The suit is plainly one of equitable cogniz ance, the bill being filed to charge the defendant, as a trustee, for a breach of trust in regard to a special deposit.

The opinion of the circuit court, reported in 25 Fed. Rep. 247, contains so full and accurate a statement, in the main, of the facts of the case, developed by the proofs, that we repeat and adopt it, as follows: "The firm of Walker, Bros. & Co., composed of the plaintiff's husband, his brother, and G. H. Judah, was a large mercantile house in Memphis that disas trously failed and made an assignment. The plaintiff and the wife of the other brother, being creditors of the firm for large amounts due them for loans to the firm, owned the book accounts, which were bought for their use by Judah in the name of Maas, the book keeper, at the assignee's sale, the husband of plaintiff paying for her share. These books, with the knowledge and consent of plaintiff and her husband, who afterwards died-but it seems with

and sometimes guardian, but without disclosing | stipulated between the parties, that the defendfor whom he was agent or guardian; that he ant received no compensation, as bailee, for the made deposits and drew checks in that way on custody of the property sued for; that the his account, as the other depositors with the Memphis & Charleston Railroad bonds bore 7 defendant did, and, at different times prior to per cent interest, payable semi-annually, and November, 1880, bought the bonds and insur- evidenced by interest coupons maturing Januance company's stock named in the bill, and ary 1 and July 1 in each year, the bonds mapaid for them by checks on his account with turing on the 1st of January, 1885; and that the defendant; that, as he would buy those se- the Mississippi Central Railroad bonds bore 8 curities, he would leave them on deposit with per cent interest, payable semi-annually, and the defendant, without taking any receipt for evidenced by coupons maturing February 1 and them; that, in the fall of 1880, he left with the August 1 in each year, the bonds maturing on defendant the Goldsmith note and the collateral the 1st of February, 1885. therefor, and the four other notes mentioned in the bill; that those notes were payable to the said G. H. Judah as agent simply, without saying for whom he was agent: that, prior to November 27, 1880, he had never told the defendant whether he had any principal or not, or who his principal was, or for whom he was guardian, if for anyone; that on or about that date, he asked the defendant to give to him, as agent for the plaintiff, a receipt for the bonds, stocks, and notes, telling it at the time that he was the plaintiff's general agent for the man270] agement and control of those securities and notes; that the defendant gave to him a receipt, as such agent; that, after the receipt was given, some of the notes described in it were paid while they were on deposit with the defendant, and the said Judah, as agent of the plaintiff, drew out the money in the ordinary way, and from time to time, as agent of the plaintiff, withdrew from the custody of the defendant the items mentioned in the receipt, until he had withdrawn them all, when he gave to the de-out any specific instructions of any kind-were fendant a receipt for them, in which he acknowledged having received them as agent for the plaintiff; that, if the plaintiff owned the items, Judah had authority from her to control and manage them, as fully as she could have done as owner, if they had been in her actual possession, instead of in his possession as her agent; that he was her general agent with reference to them, and had power not only to deposit them, but also to withdraw them from deposit, if he saw fit; that, when he demanded them from the defendant, his agency was still in force, and the defendant could not legally have refused to give them up to him as the agent of the plaintiff; that, upon returning them to Judah, as such agent, all liability of the defendant with reference to them ceased; and that the defendant is not indebted to the plaintiff on account of said securities.

Proofs were taken on both sides and the cause was heard; and the court made a decree adjudging to the plaintiff a recovery against the defendant of $5,000, being the amount of the Goldsmith note, with $1,175 interest thereon from the date of its maturity, November 1, 1881, on the ground that the defendant had collected the amount of that note and appropriated the same to its own use, and further decreeing that the defendant was not liable to the plaintiff for any of the other items mentioned in the bill, and that neither party should recover costs from the other. Each party has taken a separate appeal to this court.

