69 Neb. 220 | Neb. | 1903
In this action a rehearing has been allowed, to the end that further investigation and consideration might he
Assuming then as we shall do, that a contract so entered ihto would not in all cases and under all circum
The defendant is a banking corporation organized to do a business the nature of which, according to the terms of its charter, “shall be banking in all its branches including the buying and selling of United States bonds and municipal and other securities, the loaning of money on personal and collateral security and also on real estate security on regular banking time, the buying and selling of bills of exchange, promissory notes, mortgages, tax certificates, tax titles and all other business usually transacted by a bank or banker.” The defendant corporation was, at the time of the transactions out of which the present litigation grows, engaged in the prosecution of a banking business such as is ordinarily conducted in the smaller towns of the state. It possessed a limited capital stock, scarcely more than the amount for which it was obligated by the undertaking in replevin, if valid, executed by its cashier for the benefit of the defendants in the replevin action. The po wer of the corporation to make valid contracts is measured by its charter, and the scope of the authority of its cashier, like other officers and agents of a corporation, was limited and of these limitations the plaintiffs and all the world Avere bound to take notice. In the court of appeals of New York, the rule is thus stated:
“Every one knows that corporations are artificial creations existing by virtue of law, and organized for purposes (defined in their charters; and he who deals with one of them is chargeable with notice of the purpose for which tit was formed; and when he deals with agents or officers pf one of them, he is bound to know their powers and [[he extent of their authority. Corporations, like natural persons, are bound only by the acts and contracts of their agents done and made within the scope of their authority.” Alexander v. Cauldwell, 83 N. Y. 480. Again:
“A person dealing with a corporation is chargeable with*225 notice of its powers and tlie purposes for which it is formed, and when dealing with its agents or officers is bound to know the extent of their power and authority. A corporation necessarily carries its charter wherever it goes, for that is the law of its existence.” Jemison v. Citizens Savings Bank, 122 N. Y. 140. See also State v. Atchison & N. R. Co., 24 Neb. 143; McCormick v. Market Bank, 165 U. S. 538, 41 L. ed. 817; Pearce v. Madison & I. R. Co., 62 U. S. 441, 16 L. ed. 184.
In the former opinion, the liability of the defendant was considered and determined from the standpoint of its being a surety on the replevin undertaking as an accommodation to the plaintiff therein and that it was not otherwise interested in the litigation or the subject matter of the controversy. This position is' challenged on the ground that the record does not warrant the inference that the bank executed the undertaking merely as an accommodation. For aught that appears in tlie record, says counsel, the bank was seeking to get the possession of this property for Ross, the plaintiff in the replevin action, in order that he might convert the property into money for the benefit of and pay the same over to the bank. With all due deference to plaintiffs’ counsel, we are constrained to the view that the record warrants the inference that the undertaking was, so far as the defendant bank is concerned, an accommodation entered into by it only for tlie purpose and with the end in view of meeting the requirement of the statute, which provides that property seized on a writ of replevin shall not be delivered to the plaintiff until an undertaking by one or more sufficient sureties has been executed conditioned as required by law. Section 186 of the code. The pleadings in the case at bar, on the part of the plaintiffs, as well as the evidence in the record, all tend to support the inference that the bank had no actual interest in the property nor in its final disposition. We may fairly assume that if, in fact, such interest existed, the plaintiffs would have sought to establish such fact in order to more certainly show a right of recovery.
The rights of the parties must, we think, be determined from thé standpoint, as a matter of fact, of the bank being only an accommodation obligor on the instrument sued on. If in truth and in fact, the bank had such an interest in the property replevied, as to render the execution of the instrument necessary or proper in the furtherance of its corporate interests and business affairs, whether or not the plaintiffs were aware of the fact at the time, would be quite immaterial, and the obligation would be held valid as within the power of the corporation in the proper management and conduct of its business. The execution of the undertaking under such circumstances would not be an ultra vires act and a plea to that effect would be unavailing. But in the case at bar, in determining the liability of the defendant, we are not warranted from the record, by inference or otherwise, in saying that the execution of
In discussing the rule invoked by the plaintiffs in error as operating as an estoppel against the bank from now asserting its Avant of authority, Mr. Morse in his Avork on Banks and Banking, sec. 735, says:
“The plea of ultra vires can never be set up against one who has acquired rights under the transaction which would be valid in law but for a matter of fact of which he had no reasonable notice. Two facts must coexist in reference to the person against whom the plea is urged, to bring the case Avitlxin this section; first, he must be in the position of a bona, fide holder for value, he must have parted with some property or right, or suffered some loss pecuniary, or in some Avay altered his position (to his disadvantage if the contract is null) in consequence of the transaction; and second, the fact by reason of which the transaction is ultra vires must be one which he did not knoAV of, and could not by reasonable diligence have known, i. e., one of Avhioli he had, at the time of the transaction, no notice, actual or constructive.” And further on it is observed:
“Thus, for example, it is a general rule that a bank has no poAver to engage as surety for another in a business in which it has no interest and from .which it can derive no profit. Therefore it has no right to become an accommodation indorser. If it does so, the indorsement will be utterly void in the hands of any person having notice of the fact that it was made for accommodation. But inasmuch as a bank may become an indorser for divers legal purposes, and the contract can therefore shoAV upon its face no signs of invalidity, it Avill be treated as valid in the hands of a holder for value without notice of the facts.” Sec. 745.
