q. There are a couple of statements made by the bank (being the statements heretofore introduced by the plaintiff) of May 17, 1892, and July 12, 1892, to which you as a director certify, which show, one of May 17 shows rediscounts, $16,172.40, and the one of July 12, 1892, shows rediscounts, $81,748.88. Did you sign these?

A. I couldn't say without referring to the original reports.

Q. These are the published reports, are they not?

A. They purport to be the published report, but I do not know anything about it. was one of the directors at that time.

Q. That is one of the usual forms of the reports published in the papers, isn't it? A. Yes, sir.

Q. You now tell the jury that you do not know anything about the extent of rediscounts made by it?

A. No, sir; I cannot remember.

Mr. Denney was cashier in 1892, and he supposed that Denney transacted the business as to indorsements and rediscounting, but did not know and did not recollect that Allis did. Did not hear of him indorsing the notes uit until after the bank failed.

rle): Mr. Allis did not have the
the board of directors of the
its paper for rediscount.
on: There was nothing
hout such power. The

ht before the board.
time rediscounted
lly attended to
ras discount-
president
should

borrow some money. That was in the fall of 1892. I knew that the bank had been discounting paper long before that and borrowing money before* that, and no authority had[139] been asked of the board to do it. I knew that they were borrowing money and rediscounting paper continually.

Redirect: We had eleven or thirteen members of the board of directors; I forget which. Never less than eight or nine. There was seldom a meeting when all were present a majority present.

Q. Did they at any time rediscount, or authorize the rediscounting of paper? Did they have that authority?

A. No, sir; that was not their business. Q. Theirs was to discount paper for customers of the banks?

A. The daily offerings, yes, sir.

Did not know of Mr. Allis indorsing the name of the bank upon the paper for the purpose of rediscounting it.

Q. Did you, as a member of the board of directors, or otherwise, have any information that Mr. Allis was using the name of the bank upon his, or other people's paper, for accommodation?

A. No, sir, I never did.
Cross-examination:

Q. You didn't know he was using the name of the bank on the bank's paper? A. No, sir.

Q. You knew he was discounting paper? A. No, sir; it was not his place.

Q. Didn't the correspondence there show he was sending the paper for discount all over the country?

A. No, sir; I don't know anything about

that.

Q. Wasn't it your business to know it?
A. I do not know.

Q. You was vice president and one of the directors?

A. Yes, sir. I never knew anything about it until the failure of the bank-that he ever used the bank's name.

99

(Abeles): Not while I was there (at the meetings of the board) was authority given to Allis as president to indorse or rediscount the notes of the bank. I do not think it was ever mentioned. I knew of the bank rediscounting paper, and somebody was[140] transacting that part of the business. I think I inquired of some of the directors who it was, and was told that the authority vested in the cashier. I do not recollect that I inquired of Allis or Denney.

(Cohn): Was not a director in 1892— was for ten years prior to that time, and Allis was president in 1891, but did not recollect that he had authority from the board to indorse its paper or to rediscount it.

Cross-examination: Knew that rediscounting was being done, but supposed it was being done by the cashier-didn't stop to inquire.

Redirect:

Q. Who was authorized in the bank to perform that duty?

A. I understood the cashier.
Cross-examination:

Q. How was he authorized?
A. By law.

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