The answer does not set up, as a defense, that the defendant was not authorized to re ceive the property in question as a special deposit, or to give the receipt therefor. It was

left with Judah to collect the debts and man-
age the fund for the two beneficiaries, who re-
sided in other cities. His control over the
funds was of the most plenary character. He
married a sister of the two brothers, and had
been the most active member of the firm and
was best acquainted with its business. The
collections were deposited with the defendant
bank in his name as 'guardian,' or in the name
of Maas, the former book keeper of the firm,
who became the book keeper and assistant
cashier of the defendant bank. Prior to No-
vember 27, 1880, Judah had purchased certain
securities with the funds, which he kept on
special deposit with the bank or in the name
of Maas. On that day he came to the bank and
asked Maas for a receipt showing the special
deposit, to send to the plaintiff. The bank was
not in the habit of giving receipts or certificates
for these special deposits, but kept them noted
by numbers in a book used for that purpose.
Maas wrote a receipt on a sheet of the bank's
letter paper, and, according to his and Judah's
testimony, placed it in one of the bank's en-
velopes addressed to the plaintiff, and put it
with the bank's mail. The plaintiff and her
daughter swear that it was accompanied by a
letter from Maas. What was in the letter does
not appear, and, not being preserved, it has
not been produced, but is supposed to have
been burned as useless. The routine of the
bank was that Goldsmith, the cashier, person-
sonally signed and inspected every letter and
himself enveloped and addressed them. This
letter he did not see or sign, and it was never
copied into the letter press. The receipt was
as follows:

[271]

[272]

"Some time in 1880 the son of the plaintiff and a son of the other Walker, both young men, commenced business at Memphis as Walker, Sons & Co. This firm kept an account with the defendant bank, and later with the Bank of Commerce. It was 'never very strong' financially, and its business was cotton factorage. Judah was thought by Goldsmith to be a partner, and the plaintiff at one time swore he [273] was a silent partner, but afterwards stated she was informed he was not. He says he was only a salaried manager. The members of the firm were inexperienced, and Judah was, in fact, the almost sole manager of all its affairs-the master spirit of the concern. It is not shown that the young men took any part, except one of them kept the books after Maas had opened

them.

"The plaintiff, in October, 1880, lent to her son, the firm being also responsible, $10,000, as his capital in the concern, derived from the life insurance of her husband. Judah also appropriated or lent to the firm, from time to time, sums amounting to over $9,000, from his collections in behalf of plaintiff on the old books. The interest on these sums and on the special deposit funds were remitted by the firm -not always promptly-to the plaintiff at Philadelphia, by exchange or checks; and sometimes the coupons were sent by express to her. When remittances were delayed she wrote or telegraphed the firm. She never communicated with the bank in any way. The remittances were nearly always in letters by her son, and they contained apologies and explanations for delays.

At the same time, Judah urged a loan on the
other securities of plaintiff on special deposit,
but the bank declined this on the ground that

cotton factors' accounts were not desirable to a
bank with so small a capital. . . The bank
did not make the loan, because Judah was un-
He could get the money at the Bank of Com-
willing to pay the money on the old account.

merce. He told the officers of the defendant
bank so, and they delivered the securities to
him, fully knowing that he was going to make
that use of them. Maas consulted the president
securities to Judah, and they directed him to
and the attorney whether he should deliver the

do so.

He had forgotten, however, giving him
the receipt and sending it to plaintiff, and
neither the president nor the attorney knew
that fact. Goldsmith, the regular cashier, was
absent in New York, but he never knew that
fact. Maas never mentioned it, because, he
says, he deemed it unimportant at the time and
forgot it afterwards. The securities were
pledged to the Bank of Commerce, except the
the People's Insurance stock, which was on the
books in plaintiff's name and could not be used
by Judah. They were sold by that bank to
satisfy the loan, and are lost to plaintiff. The
firm of Walker, Sons & Co. soon after failed
disastrously, owing defendant bank a balance
of over $5,000, notwithstanding Judah, accord-
ing to his promise, appropriated to the debt
certain stocks of his own, and his diamonds.
After the failure, Kramer, a son-in-law of
plaintiff and a lawyer, came to Memphis and
presented the receipt, and then the plaintiff
learned, for the first time, that the securities had
been so used by Judah and the bank. Kramer
secured the delivery to himself of certain
'country paper' and mortgages to secure notes
that were then first taken for the $20,000 lent
by plaintiff to the firm, not including, how-
ever, the securities in controversy here. An
angry lawsuit grew out of this transaction, in
this family, in the courts of Arkansas. A New
York gentleman, nephew of the other young
Walker, filed a bill stating that the securities
belonged to him to secure his guaranty of a
loan by the Importers' and Traders' Bank of
New York to the firm for some $26,000, and
that he had sent them to the firm for collection,
and that they were, by the plaintiff's son, aud
without consent of the other Walker or Judah,
turned over to his own mother; all of which
was denied, and the averment made that this
scheme was trumped up to defeat plaintiff of
her advantage and enable Judah to continue
business on the assets at Indian Bay, Arkan-
sas.'

