206 N.W. 773 | N.D. | 1925
Plaintiff brought this action to recover the purchase *473 price of certain land which he claims he sold to the defendant bank. In his complaint he alleged that he was the owner of the land; that he bargained to sell the same to the defendant, and that he and the defendant entered into a written contract of sale and purchase; that the defendant failed to make the payments as required by the terms of this contract; and asked judgment for the amount of the payments past due together with interest thereon. The defendant answering, (1) denied that it bought the land or agreed to pay plaintiff therefor, (2) alleged that if it did enter into such a contract of purchase and sale as alleged, that the same was ultra vires and illegal and therefore unenforceable and, (3) that plaintiff sold the land to others by whom the name of the defendant bank was used for convenience, without authority so to do.
The case was tried to a jury. The record discloses the following facts. In 1919, the plaintiff owned a quarter section of farm land in South Dakota. The defendant was and is a bank organized and existing under and by virtue of the laws of the state of North Dakota and having its place of business at Hankinson, North Dakota. In 1919, John R. Jones was the president and a director, and Chas. Hein a director of the defendant bank. In July of 1919, plaintiff entered into a contract with Jones and Hein to sell the land in question. This contract was reduced to writing and executed by plaintiff and his wife as vendors and by the defendant bank through John R. Jones, president, as vendee. The price to be paid was $10,800, payable $1,000 on the execution of the contract, and $1,000 and interest annually thereafter, the purchaser to assume a mortgage of $800 then against the land. The payment of $1,000 was made at the time the contract was executed. This payment was made by check signed by John R. Jones, Pres., drawn on the defendant bank and paid out of an account in that bank known as the "stockholders' account." There is some question as to whether the check was, as executed and delivered, executed by the Farmers and Merchants Bank, the defendant, by John R. Jones, Pres., or by "stockholders' account" by John R. Jones, Pres. In December, 1919, the plaintiff surrendered possession of the land under the contract. Thereafter, and up to and including the time of the trial, the land was farmed by tenants. These tenants rented the land either from Jones or from Hein, or from some other officer of the defendant bank. *474
Such repairs as were paid for by the landlord, were paid for by some one of these parties from "stockholders' account." The landlord's threshing bill was paid for by some one of these parties, either by cash or check, drawn on "stockholders' account." The proceeds of the landlord's share of the crops was deposited to the credit of the "stockholders' account." A second payment on the contract of $1,000 and two interest payments of something over $500 each were made by John R. Jones, or some other of the officers of the defendant bank by check drawn on "stockholders' account." In 1921, the $800 mortgage debt matured and at the instance of Jones, Jarski renewed this in the amount of $1,600, and the $800 increase went into the "stockholders' account" in the bank. In 1921, two payments of $1,000 each were due and unpaid on the contract and the plaintiff agreed to take a note for these payments. This note was signed by Hein, and by John R. Jones, as president of "stockholders' account." See Jarski v. Jones,
It is the contention of the defendant that it did not buy the land in question; that the real purchaser was the "stockholders' account;" that for convenience only, the contract for deed ran to the defendant bank; that in any event, if the contract was in fact made by the bank, *475 it was ultra vires and illegal and therefore unenforceable. On the other hand, the plaintiff contends that all his dealings with reference to the sale of the land were made with the officers of the bank and that the bank was in fact the purchaser of the land; that the contract is executed, the bank has had the benefit of it and, therefore, it cannot rely upon the defense of ultra vires and illegality. The court in submitting the case to the jury charged them with reference to the defenses set out in the answer and relied upon by the defendant; that, under the facts, the defense that the contract was illegal and ultra vires, was not available to the defendant and that the only question for their determination was as to whether in fact the contract of purchase and sale was made by the plaintiff with "stockholders' account," or with the defendant bank; that the burden was on the plaintiff to establish that the contract was made with the defendant bank and that if he did so establish by a preponderance of the evidence, the verdict must be for the plaintiff. The jury returned a verdict for the plaintiff. Thereafter, the defendant moved for a new trial or for judgment non obstante. The motion was denied and judgment was entered on the verdict. This appeal is from the judgment and from the order denying the defendant's motion for a new trial or for judgment non obstante.
The defendant has assigned numerous errors. Many of the errors assigned and urged on this appeal hinge upon the second defense pleaded in the answer; that is, that in any event, so far as defendant is concerned, the contract was ultra vires and illegal, and hence unenforceable. Assuming that the defendant was the purchaser of the land and the real party in interest to this contract, if this question thus raised and pressed is pivotal and vital, it will be unnecessary to consider any other in disposing of this appeal.
Is the contract here involved ultra vires and illegal? The answer awaits a consideration of the transaction in question in the light of the statutes governing banking corporations. ". . . Certain contracts on the part of corporations may be prohibited by positive law, either statutory or common. Where such contracts are made by corporations, they are, of course, unlawful. They are mala prohibita, and void, for the same reason that the prohibited contract of an individual would be void. Yet courts have termed them ultra vires, and have then proceeded to say that ultra vires contracts were void, and might be disregarded *476
at pleasure. More properly speaking, ultra vires contracts of a corporation are such as do not in any manner serve the accomplishment of the purposes for which the corporation is chartered. They are contracts not positively forbidden, but impliedly forbidden, because not expressly or impliedly authorized. . . ." Tourtelot v. Whithed,
"It (a banking corporation) shall have the power to purchase, hold and convey such other real estate as shall be mortgaged to it in good faith by way of security for loans, or for debts previously contracted.
"Such as may or shall be mortgaged to it in good faith in satisfaction of debts previously contracted in the course of its dealings.
