Court Opinion

ID: 7173751
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:29:14.160179+00
Date Added: 2024-06-11T16:15:49.213932
License: Public Domain

On Rehearing.
By the WHOLE COURT.
O’NIELL, O. J.,
We have concluded that, inasmuch as the judgment that was rendered in this case is well founded upon the' fact that the resolution on which the officers of the People’s Bank acted in pledging the bank’s credits to the Marine Bank was confined to the securing of loans made in virtue of the resolution, the pronouncement made in the opinion handed down by a section of the court that the transaction would have been contrary to public policy if it had been authorized by the resolution of the board of directors was not necessary for a decision of the case, and should not stand as authority.
We have also concluded that the decision rendered in the case of the Feliciana Bank & Trust Co. v. City Bank & Trust Co., 144 La. 389, 80 South. 600, is not authority for the judgment rendered in this ease.
The important distinction between the Feliciana Bank Case and this case is that the Feliciana Bank was already insolvent when the officers of the bank undertook to pledge its reserve fund to a creditor having knowledge of the insolvency of the Feliciana Bank. In the case before us the People’s Bank was not insolvent when its officers pledged to the Marine Bank the money, stocks, bonds, or other property, on deposit or otherwise, to the credit of the People’s Bank, on the books of the Marine Bank, or in its possession, etc.
But that is not the only distinction between the Feliciana Bank Case and this ease. In the Feliciana Bank Case, the City Bank & Trust Company, of Mobile, a creditor of-the insolvent Feliciana Bank, undertook to deceive the bank examiner by pretending to put up a sum necessary to make good an impairment of the capital or surplus of the Feliciana Bank, at the same time retaining the sum on deposit, ostensibly but not really subject to check, but subject to being charged off as a loan to the Feliciana Bank at any time that the bank might fail. Our ruling was that the City Bank & Trust Company had to make good its pretense of having placed the money on ■ deposit to the credit of the Feliciana ^ank & Trust Company.
*952In the case before us we have concluded to rest our decree affirming the judgment appealed from upon the first or primary plea that was urged in defense of this suit; that is, that the resolution of the board of directors of the People’s Bank & Trust Company, authorizing the officers of the bank to borrow money from the Marine Bank & Trust Company and to secure the loans by pledging the assets or credits of the People’s Bank, did not authorize a transaction by which the Marine Bank & Trust Company might apply money on deposit to the credit of the People’s Bank, or the proceeds of bills receivable collected or sold for account of the People’s Bank, to the payment of the debt due by the People’s Bank for the Liberty bonds sold for account of the Marine Bank.
By section 4 of Act 193 of 1910, as amended by Act 251 of 1916 (page 524), bank officials are forbidden to pledge or hypothecate any of the assets of the bank except in pursuance of a resolution of the board of directors duly entered upon the board’s minute book.
The authority granted by the resolution of the board of directors in this case to pledge or hypothecate the assets or credits of the People’s Bank was plainly limited to the securing of the loans which the resolution authorized the bank’s officials to negotiate with the Marine Bank. In the first paragraph of the resolution (quoted in the original opinion rendered in this case), the officers of the People’s Bank were authorized to borrow money, from time to time, from the Marine Bank, and to execute notes, certificates of deposit, or agreements, “for the payment of any sums so borrowed.” And in the second paragraph of the resolution the officers of the People’s Bank were authorized to pledge any of the bonds, stocks, bills receivable, or other securities or property of the bank, “for the purpose of securing any moneys so borrowed.” There was no authority given to pledge any of the assets or credits of the hank, or to make any “agreement,” except to secure the payment of money borrowed under authority of the resolution.
It is true the word “borrow” has been given the meaning, in some cases, of a transaction similar to that by which the People’s Bank owed the Marine Bank the proceeds of the sales of the Liberty bonds. See 1 Words and Phrases, First Series, p. 844. But the authority to pledge or hypothecate the bank’s assets or credits in this case is restricted, not merely to the securing of money borrowed, but to the securing of money borrowed in virtue of the authority conferred by the resolution ; and, surely, the transaction regarding the Liberty bonds had nothing to do with the authority conferred by the resolution of the board of directors of the People’s Bank.
For the reasons stated in this opinion, the decree heretofore rendered in this case is reinstated and made final.
ST. PAUL, J., concurs in the decree.