The defendant bank made large advances
to the firm, generally by discounts on the secur-
ity of the firm's 'country paper' due from its
customers. Judah promised the bank to al-
ways protect it as far as in his power, and the The circuit court held that the defendant was
relation was very confidential. The bank began liable for the amount of the Goldsmith note
to urge him for a reduction of the account, and interest from the date of its collection, be-
and, not being willing to accommodate him cause it had collected the money and never
fully, he opened an account with the Bank of paid it to the plaintiff, but had, without due
Commerce. The Goldsmith note maturing authority, appropriated it to his own use, on
November 1, 1881, he" [Goldsmith] "notified account of the debt due to it from Walker,
Judah that he should not longer need the loan. Sons & Co. As to the $5,200 of bonds, the
Maas and Judah say that 'a few days' before court held that knowledge by the defendant of
the note matured, Judah, being unable to con- the intended breach of trust by Judah did not
tinue the loan to Goldsmith, determined to make the defendant privy to it and liable for
lend the money to Walker, Sons & Co.; and to it, as the defendant did not participate in the
accomplish that purpose the note of Goldsmith profits of the fraud; that the receipt given by
was discounted by the bank, and the proceeds the defendant did not change the relation of
placed to the credit of Walker, Sons & Co. . . . | Judah to the property and to the defendant, as

[274]

[275]

it was not a receipt to the plaintiff but one to
Judah; and that it did not satisfactorily appear
that the defendant received any part of the
money advanced on the bonds.

We are of opinion that the plaintiff is en-
titled to recover, not only in respect to the
Goldsmith note, but in respect to the $5,200 of
bonds.

that the bonds were to be redelivered on the
return of the receipt. Before and after that
time, the officers of the bank were accustomed
to receive such deposits from others, and they
were entered in a book kept by the bank. The
bonds were stolen from the custody of the
bank, through its gross negligence. On this
state of facts, this court said, p. 702 [751]: [277]
"If a bank be accustomed to take such de-
posits as the one here in question, and this is
known and acquiesced in by the directors, and
the property deposited is lost by the gross care-
lessness of the bailee, a liability ensues in like
manner as if the deposit had been authorized
by the terms of the charter." In support of
this proposition, the court cited the cases of
Foster v. Essex Bank, 17 Mass. 479; Lancaster
Co. Bank v. Smith, 62 Pa. 47; Scott v. Chester
Valley Nat. Bank, 72 Pa. 471; Bank of Carlislo
v. Graham, 79 Pa. 106; Turner v. Bank of
Keokuk, 26 Iowa, 562; Smith v. Bank of West-
field, 99 Mass. 605; Chattahoochee Bank v.
Schley, 58 Ga. 369.

We are of opinion that the execution of the
receipt or certificate in question, and its trans-
mission by mail directly by the defendant to
the plaintiff, created the relation of bailor and
bailee between her and the defendant, and
made it an act of gross negligence for the de-
fendant to deliver, or dispose of, or appropriate
the securities in question, on the sole request
of Judah, and without her direct authority.
Under the circumstances of the case, the re-
ceipt having been made out by Maas, the as-
sistant cashier, and sent by him to the plaint-
iff, on the request of Judah made on her be
half, the statement in the receipt that Judah,
agent for the plaintiff, had placed the securities
with the defendant on special deposit, must be
regarded as virtually a statement that the
plaintiff, by Judah as her agent, had placed
the securities with it on special deposit.

