Page:Federal Reporter, 1st Series, Volume 8.djvu/24

 10 FEDERAL REPORTER. �in sueh a manner as to warrant fixing any responsibility upon the bank for any khowledge of Mr. Haines. �There is one other matter that is essential to the maintenance ot this defence — First, the agreement between the makers and the rail- way Company upon which it is based ; second, the knowledge of that on the part of the bank, (of both of which I have heretofore spoken;) and, third, a violation of that agreement in the actual appropriation of the note at the time of the discount or subsequently. In respect to that my charge to you is that the misapplication of the proceeds of the note, made by the officers of the railway company without the knowledge and without the participation of the bank, would not invalidate the right of the bank to recover on the note. It is only a knowledge of the purpose of the officers of the railway company to make the misapplication, and their joining in effecting that purpose, by giving them the amount of the discount of the note with that intention, that makes them responsible for the breach of faith towards the makers of the note. For instance, in respect to the $3,000 and the interest on it, part of the consideration of this note consisted of the payment of that amount of indebtedness from the railway com- pany to the Lebanon National Bank, incurred by an original trans- action with it; if you find that that was a legitimate transaction, and that the proceeds of that much of the note were applied in fact according to the intention of the makers of the note, then the Waynes- ville National Bank, in respect to that part of the consideration, stands exacty in the shoes of the Lebanon National Bank, and would be entitled to recover for that part of the consideration. So with regard to the additional amount of $1,500, applied in another similar way ; and so with regard to all of them. These notes were obliga- tions of the railway company, and in order to complete the defence of.the makers of the note, as against the bank, on this ground, it must be shown that the appropriation of the proceeds, in which the bank partioipated with knowledge, was contrary to that agree- ment ; that is, that the debts, the payment of which was provided for by the appropriation, were not embraced within the terms of the agreement according to which the note was originally given. �Verdict for plaintifi for $11,183.34. �Motion for new trial made; heard, overruled, and judgment for plaintiff for amount of verdict. �Note. In view. of the number and magnitude of corporations In this country at the present time, and their constant growth, the question of notice ��� �