Cadle v. Tracy.

mons and complaint which were originally put in against the corporation in the suit. The judgment is against Cadle, as receiver, to be collected of the moneys attached - that is, against Cadle, as receiver, so far as the moneys attached were concerned, and against him, as receiver, to that extent only, or as receiver of those moneys Tracy was not establishing or enforcing any other right, against those moneys, but such right as he had to collect his debt out of those moneys, in the suit he had brought against the bank. Cadle, then, having come in, and, in his answer in that suit, raised the point, that the court had no jurisdiction to entertain originally the suit against the bank, or to issue the attachment, cannot be regarded as having, by that act, conferred any jurisdiction on the court, to render the judgment which it did render, which it would not have had if the suit had proceeded without the substitution of Cadle as a defendant.

In The Commercial & Railroad Bank of Vicksburg v. Slocomb, 14 Peters, 60, 65, it is held, that, in the case of a corporation aggregate, no waiver of an objection to jurisdiction can be produced by the fact that the corporation appears and pleads by attorney, "because, as such a corporation cannot appear but by attorney, to say that such an appearance would amount to a waiver of the objection, would be to say, that the party must, from necessity, forfeit an acknowledged right, by using the only means which the law affords of asserting that right."

This principle must apply, a fortiori, to the case of an insolvent and dissolved corporation represented by a receiver of its assets, acting under specific provisions of law.

If the State court had no jurisdiction originally of the suit against the corporation, and no right to attach the funds, it had no jurisdiction to render the judgment it did render, and the question stands, in this court, as if Cadle had never been made a defendant, or answered, in the suit in the State court, but had, instead, brought this present suit, in this court.

As the State court had no jurisdiction, the attachment, which is the only claim asserted by Tracy to a right to the moneys in the hands of the Ocean Bank, must fall, and the plaintiff must have a decree, declaring his title to such moneys to be free from any claim made by Tracy.

Of his title to them, under the act, the claim of Tracy being out of the way, and of his right and duty, under the 50th section, to

Cadle v. Tracy.

collect them, and of his right to bring this suit in this court, to collect them, there can be no doubt. Kennedy v. Gibson, 8 Wall. 498.

Some disposition, before a decree can be entered, must be made of the case as against the defendant Kelly, as late sheriff, either by taking the bill as confessed against him, or otherwise. The injunction prayed for against Tracy must issue.

As the bill sets up and admits the lien of the United States on the moneys in the Ocean Bank, and the answer of the United States attorney also claims such lien, such lien must be recognized and declared by the decree in respect of such moneys as the Ocean Bank shall be decreed to pay.

The bill claims, that the Ocean Bank should pay to the plaintiff the full sums of money, with interest from April 15th, 1867. That bank has gone into insolvency.

Its receiver, by his answer, sets up that he has declared dividends of 70 per cent, from the assets of that bank, and expects to declare further dividends therefrom. He also admits that the Ocean Bank had the $6,972.88, in currency and the $8,409.96 in gold coin, and avers that the latter has been converted into $9,155.43 in currency, making an aggregate of $16,128.31 in currency, and that he has 70 per cent of that sum in his possession, to the credit of the Selma Bank, and payable as may be decreed by this court. The plaintiff, in a special replication to such answer, objects to the sale of the gold, and claims that the receiver of the Ocean Bank should account for the gold and currency, with interest, as a special fund or trust, unaffected by any ability to declare any dividends.

This question has not been discussed on the part of the receiver of the Ocean Bank, and the parties interested in it are entitled to be heard upon it.

Sterne Chittenden, for plaintiff.

Eugene Smith, for Tracy.

Henry E. Tremain, for United States Attorney.

In re Wild.

IN RE WILD.

(11 Blatchford, 243.)

Interest on loans to corporations in New York.

In New York the rate of interest which a corporation may pay is not limited. A National bank, located in that State, loaned money to a corporation at a rate of interest exceeding seven per cent per annum. Held, that the interest on the loan was forfeited under section 30 of the National Banking Act (13 Stat. at Large, 108), which provided that when no rate of interest was fixed by the law of a State, a National bank might charge a rate not exceeding seven per cent, and that if it charged more, the entire interest should be forfeited.

(Circuit Court, Second Circuit, Southern District of New York.)

WOOD

OODRUFF, J. On the 13th of February, 1871, the bankrupt Alfred Wild, without consideration, and as mere surety, became the indorser of two promissory notes made by the Portage Lake and Lake Superior Canal Company, one for $73,902.51, and the other for $35,111.49, which, on that day, were delivered to the Ocean National Bank, and were made payable with interest. These notes were given in renewal of a number of other notes then unpaid, which had been also given in renewal of prior notes held by the bank, and which were taken from the Canal Company for a loan of two sums of $75,000 each, made on and after the 7th of January, 1867, by the said bank. One of the sums was agreed, on the 5th of January aforesaid, to be loaned in form to the said Canal Company, and the other was at the same time agreed to be loaned to P. J. Avery, but is proved by the testimony, and was found by the referee in the District Court, to have been in fact for the benefit of the Canal Company, who, in the accounts kept of the transaction, was treated as the actual debtor for both amounts.

