Patrick v. Arkansas National Bank

Kirby, J., (after stating the facts). It is first urged that there is ¿10 oral testimony properly included in the record, that the decree of the chancellor must be presumed to be correct, and the case affirmed accordingly. The decree recites that all the parties agreed in open court that the oral testimony of the witnesses may be taken in shorthand by the stenographer, naming him, and by him transcribed in typewritten form and filed herein, either in term time or vacation, and, when so taken and filed, shall be treated as depositions of the witnesses and become a part of the record in this cause. What purports to be the testimony of the witnesses was presented to the clerk in typewritten form and by him filed and certified to this court as a true, perfect and complete transcript of all the depositions, exhibits thereto, entries and proceedings of the witnesses mentioned, etc. Couns'el for appellant contend that this transcript of testimony is not sufficiently identified as having been taken by the stenographer in accordance with the agreement, there being no certificate by him thereto, nor properly made a part of the record of the case by bill of exceptions, submitted to them for examination and certified by the trial judge. They do not contend, however, that there was any material testimony that is not included in the corrected record here. The court is of opinion that, under the agreement of the parties that the oral testimony, when transcribed and filed, either in term time or in vacation, shall be treated as depositions of the witnesses and become a part of the record in this cause with the certificates of filing by the clerk, and to the transcript that it contains all the testimony, etc., is sufficient to show the evidence upon which the cause was heard. Lenon v. Brodie, 81 Ark. 208, 98 S. W. 979; Sanders v. W. B. Worthen, 122 Ark. 104, 182 S. W. 549; Massey v. Kissire, 149 Ark. 215, 232 S. W. 24; McMillan v. Brookfield, 150 Ark. 518, 234 S. W. 621. Although appellants, Price, Patrick and-Clark, denied the execution of the note to the bank, in their answer, the note itself, with their signatures and their admissions in testimony, shows its execution and indorsement by them, and the undisputed testimony shows that the bank loaned the money thereon, and passed it to the credit of the maker, Patrick, who afterwards checked it out to the corporation, which used it in payment for a note they were liable on to another bank. At the very least, they could not be considered other than"accommodation parties and liable on the instrument to the holder for value, notwithstanding- such holder may have known, when taking it, that they were only accommodation parties. Crawford & Moses’ Digest, § 7795; Hamilton v. Brown, 88 Ark, 97, 113 S. W. 1014; Fox v. State, 102 Ark. 451, 145 S. W. 228; First National Bank v. Allen, 141 Ark. 328, 216 S. W. 1039. It is next contended that the court erred in dismissing- their cross-complaint against Roberta Fulbright on the contract for the sale of their stock in, and liquidation of the debts of, the Ozark Poultry & Egg Company. The court found, however, that these parties had, in violation of the terms of the said contract, refused and failed to select an appraiser and to make a second appraisement of the fixed assets of said corporation, upon the demand of Roberta Fulbright, in accordance with the express agreement therein that such second appraisement should be made if either party thought the first appraisement unreasonable, and by filing of the cross-complaint herein, which amounted to a substantial breach of the contract and released her from'its performance. This finding of the facts is supported by the testimony, and no error was thereby committed, nor in declaring such finding a breach of the contract that released Roberta Fulbright from liability to them for any failure to perform it. They claimed that she was liable to them for payment of the value of their stock in said corporation, to be ascertained by the appraisement and sale of its assets and property, in accordance with the terms of the agreement therefor. It is undisputed, however, that one of them, Price, shortly before the mailing of said contract, had offered to buy the one-half of the stock of the Ozark Poultry & Egg Company owned by her intestate, her husband, at the time telling- her that he found that the company had come to the end of their row. They were heavily indebted, owed $50,000 to the banks, and the liquid assets amounted to about $39,000; “that the company was worth $18,000 less than nothing, ’ ’ but that he would see that she would not lose anything, and would give her $6,000 par value for the stock. The liquidation of the corporation proceeded under the agreement until the appellants filed their cross-complaint against her, asking for receiver of the assets, and the corporation was then put into bankruptcy, and its administration there failed to show the payment of its debts and that the stock of appellant was of any value whatever. The decree as to these appellants is correct, and is affirmed. The court erroneously held the estate of Jay Pulbright, a director and president of the bank at the time the loan was made, responsible for the payment of the balance due thereon, adjudging it an excess loan knowingly made by him as a director of the bank. The bank first brought suit against Patrick, Price and Clark on the note executed by Patrick and indorsed by the other, and finally, in the denial of the allegations of the answer and cross-complaint of Patrick, alleged that the loan represented by the note sued on was an excess loan to the Ozark Poultry & Egg Company, made by Jay Pulbright, the director and president of the bank, knowingly and in violation of the National Banking law, and that Roberta Pulbright, as his administratrix, was liable to the bank to the payment of the balance due thereon, under §§ 5200 and 5239 of said statute. On this point it made the following