President & Dirs. of the Bank of Louisville v. Young

Citation37 Mo. 398
PartiesTHE PRESIDENT AND DIRECTORS OF THE BANK OF LOUISVILLE, Plaintiffs in Error, v. JOHN YOUNG, Defendant in Error.
Decision Date31 March 1866
CourtUnited States State Supreme Court of Missouri

Error to St. Louis Court of Common Pleas.

Whittelsey, for plaintiff in error.

I. The first instruction given for the defendant was erroneous, because not warranted by the evidence, nor by the statute. The evidence showed that Campbell, the president of the bank, was on a visit to St. Louis, and made a loan to Conant, and took his note, endorsed by George Pegram. This was the only loan proven ever to have been made in this State by the bank, and Campbell had no office or place of business in this State.

The words of the statute (R. C. 1855, p. 289, § 14) are: “Bonds. &c., given for money lent or advanced by a foreign corporation, situated or located, or which is doing business by its officers or agent, within this State, &c., shall be void.” These words evidently require that something more should be shown than one single transaction. It is the “doing business” which is forbidden; section 11, forbidding any foreign bank from keeping any office of discount, & c., shows this to be the intent of the statute. (See also §§ 7 and 13.) Section 13 makes every day's keeping open an office a distinct offence. (Sackett's Harb. Bk. v. Lewis Co. Bk., 11 Barb. S. C. 213; Bates v. State Bk., 2 Ala 465-75; Potter v. Bk. of Ithaca, 5 Hill, 490, S. C. on appeal, 7 Hill, 530; Suydam v. Morris C. & B. Co., 6 Hill, 217; City Bank v. Beach, 1 Blatch. C. C. 425; Pennington v. Townsend, 7 Wend. 276; 25 Wend. 648; Ang. Corp. §§ 264, 274.)

II. Although the original note may have been void, so that no recovery could have been had upon it, yet the plaintiff could have recovered the value of the thing lent, and a new note having been given, the new consideration supported the new note, and the plaintiff is entitled to recover. Note the different wording of §§ 6 & 14. (Armstrong v. Toler, 11 Wheat. 258; Chit. Cont. 40-1; Barjean v. Walmsley, 2 Strange, 1249; Robinson v. Bland, 2 Burr, 1077, 1080, 1082.) These last two cases cited and approved, Utica Ins. Co. v. Scott, 19 Johns, 1-7; 5 Barb. S. C. 9; 3 Ed. Ch. R. 395.

III. The second instruction was erroneous. The interest taken having been legal by the law of this State, where the contract was made and to be performed, the contract was valid.

a. The lex loci governs the contract. (Broadhead v. Noyes, 9 Mo. 96; Andrews v. Pond, 13 Pet. 65; DeWolf v. Johnson, 10 Wheat. 367, 383; Sto. Bills, § 148; Sto. Conf. L. §§ 243, 296; Hosford v. Nicols, 1 Paige, 220.)

b. The limitation in the charter upon the rate of interest is confined to notes negotiable and payable at the bank. (Charter, § 12.) It may do a general banking business, deal in bills, &c. (Id., § 2.)

c. It was not forbidden by its charter from purchasing notes or making loans in other States, and not being forbidden, it could thus deal and lend. (Ang. Corp. § 273; Blair v. Perpetual Ins. Co. 10 Mo. 559; Bk. of Augusta v. Earle, 13 Pet. 321.)

d. The provision in the charter, limiting interest to six per cent., was but prescribing the general statute as the rule for the bank, and did not prevent it from taking for a loan in another State the interest legal by the law of that State. The charter merely required the bank to observe the law. (Bard v. Poole, 2 Kern., N. Y., 595; City Sav. Bk. v Bidwell, 29 Barb. 325; Knox v. Bank U. S., 26 Miss. 655; 6 Conn. 420 3 Cow. 684; Bailey v. Murphy, Walk. Ch. 424.) It must be observed that the law of Kentucky does not avoid a contract for usury.

e. The violation of its charter by plaintiff cannot be taken advantage of collaterally. (Bk. of Mo. v. Merchants' Bk., 10 Mo. 132; Farmers' Bk. v. Garten, 34 Mo. 119; Fleckner v. Bk. U. S., 8 Wheat. 457.)

Glover & Shepley, for defendant in error.

I. The note sued on in this cause was absolutely null and void. The transaction in its inception was null and void. The loan was made in violation of § 14 of “An act to prevent illegal banking, and the circulation of depreciated paper currency within this State,” approved December 8, 1855. (1 R. C. 1855, p. 289, § 14.) A fraud upon a statute is a violation of a statute. (2 Pet. 527, 536.) A foreign corporation of New Jersey doing business in New York contrary to a statute of New York was held not entitled to recover on the prohibited contract. (7 Wend. 276; 22 Me. 491; 11 Wheat. 258; 3 McLean, 103; 2 Doug. 155; 1 Doug. 401; 14 Mass. 322.)