The reason assigned for giving to the transaction the form of two loans, one to the Canal Company and the other to P. J. Avery, was, that the National Banking Law prohibits an indebtedness by any one party, as borrower, to associations formed thereunder, to an amount greater than one-tenth of the capital of the association making the loan.

There is inconsistency, in permitting the bank, or its receiver,

In re Wild..

to make such a transaction, and avoid the charge of violating the Banking Act, by making it a loan in part to Avery, and in part only to the Canal Company, and, on the other hand, to avoid the statutes against usury, of the State of New York, by declaring the whole to be a loan to the Canal Company, a corporation.

It would be no injustice to the bank to hold the form given to the transaction in order to save the bank from a violation, or from an apparent violation of the Banking Act, conclusive; and circumstances might, I think, be suggested, in which the bank would be estopped by it to aver that the transaction was other than it appeared on its face, and in the written instruments by which it was agreed that the loan should be made, and in the form of the notes actually given to the bank by Avery therefor.

For the purposes of the case before me, I have concluded to treat the transaction in the aspect most favorable to the bank, and in accordance with the claim made in its behalf as a loan to the Canal Company, a corporation of the State of Michigan.

The above-mentioned note for $73,902.51 was, on the 18th of September, 1871, renewed for the amount of $70,000, and a new note for the last-named sum, payable with interest thereon, was given by the same corporation under a new name: "Lake Superior Ship Canal Railroad and Iron Company," indorsed by the bankrupt Wild and others.

The two notes, one dated September 18th, 1871, for $70,000 and interest, the other, dated February 13th, 1871, for $35,111.49 and interest, constitute the claim made by the receiver of the bank against the estate of the bankrupt Wild, who indorsed them; and it is the allowance of that claim by the District Court which is appealed from by the assignee to this court.

The loan originally made by the bank was further secured by the delivery to the bank of coupon bonds of the Canal Company, secured by mortgage to the amount of two hundred thousand dollars, and it was made a condition of the loan, that the Canal Company should purchase and receive from the bank certain bonds, amounting on their face to $237,000, of a Georgia railroad corporation, whose road had been stripped of its rails and furniture, whose track had grown up with trees and bushes, which had not been used for many years, on whose bonds no interest had been for a long time paid, and whose bonds had no market value; and their want of intrinsic value was more fully shown by a foreclosure soon

In re Wild.

after affected, on which the road, the mortgage security for the entire issue of bonds, $924,600, of which these were a part, was sold at public auction to the highest bidder for $1,500. It is true that the purchaser of the road, who seems to have acted for the Canal Company, states that after obtaining an act of the Legislature of Georgia, incorporating a new company, and an act authorizing the State to guarantee another large issue of bonds to enable the new company to reconstruct the railroad, he received a like amount of stock in the new company, $237,000, and succeeded in selling that for $47,000, which sum he paid to the Canal Company, as and for the proceeds of the purchase which they made from the bank, and of his exertions to obtain a new charter and the pledge of State aid, without which the stock would seem to be of little, if any, value.

Recurring to the transaction between the Ocean National Bank and the Canal Company, it was made a condition of the loan of the $150,000 by the bank to the Canal Company that, besides paying interest at seven per cent per annum, and securing the same by $200,000 of their mortgage bonds, with power to the bank, at any time, to sell such bonds at any price not less than ninety cents on the dollar, toward the repayment of the loan (which might, therefore, not continue for more than a very brief term), the Canal Company should, also, purchase from the bank the before-mentioned. nearly worthless bonds of the Georgia Railroad Company, and should pay therefor the sum of $100,000, securing such payment by a like amount of their mortgage coupon bonds.

There was, also, a further requirement, to wit, that the trustee to whom the mortgage securing the Canal Company's coupon bonds was executed, should be removed or should resign his trust, that the president of the bank should be substituted in his place, and that the moneys loaned by the bank should only be drawn by the Canal Company from the bank by checks countersigned by the president of the bank, as such trustee.

Their president was active in the negotiations with the company and in settling the terms of the loan; and he required of the Canal Company, professedly for his own benefit, $50,000 of their mortgage coupon bonds, as compensation for acting as trustee.

I shall place no special stress upon that payment to the presi dent, as affecting the question of the liability of the bankrupt in this case.

It, however, belongs to the history of the transaction.