In regard to the Goldsmith note, shortly bebefore it matured, in November, 1881, Judah indorsed it over to the defendant as collateral security for a note of larger amount, made by Walker, Sons & Co., which the defendant then discounted at the instance of Judah. The proceeds of that discount were, to the extent of $6,000, applied by the defendant upon a debt antecedently existing from Walker, Sons & Co. to it. When the Goldsmith note became due, in November, 1881, the defendant, claiming to be the owner of it, collected it and retained the proceeds. Thus a note which confessedly, and to the knowledge of the defendant, belonged to the plaintiff, was diverted to the use of the de fendant by the co-operation of it and of Judah. Judah, if not a partner in the firm of Walker, Sons & Co., was, to the knowledge of the officers of the defendant, the active and controlling manager, both in its business with the defendant and otherwise, of the affairs of that firm. Maas, the assistant cashier of the defendant, [276] and who was its acting cashier during the period of the transactions in question, was, before his connection with the defendant, the confidential book keeper of the prior firm of Walker, Bros. & Co., of which Judah was a member, and had a close personal intimacy with Judah. When the book accounts of Walker, Bros. & Co. were sold, Maas bought them, on behalf of the plaintiff and her sister, and the funds realized from that purchase were in part deposited in the name of Maas, with the defendant; and Maas, on the request of Judah, opened the books of Walker, Sons & Co., when that firm was formed. Judah promised Maas that he would certainly protect the defendant in case of disaster to the firm of Walker, Sons & Co. At the time the Goldsmith note was thus converted, the condition of Walker, Sons & Co. was precarious, if the firm was not insolvent. Before the conversion of the railroad bonds, Judah pledged to the defendant certain stocks belonging to himself, for the debt due to it by Walker, Sons & Co.; and it is apparent that Judah was constantly being pressed by the defendant to make payments on the firm's debt to it, and that Maas, being the acting cashier of the defendant, knew, from the state of the account which the firm kept with the defendant, that it was substantially with- Judah testifies that the instructions of the out available funds. In none of the transac- plaintiff to him did not, directly or indirectly, tions between the defendant and Judah in re-authorize him to pledge any bonds or securities gard to the Goldsmith note and the bonds, was the receipt or certificate which had been sent to the plaintiff redelivered to the defendant; and the defendant knew that it had gone into the hands of the plaintiff, because it had been sent to her by mail directly from the defend

ant

In National Bank v. Graham, 100 U. S. 699 [25: 750], one Graham had deposited in a national bank certain bonds of the United States for safe keeping, and had received from the cashier a receipt setting forth that fact, and 130 U. S. U. S., Book 32.

Maas' statement, in his testimony, is that
Judah came to him, while he was in the dis-
charge of his duties in the bank, "and said he
wanted a receipt, or a statement rather, of
what securities he had there on special deposit,
to send to Mrs. Walker in Philadelphia.
He said Mrs. Walker wanted to know what she
held. About that time, on our special de-
posit book, these bonds and note and stock,
mentioned in said receipt, were entered as de-
posited by G. H. Judah, ag't Mrs. Eliza
Walker." Maas further states that Judah
never exhibited any authority to him or to the
bank, to dispose of the note and the bonds and
securities mentioned in the certificate which
was sent to Mrs. Walker.

obtained with her money, for his own debts or
the debts of others, and that his power was
limited to invest her moneys for her exclusive
benefit and use.

It is very clear that Judah had no power,
either in fact or in law, to pledge the Gold-
smith note as security for an existing debt of
Walker, Sons & Co. to the defendant. Such
act was not an investment of the trust fund,
and the officers of the defendant knew that it
was not. Duncan v. Jaudon, 82 U. S. 15
Wall. 165 [21: 142]; Smith v. Ayer, 101 U. S.
62

963

[278]

820 [25:955]; Nat. Bank v. Ins. Co. 104 U S.nized the plaintiff as the true owner of the
54 [26:693]; Shaw v. Spencer, 100 Mass. 382;
Loring v. Brodie, 134 Mass. 453.

bonds, her name being mentioned in it; and it
was capable of no other construction than that
the plaintiff owned the securities mentioned.
Knowing, from what passed between Maus and
Judah, that the bonds were to be used to raise
money for the benefit of Walker, Sons & Co.,
and knowing that such use was an improper
disposition of the bonds, unless the transaction
were affirmatively and directly sanctioned by
the plaintiff, the defendant became a party to
the misappropriation of the bonds. It is im-
material, in this view, whether or not the de-
fendant received any portion of the money
loaned by the Bank of Commerce on the se-
curity of the bonds.

