have had some knowledge of the nature of the negotiations.
It appears by the testimony of John D. McMullin, an attorney, who was representing the directors and examiner, that he was in charge of the final negotiations with relation to the advancement of the cash, the giving of the mortgages, and, it seems, the final arrangements for securing the loans.
He testified that to get the permission of the Comptroller to reopen, it was required that this $50,000 should be a clear asset without any corresponding obligation on the part of the bank, and that neither the reports to the Comptroller nor the books of the bank showed any charge indicating that the $50,000 so advanced was an obligation of the bank.
It appears that the checks of the various companies were delivered in escrow to Mr. Ransom between January 19, 1932, and February 16, 1932. Prior to the first date, the mortgages had been executed and recorded, and Mr. McMullin testified that, before the date of Delivery of the first check, he had communicated by letter with all of the complainants, or their attorneys, advising them that the bank could not become a debtor for the amounts advanced; that such action would make it impossible for the bank to accomplish the purpose for which the moneys were advanced, and, as I view it, distinctly advising the interested parties that the bank could not assume a legal obligation to repay.
The evidence generally satisfies me that the advances were made only upon the security of the mortgages. The burden is upon the complainants to prove their case by a preponderance of evidence. Considering the testimony of Mr. McMullin, the fact that no obligation was given by the bank, that no direct promise of the bank to pay was made by Mr. Collisson, that no evidence of any action taken by the board of directors was produced, and that the checks were delivered after the letter of Mr. McMullin was sent, in which it was stated that the bank could not assume legal liability, I have come to the conclusion that there was no legal obligation on the part of the bank to repay the moneys advanced. Particularly is this true by reason of the bank's insolvency, and the provisions of the statute with relation to the distribution of the assets of insolvent national banks. There are some intimations in the proofs that the bank would take an assignment of the mortgages, but this was only a suggestion, and did not become a contract binding upon the bank or its receiver.
Counsel for complainants suggest in their brief that, because of the fact that the bank owned all of the stock of the Ocean City Securities Corporation and received the benefits from the moneys advanced, it is legally bound to repay the advances, and cites sundry cases to sustain this contention. I have examined the cases cited, and in certain instances, under the circumstances in each case, it appears that this doctrine has at times been established; but this does not apply to the instant case, holding, as I do, that there was a distinct understanding that the bank should not be legally bound to repay.
I find as facts:
(1) That each of complainants advanced the sum of $12,500 for the use of the bank, upon the understanding that this sum was required to permit the bank to reopen.
(2) That each of the complainants received as sole security therefor a bond of the Ocean City Securities Corporation, accompanied by concurrent mortgages to secure the amount so advanced, on property of the said Securities Corporation in Ocean City, N.J.
(3) That the property upon which the mortgages were a lien was, at the time, considered of a value in excess of all encumbrances.
(4) That it was believed, at the time of the advance of the money, that the bank would be re-established on a solid basis, and eventually repay the advances by purchasing the aforesaid mortgages.
(5) That no evidence of indebtedness was given, or intended to be given by the bank, to the complainants, or any of them.
(6) That no entry was made in the books of the bank showing that the complainants, or any of them, were creditors of the bank.
(7) That there was no action on the part of the directors of the bank, or any other person having lawful authority to bind the bank, by which an agreement was consummated, making the bank or its receiver responsible for repayment.
My conclusions of law are:
There being no contract, express or implied, on the part of the bank to borrow on its credit, or to repay the amounts advanced, the complainants cannot recover.
The restraint prayed for in the bill will be denied, and, the other matters at issue being herein decided adversely to the prayers of the bill, it will be dismissed.
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