CLARK v. TILLINGHAST, 201 F. 77

KOHLSAAT, Circuit Judge (after stating the facts as above). It' does not appear that the Comptroller directed the $20,000 guaranty to' be given in lieu of, or as ,a substitute' for, the notes' taken on salé of the $40,000 bonds, nor does'it appear that the $20,000 'guaranteed' was realized on. Manifestly, it would not have been fair or legal to require defendant to take back his note, surrender his bonds, and join the other directors in guaranteeing the payment af $20,000, and at the same time withhold surrender of his note.

It appears that the other purchasers of stock received their notes when .they surrendered their stock — at least such is the inference from the record — and that defendant could have had his, at any time after the rescission and prior to the advent of the examiner, by applying for it. It must be remembered, however, that' it was not within the power of the Comptroller, or his receiver, or the directors, or all of them, to have deprived the bank of any advantage it had fairly obtained by the sale of the $40,-000 of bonds, especially as it affected their own liability.

Thompson on Corporations (2d Ed.) 1225 et seq., 6199 et seq., and cases.cited; Drury v. Cross, 7 Wall. 302, 19 L. Ed. 40; Hays v. Citizens’ Bank, 51 Kan. 535, 33 Pac. 318; Taylor v. Mitchell, 80 Minn. 492, 83 N. W. 418; Haywood v. Lincoln Lumber Co., 64 Wis. 647, 26 N. W. 184; Asheville Lbr. Co. v. Hyde (C. C.) 172 Fed. 730, and cases there cited. The advantage belonged to the creditors, for whom they were to that extent trustees.

Just why the examiner should deem the bonds a weak asset, and at the same time take the directors’ guaranty of $20,-000 in preference to the individual obligations of the directors to the amount of $40,000; is not made plain by the record. There is a seeming inequality of justice in pursuing this defendant, just because he alone was tardy in taking up his note. That question, however, is not presented by the record, and need not be further considered. It is clear from the record, however, that the examiner, the Comptroller, and the receiver were advised of the facts:

(1) That the bonds represented the equity in the Chicago block, and should be dealt with as though they constituted the .equity; (2) that defendant was the owner of $6,000 thereof, subject to the lien of his $5,000 note held by the bank; (3) that the equity was of an uncertain value, and of such a nature as not to be quickly realized on without sacrifice; and (4) that defendant’s interest, entitled him to notice of and participation in any proceedings involving the annihilation of his $6,000 bond investment.

The Circuit Court took this view of the matter, and attémpted to reriiedy plaintiff’s disregard of defendant’s rights in that respect by crediting the latter with his pro rata share of. the proceeds of the sale of the equity, on the theory of part failure of consideration. Whether he succeeded in making a fair adjustment must remain a mere matter of conjecture, so far as appears in the record. De- ■ fendant was equitably entitled to have his $6,000 of bonds, or 0/s5 of the equity, dealt with separately, or at least to an ascertainment that a sale of the whole equity would result in an advantage to him.

Instead of making any attempt to protect defendant’s interests, the receiver sold the collateral as though it were an independent asset, taking the benefits of the attempted rescission and disavowing the rescission. The Circuit Court held that there was in this case a partial failure of .consideration, and upon that theory allowed defendant his pro rata share of, the equity as above stated. With this holding, under the facts of the case, we do not dissent, although there may be some question whether defendant may in such a proceeding set up want or failure of consideration.

The examiner required the sale of the bonds for the purpose of enabling the bank to pass an examination. In such a case it has been said that' the consideration for the note was, among other things, the deposits made upon the credit obtained or favor granted by reason of the extension, if any deposits were made. Skordal v. Stanton, 89 Minn. 511, 95 N. W. 449; Atwater v. Smith, 73 Minn. 507, 76 N. W. 253; Pauly v. O’Brien (C. C.) 69 Fed. 460; New England Fire Ins. Co. v. Haynes, 71 Vt. 306, 45 Atl. 221, 76 Am. St. Rep. 771 (1899); State Bank v. Kirk, 216 Pa. 452, 65 Atl. 932; Best v. Thiel, 79 N.

Y. 15; Tillinghast v. Carr (C. C.) 82 Fed. 298; Murphy v. Gumaer, 18 Colo. App. 183, 70 Pac. 800; Merchants’ Bank v. Rudolf, 5 Neb. 527; Proctor v. Baldwin, 82 Ind. 370; Bigelow on Estoppel (5th Ed.) 611; Morris on Banks and Banking, § 137. We are not impressed with the injection of the fact that the rescission was agreed upon on a Sunday. If this defense should avail, it is a fact that action and consequent ratification was had on a secular day. In our view of the case, that question is not material.

While we are of the opinion that the action of the receiver in handling and selling the stock was irregular, and for' all that appears unfair to defendant, we are not disposed to hold that defendant has not received all the consideration he is entitled to in a proceeding at law. The judgment of the Circuit Court is affirmed.