Town of East Hartford v. American National Bank

Pardee, J. Leonard T. Pitkin, treasurer of the town of East Plartford, dejDosited town money with the American National Bank; he withdrew it upon official checks, but for his own private uses; afterwards the bank paid his official overdrawing checks, and discounted his official notes, the avails of which were deposited with it to his official account, and part of them at least were withdrawn upon official checks for town uses. Subsequently by official checks upon town money deposited with the bank he repaid the loan. The bank had no knowledge of the misappropriation. The treasurer had no power to borrow money for the town or bind it for the repayment; the bank made no inquiry of him or any other person as to his authority, but it loaned the money in good faith, believing that it would be applied to town uses. The town sues for the money appropriated by the treasurer to the payment of the notes. The case is reserved for our advice. As the bank must be held to have known that the treasurer was not authorized to borrow money for the town, paying his overdrawing checks and discounting the notes were each loans#by it to him as an individual. By lending to an officer whose office conferred no power to borrow, the bank cannot force itself into the position of a creditor of the town against its will and without its knowledge; and the payment of its debts by the unauthorized act of the treasurer from money thus borrowed is not an appropriation of it by the town to its uses; it had previously placed money in his hands for the payment of those specific debts; there remained to it upon knowledge the right to repudiate the unauthorized borrowing and payment; the right to remain in debt, with its creditors’ permission; not having that, the right to borrow for itself. Upon such repudiation the transaction remains the lending by the bank to the agent for himself; the money borrowed remains his own; the duty to repay solely upon him; the right of the bank to recover, solely from him. The bank had notice as to the time when, and as to the character of the checks by which, the treasurer withdrew Ms deposit with it of the money [553] loaned to and borrowed for himself; it knew when it was exhausted; it knew when after such exhaustion he again as a duly authorized agent deposited with it money belonging to the town; and it knew the payment of his debt to it to be from that; knew it to be unauthorized and of course illegal. The intentional reception of this money upon a private debt was burthened with an obligation to return it upon demand. There are many instances in which municipal corporations have undertaken to sell, and have received money for, property which they had no power to convey; have received money and property in ways and for uses not permitted by the law of their being; have received the benefit of labor and materials furnished, in ways forbidden by their respective charters, for buildings which they were under obligation to erect, and have undertaken to shield themselves from re-payment of the money or payment for the property thus appropriated behind either the errors of their agents or their own inability. But in behalf of the complete and irresistible equity in favor of the claimants, the courts have set aside these technical defences; but only in behalf of perfect equity; only in cases where, notwithstanding violations of restrictions in charters, the corporation has received and retained for its advantage that which in good conscience it should repay or pay for; only in cases where, if it is compelled to repay money or pay for property applied to its use by the unauthorized act of an agent, the judgment will inflict no loss upon it. In the case before us, the bank having loaned money to an agent known to be without authority to borrow, cannot invoke the aid of this principle without demonstrating that upon all the facts a judgment in its favor will inflict no loss upon the town. As a matter of law the loan was to an individual; the town cannot be forced into the position of a debtor for it, if thereby it will without fault suffer loss, even if he volunteered without its knowledge to pay therewith its debts. [554] The Superior Court is advised to render judgment for the plaintiff for the sum of $8,878.92, with interest from demand. In this opinion the Other judges concurred.