ACTION to compel the return of certain se- owing to it by the Fidelity National Bank at

June 14, 1887, the Fidelity National Bank June 15 the defendant telegraphed the Fidelof Cincinnati transmitted to the defendant, aity Bank: "On satisfactory bills, when re

are concerned. Pacific Nat. Bank v. Mixter, supra. | notes and other securities deposited with them for If there was no authority of law for taking the a balance due on general account cannot exist attachment, it follows there can be none for taking where the pledge of property is for a specific sum the bond given for its dissolution. See Carpenter and not a general pledge. Neponset Bank v. Lev. Turrell, 100 Mass. 450; Tapley v. Goodsell, 122 land, 5 Met. 259; Duncan v. Brennan, 83 N. Y. 487, Mass. 176. 491.

quest, for whatever you sent us would be subject to this attachment if we accept such remittances. Would it not be well also to have any orders which you may have given to your correspondents to remit to us for your account canceled? We send you statement of account, showing you overdrawn $113,049.99. Our collections account appears about $34,000 in your hands in addition thereto."

June 18 the Fidelity Bank wrote to defendant: "We to-day drew small checks amounting to about $5,800 before we received your message. We trust you have sufficient security to protect the $200,000 attachments and pay the checks of to-day, and leave a small surplus addition which you can no doubt help us on. We think we are over the worst, and if our friends stand by us everything will work in good shape soon. We thank you for your favors, which are greatly appreciated."

June 19 Fidelity Bank telegraphed defendant: "Will you protect our outstanding drafts on you with proceeds in our letter of the 7th (remittances for collection and credit) which will more than cover. If not, deliver to First National Bank and we will instruct them to protect. Wire at once."

ceived, might advance $200,000. Amount you | You will, of course, see the wisdom of this rename much too large.' The same day the Fidelity Bank wrote to defendant: "We have your telegram that you will advance $200,000 on satisfactory bills. The demand on us to day is fearful, but we can recover by your help during the week. The $1,000,000 of bills are choice, and beg of you to stand by us to a larger amount, if we require it, which we will for a few days. We have been keeping an active account with you, and have no other bank to ask favors of. If you will do as we request it will be one of the best acts of your history, and be appreciated more than words can express. There is no bank that we know of that can pay all at one time, without help, and we beg of you to see us through, especially as you run no risk, as these bills receivable are all good beyond question. The panic is subsiding, and we think in one week will be a thing of the past." The same day the Fidelity Bank telegraphed the defendant: "Charge us and deposit with assistant treasurer, New York, $100,000. Have him wire at once assistant treasurer here to pay us $100,000 currency.' June 17 defendant telegraphed to Fidelity Bank: "We wrote you yesterday that we expected to be liberal, and may increase the amount somewhat. Telegraph us authorizing June 20 defendant wrote to Fidelity Bank: us to discount any of the notes, and pledging "Your telegram of the 19th inst. has been reall notes and security in our hands for any in-ceived, asking if we would protect your outdebtedness to us, and confirm by letter." The standing drafts against yours of 17th. We same day the Fidelity Bank telegraphed to wired back that we have paid your drafts. We defendant: "If you will discount $500,000 of have not refused payment of any of your drafts the bills and return balance, it will be suffi- excepting the four of $100,000, stopped by you. cient. Wire at once." The same day the de- Herewith statement of your account, showing fendant telegraphed to the Fidelity Bank: you overdrawn $89,020 at close of business to"We think it would be enough if we discount day. Also you owe us for collections $34,$650,000 of the bills, and then charge up the 340.29." certificate of deposit for $300,000, retaining a margin of collaterals, and returning the rest." The same day the Fidelity Bank telegraphed defendant: "Please refuse payment on our four drafts, Nos. 16,411 to 16,414 inclusive, for $100,000 each." June 18 the Fidelity Bank telegraphed to defendant: "Please discount $800,000 of the bills, and then charge up certificate of deposit for $300,000; retain a margin of collaterals and return us balance. If this is done we pledge all notes and securities in your hands for any indebtedness to you.' The same day the defendant telegraphed Fidelity Bank: Attachments just served, suit Bank of Montreal on your account and all your property here; $200,000 amount of suit." The same day the defendant telegraphed to the Fidelity Bank: "Make no remittances to Chemical, and do not draw on it." The same day the defendant wrote to the Fidelity Bank: "Your telegram of this date has been received. Please discount $800,000," etc., "and while framing a reply in which we intended to say that we would make it $700,000 total indebtedness, not $800,000-which we considered too large at 11.45 A. M., the warrant of attachment which is enclosed herewith for your perusal, and return by return mail, was served on us, thus putting a check upon any further loans to you or essential change in the account. We then telegraphed you of this attachment and shortly thereafter wired you by Western Union, and then by Baltimore & Ohio, not to send any remittances and not to draw on us.

