Mapes v. German Bank of Tilden

SANBORN, Circuit Judge. Edward B. Hansen and H. M. 'Culbertson were the stockholders, and Hansen was the president, of the Hansen .Mercantile Company, a corporation, which commenced business on September 1, 1907, and was adjudged bankrupt on April 4, 1908, on a petition filed December 10, 1907. The German Bank of Tilden, a corporation, .presented, and the court below allowed, its claim against the estate of the bankrupt for $6,360.20, upon a promissory note, for $6,610.20, dated November 20, 1907, upon which an indorsement of payment of $260 had been made. There is some conflict in the evidence, but these are the facts which in our opinion the testimony establishes: The consideration for this note of the corporation was: (1) A promissory note for $760.20 and interest at 8 per cent, -dated August 10,1907, made by E. B. Hansen and H. M. Culbertson to Fred Ruegge, the former partner of Hansen, which the bank had bought, and which Hansen originally gave to Ruegge in part payment for his interest in their partnership property. (2) A promissory note for $3,000 and interest at 8 per cent., dated August 20, 1907, made by E. B. Hansen, FI. M. pulbertson, and Addie M. Culbertson, which Hansen gave to the bank for money he borrowed of it to pay his indebtedness to the Elk-horn Valley Bank, and $2,700 of the proceeds of which were used for that purpose. The proceeds of this note were placed by the German Bank to the credit of, and were checked out by, E,. B. Hansen under the name of “Hansen Merc. Co.” in August, 1907, before the corporation commenced business, and while Hansen was conducting the business which he subsequently turned over to that corporation. (3) A promissory note of $1,500 and interest at '8 per cent., dated August 10, 1907, payable to the German Bank, made by Louis Hansen, a brother of E. B. Hansen. (4) A promissory note, of the Hansen Mercantile Company, given to the bank for an overdraft which it had made thereon. The note for $6,610.20 raised the legal presumption that the Mercantile Company was indebted to the bank in that amount. But the evidence is convincing that the corporation derived no benefit from, and that it never, for any valuable consideration, assumed or agreed to pay, either E. B. Hansen’s note for $760.20, or the $2,700 used to pay Hansen’s note to the Elkhorn Valley Bank, or Louis Hansen’s note for $1,500, or the interest on these amounts; and this fact necessitates a reduction of the claim of the bank by these amounts, and by $260, which was indorsed upon the note when it was made, and renders • the just amount of its claim $1,322.32 and interest from November 20, 1907, at 8 per cent, per annum. The officers of a trading corporation undoubtedly have authority to-make and deliver its promissory notes for the just debts of the corporation, and the-acts of such officers in this regard are presumed to be lawfully done, when no notice to the contrary is received by the holder of the paper. But it is beyond the powers of the corporation and of its officers alike to make accommodation paper, or to guarantee or to pay the obligations of others in which it has no interest, and from which it derives no benefit. Park Hotel Company v. Fourth National Bank, 30 C. C. A. 409, 414, 86 Fed. 742, 747, and cases there cited; Bowen v. [91] Needles National Bank, 94 Fed. 925, 36 C. C. A. 553; Merchants’ Hank of Valdosta v. Baird, 160 Fed. 642, 645, 90 C. C. A. 338, 341, 17 L. R. A. (N. S.) 526. The officer of the German Bank who took this note for $0,610.20 knew, and through him the bank itself knew, that Jlansen gave it on behalf of his corporation to pay the notes of himself and of others which the bank itself owned, that this mercantile corpora-' tion derived no benefit from the payment of these notes, and that to the amount thereof its note must be invalid under the law in the hands of its payee. In this state of the case the bank assumed the burden and the risk of proving in the teeth of its knowledge that the note was given by the Mercantile Company for some legal consideration sufficiently beneficial to it to support its promise to pay these debts of others. It has not only failed to hear this burden, but the proof is that there never was any such consideration. The order of the court below must accordingly he reversed, and the case must be remanded, with directions to allow the claim of the German Bank for $1,322.32 and interest thereon at 8 per cent. .pep annum from November 20, 1907; and it is so ordered. -