Citizens State Bank v. First National Bank

Citations

• 98 Kan. 109
• 157 P. 392
• 1916 Kan. LEXIS 26

Syllabus

<p>SYLLABUS BY THE COURT.</p> <p>1. Banking — Insolvent Bank May Not Give Preference to Creditors or Depositors. Section 499 of the General Statutes of 1909, as amended by section 1 of chapter 65 of the Laws of 1911, which prohibits a bank from giving a preference to any depositor or creditor by pledging the assets of the bank, applies only to a bank which is insolvent. '</p> <p>2. Same. An agreement in a promissory note executed by a solvent bank, by which it agrees to give additional securities in the future upon demand of the lender, is a valid agreement only so long as the borrowing bank remains in a solvent condition. The collateral agreement is limited by the statute (Gen. Stat. 1909, § 499, amended by Laws 1911, ch. 65, § 1) which forbids a bank to give a preference to any depositor or creditor.</p> <p>3. Same — Agreement to Give Additional Securities to Bank’s Creditor— Agreement Valid only so Long as Bank Remains Solvent. A solvent bank borrowed $10,000 from another bank and gave its promissory note, pledging at the same time certain of its assets as collateral security. The note contained an agreement to give additional security upon notification by the holder. Subsequently, when the borrowing bank was insolvent, its officers at the demand of the holder turned over additional assets of the bank to secure the indebtedness. Upon these facts it is held that the previous agreement did not create an equitable lien on the assets subsequently turned over, and that replevin will lie at the suit of the borrower to recover the assets turned over in violation of the statute.</p> <p>4. Same — A Preferred Creditor Ca/n Not Retain Assets of Bank Transferred During Bank’s Insolvency. Notwithstanding the statute which prohibits banks from preferring creditors contains no declaration that any act in violation thereof shall be void, it is held that a creditor who accepts a preference from an insolvent bank will not be permitted to retain the benefits of the transaction.</p>