$15.

562

$ 20.

191

Alaska.

Safety Appliance Act...305, 535

Twenty-eight Hour Law.... 306

(B.) STATUTES OF THE STATES AND TERRITORIES.

Civil Code, §§ 504, 505.

Crim. Code, § 202...

Arizona.

Penal Code, par. 717... 268

Constitution, 1874, Art.

Arkansas.

88 1050-1054 295

California.

Illinois.

CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES

AT

OCTOBER TERM, 1918.

HARRIMAN NATIONAL BANK OF NEW YORK v. SELDOMRIDGE, AS RECEIVER OF THE MERCANTILE NATIONAL BANK OF PUEBLO, COLORADO.

ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.

No. 173. Argued January 31, 1919.-Decided March 3, 1919.

A, the cashier of the M. National Bank and in control of its affairs, acting in the name of B, its president, by correspondence induced the H. National Bank to agree to lend B a sum of money to be secured by the joint note of A and B and certain collateral. A then bought certain shares from T, with a check on the M. Bank signed with B's name, and forwarded by mail to the H. Bank a forged note and collaterals in apparent compliance with the loan agreement, upon receipt of which the H. Bank credited B with the amount agreed on; but in the meantime the check to T had been paid by the M. Bank, and A, to meet it, had made a slip falsely purporting to show a deposit there by B of a check on the H. Bank for the amount of the proposed loan. Having at first credited B with the amount of the loan, the H. Bank, under instructions sent by A in the names of the M. Bank and of B, respectively, made bookkeeping entries transferring the credit to the M. Bank, and later. upon receiving notice from B to cancel A's authority to act for the M. Bank, made further entries withdrawing the credit from the

(1)

Argument for Plaintiff in Error.

249 U. S.

M. Bank's account; and still later, upon learning that the M. Bank had failed, made additional entries to cancel the loan. B repudiated A's action and denied liability. Held: (1) That, as against the M. Bank, the H. Bank had the right to rescind and cancel the loan agreement for failure to comply with its conditions and for the fraud; (2) that the payment of the check to T and the making of the fraudulent deposit to meet it, having occurred before the H. Bank received the note and collateral or made any entry on its books, could not subject it to liability in favor of the M. Bank; (3) that the bookkeeping entries made by the H. Bank could not create such liability, in the absence of any consideration moving to it from the M. Bank, and in the absence of any ground for estoppel. P. 10.

240 Fed. Rep. 111, reversed.

THE case is stated in the opinion.

Mr. Charles E. Hughes, with whom Mr. Bertram L. Kraus was on the brief, for plaintiff in error:

The credit was obtained by fraud, the collateral security being forged, and hence the defendant was entitled to rescind. The evidence clearly shows that the note itself and the powers of attorney for transfer of the certificates of stock were forged. In view of the forged collateral, it makes no difference whether W. B. Slaughter authorized his signature and thus became a party to the note or not. Bradley v. Seaboard National Bank, 167 N. Y. 427; Flatow v. Jefferson Bank, 135 App. Div. 24; Mann v. Franklin Trust Co., 158 App. Div. 491.

On the transfer of the credit, the Mercantile Bank took subject to all equities. It had no standing superior to that of the Slaughters. There was no negotiable paper used; the transfer was merely a book entry of credit. The suggestion of an account stated between the Mercantile Bank and the defendant is unavailing. The former was simply the transferee of a chose in action created through fraud. An account stated may be opened on proof of fraud or mistake. Lockwood v. Thorne, 18 N. Y. 285, 292. See also Greenhalgh Co. v. Farmers National Bank, 226