(257 F.)

be a denial of the fact of the deposit and evidence to support the denial. If the deposit has not in fact been made, the bank is not liable, notwithstanding a certificate has been issued. The certificate is evidence, but not conclusive evidence, of facts which place. liability upon the bank. The certificate does not itself create a liability. The execution of a promissory note may result in a liability, without reference to whether it is based upon a consideration. A certificate of deposit creates nothing, but merely establishes, or prima facie establishes, a fact which may be the basis of a liability.

The question in this case is whether or not a deposit was made for the plaintiff. If it was the bank is liable. If it was not, the bank (under the issues made) is not liable. Holmes, at the time he issued the certificates of deposit, was the president of the bank. In the course of business of the bank, he had a right to speak for it. He had authority to accept deposits and issue certificates of deposit. He exercised this authority. He made a statement in writing to the effect that the deposit had been made. He was authorized to make such statement for the bank. If it was not true, the bank (no issue of estoppel being presented) would not be liable, notwithstanding his statement.

A certificate of deposit, issued in the course of business by a person who was the chief officer of the bank, and who had specific authority to receive money for the bank and issue statements that it had been received, ought to carry the prima facie presumption that the deposit which it recites had been made. The tender to plaintiff of the bank's note would have given notice that Holmes was undertaking to do that which was beyond his authority as bank president. His statement that money had been deposited to the credit of plaintiff was a statement made in the course of business that he had done something which he had a right to do, and the doing of which would place liability on the bank.

Nor would the transaction necessarily be one for his own benefit. By securing deposits and issuing certificates, he was carrying out the policy of the bank. Plaintiff had been given the option of being paid in cash or having the money deposited in the bank. It would have been advantageous to the bank that the deposit be made. She had made deposits before and received certificates from Holmes, and she accepted these certificates without knowledge of anything wrong, and without reason to make any character of inquiry, and without any knowledge, or notice, or intimation that she was doing anything that would be advantageous to Holmes, or other than advantageous to the bank. The bank held out the president as a person worthy of confidence. Plaintiff cannot be charged with any character of fault in assuming that the deposit which he said was made, was in fact made. The president had a right to make such a deposit. He had general authority to issue certificates of deposit. Plaintiff had a right to assume that he had properly exercised his authority.

The certificate on its face was regular. It was issued in the name of the bank, by the president of the bank, who had authority to isIt imported a consideration, and prima facie evidenced a debt.

sue.

of the bank. The burden was properly placed on defendant to prove its invalidity.

At the time payment of the certificates of deposit was requested, Holmes was no longer connected with the bank, having prior thereto become a defaulter. Ascertaining that fact, Mr. Rust asked Mr. McAdams, then president, whether the bank books showed the deposit. The latter went into the vault, examined the books, returned, and stated that the books showed the deposit. There is no controversy about this. Mr. Rust testifies that McAdams also stated that the books showed three certificates, of $2,000 each, and promised that they would be paid at maturity on June 5th. McAdams denied these statements, and further testified that he subsequently ascertained that he was mistaken as to the records showing deposits of $6,000 by Mrs. Rust, explaining that he had been misled by entries on the deposit register offered in evidence, which showed four certificates issued to Mrs. Rust, aggregating $1,000, and one immediately under these for $5,000, without either ditto marks or name. He testified that this $5,000 certificate was in fact issued to the Kansas City Life Insurance Company.

The verdict of the jury involved a finding that the deposit had been made. If there was any evidence to that effect, the verdict should be sustained. It is insisted that the statement of McAdams was made by an agent of the bank, long after the transaction, and that the corporation would not, on that account, be bound. The transaction between plaintiff and Holmes was not the subject-matter of the statement by McAdams. His statement had exclusive reference to what was shown by the records of the bank as to the business of the bank. If the bank's books showed that the deposit was made, that fact could be established to show the fact of the deposit. McAdams was president of the bank, in actual control of its affairs. He was in charge of and helped to make its records. In the course of the business of the bank, in response to the question of a customer of the bank with regard to pending bank business, he made a statement of what was shown by the books of the bank. It was not a recital of a past transaction, but a statement of an existing status. It was his duty, under the circumstances, to make the examination and state the facts disclosed. It may be that that which he said was not conclusive, either as to what the books showed, or as to the fact which the books evidenced. It may be that the bank is not estopped from showing that the president was mistaken as to what the bank books showed. It may be that the admissions are not conclusively binding.

