Kendrick State Bank v. First Nat. Bank of Portland , 206 F. 940 ( 1913 )

WOLVERTON, District Judge

(after stating the. facts as above). It is admitted on the part of plaintiff’s counsel that if the loan made by the Portland Bank was to the Kendrick Bank, and not to Bradbury individually, and can be so treated in legal contemplation, then the Portland Bank was legally authorized to charge off the balance standing to the credit of the Kendrick Bank against the Bradbury note, and thus protect itself against loss on account of the failure of the Kendrick Bank to that extent. The vital question depends upon whether, in an action at law, the defendant will be permitted to show that the debt incurred by the execution of the Bradbury note is the debt of the Kendrick Bank, as it was really intended to be by the plain agreement and understanding of the parties.

[1] It is the doctrine in Oregon that, as it relates to simple contracts, the presumption that a contract made in the name of the agent of a known principal is the contract of the agent and not of the principal is a disputable one, and that it may be shown by parole that the principal is bound also, but that in no event may the agent be so discharged. Barbre v. Goodale, 28 Or. 465, 38 Pac. 67, 43 Pac. 378. But it was said in that case:

‘‘This doctrine must be limited to simple contracts, and may not be extended to negotiable instruments and specialties under seal, as they constitute an exception to tlie rule.”

[2] In the present case, however, the defendant, in purpose and effect, is not suing on the note, but to recover on the contract of the parties/of which the note is only an incident. It is a contract of which the principal has received, as it was so intended, the sole and entire benefit. The money obtained through the arrangement went at once to the credit of the Kendrick Bank, and was so held by its correspondent, against which the Kendrick Bank drew checks and drafts as occasion required, and constituted its source of credit with the Portland Bank. Indeed, the contract was entered into by tlie bank through its recognized officer, and the case does not stand upon the footing of a mere agent contracting in the name of his principal, individually, Bradbury received not the slightest benefit from the arrangement, and, while he probably would not be allowed to escape being bound by his obligation, yet I am constrained to the view that the bank also, in an action directly between the parties to the contract, cannot escape liability. See Appeal of Third National Bank of Philadelphia et al., 141 Pa. 214, 21 Atl. 598, 12 L. R. A. 223. It would work a glaring injustice here to adopt the opposite view. This is readily apparent from the simple facts of the case.

[3] If it be said that the Kendrick Bank, or its president in its behalf, adopted this method of obtaining credit with the Portland Bank with a view to suppressing a full statement of its liabilities to the bank commissioner, it may be conclusively answered that the Kendrick Bank will-not be permitted to take advantage of its own wrong, and thereby perpetrate an injustice upon the Portland Bank.

[4] Another question presented is whether the president of the bank was authorized to enter into such a contract in behalf of the corporation ; but, the bank having received the sole and entire benefit of the transaction, it has ratified the acts of its chief officer, even conceding that he acted beyond the scope of his authority,'a question we are not now called upon to determine. Aldrich v. Chemical National Bank, 176 U. S. 618, 20 Sup. Ct. 498, 44 L. Ed. 611.

In view of these considerations, the defendant is not only entitled to its set-off as claimed, but to recover the balance due from the plaintiff upon the account between the banks.