By a stipulation between the parties it appears that the Fidelity Bank "was insolvent on the 14th day of June, 1887, but that the defendant had no knowledge or reasonable ground of apprehension that such was the fact." The Fidelity Bank closed its doors June 21, 1887, and the complainant was appointed its receiver June 27, 1887.

Upon these facts the complainant insists that the defendant did not acquire any title to the securities sent to it June 14, because the transfer was void by $5242, U. S. Rev. Stat., which prohibits all transfers by any national banking association made after the commission of an act of insolvency, or in contemplation thereof with a view to the preference of one creditor to another. On the other hand the defendant insists that it acquired a banker's lien upon the securities for the amount of any balance upon its general account with the Fidelity Bank which remains unpaid.

The naked fact that the Fidelity Bank was insolvent at the time it sent the securities to the defendant does not imply that the transfer of the securities was made in contemplation of insolvency, or with a view of a preference to the defendant over its other creditors. Although in the light of subsequent events the Fidelity Bank was then insolvent, it may be that its insolvency was not suspected by its officers. So far as appears no act of insolvency had been committed.

A bank is not in contemplation of insolvency until the fact becomes reasonably apparent to

its officers that it will presently be unable to meet its obligations, and will be obliged to suspend its ordinary operations. Roberts v. Hill, 24 Fed. Rep. 571.

Until this condition of affairs exists, certainly a national banking association does not violate the Statute by pledging its securities to a reasonable amount to raise money needed to meet an unexpected run. The best managed insti tutions are liable to such contingencies, and the right to use their assets in an honest attempt to bridge over such a crisis is indispensable to their safety. Obviously the exercise of this right would be impracticable if the pledge becomes void whenever the attempt of the bank to rescue itself from failure proves unsuccessful. It is apparent that the Fidelity Bank did not intend to pledge the securities as collateral to its antecedent indebtedness when it sent them in June to the defendant, or for any purpose other than to the advances which it then desired. They were sent to protect the defendant against a temporary loan, not of any specific sum, but of such sums as the Fidelity Bank might need to meet the exigencies of the situation against overdrafts not warranted by the state of its account with the defendant, and which it expected to be compelled to make immediately. The defendant understood this, but was unwilling to accede to a loan of an indefinite amount, and offered at first to advance $200,000. The Fidelity Bank was not satisfied with this proposition, and begged the defendant to "stand by" to a larger amount if its necessities so required. The letter of the defendant of June 17 does not imply any understanding on its part that it was to hold the securities to protect the former loan, much less the general account of the Fidelity Bank. That letter mentions the fact of the previous loan of $300,000 apparently as a suggestion of the extent of the assistance already rendered and its disposition to treat the Fidelity Bank with liberality. That the defendant did not suppose the securities were in its hands as collateral for anything except the sums needed by the Fidelity Bank for the emergency is apparent from its letter of June 17 asking the Fidelity Bank to pledge them for all indebtedness. To this the counter proposition of the Fidelity Bank was that it would accede if the defendant would discount $500,000 of the securities and return the rest. Up to this time there had been no thought on the part of either bank that the securities were to be a collateral for the general indebtedness of the Fidelity Bank. In the mean time the defendant had advanced $200,000 by depositing it for the Fidelity Bank with the assistant treasurer at New York City, and the Fidelity Bank had telegraphed for $100,000 more; and thereupon, answering the last proposition of the Fidelity Bank, the defendant proposed to discount $650,000 of the securities and return the rest, doubtless meaning to apply the proceeds to its $300,000 loan of March, and to its advances made after June 14, retaining the excess as a margin to make good these amounts in case any of the discounted paper should not be paid. To this proposition the Fidelity Bank replied that if the defendant would discount $800,000 of its securities it might charge up the $200,000, return the balance and retain a margin of collateral,- that is the proceeds of the $800,000❘

