118 F. 981 (8th Cir. 1902), 1,724, Brown v. Schleier

Docket Nº:1,724.
Citation:118 F. 981
Party Name:BROWN v. SCHLEIER et al.
Case Date:November 10, 1902
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 981

118 F. 981 (8th Cir. 1902)




No. 1,724.

United States Court of Appeals, Eighth Circuit.

November 10, 1902

James H. Brown (H. M. Orahood, Earl M. Cranston, Robert J. Pitkin, and William A. Moore, on the brief), for appellant.

R. D. Thompson (G. C. Bartels and James H. Blood, on the brief), for appellees.

Appeal from the Circuit Court of the United States for the District of Colorado.

This case passed off below on a demurrer to the bill of complaint, which was once amended before the demurrer thereto was sustained. (C.C.) 112 F. 577. The case made by the bill of complaint, as amended, is as follows: The People's National Bank of Denver, one of the appellees, was incorporated on July 30, 1-89, under the national bank act, for the period of 20 years from July 1, 1889, with a capital stock of $300,000, divided into shares of $100 each. On September 12, 1889, it leased a lot of ground in the city of Denver, having

Page 982

a front on Lawrence street of about 90 feet, from George C. Schleier, one of the appellees, for the term of 99 years from February 1, 1890, at a yearly rent of $13,975, which rent was to be paid in monthly installments of $1,164.58 during each month of the term. The lessee, the People's National Bank, hereafter sometimes termed the 'Bank,' agreed to erect within 18 months from and after February 1, 1890, at its own cost and expense, a substantial building, not less than four stories in height, to cost not less than $100,000. By the terms of the lease the lessee was to have no right to remove the building, but the same was to become a part of the realty. The lease also gave to the lessee and its assigns an option to extend the lease for the same rental for a term of 50 years from and after the expiration of 99 years. The bank took possession of the demised premises, and on or about the month of January, 1891, had completed the erection of a building thereon, eight stories in height, at a cost of$305,725.39. On July 19, 1893, the bank became unable to pay its depositors in due course of business, and the comptroller of the currency appointed J. B. Lazear as receiver thereof, pursuant to the provisions of the national bank act. Said Lazear remained in possession of its assets and affairs until August 21, 1893,when he was discharged; the bank having in the meantime levied an assessment of 20 per cent. upon its shareholders, and thereby restored its capital so that it was deemed safe for it to resume business. At the date last mentioned the business and affairs of the bank had become somewhat involved and commingled with the business of another bank known as the People's Savings Bank, which latter bank was located and did business in the bank building that had been erected by the People's National Bank, in which the latter bank also transacted its business. The People's Savings Bank, having become embarrassed, subsequently made an assignment to Fermor J. Spencer, assignee, who thereafter, on June 26, 1897, brought an action against the People's National Bank, in which action he recovered a judgment against it in the sum of $475,825.71 on November 30, 1899. About the month of January, 1897, the People's National Bank commenced to liquidate its affairs with a view of surrendering its charter, and on April 27, 1897, its stockholders, at a meeting duly held for that purpose, resolved to go into voluntary liquidation. On September 20, 1897, the bank called a meeting of its stockholders to consider a proposition to surrender the remainder of its leasehold term to Schleier, the lessor, stating in its notice to the stockholders that, as the income from the property which it had leased was less than the fixed charges, it had become necessary to take some action to relieve the bank. At that time there was due for rent in arrear under the lease, and for taxes which the lessee was obligated to pay, a sum amounting altogether to about $6,000. In compliance with action which appears to have been taken at said stockholders' meeting, the bank, subsequently, on October 30, 1897, surrendered its leasehold term to the lessor, and the lessor agreed, in consideration of such surrender, to discharge the bank from its liability to pay such rents and taxes as were then in arrears; also to discharge the bank from all further installments of rent which were to accrue under the lease. Some time after the bank had resolved to go into voluntary liquidation, to wit, on December 20, 1899, Earl M. Cranston was appointed receiver of the People's National Bank for the purpose of winding up its affairs. He continued to serve as receiver until May 27, 1901, when he resigned his office, and Edwin F. Brown, the present receiver and appellant, was duly appointed in his place and stead by the comptroller of the currency. In view of the premises, the complainant prayed that the court would decree that the lease executed by Schleier to the bank on September 12, 1889, was null and void, in view of the national bank act; that the agreement purporting to cancel and surrender said pretended lease was also null and void; that there might be a full accounting between Schleier and the receiver; and that whatever was found due to the receiver upon said accounting be declared a first and prior lien upon the bank building which the bank had erected, as well as upon the ground upon which it was situated. The bill was demurred to for want of equity, and the demurrer was sustained, whereupon a decree was entered dismissing the complaint. To reverse such decree an appeal has been prosecuted to this court.

Page 983

Before SANBORN and THAYER, Circuit Judges, and LOCHREN, District judge.

THAYER, Circuit Judge, after stating the case as above, .

The bill in this case appears to have been exhibited, and a recovery is sought, upon the theory that the lease of September 12, 1889, was executed by the People's National Bank in excess of its corporate powers, and was therefore void; that Schleier, the lessor, was a party to the act whereby the charter of the bank was violated, and is therefore liable as a joint tort-feasor for all the damage which the creditors of the bank have sustained in consequence of the execution of the lease without lawful authority. It is urged, in substance, that the lease was ultra vires the bank, because it undertook, in violation of section 5137 of the Revised Statutes (U.S. Comp. St. 1901, p. 3460), to erect a building on the demised premises which it did not contemplate using 'for its immediate accommodation in the transaction of its business,' but did intend to rent in part to third parties. It is also claimed that the bank exceeded its powers in making the lease, because it contracted an indebtedness to an amount exceeding its capital stock, in violation of section 5202 of the Revised Statutes (U.S. Comp. St. 1901, p. 3494), by engaging to pay rent at the rate of $13,975 per annum for the term of 99 years; and incidentally it is claimed that the power conferred upon national banks by section 5137 of the Revised Statutes to purchase and hold such real estate 'as shall be necessary for its immediate accommodation in the transaction of its business' does not comprehend the power to lease property with a view of erecting a building thereon for its accommodation in the transaction of its business, nor the right to lease property for a longer period than it is to exist as a corporation.

We entertain no doubt that the power conferred on national banks by section 5137 of the Revised Statutes to purchase such real estate as is needed for their accommodation in the transaction of their business includes the power to lease property whereon to erect buildings suitable to their wants. The power to purchase land is larger than the power to lease by as much as a fee simple estate is larger than a term for years, and the greater power includes the less. In the larger towns and cities of the United States, national banks usually find it necessary to locate themselves in the business centers, where property is most in demand and likewise most valuable. In the large cities it will doubtless sometimes happen that a bank cannot locate itself in a quarter where its business interests demand that it should be located, unless it leases...

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