II. The plaintiff, by the law of its existence, could not take a higher rate of interest than one per cent. for sixty days, including days of grace; and if it did so, the whole contract for interest was made void, and payments thereon might be recovered back by the person paying the same. The bank charter forbids a greater rate of interest than six per cent. per annum. (Laws of Ky.)

We contend that this law of the corporation of the plaintiff in this suit is binding on it in Missouri as well as in Kentucky. It may be that individuals may make any contract in any State which the laws of such State allow. But this is not the case with corporations; they can derive no new powers beyond those granted at home; they are restricted everywhere by the laws of their being. (8 Ohio, 286; 11 Ohio, 489.) In Ang. & Ames on Corporations, 234, it is said in deciding whether a corporation can make a particular contract, we consider first whether its charter, or some statute binding on it, forbids or permits it. (4 Pet. 152, 168.)

III. As corporations are the mere creatures of the law, and derive all their powers from the laws creating them, it is perfectly just and proper they should be obliged to show their authority for the business they assume. (2 Kent. 299, 5th ed.; 2 Pet. 527; 2 Doug. 259; 3 McLean, 103, 267.)

A corporation enjoys such special privileges or franchises as the laws give to it, and no other.

IV. The bank being prohibited from charging more than one per cent. for sixty days, including days of grace, and having wilfully violated the law of its charter in that behalf, the whole contract was null and void from the beginning. A corporation can do no valid act which its charter prohibits. (2 Pet. 527.) The violation of charter defeats the action on the note. (1 Hall. N. Y., 480; 5 Conn. 560; 3 Eng. Com. Law, 215; 7 Wend. 276, 34; 7 Mo. 586; 26 Barb. Sup. Ct. 596; 7 N. Y., 3 Selden, 328; 3 Comst., 3 N. Y., 19, 34; 8 Ohio, 286; 4 Wheat. 636; 2 Doug., Mich., 251.)

The charter provided that the bank might take six per cent. and no more; the bank contracted for more; and though no provision of the law declared the note void, it was so held to be. (11 Wheat. 271; 2 Doug., Mich., 254.) It is laid down that though the contract was to be performed in New York, it was to be controlled by the laws of Indiana chartering the bank. (11 Wheat. 271; 11 Ohio, 489.)

It is a good defence to any action by a corporation that the contract is not authorized by its charter. (21 Mo. 92.)

A corporation and an individual do not stand on the same footing in regard to the right of contracting. The latter may make any contract not inconsistent with the interests of society, whilst the former must look to the powers given in the charter. (10 Mo. 565.)

WAGNER, Judge, delivered the opinion of the court.

The record in this case shows that in 1857, one Campbell, who was president of the Bank of Louisville, Kentucky, a foreign corporation, came into this State as agent of the bank, and brought with him a large amount of foreign bank notes, for the purpose of using the same in buying and selling bills of exchange, checks and drafts, and discounting bills and notes, and loaning the same in this State; and that a large portion of the notes so brought were issued by him and circulated in this State. That H. A. Conant & Co. applied to said Campbell, in the city of St. Louis, for a loan of $5,000, and the loan was made upon the note of Conant & Co., endorsed by George Pegram and the defendant, which note was discounted, and $4,842 paid to Conant & Co., in Kentucky bank notes, then at a discount of one per cent. The loan was made by agreement at ten per cent. per annum, but the rate of interest actually charged it is contended, was greater. There were various renewals of this note, by bills of exchange and notes, and partial payments made on each renewal, when finally Conant & Co. made a new note for the balance remaining due, endorsed by the defendant alone, before the maturity of which Conant & Co. failed. But, subsequently, renewals were still made, at the request and on the endorsement of defendant; and at last, to close the matter, he took up the note of Conant & Co., and gave his note in its stead, which is the note here sued on. It furthermore appears that the Perpetual Insurance Company of St. Louis was the collecting agent and correspondent of the plaintiff, both prior and subsequent to the loan to Conant & Co. Large quantities of foreign bank paper were deposited with the secretary of the insurance company, who paid it out under instructions from plaintiff, the usual course being to have the paper of applicants for loans passed on at plaintiff's place of business in Kentucky, and then remitted here, with directions to pay out certain specific amounts. But the paper in this case was discounted here, and renewed on divers occasions at the office of the agent.

The charter granted the plaintiff by the Legislature of Kentucky, was set up in defence, by which it is declared, in § 12, “that said bank should not contract for or receive a greater interest than at the rate of six per cent. per annum, for the loan or forbearance of money; and interest on promissory notes, negotiable and payable at said bank, and there discounted, shall be calculated on the true time such notes have to run, including three days' grace,” &c.

The laws of the State of Kentucky were also given in evidence, by which it was provided that all contracts and assurances made directly or...

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