| discounted paper; and in that event all retained in its hands should stand as collateral for its whole indebtedness. At that time its whole indebtedness, as appears from the defendant's letter of June 18, was $300,000, $200,000, $113,000 and $34,000,-in all $647,000; and the Fidelity Bank doubtless supposed that the discount of $800,000 of securities would cover its whole indebtedness and enable it to draw from them until there should be left only a sufficient margin to provide for the nonpayment of any of the discounted paper. Before this proposition on the part of the Fidelity Bank was assented to by the defendant the attachment was served at the suit of the Bank of Montreal, and the negotiations were closed. When the negotiations were thus terminated the Fidelity Bank had not consented that the securities should stand as collateral for the March loan of $300,000, or for its general indebtedness to the defendant. At this time the defendant had advanced the Fidelity Bank $200,000 on the faith of the securities, and had written that it expected to be liberal and might increase the amount. It is not quite clear whether the defendant had not also permitted the Fidelity Bank to overdraw its account in the further sum of $113,000 (subsequently reduced to $89,000). Under the circumstances any overdraft made after the securities were sent to the defendant, and after it had advanced the $200,000, should be regarded as one allowed on the faith of the securities, in the absence of distinct evidence to the contrary. If any part of the $89,000 was a previous overdraft to that extent it is not to be included. In this connection it is proper to say that the amount of an overdraft is not necessarily the sum drawn, but is the amount drawn less the amount to which the drawer, at the time, is entitled to a credit balance upon his account.

If there was no transfer of the securities to protect the antecedent indebtedness of the Fidelity Bank, there was not a preference of the defendant over its other creditors, and consequently there is nothing in the transaction which contravenes the provisions of the Statute. Although the securities sent were of a value vastly in excess of the sum advanced upon them, they were sent upon the expectation by the Fidelity Bank of obtaining advances to the limit for which they would be acceptable collaterals; and before there was any suggestion of pledging them for pre-existing indebtedness the defendant had acquired a valid lien upon them by the advances already made, and the Fidelity Bank was unable to recall them if it had desired to do so. The Statute is directed to a preference, not to the giving of security when a debt is created; and if the transaction be free from fraud in fact, and is intended merely to adequately protect a loan made at the time, the creditor can retain property transferred to secure such a loan until the debt is paid, even though the debtor is insolvent, and the creditor has reason at the time to believe that to be the fact. This has often been decided in the analogous cases arising under the Bankrupt Act (Tiffany v. Lucas, 82 U. S. 13 Wall. 410 [21 L. ed. 198]: Cook v. Tullis, 85 U. S. 13 Wall. 332 [21 L. ed. 933]; Clark v. Iselin, 88 U. S. 21 Wall. 360 [22 L. ed. 568]), and has been expressly held in a cause arising under the

present statute,-Casey v. La Société de Credit | particular loan, that there was no express unMobilier, 2 Woods, 77.

derstanding between the two banking firms that they were to stand as a security for general transactions, and that the loans subsequently made upon them were specific loans accompanied by an express pledge; and held that these circumstances were inconsistent with the existence of a general lien. The opinion cites various adjudications which hold that where securities are pledged to a banker for the payment of a particular loan or debt he has no lien upon them for a general balance, or for the payment of other claims. As that decision is controlling upon this court it is unnecessary to refer to any other authorities.