finding of fact: “That on said date aforesaid (November 15, 1922), the deceased, Jay Fulbright, while acting both as president and director of the plaintiff, Arkansas National Bank, and as president and director of the said Ozark Poultry & Egg.Company, negotiated, granted and made to the defendant, P. M. Patrick, a loan of $10,000, which was evidenced by a promissory note executed by said defendant, Patrick, and indorsed by the defendants, M. L. Price and R. M. Clark; that said loan was made to the defendant, Patrick, for the benefit of the Ozark Poultry & Egg Company.” The Ozark Poultry & Egg Company, hereafter called the corporation, was indebted, at the time of this loan, to the bank in such a sum as that the amount of the loan, $10,000, would have been in excess of the amount the bank, with its capital and surplus, could lend to any one person, firm or'Corporation. The testimony shows that Pulbright was the president of the corporation, which had been doing an extensive business, as well as director and president of the bank. The directors of the corporation, before the making’ of this loan, had on numerous times borrowed money from the bank on paper executed by them. This loan was applied for by Patrick, the maker, presenting’ the note, which had already been signed and indorsed at the office of the corporation, to the cashier of the bank, who advanced the money thereon, placing it to the credit of the maker of the note, who, later that day, checked it out to the corporation, which used it inpayment of one of its notes due to a bank in Port Smith. The corporation charged itself with the money as having been received from and due to Patrick, the maker of the note. Unquestionably these individuals, the maker and indorsers of the note, had the right to borrow money from the bank, and it was not unusual for them to do so, and lend it to the corporation, of which they were directors and stockholders. They were separate and distinct persons from the corporation, and not personally liable to the payment o'f its debts. The money borrowed by the corporation from the bank constituted no liability against them, personally or individually. They were not an association, or a company or firm, nor with the corporation any person within the meaning of said § 5200 of the statute, providing that total liability of any borrower shall at no time exceed one-tenth part in amount of the capital stock. This corporation was not thought to be insolvent at the time this money was borrowed from the bank by Patrick and his indorsers, and by them loaned to it. The cashier, after making the loan, later asked Pulbright, the president of the bank and also of the corporation, first, after telling him that the loan had been made on the note signed by Patrick and indorsed by the other two, if it was signed as it should have been, and he replied that it was. It is true some of the witnesses liable to the payment of the note stated it was agreed to be made and the loan procured for the corporation in that way to avoid the appearance of its being a loan to tbe corporation, which would have been an excess loan made to one borrower in violation of the statute. The witnesses, however, were liable to the payment of the note in any event, and seeking to escape such liability by transferring it to the estate of Fulbright, who could not testify about the transaction. The chancellor found, too, that Jay Fulbright, while acting both as president and director of the plaintiff bank and of the corporation, “negotiated, granted and made to defendant, F. M. Patrick, a loan for $10,000, which was evidenced by a promissory note executed by said defendant, Patrick, and indorsed by the defendants, L. M. Price and R. M. Clark;” that said loan was made to the defendant, Patrick, “for the benefit of the corporation.” Even if it could be said' that the $10,000 loan to Patrick was a loan indirectly to the corporation, of which Fulbright was president, and for the making of which the directors of the bank would be liable for the resulting damages under the law prohibiting an excess loan to one borrower, corporation, association, individual, partnership and members thereof, then it is more nearly true, and the proof would have warranted the finding, that Fulbright only procured the making of the loan, which was granted by the cashier of the bank, and later approved by its board of directors, at a meeting from which he was absent, and in the making of which loan he did not knowingly participate in his capacity as director or officer of the bank. This transaction is unlike that in the case of the Corsicana National Banh v. Johnson, 251 U. S. 68, where the testimony showed there was an excess loan to two persons, individuals, in making which the bank director knowingly participated, rather than two loans, neither of them excessive, made to borrowers severally. It was shown that one of the parties indorsed the note of the other, the maker of which in turn indorsed his note for a like sum, which would not have been an excess amount. These individuals had been partners and jointly interested in many ventures, and were still partners in some, and the transaction was treated as one in the making of the ioan by the bank, the money being forwarded by check or draft payable to the order of the two individuáis jointly, as though they were a firm or partnership. Here, as already said, while it is true the maker and indorsers of this note were directors of'the corporation to which they loaned the money borrowed by them, they were entirely separate and distinct persons from said corporation, and without personal liability to the payment of its debts or performance of its obligations. It follows that the court erred in holding Roberta Fulbright, as administratrix of the estate of her deceased husband, liable to the payment of the balance due on said Patrick note. The cause is therefore remanded to the chancery court, with directions to dismiss the action as against the said administratrix.