U.S. Supreme Court
Federal Land Bank v. Gaines, 290 U.S. 247 (1933)
Federal Land Bank of Columbia,
South Carolina v. Gaines
Argued November 16, 17, 1933
Decided December 4, 1933
290 U.S. 247
1. A National Farm Loan Association, composed of borrowers under the Federal Farm Loan Act, though in a general sense it is a public agency or instrumentality for carrying out the policy of the statute, does not act as the agent of the lending Federal Land Bank after money transmitted through the Association to the borrower has passed from the control of the Land Bank. P. 290 U. S. 254. chanroblesvirtualawlibrary
2. A borrower, by his application and by endorsing the check sent by the lending Land Bank to pay a loan, consents to the procedure prescribed by the Act whereby the Association shall be a co-obligor with the borrower and the money borrowed shall be sent by the Land Bank to the Association, and the Association shall have control over the disbursement of the proceeds of the check for the agreed purposes of the loan. There is no inconsistency with the purposes sought by the Farm Loan Act in placing upon the borrower, instead of the lending bank, the risk of insolvency of a depository bank in which the Association places the proceeds of the check pending their disbursement. P. 290 U. S. 254.
3. This conclusion is fortified by the fact that the Act contemplates that lending banks shall use the mortgages, given by borrowers, as collateral for Land Bank bonds, and that such use would be impaired if the risk were upon the lending bank during the long period that may elapse between the time the proceeds of a loan pass from the control of the Land Bank and the time they are actually disbursed by the Association to the use of the borrower. P. 290 U. S. 255.
4. There is no failure of consideration for a borrower's mortgage when, pursuant to the scheme of the Act, a Land Bank has sent a check made payable to the borrower and a Farm Loan Association, when the check has been endorsed by the borrower and delivered to the Association for disbursement of the proceeds, and when the proceeds are lost through the insolvency of a bank in which they had been deposited by the Association pending disbursement. P. 290 U. S. 256.
204 N.C. 278, 167 S.E. 856, reversed.
Certiorari to review the affirmance of a decree cancelling a mortgage for failure of consideration. This relief was conditioned upon prior repayment of a small sum that had been advanced to defray taxes on the land. It was a "controversy without action," submitted to the trial court upon an agreed statement of facts. chanroblesvirtualawlibrary