"Such as it shall purchase at sales under judgments, decrees or mortgages held by the corporation, or shall purchase to secure debts due it; but no banking corporation shall hold the possession of any real estate under mortgage, or title and possession of any real estate purchased to secure indebtedness, for a longer period than five years from the date of acquiring title thereto. And all real estate heretofore and hereafter conveyed by any such banking corporation, shall be deemed to have been acquired, held and disposed of in conformity with the provisions of this chapter."
Section 5153 provides that any banking corporation violating the provisions of §§ 5151 and 5152 shall be subject to a fine of not more than $500 and cancellation of its certificate, and § 5173 makes any violation, by an officer of a banking association, of any of the provisions of *477
chapter 28, supra, a misdemeanor, and provides a penalty therefor. These various statutes were considered and their effect measured in the case of Smith v. Rennix,
"These statutes were intended primarily for the protection of depositors. Experience has demonstrated the necessity of such regulatory measures. If a bank may employ all of its assets in the purchase of real estate, and does so, it will hardly be in position to meet its obligations to its depositors. In order to give these regulatory measures force, the Legislature has imposed a penalty both upon the banks, and upon the officers of the banks, who violate them. And contracts made in violation of these statutory provisions are not merely ultra vires, but unlawful and void. Comp. Laws 1913, § 5922; Wald v. Wheelon,
How was this contract here in question, assuming that it was entered into by the defendant, one which could directly or incidentally tend to attain and accomplish the objects and purposes for which the defendant bank was organized and chartered? Was it a contract prohibited by the laws of the state of North Dakota? That is, was it ultra vires or unlawful? Keeping in mind the distinction drawn in Tourtelot v. Whithed, supra, the inevitable conclusion is that it was both ultra vires and unlawful. This land, the subject of the contract, was farming land situated in the state of South Dakota. The bank was a North Dakota bank. Its place of business was at Hankinson, North Dakota. It seems apparent that if the defendant bank contracted to buy this land it did so for purely speculative reasons. The transaction was a business transaction in real estate. We think it no stretch of construction to say that considered as such it was contrary to the prohibition of § 5187, supra, against the bank's employing any of its assets in trade or commerce. Indeed, it would require a stretch to hold otherwise. Likewise, it was contrary to the prohibition of §§ 5151 and 5152. Certain it is that the land could not be used for any of the proper business purposes of the bank. It is just as certain that it was not taken in payment or satisfaction of an obligation to the bank. Nor was it taken as security for any advancement made to any purchaser of the land. Nor did the transaction come within the purview *478 of the provision permitting real estate to be acquired by way of mortgage and foreclosure, or at execution sale. The bank was engaging in the real estate business, no more no less. The transaction was a palpable transgression against both the letter and the spirit of the statute. It follows that so far as the bank was concerned, the contract was not merely voidable but void. See Smith v. Rennix, supra, and cases cited; 14a C.J. 309 et seq.
The plaintiff strenuously insists that in the instant case the contract was fully executed; that the plaintiff has parted with his farm; that the defendant has the farm and is now seeking to avoid payment therefor; that it is endeavoring to take advantage of its own criminal practice for its own benefit and to the disadvantage of the plaintiff; that injustice will result to the plaintiff if he, who was not forbidden to enter into the contract is deprived of his remedy as against the bank; if he is penalized for the unlawful acts of the officers of the bank with whom he dealt; that the law will be satisfied if the officers are prosecuted, and the bank's charter forfeited, and contemplates no more than that. It seems to us, however, that the plaintiff misconceives the situation. In the first place, the defendant has come into court denying that it made the contract; it disclaims any rights under the contract; its says its name was used for purposes of convenience only, and that in fact it was not a contracting party. In the next place, the contract is not fully executed. It is true that the plaintiff has surrendered possession of the land to someone under the contract. Conceding that the bank has been, by virtue of that surrender, using and occupying the land, nevertheless, the plaintiff still retains legal title. The instant action, while brought on the contract to recover the purchase price is, nevertheless, in effect, an action for specific performance. Suppose that the shoe were on the other foot; suppose that the land had gone up in price instead of going down — (Ay, there's the rub!) — and that the bank were bringing an action to compel the plaintiff to convey, the plaintiff resisting on the ground that the contract was ultra vires and illegal and the bank could not under the law, take title. Surely, under such circumstances, no court would lend its aid to compel the plaintiff to perform. This action is the counterpart of such an action, though in form an action for the recovery of money on the contract.
Plaintiff contends that the defendant is estopped to plead the ultra *479 vires and illegality of the contract. It is true, there are many cases in the books wherein parties to contracts have been held estopped to plead their ultra vires. But, invariably, in those cases the contracts were merely ultra vires and not illegal. These were fully executed and the parties had enjoyed the fruits thereof. Where, however, the contract is illegal and void, as we have held the one here involved to be, no estoppel can be raised. See 14a C.J. 309 and 587, and cases cited.
Counsel further urges that plaintiff was an ignorant, unlettered man, who relied upon the honesty and good faith of those with whom he dealt; that he did not know the contract was ultra vires and unlawful. But plaintiff, when he entered into the contract, whatsoever his ignorance or actual knowledge of the law, was charged with knowledge of the law. See Anderson v. First Nat. Bank,
The judgment of the district court will be reversed and the case remanded with directions to the district court to order judgment for the defendant notwithstanding the verdict. It is so ordered.
CHRISTIANSON, Ch. J., and BIRDZELL, BURKE, and JOHNSON, JJ., concur. *480