Burton, Receiver of First Nat. Bank of La Crosse, v. Burley, Receiver.

to the La Crosse National Bank. What security can there be in the business relations between banks if accounts of this kind are not considered conclusive and binding upon the respective banks, unless, indeed, there is a mistake, or it can be shown that there has been a fraud practiced upon the bank, against which the charges are made, and that fraud known to the other bank or its officers? Unless that can be done, there would be no safety in the transactions of banks with each other. One bank would never know what to do on instructions given, or a charge made. Here is an "individual" account which one bank has against a particular person. Another bank with which it is transacting

business, and with which it has an account, instructs that bank to charge this individual indebtedness to it. The charge is made and the account rendered showing it is done, and the bank which makes the charge knows nothing of any wrong being done, or of any mistake, or of any fraud being practiced by the officers of the bank. That being so, it must foreclose the bank or else banks must cease doing business with each other. And it ought to be so. Where a bank, established under an act of Congress, or in any other way, elects its own officers, the men who are interested in the bank, the stockholders, the depositors, ought be bound by the authorized acts of the officers, or those which appear to be authorized, whether they are or not, and by the general mercantile usage of banks. So that in any view that I can take of this case, it seems to me that the plaintiff cannot maintain its action; that it must be concluded by the course of the business which has been done. Non constat, but that admitting all that is claimed on the part of the plaintiff, Mr. Sutor may have presumptively made some arrangement justifying his action with his own bank. The natural presumption that would arise in the minds of the officers of the city bank was that Mr. Sutor had made some transactions with the La Crosse bank, by which he was authorized to act, and by which the La Crosse bank had assumed the individual debt which Sutor owed to the City National Bank. If the defendant insists the court must certify to the balance due from the La Crosse bank to the city bank, because I hold that these items of accounts which are the subject of controVOL. II-16

Wright v. First National Bank of Greensburg.

versy constitute a valid charge against the La Crosse National Bank.

This is a controversy between the creditors of two insolvent banks, and I think the loss occasioned by the wrong of the officers of the La Crosse bank should fall on the creditors of that bank, rather than on those of the Chicago bank.

WRIGHT V. FIRST NATIONAL BANK OF Greensburg.

(18 Albany Law Journal, 115.)

Right to sue National bank for usurious interest assignable in bankruptcy.

The right of a borrower to sue a National bank for double the amount of usury taken is a claim or debt which will pass to his assignee in bankruptcy, and such assignee can maintain an action thereon.

(Circuit Court, District of Indiana.)

A

CTION to recover the penalty for taking usurious interest, brought by Arthur L. Wright and Henry H. Woollery, assignees of Francis J. Randolph, Frank Wright and Ebenezer Nutting, bankrupts, against the First National Bank of Greensburg. The opinion states the case.

Coffroth & Stuart, Baker, Hord & Hendricks, Dye & Harris, for plaintiffs.

McDonald & Butler, for defendant.

GRESHAM, J. The declaration alleges that the defendant has reserved, taken and received usurious interest from the bankrupts. The action is brought to recover double the amount of interest thus paid, and is based upon the 30th section of the Banking Act, U. S. Stat. at Large, which reads as follows:

* * *

Every association organized under this act may take, receive, reserve and charge on any loan interest, at the rate allowed by the laws of the State or Territory where the bank is located, and no more; except that where by the laws of any State a different rate is limited for banks of issue, organized under any State laws, the rate so limited shall be allowed every associa

Wright v. First National Bank of Greensburg.

tion organized in any such State under this act. And when no rate is fixed by the laws of the State or Territory the bank may take, receive, reserve or charge a rate not exceeding seven per cent. And in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back, in any action of debt, twice the amount of interest paid from the association taking or receiving the same.”

The defendant demurs to the declaration on the ground that the plaintiffs, as assignees in bankruptcy, have no legal capacity to prosecute the action. This is the only question presented by the demurrer.

The right of action given by this section is penal. Tiffany v. National Bank, etc., 18 Wall. 409; Thomp. N. B. Cas. 90.