The view thus reached is necessarily fatal to the contention of the defendant that it acquired a lien securing it for the $300,000 loan or for the payment of the balance arising upon the general account of the Fidelity Bank. It is familiar law that a banker has a lien upon all funds and securities in his possession deposited with him in the usual course of business by a customer to facilitate the financial transactions contemplated between them, which extends to the payment of any balance on general account. The lien arises from the implied understanding of the parties that credit is to be given in the course of dealings between them by the banker It follows that the defendant did not acquire to the customer upon the faith of the securities. a lien upon the securities except for the adIt is equally familiar law that the lien does not vances made and overdrafts permitted on the exist when the securities have been deposited faith of the securities. If the sending of the for a special purpose, or for the payment of a securities had resulted either in consequence of particular loan; and where they are delivered a subsequent express contract, or in consespecifically to protect the banker in a particu-quence of any implication from the nature of lar transaction or series of transactions, he has no lien upon them for any other purpose, and cannot assert one for any other indebtedness whether arising upon general account or otherwise.

This doctrine has very recently been de clared and applied by the Supreme Court of the United States in Reynes v. Dumont, 130 U. S. 354 [32 L. ed. 934]. That was a case in which securities, consisting of $275,000 of municipal bonds, had been left by one banking firm with another for a period of two years and a half, during which large transactions on general account took place between them, various loans were made to the former by the latter upon an express pledge of the bonds, and the former, at the request of the latter, had also obtained various loans of other bankers by pledging so many of the bonds as was necessary in the particular transaction. The court found as a fact that the bonds were left with the banking firm originally as collateral for a

the transaction in giving the defendant a lien for the antecedent indebtedness of the Fidelity Bank, it is extremely doubtful whether the transaction could be upheld.

The cases of First Nat. Bank v. Colby, 88 U. S. 21 Wall. 609 [22 L. ed. 687], and National Security Bank v. Butler, 129 U. S. 223 [32 L. ed. 682], take a view of the Statute which suggests that no preference can be obtained by one creditor of a national bank over another, after the bank has become insolvent, whether obtained with the consent of or by adversary proceedings against the bank, and whether the creditor has, or has not, any reason to suppose the bank to be insolvent at the time.

The complainant is therefore entitled to a decree, and the defendant must account for all the securities which it has not returned to the complainant, their value or proceeds, less the amount of advances and overdrafts made after it received them.

DAKOTA SUPREME COURT.

NELSON COUNTY, Respt.,

v.

Mowbray S. NORTHCOTE et al., Appts.

(....Dak.....)

thus to have his accounts audited and allowed by the county commissioners, does not render the lender liable to an action in favor of the county, to recover money subsequently embezzled by such treasurer, on the ground that such loan enabled the treasurer to retain his office and thus gave him the opportunity to embezzle the further sum. Any damage which may have resulted from the fraud or wrong of the lender is too contingent, remote and indefinite to constitute a cause of action.

1. Loaning cash and securities to a county treasurer, knowing him to be an embezzler, for the purpose of enabling him to conceal his embezzlement by showing the money and securities as the property of the county, and 2. The insertion of an allegation of conNOTE.-Damages not recoverable for results too re- and reasonable consequences of his own conduct

mote from alleged cause.

Where the damage resulting from the act of another is too remote, or flows not naturally, legally and directly from the alleged injury, the plaintiff will not be entitled to recover. Butler v. Kent, 19 Johns. 223; Kelly v. Partington, 5 Barn. & Ad. 651; Boyle v. Brandon, 13 Mees. & W. 738; 3 Steph. Com. 465; Bacon, Abr. Actions in General (B).

The general rule is that a defendant is not answerable for anything beyond the natural, ordinary

Crain v. Petrie, 6 Hill, 523; Bennett v. Lockwood, 20 Wend. 223; McGrew v. Stone, 53 Pa. 436.

If one's fault happens to concur with some extraordinary event, and not likely to be foreseen, he will not be answerable for the unexpected result. People v. Albany, 5 Lans. 524; Fairbanks v. Kerr, 70 Pa. 86; Morrison v. Davis, 20 Pa. 171.

When the injury suffered is not the legal and natural consequence of the wrongful act of the party sought to be made liable, but results from the wrongful act of a third party, only remotely

induced by defendant's conduct, he is not liable. Co. 35 N. J. L. 30; Scholes v. North London R. Co. 21 Ward v. Weeks, 7 Bing. 211.