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Who's Money Did They Loan?

nesaranews.blogspot.com | May 28, 2015

Please read these cases, then open the gif for Title 62 Revised Statutes Chapter 4. Read section 37 real close and ask yourself, Who's money did they loan?

A national bank cannot lend its credit or become the guarantor of the obligation of another unless it owns or has an interest in the obligation guaranteed especially where it receives no benefits therefrom. Citizens' Nat. Bank of Cameron v. Good Roads Gravel Co., Tex.Civ.App.1921, 236 S.W. 153, dismissed w.o.j.

A national bank has no power to guarantee the performance of a contract made for the sole benefit of another. First Nat. Bank v. Crespi & Co., Tex.Civ.App.1920, 217 S.W. 705, dismissed w.o.j.

National banks have no power to negotiate loans for others. Pollock v. Lumbermen's Nat. Bank of Portland , Or.1917, 168 P. 616, 86 Or. 324.

A national bank cannot act as broker in lending its depositors' money to third persons. Byron v. First Nat. Bank of Roseburg , Or.1915, 146 P. 516, 75 Or. 296.

A national bank is not authorized to act as a broker in loaning the money of others. Grow v. Cockrill, Ark.1897, 39 S.W. 60, 63 Ark. 418. See, also, Keyser v. Hitz, D ist.Col.1883, 2 Mackey, 513.

Officers of national bank in handling its funds are acting in a fiduciary capacity, and cannot make loans and furnish money contrary to law or in such improvident manner as to imperil its funds. First Nat. Bank v. Humphreys, Okla.1917, 168 P. 410, 66 Okla. 186.

Representations made by bank president to proposed surety as to borrower's assets, in connection with proposed loan by bank, held binding on bank. Young v. Goetting, C.C.A.5 ( Tex. ) 1926, 16 F.2d 248.

Bank is liable for its vice president's participation in scheme to defraud depositor by facilitating prompt withdrawal of his money. National City Bank v. Carter, C.C.A.6 ( Tenn. ) 1926, 14 F.2d 940.

A national bank receiving the proceeds of a customer's note and mortgage with authority to pay out the same upon a first mortgage lien upon real estate is acting intra vires and liable for breach of its duty. Brandenburg v. First Nat. Bank of Casselton, N. D .1921, 183 N.W. 643, 48 N. D . 176.

It has been held that the right to discount and negotiate notes, etc., goes no further than to authorize the taking of them in return for a loan of money made on the strength of the promises contained in them, and does not contemplate a purchase in the market. Lazear v. National Union Bank, Md.1879, 52 Md. 78, 36 Am.Rep. 355. See, also, Rochester First Nat. Bank v. Pierson, 1877, 24 Minn. 140, 31 Am.Rep. 341.

National bank is not authorized under national banking laws to lend deposited money on depositor's behalf. Carr v. Weiser State Bank of Weiser, Idaho 1937, 66 P.2d 1116, 57 Idaho 599.

Under this section, a national bank had no authority to enter into a contract for loaning money of a depositor kept in a deposit account through its cashier authorized by the depositor to draw thereon to make loans. Holmes v. Uvalde Nat. Bank, Tex.Civ.App.1920, 222 S.W. 640, error refused.

A bank has no right to loan the money of other persons. Grow v. Cockrill, Ark.1897, 39 S.W. 60, 63 Ark. 418.

A "deposit for a specified purpose" is one in the making of which a trust fund is constituted with respect to which a special duty as to its application is assumed by the bank. Cooper v. National Bank of Savannah , Ga.App.1917, 94 S.E. 611, 21 Ga.App. 356, certiorari granted 38 S.Ct. 423, 246 U.S. 670, 62 L.Ed. 931, affirmed 40 S.Ct. 58, 251 U.S. 108, 64 L.Ed. 171.

Fund, deposited in bank for special purpose subject to depositor's check, remains property of depositor. U.S. Shipping Board Emergency Fleet Corporation v. Atlantic Corporation, D .C.Mass.1925, 5 F.2d 529, error dismissed 16 F.2d 27.

'In the case of a special deposit, the bank assumes merely the charge or custody of property, without authority to use it, and the depositor is entitled to receive back the identical money or thing deposited. In such case, the right of property remains in the depositor, and if the deposit is of money, the bank may not mingle it with its own funds. The relation created is that of bailor and bailee, and not that of debtor and creditor.' 3 R.C.L. 522. Tuckerman v. Mearns, App. D .C.1919, 262 F. 607, 49 App. D .C. 153.

National banks are liable for the loss of property held by them merely for the accommodation of their customers, without any consideration for the keeping of it except the profit derived from the banking business of such customers. Security Nat. Bank v. Home Nat. Bank, Kan.1920, 187 P. 697, 106 Kan. 303.


Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager


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