In the absence of a statute authorizing it, a right to a penalty cannot be assigned, nor a right of action for a tort. Gardiner v. Adams, 12 Wend. 297. The defendant exacted and received usurious interest. Had the bankrupts remained solvent they might have prosecuted an action for double the amount of interest paid. Unless the right of action has been barred it yet exists, either in the bankrupts or their assignees. It is insisted that because the bankrupts could not have sold or transferred the right of action, if they had remained solvent, therefore, their assignees have no legal capacity to prosecute the suit. Tiffany v. National Bank, supra, was an action by a trustee to recover the penalty given by the statute. The plaintiff recovered, but his capacity to maintain the action seems not to have been directly raised. In the case of Crocker, assignee, v. First National Bank, etc., 4 Dill. 358; Thomp. N. B. Cas. 317, the precise question raised by this demurrer was considered, and it was held by DILLON, J., that the assignee was the "legal representative" of the borrower within the meaning of the Banking Act, and as such could maintain the suit whether the right of action vested in the assignee under the Bankrupt Law

or not.

In Tiffany v. Boatman's Association, 18 Wall. 375, the assignee in bankruptcy was allowed to recover usurious interest which had been paid by the bankrupt in violation of the statutes of Missouri.

Wright v. First National Bank of Greensburg.

In Meech v. Stoner, 19 N. Y. 26, it was held that an assignee could maintain an action to recover money lost at faro, under a statute which gave the right of action to the loser. See, also, Carter v. Abbott, 1 B. & C. 444, and Gray v. Bennett, 3 Metc. 522. In this last case the assignee of the insolvent debtor was allowed to recover three-fold the amount of usurious interest paid to the defendant, that being the amount allowed by the Massachusetts statutes. This is a well-considered case.

In Bromley, assignee, v. Smith, 2 Biss. 511, it was held by MILLER, District Judge, that the assignee could not maintain an action to recover the penalty given by the statute. And it seems

to be conceded that in the case of Barnett v. Muncie National Bank, in the Circuit Court of the United States for the Southern District of Ohio, a similar ruling was made by Justice SWAYNE, and the late Circuit Judge, EMMONS, in an oral but unreported opinion. (See same case, ante, p. 18.) To the same effect is

Nichols v. Bellows, 22 Vt. 581.

The Bankrupt Act (Rev. Stats., §§ 5044, 5045, 5046 and 5047) vests in the assignee for the creditors the entire estate of the debtor every thing of beneficial interest passes by the deed of assignment, except certain necessary exemptions which are intended to protect the bankrupt and his family from temporary distress.

It is true that rights of action for torts to the debtor's' person, such as assault and battery, false imprisonment, malicious prosecution, libel and slander, do not pass to the assignee. While it must be conceded that under the decision of the Supreme Court this is an action, in part at least, to recover a penalty, yet there are reasons why claims of this kind should vest in the assignee which do not apply to the rights of action for damages growing out of mere torts to the debtor's person. In the right of action given by the Banking Act the bank exacts and receives from the borrower more than the law allows as a fair compensation for the use of its money. In this illegal way the bank gets into its possession part of the borrower's estate, money which should go to the creditors of the bankrupt borrower. This demand and receipt of illegal interest by the bank may have materially con

St. Louis National Bank v. Brinkman.

tributed to the bankrupt's downfall. The recovery allowed by the 30th section of the act is "in an action of debt."

If the assignees are not the "legal representatives" of the bankrupt within the meaning of the 30th section of the Banking Act, and the right of action never passed to them under the Bankrupt Act, then, unless the suit has been barred, the bankrupts may sue for and recover the money for their own benefit, when, perhaps, they have already received their full exemptions and have been discharged from all their obligations.

As between the bankrupts and their creditors this would be unjust, and such a result is not easily reconciled with the chief object of the Bankrupt Law, which is the equal distribution of the insolvent debtor's entire estate amongst all his creditors.

In Grey v. Bennett, supra, "it is very clear," say the court, "that if a creditor of the insolvent debtor should attempt to prove a note under the commission, it would be the duty of the assignee to reduce the amount, if usurious interest had been taken on it, or was reserved in it, and in this manner the creditors would be benefited by such reduction. Why should they not have the advantage of it where the debtor was paid the usurious demand prior to the insolvency and within the time limited by the statute for recovering it?"

I think the assignees are the "legal representatives" of the bankrupts within the meaning of the 30th section of the Banking Act; and that the right of action given by said section is a “claim” or “debt" which passed to the assignees under the sections of the Banking Law already cited.

Demurrer overruled.

ST. LOUIS NATIONAL BANK V. BRINKMAN.

(1 Federal Reporter, 45.)

Jurisdiction.

National banks are not authorized to institute suits in the Federal courts out

of the districts where they are established, when the amount in controversy does not exceed $500.

(Circuit Court, District of Kansas.)