Federal Deposit Insurance Corporation, Etc., and v. Santino D. Meo, And

Before MERRILL, KILKENNY and CHOY, Circuit Judges.

Meo appeals from a judgment of the district court holding him liable on a promissory note he, as maker, gave to a now-closed national bank. We reverse.

Statement of Facts

In December, 1962 Meo and three associates executed a promissory note to San Francisco National Bank (“SFNB”) to enable them to acquire 1000 shares of SFNB’s common stock. Instead of properly executing the order SFNB directed its brokers to issue and transmit 1000 voting trust certificates in the name of the purchasers. Appellant and his associates never saw the trust certificates, which were held by SFNB as security for the loan, and were not aware of the manner in which their order had been executed.

In 1963, appellant and the co-makers became apprehensive over the affairs of the bank and sought to sell their stock and discharge their debt. While the other three signers of the note did liquidate their positions, appellant did not do so. Still unaware of the mis-execution of his order, he instead signed a new note (the subject of this litigation) for his share of the balance due, $15,776.87.

Appellant’s note remained an asset of the bank until…