Breedlove v. Freudenstein

FOSTER, Circuit Judge. Appellee brought this suit as receiver of the Merchants National Bank of Brownsville, Tex., to recover on six promissory notes, executed by its trust officer, representing the trust department of the bank as executor of the will of F. N. Booth. A plea in abatement and exceptions or demurrers were overruled. The jury was waived and, after the taking of evidence, judgment was entered by the District Court as prayed for, a total amount of $15,647.88, which included interest and attorney’s fees as provided for in the notes. The assignments relied upon present only this proposition: That the bank was not authorized to contract as executor with itself and the notes were void for want of two contracting parties. The following facts appear from the pleadings: F. N. Booth died, leaving a will appointing the Merchants National Bank as executor and vesting it with full powers to pay the debts of the estate and sell property, if necessary for that purpose, provide for the education of his children, and generally to do any act that he might have done during his lifetime. The bank was appointed and qualified as independent executor by the probate court of Cameron county in April, 1930, and filed an inventory which showed debts of about-$14,000 requiring immediate payment and only about $3,000 in cash. For the purpose of administering the estate, from time to time the trust department of the bank borrowed from the commercial department on notes executed by it as independent executor of the estate of Booth, the notes being signed by its trust officer. The bank closed for business on March 24, 1932, and John M. Young was appointed receiver by the Comptroller. He filed a formal resignátion of the bank as independent executor, made an accounting, and the bank was discharged. After the resignation of the bank, appellant was appointed administrator de bonis non with the will annexed in place of the bank. The six notes sued on were renewals of other notes previously given and came into the hands of the receiver as assets of the bank when it closed. Subsequently, appellee became receiver of the bank. Appellant promised to pay the notes, but did not do so, and finally formally disallowed them February 27, 1936. Thereafter this suit was brought as the notes were about to be barred by limitation. It is conceded by appellant that the bank as administrator would be entitled to recover for advances made to the estate in a suit in equity. It is not suggested that the bank was without authority to borrow money for the benefit of the estate, was guilty of fraud, or that there was want of consideration. The sole issue presented is whether the notes were valid contracts. The bank was granted a special permit to do a general trust business and to act as executor or administrator of the estates of deceased persons, under the provisions of the federal statute. 12 U.S.C.A.. § 248 (k). The Texas statute, article 396, subd. 10, Rev.Stat. of Texas 1925, grants similar authority to the banks of the state. There are no federal or Texas decisions on the precise point here presented nor does there appear to be any such decisions by other courts. It is plain that Congress intended to grant authority to national banks to do a trust business in competition with state banks. The authority to act as administrator of the estate of a deceased person would be of little value if the right of the bank to deal with the estate as an entity were barred, as this would seriously interfere with its general banking business. The District Court reached the conclusion that the_ bank, acting as executor, through its trust department, was a separate entity from the bank in doing its general banking business. We agree with that conclusion. The bank was acting as administrator under the authority of the probate court, and its acts in that respect were by authority of, and subject to, the approval of that court. It was not a free agent to do as it pleased and was not lending money to itself in the transactions involved. It was lending money to the estate of Booth. We consider it was as much authorized to do so when it was it [326] self acting as administrator as it would have been had the estate been represented by an individual entirely separate and unconnected with the bank. The record presents no reversible error. Affirmed.