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Texas & Pacific Railway Co. v. Pottorff, 291 U.S. 245 (1934)

Texas & Pacific Railway Co. v. Pottorff

No. 12

Argued December 7, 1933

Decided February 5, 1934

291 U.S. 245


l. A national bank has no power to pledge its assets to secure private deposit. P. 291 U. S. 253.

2. Such pledges are neither customary nor necessary in the business of such banks, and are inconsistent with provisions of the National Banking Act designed to secure uniform treatment of depositors and ratable distribution of assets in case of disaster. Pp. 291 U. S. 254-255.

3. The Acts of Congress authorizing national banks to give security for deposits of specified public funds do not impart or imply power to pledge assets to secure private deposits. P. 291 U. S. 257.

4. The contention that, since the relation of bank to depositor is that of debtor and creditor, and since a national bank may borrow

Page 291 U. S. 246

money upon a pledge of assets, it my likewise pledge assets to secure private deposit is untenable. The difference between deposits and loans is fundamental and far-reaching. P. 291 U. S. 259.

5. A national bank is not estopped to deny the legality of an ultra vires pledge of assets by which it obtained deposits; still less is its receiver when the bank has become insolvent. P. 291 U. S. 260.

6. The fact that a general deposit was obtained by the bank on the faith of an ultra vires pledge of its assets does not create a constructive trust or confer upon the depositor a preference over other creditors in the event of the bank's insolvency. P. 291 U. S. 261.

63 F.2d 1 affirmed.

Certiorari, 290 U.S. 609, to review the affirmance of a decree dismissing a bill brought by the Railway against the receiver of a national bank, and granting relief to the receiver on a cross-bill.

Page 291 U. S. 251

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