The gist of the discussion in the opinion regarding the plea is found at page 586. In speaking of the plea, which
“But in the latter case the defense may or may not be available, depending upon the question whether the party dealing with the corporation is aware of the intention to perform the act for an unauthorized purpose, or under circumstances not justifying its performance. And the test as between strangers having no knowledge of an unlawful purpose and the corporation, is to compare the terms of the contract with the provisions of the law from which the corporation derives its powers, and if the court can see that the act to be performed is necessarily beyond the powers of the corporation for any purpose, the contract can not be enforced, otherwise it can.”
With reference to the same point Mr. Justice Selden, in a well considered opinion, Bissell v. Michigan S. and Northern I. R. Cos., 22 N. Y. 258, says (p. 290):
“Where the want of power is apparent, upon comparing the act done with the terms of the charter, the party dealing with the corporation is presumed to have knowlege of the defect, and the defense of ultra vires is available against him. But such a defense would not be permitted to prevail against a party who can not be presumed to have had any knowledge of the want of authority to make the contract. Hence, if the question of power depends not merely upon the law under which the corporation acts, but upon the existence of certain extrinsic facts, resting peculiarly within the knowledge of the corporate officers, then the corporation would, I apprehend, be estopped from denying that Avhich, by assuming to make the contract, it had virtually affirmed.”
In an early English case out of which the doctrine as at present applied by the courts has been developed (Mayor of Norwich v. Norfolk R. Co., 30 Eng. L. & Eq. 120), it is said by Mr. Justice Earle:
“The doctrine was introduced at law by the East Anglian Railway Company Case, and the contract there in question, being a contract by one railway company to pay*236 the costs of another railway company, incurred in applying to parliament, was judicially perceived, from the terms of the contract itself, to be necessarily unconnected with the purpose of the defendants’ incorporation, and, therefore, prohibited. This is the point decided in the case. * * * Looking at the report, with the remarks in the argument, I understand the court to have meant, that any application of the funds, and any contract which, in the knowledge of the party, who should sue upon the contract, was intended for a purpose unconnected with the purpose of incorporation, was prohibited; and that, where the contract itself appeared to be necessarily unconnected with the purpose of incorporation, both the parties must have known it to be so, and the court judicially perceive it to be void; and that, if the contract was not necessarily so unconnected, the ground of illegality must be averred and found in the usual way, before it could be a ground of judgment; and that no application of the funds and no contract was prohibited by implication, which the parties intended to be connected with the purpose of incorporation, however distant the connection might be. The question put in the course of the argument: ‘Would a contract by a railway company for a theater or chapel be void?’ exemplifies the doctrine. It would or would not, according as the purpose of the contracting parties was or was not connected with the railway. It might be a speculation separate from the railway, and prohibited. Or, if the works were wanted in a waste place, and the company found it for their interest to build a town and supply it with all requisites for inhabitancy, and, in order to secure a permanent supply of workmen of skill and responsibility, added a chapel and a theater with religious and secular instruction, it might be for the purpose of the railway, and valid, and, though distantly connected, the outlay might be found eventually to increase the profit from the traffic.”
