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Cake v. The First National Bank of Lebanon.

Sharp & Alleman, for plaintiff in error.

A. L. Smith, for defendant in error.

SHARSWOOD, J. We think the first, third, fourth and fifth assignments of error must be sustained, but not the second.

The defendant below was accommodation indorser for Stine on two notes, which had been discounted by the bank, and being unpaid at maturity were duly protested. Stine procured Cake to indorse renewal notes, and sent them to the bank, who retained them until at least after one of them had fallen due, and then informed Stine that they had not accepted them. No notice of non-payment was given Cake on these notes. This suit was instituted on the first notes. It is the very case of Hart v. Boller, 15 S. & R. 162, in which this court held that it was error to take from the jury the question whether the renewal notes were accepted in payment.

We think, too, that Overholt v. The National Bank of Mt. Pleasant, 1 Norris, 490, is directly in point on the question raised as to the usurious interest received by the bank. It was there decided that where there has been a series of renewal notes given for the continuation of the same original loan, the taint of usury in the first transaction follows down the descent through the whole line, and when therefore a National bank sues to recover its debt on the last of the series of renewal notes, the borrower is entitled to credit for all interest he has paid from the beginning on the loan, and not merely to the excess above the lawful rate.

Judgment reversed, and venire facias de novo awarded.

Maynard v. Bank.

MAYNARD V. BANK.

(1 Brewster, 483.)

Conversion of State bank into National bank - Effect of.

The conversion of a State bank into a National bank, under the act of Congress of June 3d, 1864, did not work an annihilation or dissolution, but only a change of the bank.

Such change does not adeem a residuary legacy in certain shares of the bank, limited upon a life estate in such shares which is to become an absolute one, in case the bank should pay off or refund its stock, by reason of the expiration of its charter or from any other cause. The change is not equivalent in law, to a paying off in fact, and the residuary legatee is entitled to the stock on the death of the legatee for life.

M. Arnold, Jr., for complainant.

Furman Sheppard; for defendant.

W. J. McElroy, for the bank.

BREWSTER, J. This case has been argued on bill and answer. The object of the proceeding is to test the title to 34 shares of stock of the Mechanics' National Bank of this city.

All the relief sought for by the complainant, save the injunction, could be obtained at law; but as the parties have elected this forum, we have endeavored to consider the case and the able argument on both sides with care.

The stock in controversy was owned by Anthony Finley in his life-time. By his will he bequeathed the dividends thereon to his sister, Eliza Finley, for her sole use during her natural life. Then follow the words which have given rise to this litigation: "I do hereby will," the testator says, "that if, at any time during the life of my said sister, the whole or any part of said stock shall be paid off and refunded, by the expiration of the charter, or from any other cause whatsoever, then the amount so paid off and refunded shall be paid to my said sister, for her sole and absolute use and benefit forever."

Maynard v. Bank.

The bill avers that neither the whole nor any part of the stock has been paid off and refunded, but that the same still stands in the name of Anthony Finley on the books of the bank; that Eliza Finley died in the early part of this year; that the complainant, as residuary legatee of Anthony Finley, is entitled to the stock, and as executrix of his will is privileged to transfer it; but that the bank, having been notified of a claim to said stock by William Ayres, has refused to permit the complainant to transfer it.

The answer of the defendant Ayres, admitting all the averments of the bill save that of title in the complainant, presents a claim to the stock founded upon the fact that the bank was formerly a State institution; that, having become "an association for carrying on the business of banking under the laws of the United States," it is "to be deemed as having surrendered its charter," and that thereby the stock became the property of Eliza Finley, precisely as if it had been paid off and refunded as provided for by the will.

The answer of Mr. Ayres then presents his title through Eliza Finley, under an instrument of date February 18th, 1867, whereby, in consideration of his agreeing to pay her an annuity of $125, she transferred to him inter alia this stock.

She died before the first installment of the annuity fell due, but his rights are the same as if she had lived many years.