Certain bank books were introduced which contained nothing to sustain the statement which Rust says the president made to him. It is entirely possible that the president did, in the first instance, make a mistake. It is entirely possible that the part of the record which he pointed out was that which misled him. It is also possible that there were other records, which he examined at the time, which sustained the statement that Rust said he made at the time. If the books showed what Rust says McAdams told him, they evidenced the deposit which is the basis of the suit. The admission as to the contents

(257 F.)

of the books was made in the course of the business of the bank, by the person properly conducting that business, and within the line and scope of his duties as an officer. The matter was before the jury; they were entirely within their province in determining whether they would accept the admission which they had a right to find he had made when first asked about the liability of the bank, or accept the statement which he subsequently made, supported by such bank books as were produced.

It may be that no deposit was ever made in the bank for the benefit of the plaintiff; but a jury was justified in concluding that the books showed the deposit, and that such a deposit had been made. Two presidents of the bank made statements to that effect. selection of high officers of the bank, the directors make a peculiar appeal to the public to rely upon their integrity. The relations which result are of the most confidential character. The entire business of the country is based upon the belief of the general public that confident reliance may be placed in the honesty of such officials. If the bank is to be sustained on this appeal, one of its customers is to be deprived of more than $6,000, because she was willing to rely upon the honesty of a bank president, held out by the bank to be worthy of confidence, and accepted the word of his successor, held out by the bank as worthy of confidence.

The jury were authorized to find that the persons selected by the First National Bank of Sweetwater, Tex., to represent it in its financial affairs, did not defraud the plaintiff, but that the deposits for which she holds the bank's certificates were in fact made.

The judgment ought to be affirmed.

RINEHART & DENNIS CO. v. CHILDRESS & TAYLOR.

(Circuit Court of Appeals, Fourth Circuit. February 13, 1919.)

No. 1675.

1. EVIDENCE 96(2)—ACTION ON COntract.

A railroad contractor, sued by subcontractors, held to have the burden of proving as an affirmative defense that damage for which it paid a judgment to a landowner was caused by unskillfulness or negligence of plaintiffs, for which they contracted to be responsible.

2. EVIDENCE ~332(1)—RECORD IN ANOTHER Surt.

The record on appeal in an action in a state court, including evidence, held not admissible in an action in a federal court between two of the defendants, in which the issues were not the same.

In Error to the District Court of the United States for the Western District of Virginia, at Big Stone Gap; Henry C. McDowell, Judge.

Action by Childress & Taylor against the Rinehart & Dennis Company. Judgment for plaintiffs, and defendant brings error. Affirmed.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

G. M. McNutt, of Charlottesville, Va. (A. P. Walker, of Charlottesville, Va., on the brief), for plaintiff in error.

S. H. Sutherland, of Clintwood, Va. (Geo. C. Sutherland, of Clintwood, Va., on the brief), for defendants in error.

Before PRITCHARD and WOODS, Circuit Judges, and CONNOR, District Judge.

CONNOR, District Judge. The transcript discloses the following

case:

The Carolina, Clinchfield & Ohio Railway Company entered into a contract with Rinehart & Dennis Company for the construction of a line of railway between Elkhorn City, Ky., and Dante, Va. Rinehart & Dennis Company, hereafter referred to as plaintiff in error, sublet a portion of the work to Childress & Taylor, hereinafter referred to as defendants in error. It was provided in the contract between these parties that the work was to be done by the subcontractors in all respects in accordance with the plans, specifications, directions, and orders of the chief engineer of the railway company.