Because of the right of a railway company in the exceptional instance mentioned to buy real estate and
A correct determination of the rights of the parties in the case at bar must, we think, be arrived at by an application of the rule and the reason given therefor in Western Nat. Bank v. Armstrong, 152 U. S. 346. In the- case cited, it is held that the borrowing of money by a bank though not illegal, is so much out of the course of ordinary and legitimate banking business as to require those marking the loan to see to it that the officer or agent acting for the bank had special authority to borrow money. This authority is commented on in the former opinion by commissioner Pound who prepared the same and we need not further speak of it here. In principle, it is authority directly in point and commends itself as eminently sound and fully sustained by the authorities and text writers. It was, we think, equally incumbent on the defendants in the replevin action, in the case at bar, to see to it that the cashier of the bank executing the replevin undertaking did so under such circumstances as would render the obligation entered into within the scope of the powers of the bank as defined by its charter and that in failing to
If the execution of such undertakings were a part of the business of the banking corporation, if it were a part of the general duties of its cashier, if it were apparently within the general scope of his authority, although, in this particular case, the engagement was for accommodation only and in excess of the actual authority of the cashier, a different question would be presented from the one we are now here to deal with. The courts of Illinois have passed directly on the question, here being considered and hold that the execution of a bond by a national bank as surety'in a replevin suit is beyond its powers and void. Bailey v. Farmers Nat. Bank, 97 Ill. App. 66. In that action, as in the present one, property was seized by a writ of replevin, a bond executed and the property delivered to the plaintiff in replevin. Afterwards suit was instituted on the replevin bond and the defense of ultra vires interposed by the bank which had executed the same as surety. Because of the fact that the property had been delivered to the plaintiff in the replevin action, it was contended, as it is here, that the bank Avas estopped from pleading its want of power to execute the undertaking. To this it is said by the court, the rule is that the charter of a corporation, read in the light of any general laws which are applicable, is the measure of its powers, and the enumeration of those powers implies the exclusion of all others not fairly incidental; that the rule is founded on different considerations, the highest of which is in the interests of the public that the corporation shall not transcend the powers conferred upon it by law. Citing Central Transportation Co. v. Pullman’s Palace Car Co., 139 U. S. 24; Best Brewing Co. v. Klassen, 185 Ill. 37. It is further said that the statute providing for the organization and incorporation of a national bank does not expressly or impliedly give the bank, sued in the action,
“Even if defendant in error had duly executed the bond sued upon in this case as surety for the shoe company, and it had been delivered and accepted by plaintiff in error on the faith of such execution, and he had incurred liabilities upon the strength of it by executing the replevin writ as therein stated, yet if defendant in error was without authority to execute .the bond, it would not be liable upon it, as expressly held in Best Brewing Co. v. Klassen, supra; Central Transportation Co. v. Pullman’s Palace Car Co., supra; and the court for that reason, therefore properly sustained the demurrer to it also.”
In Brewing Co. v. Klassen, supra, it was held that the corporation had no implied or express power to become surety on an appeal bond to a forcible detainer suit, between third parties, where it is not shown that such act was reasonably necessary to accomplish the end for which the corporation was formed. In the opinion it is said:
“The purpose of the corporation, as expressed in its charter, is to manufacture and sell ale, beer and porter and carry on a general brewing business. It would seem no acts could be more unlike than the doing of those authorized by the charter of the company and the signing of appeal bonds as surety. The instrument was executed in a suit not by or against the corporation, but by a third person against another to recover possession of a house. Prime facie the signing by the company of an appeal bond in such a suit was an act beyond the purpose for which it was organized, and consequently illegal. If it had*240 been shown that it was executed clearly for the purpose of promoting or protecting its own business of brewing or selling beer, etc., — that is to say, if the act had been reasonably necessary to accomplish the end for which the corporation was formed, — it would have been within the scope of the corporate power. But it can not be held that every act in furtherance of the interests of a corporation is intra vires. Many acts can be suggested Avhich, though beneficial to the business of a corporation, are too remote from its general purposes to be deemed reasonably Avithin its implied powers. What is and what is not too remote must be determined according to the facts of each case. The rule has been stated to be: In exercising powers conferred by its charter, a corporation may adopt any proper and convenient means tending directly to their accomplishment, and not amounting to the transaction of a separate, unauthorized business.” Clark v. Farrington, 11 Wis. 321.
As illustrative of the rule and its application to different cases, by reason of the peculiar circumstances surrounding them, may be cited Merchants' Bank v. State Bank, 77 U. S. 604; North River Bank v. Aymar, 3 Hill (N. Y.), 262; Farmers & Merchants Bank v. Butchers & Drovers’ Bank, 16 N. Y. 125; Credit Co. v. Howe Machine Co., 54 Conn. 357.
Some questions having a bearing on the principal propositions advanced are called to our attention especially with reference to the relative situations of the parties, which it is maintained are worthy of consideration in the determination of their respective rights. In the main, we think these matters have been sufficiently adverted to in the former opinion. It is urged by counsel that the plea of ultra vires is often urged with a view of escaping from the obligations of a contract, which in justice and good morals should be executed by the corporation seeking to avail itself of the plea; that the courts are not prone to look with any special degree of favor on such a plea, and especially when the allowance of it will work injustice to
Reaffirmed.