The question, therefore, is simply this: Was the change from a State to a National bank a paying off and a refunding of the stock? It is very clear that the shares were never, in fact, paid off; for had this been done, Eliza Finley would have had the cash. I do not dwell on the word "refunded," which, in strictness, meaning "to pour back," was evidently used by the testator as a synonym for "paid," which is also one of its definitions.

The complainant says the stock has never been paid off or refunded, but that it still stands in the name of Anthony Finley. The defendant does not deny this averment, but simply contends that by the change in the character of the institution the shares "became vested in the said Eliza Finley for her sole and absolute use." The answer to this is, that the will does not so read. The testator does not say if this bank shall surrender this charter or become a National bank the stock shall belong to Eliza Finley; but, regarding it probably as the best investment of the money, and willing that she should have the dividends for life, he yet

Maynard v. Bank.

foresaw that from some cause the shares might be paid off, and in that contingency she was to be the absolute owner of the money. She might, perhaps, have claimed an appraisement of the stock, but it is useless to inquire whether she had this right, for if possessed of it, she never exercised it, and was content to allow the stock to stand, as it had stood since her brother's decease, in his name. Unless, therefore, the defendant can establish the impossible proposition that stock still outstanding has been paid off, his case would seem to be hopeless.

Since, then, these shares were never paid off by the bank or received by the legatee, it would seem to be unnecessary to consider the question presented by the defendant Ayres, that this change in the character of the bank was equivalent to a refunding of the stock, or, in other words, was a payment in law if not in fact. The act of Congress under which this transition occurred was approved June 3d, 1864. The 44th section, 15 Stat. at Large, pp. 112, 113, enacts that any bank incorporated by special law of any State may become a National bank, and the required certificate may be made by the directors, and they must certify that two-thirds of the stockholders have authorized them to change and convert the bank into a National bank. It would seem, therefore, that there was to be no annihilation or dissolution, but rather a "change." But were this otherwise, it would seem to be well settled that the transformation from State to National bank stock did not adeem the legacy, for an ademption can only take place in the life-time of the testator, and the principles governing such cases would seem to be conclusive against the defendant. See 1 Roper on Legacies, 240, 241; Walton v. Walton, 7 Johns. Ch. Cas. 258, and Bringhurst v. Cuthbert, 6 Binn. 398.

Let a decree be drawn for the complainant.

Lockwood v. The American National Bank.

LOCKWOOD V. THE AMERICAN NATIONAL BANK.

(9 Rhode Island, 308.)

National banks - Directors- Qualification of — By-laws.

Where no qualification is required and there is no usage to control, a person who is elected a bank director is presumed to accept the office unless he decline it. This presumption may be rebutted. Whether simple non-action as a director, for five months, would be ordinarily sufficient to rebut itquery. But where the stockholders of a bank, in an instrument authorizing its conversion from a State to a National bank, named all the directors who had been elected at the last annual election as those who are now directors of said bank," the court cannot hold that two of those so named were not directors at the time of such conversion, because they had never acted in that capacity since their election five months previously.

By the provisions of section 44 of the National Banking Act, upon conversion of a State to a National bank, all the directors of the former become those of the latter, until an election or appointment by the National bank. Semble, that no oath is required from these ad interim directors, the oath prescribed by section 9 of the aforesaid act being designated for those regularly elected by the National bank, but, assuming its necessity, a majority of those who were the directors of the State bank before its conversion is necessary to make a quorum of the board of the National bank.

In all cases where an act is to be done by a corporate body or a part of a corporate body and the number is definite, a majority of the whole number is necessary to constitute a legal meeting, although at a legal meeting, where a quorum is present, a majority of those present may act.

Hence, a by-law adopted at a meeting of six ad interim directors of a National bank, which had twelve directors before its conversion, is invalid, because not adopted by a majority or quorum of the board.

A

CTION on the case to recover damages of the defendant bank for refusing to permit transfers to be made on their banks to the plaintiff of certain shares of the stock. The defense was, that under a by-law of the bank no stockholders of the bank could sell and transfer his stock while indebted to the bank, and that the stockholder in whose name the shares stood on the books of the bank, and from whom plaintiff claimed, was indebted to the bank when he made the sale. In several other cases considered at the same time the Supreme Court of Rhode Island held that such a

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