The subcontractors assumed all liability and agreed to indemnify the contracting company against all loss or damage "sustained by depositing material to public injury or to the injury of any person or corporation, including cost and expense of defense, provided they be notified of the bringing suit and be permitted to defend." They also assumed responsibility for all damage done by their workmen, during the performance of the work, to property adjacent to said line of railway, in consequence of their unskillfulness or negligence. If any such damage was done, the chief engineer should have the right to settle and pay the same, and to deduct the amount thereof from the payments to be made under the contract. Payments were to be made on account of the work and material upon the estimates certified by the chief engineer, and when he certified that the work was completed and accepted, final payment was to be made-such certificate to be conclusive, the subcontractors executing a release from all claims and demands whatsoever growing in any manner out of the agreement.

On July 31, 1914, the defendants in error received from the engineer the "final estimate" of the work done and material furnished under the contract, showing a balance due them thereon of $8,328.29. On the 28th of May, 1917, defendants in error brought an action in assumpsit against plaintiff in error for the recovery (among other items) of this balance, filing with their declaration a statement of account or bill of particulars of which said amount constituted the first item.

[1] Plaintiff in error pleaded nonassumpsit and filed their "grounds of defense," in which the balance on "final estimate" was included among other items. Among other grounds of defense it set forth that, between February 1, 1915, and October 1, 1916, it paid, in discharge of a judgment, interest, and cost recovered in the state court, by one Hill against the railway company, plaintiff's in error, and defendants in error, jointly, the sum of $2,816.72, which it claimed as a

(257 F.)

credit or set-off on account of the balance due plaintiffs on the "final estimate." Upon the trial, for the purpose of establishing this "ground of defense" credit, or offset, plaintiff in error offered in evidence "the pleadings and orders in the Elkanah Hill litigation in the circuit court of Dickerson county, Virginia." Upon objection of defendant in error, the District Judge stated that, in his opinion:

"The defense made in regard to this judgment was an affirmative defense, and therefore the burden was on plaintiff in error. It follows it cannot put in evidence in that trial the pleadings and evidence in the Hill case, unless it avowed that it would introduce evidence tending to show either: (1) That the liability to Hill arose solely from the negligence or other wrongdoing of Childress and Taylor; or (2) evidence that will clearly and satisfactorily show that an ascertainable, definite part of the entire amount was due to the sole wrongdoings of Childress and Taylor."

Counsel, when asked whether they could make the avowal, responded that they could not do so. The court excluded the proposed evidence, and plaintiff in error excepted. It then offered to introduce a transcript of the record in the same case, the original writ of supersedeas from the Supreme Court of Appeals of Virginia, and the final order certified by the clerk of said court. This transcript included the evidence in said case sent up on appeal to the Supreme Court of Appeals of Virginia. This was also, upon objection, excluded, and plaintiff in error excepted.

No other evidence having been offered to sustain its contention in respect to the payment, of the judgment in the Hill case, the court directed the jury to return a verdict for defendant in error in respect to that item. Plaintiff in error excepted, and assigns each of the said rulings of the court as error.

Passing the objection to the admissibility of the evidence, raised by defendant in error because the claim to deduct the amount of the Hill judgment from the amount found by the engineer to be due them, for that it was not pleaded as a set-off or payment, and not admissible under the plea of non assumpsit, and treating, as the District Judge did, the evidence as relevant to the issue, we proceed to inquire respecting the validity of defendant's exception.

The record in the case of Elkanah Hill v. Railway Co., the plaintiff in error, and defendants in error, jointly, discloses a declaration containing five counts, all of which aver that plaintiff was the owner, to the middle of the stream, of a tract of land lying on the waters of Russell Fork creek, upon which he had constructed and operated a mill; also that, upon said creek were rich, productive bottom lands. used and cultivated by plaintiff.

The first count charges that defendants wrongfully trespassed upon said lands, and by the several means, elaborately set out, destroyed his milldam and injured the bottom lands. The second count charges that defendants wrongfully and unjustly erected and built a certain wall, bank, or mound in, along, and near the said creek, on the opposite bank to plaintiff's land, in a careless, negligent, and improper manner; that by reason thereof the plaintiff's land was overflowed, and covered with sand, stones, and gravel, to the injury of his mill and bottom