Overview
Case summary
This case involves a suit by Dominion National Bank against the receiver of Citizens’ National Bank to enforce a $5,000 claim on a promissory note. The note was executed by O.M. Overman, president of Citizens’ Bank, without directors' knowledge or authorization, to replace funds he had embezzled from the bank's reserve account. The loan proceeds were deposited to Citizens’ Bank account and used to pay bank debts. The receiver denied liability, arguing the loan was unauthorized and unratified. The Circuit Court of Appeals affirmed the lower court's judgment for Dominion National Bank, holding that because the bank received the benefit of the loan through its president, it was affected with his knowledge and liable for money had and received. The court distinguished dicta in Bank v. Armstrong and applied principles from Atlantic Cotton Mills v. Indian Orchard Mills.
Abstract
A bank sued the receiver of another bank to enforce a promissory note executed without authorization by the debtor bank's president to cover embezzled funds, with proceeds used to pay the bank's debts. The court held the debtor bank liable for money had and received, imputing the president's knowledge to the bank due to its benefit from the loan. The judgment enforcing the claim was affirmed.
Opinion of the court
opinionTAFT, Circuit Judgejoined by LURTON, HAMMOND
- Bank received benefit of loan through its president
- Bank is affected with president's knowledge of loan receipt
- Liability exists for money had and received despite lack of director knowledge
- Distinguishes dicta in Bank v. Armstrong
- Applies principle from Atlantic Cotton Mills v. Indian Orchard Mills
Jurisdiction
not challenged- Appeal from lower federal court decision
Procedural posture
- Validity of claim on promissory note
- Bank liability for president's unauthorized loan
Legal categories
Case record
Issues & holdings
de novo
Bank received benefit through its president and is affected with his knowledge, creating liability for money had and received
Issue preserved for review
Holdings of the court
Error analysis
- Lower court erred in holding bank liable for unauthorized loan without director knowledge or ratification — legal · no error foundNot applicable as no error found
Standards of review
- Bank liability for unauthorized loan — de novo Legal issue of bank liability reviewed de novo
Timeline
Directors learned of loan and embezzlement after receiver appointment
No prior knowledge or ratification by directors
$5,000 drawn out by Citizens’ Bank to pay its lawful debts
Bank received benefit of loan proceeds
Overman borrowed $5,000 from Dominion National Bank, executing promissory note as bank president
Unauthorized transaction forming basis of claim
$5,000 loan proceeds deposited to Citizens’ Bank account at United States National Bank of New York
Bank received funds through its president
Overman embezzled funds from Citizens’ Bank reserve account at United States National Bank of New York
Created need to replace funds, leading to unauthorized loan
Circuit court ruled in favor of Dominion National Bank, requiring receiver to allow claim
Outcome: Judgment for Dominion National Bank
Lower court decision appealed
Facts & evidence
Key facts
5 facts- O.M. Overman, president of Citizens’ National Bank, embezzled bank funds from reserve account at United States National Bank of New York
- To replace embezzled funds, Overman borrowed $5,000 from Dominion National Bank, executing promissory note as bank president
- Loan proceeds were deposited to Citizens’ Bank account at United States National Bank of New York
- The $5,000 was drawn out by Citizens’ Bank to pay its lawful debts
- Directors of Citizens’ Bank had no knowledge of loan or embezzlement until after bank failure and receiver appointment
Procedural history
5 steps- Dominion National Bank sued receiver to allow $5,000 claim on promissory note
- Receiver denied note was authorized by bank or ratified by directors
- Facts were agreed upon by parties
- Circuit court ruled in favor of Dominion National Bank
- Receiver appealed to Circuit Court of Appeals
Evidence in the record
- Agreed facts regarding transaction
- Promissory note for $5,000 executed by Overman
- Evidence type: Promissory note and loan transaction · Challenge basis: Lack of authority and ratification · Trial court ruling: admitted · Reasoning: Bank received benefit through its agent · Challenged on appeal: true · Appellate outcome: affirmed
Objects of relevance
Authorities
Cited authorities (2)
Related cases (2)
Standards & doctrines
- Agency doctrine binding principal with agent's knowledge
- Money had and received quasi-contract theory
Legal principles applied
- Principal bound by agent's knowledge when receiving benefit
- Bank liability for money had and received through its officer
Notable quotes
“Having received the benefit through an agent, it is affected with the burden of the notice which that agent had of its reception, and therefore it became liable for money had and received to its use”majority — Explaining why bank is liable despite lack of director knowledgeCore legal principle applied in case
“This remark, however, was extrajudicial, and not required by the facts of the case; and, until the supreme court shall adjudicate the point, we think we are at liberty to disregard the obiter dictum”majority — Discussing dicta in Bank v. Armstrong regarding director knowledge requirementCourt's approach to distinguishing precedent