FIRST NATIONAL BANK OF AIKEN
v.
J. L. MOTT IRON WORKS
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The First National Bank of Aiken guaranteed payment to J. L. Mott Iron Works for goods sold to enable the Kaiser Company to complete a construction contract, with the bank receiving benefits from the guaranteed transaction. The Supreme Court affirmed judgment against the bank, holding that when a party receives benefits from inducing a contract through a guaranty, it is accountable to the other contracting party for those proceeds up to the amount of the guaranty.
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Mr. Justice Holmíes delivered the opinion of the court.
This is a suit against, the petitioner upon a written guaranty of payment' to the respondent of $2,363.50 for goods sold to the Kaiser Company. The plaintiff, (the respondent,) had a verdict and judgment and the judgment was affirmed by the Supreme Court of the State. Th.e case comes here' on the question of th.e liability of the bank, upon the facts that we shall state. •
They are simple.- A firm of McGhee and.McGhee was building a hospital in Aiken. The firm had contracted with the Kaiser Company for the-heating and plumbing, at the price of $7,800, the firm agreeing to pay eighty-five per cent, of the labor and materials furnished each month and the remaining fifteen at the completion of the system. The Kaiser Company assigned this contract to the bank and the firm agreed to make all checks under the contract payable to the bank. This was done as 'security to the bank for advances the validity of which is not contested. In the course of performance the Kaiser Company ordered the goods .concerned from' the respondent, but the respondent required security before it' would send them. Thereupon the bank in order to enable the company to complete its contract and thereby to repay the advances that the bank had made gave the guaranty in question. Subsequently the bank received $1,105.28 and might have received much more than the amount of its guaranty although in fact it allowed the McGhees to pay checks for $5,468 to the Kaiser Company, with the result that' the Kaiser Company still owes it some money. Therefore the bank is in the position of having realized the benefit to acquire which the guaranty was made, and of having realized it out of the proceeds of the goods that it induced the Iron Company to sell.
In such circumstances, whether the contract is valid or not, the contractor is accountable to the contractee, up to the amount of his-undertaking, for the proceeds coming to his hands from the contractee upon the inducement of the contract. Citizens’ Central National Bank v. Appleton, 216 U. S. 196. In this case therefore the plaintiff • is entitled to recover the amount for which it has declared, and as the case was fully tried upon the merits, the distinction between a recovery on the guaranty, as having been, necessarily incident to the business of banking, and a recovery of the amount received by'petitioner on account of the guaranty, becomes purely formal.
Judgment affirmed.
Mr. Justice Clar^u.,,ms absent and took no part i’n the decision.
Cases With Similar Vibessemantic neighbors from the corpus
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Modoc Cnty. Bank (Formerly Bank of Ft. Bidwell) v. Ringling, 7 F.2d 535 (9th Cir. 1925)…0; Farmers’ & Merchants’ National. Bank v. Illinois National Bank, 146 Ill. App. 136; People’s Bank v. National Bank, 101 U. S. 181, 25 L. Ed. 907; Mott Iron Works v. Kaiser Co. (S. C.) 103 S. E. 783; First National Bank of Aiken v. Mott Iron Works, 258 U. S. 240, 42 S. Ct. 286, 66 L. Ed. 593. We find no error in the record. The judgment of the District Court is accordingly affirmed.…1 / 2
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Kirkman v. Farmers' Sav. Bank of Boyden, 28 F.2d 857 (8th Cir. 1928)…alid: Ellis v. Citizens’ Nat. Bank, 25 N. M. 319, 183 P. 34, 6 A. L. R. 166; Citizens’ Nat. Bank v. Appleton, 216 U. S. 196, 30 S. Ct. 364, 54 L. Ed. 443; People’s Bank v. Nat. Bank, 101 U. S. 181, 25 L. Ed. 907; First Nat. Bank v. Mott Iron Works, 258 U. S. 240, 42 S. Ct. 286, 66 L. Ed. 593; U. S. Nat. Bank v. First Nat. Bank, 79 F. 296 (C. C. A. 8), aff’d 174 U. S. 125, 19 S. Ct. 628, 43 L. Ed. 920. In the case last cited this court in its opinion said: “The public interest requires that the same pre…1 / 2
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Downey v. City OF Yonkers & three other cases, 106 F.2d 69 (2d Cir. 1939)…n a preference based on a transaction forbidden by the Act. While a national bank in some cases may be under a duty to return benefits it has received as the result of an ultra vires transaction (see First National Bank of Aiken v. Mott Iron Works, 258 U.S. 240, 42 S.Ct. 286, 66 L.Ed. 593; Citizens’ Central National Bank v. Appleton, 216 U.S. 196, 30 S.Ct. 364, 54 L.Ed. 443), the rule if applicable here would not help the defendant since it would not be entitled to a preference against the other depositors…
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- Citizens' Cent. Nat'l Bank of N.Y. v. Appleton, 216 U.S. 196 (U.S. 1910)