It is urged on the part of the defendant, that
Judah, as agent of the plaintiff, collected the
book accounts of Walker, Bros. & Co.; that he
deposited the moneys collected with the de-
fendant, to his credit as guardian; that out of
those funds he made loans to Walker, Sons &
Co., to which the plaintiff did not object; and
that he bought the securities in question with
moneys belonging to the same fund. But,
from the fact that the plaintiff had lent to the
firm of Walker, Sons & Co. other moneys, it
does not follow that, after the giving of the
receipt in question, authority from her to dis-
pose of the securities so placed with the de-
fendant on special deposit, is to be inferred.
Her demand upon the defendant, through
Judah, for the receipt showing the special de-
posit, and the sending of such receipt directly
to her by the defendant, changed the relations
of herself and Judah and the defendant to the
securities deposited. The defendant knew, as
well as did Judah, that an investment of the
proceeds of any of the securities in a loan to
Walker, Sons & Co., was not a safe invest-
ment. It also knew that the appropriation of
the proceeds of the Goldsmith note towards
paying a debt due to it by Walker, Sons & Co.,
was an unlawful appropriation; and that the
securities covered by the receipt were held as
investments, and were the property of the
plaintiff. So far as the collection of the inter- THE GARFIELD MINING AND MILL-
est on the Goldsmith note and on the bonds
was concerned, when the moneys collected in
[279] fact reached the plaintiff, the transactions were
completed; and no argument can be drawn
from them in support of any implied authority
to Judah or to the defendant to divert or ap-
propriate the principal of the securities.

It results from these views that the decree of [280] the Circuit Court must be reversed, and the case be remanded to that Court with a direction to enter a decree in favor of the plaintiff, not only for the amount of the Goldsmith note, namely, $5,000, with interest from November 1, 1881, but also for the proper value of the $5,200 of bonds, with proper interest, such value and interest to be ascertained by the Circuit Court, and the plaintiff to recover costs in this Court on both appeals, and costs in the Circuit Court.

The views above stated, as applicable to the Goldsmith note, apply also, very largely, to the $5,200 of bonds. Under the terms of the receipt, the plaintiff was the bailor and the defendant was the bailee, in respect of the bonds, equally with the note. The defendant was not the bailee of Judah, so as to be authorized to deliver the bonds to Judah without the authority of the plaintiff. The defendant had no right to deliver the bonds to Judah, when it knew that Judah intended to deliver them to the Bank of Commerce as collateral security for a loan of money to be made by that bank to Walker, Sons & Co.; and this, without regard to the question whether or not the defendant was to receive, or did receive, any part of the money borrowed from the Bank of Commerce. Judah applied to the defendant for a loan of money for Walker, Sons & Co. on the bonds. Maas, representing the defendant, declined to make the loan. On receiving such refusal, Judah stated to Maas that he could probably get the money at the Bank of Commerce. Afterwards, he called upon Maas for the bonds, and told him he had got the money at the Bank of Commerce; and Maas knew, when he handed the bonds to Judah, that Judah received them with a view to a loan to be made by that bank to Walker, Sons & Co.; and Maas also knew at that time that Judah was the agent of Walker, Sons & Co. By the face of the receipt, the defendant recog

AUGE O. HAMMER, Piff. in Err.,

V.

ING COMPANY.

(See S. C. Reporter's ed. 291–30′)

description of

Proof of foreign corporation
mining claim oath of locators
ruling-forfeiture.

erroneous

1. Under the laws of Montana with reference to foreign corporations, a copy of the certificate of the incorporation of a company in New York, as acknowledged before a notary public, authentiState of New York, under his official seal, as being cated by the certificate of the Secretary of the a correct copy of the duplicate original on file in his office, is sufficient evidence of its incorporation. mining claim is sufficient, under $2324 of the Re2. A description in the notice of location of vised Statutes which describes the claim as located a certain number of feet from another mine; such mine will be presumed to be a natural object or permanent monument within the meaning of the statute until the contrary appears, where the location is further described by the length of its boundary lines and stakes at the corners.

3. The oath of one of the locators of a mining
claim, accompanying the recorded notice of loca-
tion as to their citizenship, is prima facie evidence
of that fact within the statute.

ces deducible from the prior possession of the
4. A ruling of the court respecting the inferen-
plaintiff is not erroneous, nor prejudicial to the
defendant, where the validity of the original loca-
sets up a forfeiture of the claim by the plaintif
tion is not put in issue by the answer, which only
and defendant's relocation of it.

5. A forfeiture cannot be established except upon
clear and convincing proof of the failure of the
former owner to have work performed or improve-
ments made to the amount required by law.
[No. 207.]

Submitted March 15, 1889. Decided April 8,

1889.

IN ERROR to the Supreme Court of the Ter

ritory of Montana, to review a judgment for the plaintiff in an action to quiet its title to a

[291]

[292]

[293]

[294]