National Bank v. Matthews

• Decision Date: 01 October 1878
• Parties: NATIONAL BANK v. MATTHEWS
• Court: U.S. Supreme Court

98 U.S. 621

25 L.Ed. 188

NATIONAL BANK v. MATTHEWS.

October Term, 1878

ERROR to the Supreme Court of the State of Missouri.

On the 1st of March, 1871, Hugh B. Logan and Elizabeth A. Matthews executed and delivered to Sterling Price & Co. their joint and several promissory note for the sum of $15,000, payable to the order of that firm two years from date, with interest at the rate of ten per cent per annum. The payment of the note was secured by a deed of trust, executed by her, of certain real estate therein described, situate in the State of Missouri.

On the 13th of the same month, the note and deed of trust were assigned to the Union National Bank of St. Louis. Price & Co. failed to pay the loan at maturity. The bank directed the trustee named in the deed of trust to sell. Said Elizabeth thereupon filed this bill in the proper State court to enjoin the sale. The bank in its answer avers that it 'accepted the said note and deed of trust as security for the sum of $15,000, then and there advanced and loaned to said Sterling Price & Co. . . . on the security of said note and deed of trust.' A perpetual injunction was decreed, upon the ground that the loan by the bank to Price & Co. was made upon realestate security; that it was forbidden by law; and that the deed of trust was, therefore, void. The decree was made upon the pleadings. No testimony was introduced upon either side The bank removed the case to the Supreme Court of the State, where the decree was affirmed. The bank then sued out this writ of error.

Mr. Philip Phillips for the plaintiff in error.

This case does not fall within the limitations imposed by Rev. Stat., sect. 5137. No mortgage or conveyance of real estate was made to the bank. Price & Co. had only a lien which could be enforced in default of payment. This was all that they passed to the bank: Potter v. McDowell (43 Mo. 93); Watson v. Hawkins (60 id. 550); and it was a mere incident to the note, securing its payment to the holder thereof in good faith, although he was ignorant, at the time of taking it, of the existence of the lien. Had the mortgage not been delivered nor any thing said about it, the bank, on failure of the maker to pay the note, would have been entitled to the lien: Green v. Hart (1 Johns. (N. Y.) 590); Chappell v. Allen (38 Mo. 213); and its right to assert it could not have been successfully resisted on the ground that to permit it to do so would authorize a violation of its charter.

The act, by authorizing loans to be made 'on personal security,' cannot be held as limiting the transaction to the personal undertaking of the parties to the note; and it would not be violated if the bank should require as collateral a deposit of bonds or of stocks, either of States, municipalities, or incorporated companies. Shoemaker v. National Bank, 2 Abb. (U.S.) 416; Schouler, Personal Property, pp. 87, 94; Pittsburg Car Works v. Bank, Thompson's Nat. Bank Cases, 315. In many of these instances the bonds or stocks are secured by real estate. This, however, does not change the character of the collateral, or make it other than personal security. See also First National Bank of Fort Dodge v. Haire, 36 Iowa, 443; Merchants' National Bank v. Mears, Thompson's Nat. Bank Cases, 353.

The decision of the learned court below questions neither the right of the bank to recover the contents of the note by suing the parties thereto, nor the validity of the lien created by the mortgage. Here there are a bona fide subsisting debt, evidenced by the note, whereof the bank is the lawful holder, and a lien which Price & Co., before their attempted transfer of it, could have made available. It does now inure to their benefit, because they have assigned the note, and it cannot be enforced by the bank, as it was made void in its hands. Is the lien then vacated? It certainly is, for all practical purposes, if the extraordinary position taken below should be sustained here.

Can the defendant in error, by a strained construction, be permitted to make the objection and cancel a contract which the statute does not declare to be void? There is some contrariety of opinion upon this question, and the court is referred to some of the numerous cases which answer it in the negative. Smith v. Sheely, 12 Wall. 360; Gold Mining Company v. National Bank, 96 U. S. 640; Silver Lake Bank v. North, 4 Johns. (N. Y.) Ch. 370. The decision in the last case is, that if the bank had passed 'the exact line of its power, it would rather belong to the government to exact a forfeiture of the charter, than to the court in this collateral way to decide a question of misuser by setting aside a just and bona fide contract.' The same doctrine is repeated in Steam Navigation Company v. Wood, (17 Barb. (N. Y.) 380), and supported by the judgments of the courts of Massachusetts, Pennsylvania, and other States. Ang. & A. Corp., sect. 153.

Mr. J. A. Hunter, Mr. John W. Noble, and Mr. John C. Orrick, for the defendant in error.

The deed of trust is in effect a mortgage with a power of sale thereto annexed. Although a third person is named as trustee, and vested with that power, the grantor has an equity of redemption, which may be judicially foreclosed and sold. The cestui que trust has a beneficial interest in the lands. Kennett v. Plummer, 28 Mo. 142; Chappell v. Allen, 38 id. 213; Potter v. Stevens, 40 Id. 229. In the absence of any statutory prohibition, the assignments would have vested that interest in the bank, but as the latter is permitted (Rev. Stat., sect. 5137) to 'purchase' or 'hold' real estate in certain specified cases,—of which this is not one,—and in 'no other,' the assignments passed no interest in the lands, and conferred no right to subject them to sale to pay the note.

The words 'purchase' and 'hold,' where they occur in that section, are not confined to cases where the absolute title to the fee has been conveyed. The provision allowing the bank to take a mortgage, by way of security for debts previously contracted would be superfluous, if the general prohibitory words did not forbid it to purchase such an interest in real property as a mortgage transfers. Looking at the mischief which the statute had in view, it is immaterial whether the mortgage is made directly to the bank, or is assigned to it. The interest acquired is in each case the same.

The preceding section allows the bank to loan money on personal security. This virtually prohibits loaning it on any other. Expressio unius est exclusio alterius.

The decided cases, without a dissent, affirm that all grants of corporate power are to be construed favorably to the public at large and most strongly against the corporation; that it has only the powers expressly given or necessarily implied; that the specification of certain powers prohibits by implication the exercise of other substantive powers, and that the intention of the law-maker is to be gathered from the whole statute. Governed by these fundamental rules, it must be held that the transaction on the part of the bank was ultra vires, not allowed by, but in palpable violation of, the statute to which it owes its existence, and consequently void. The injunction was therefore properly awarded. Fowler v. Scully, 72 Pa. St. 456; Kansas Valley National Bank v. Rowell, 2 Dill. 371; Ripley v. Harris, 3 Biss. 190; Commonwealth Bank v. Clark, 4 Mo. 59; Griffith v. Commonwealth Bank, id. 255; Bank of Lawrence v. Young, 37 id. 398; Downing v. Ringer, 7 id. 585; White v. Franklin Bank, 22 Pick. (Mass.) 181; Brown v. Farkington, 3 Wall. 381; Beasley v. Bignold, 5 Barn. & Ald. 335; Forster v. Taylor, id. 887; Cope v. Rowlands, 2 Mee. & W. 149.

MR. JUSTICE SWAYNE, after stating the facts, delivered the opinion of the court.

This case involves a question arising under the national banking law, which has not heretofore been passed upon by this court. We have considered it with the care due to its importance.

Our attention has been called to but a single point which requires consideration, and that is, whether the deed of trust can be enforced for the benefit of the bank.

The statutory provisions which bear upon the subject are as follows:——

'SECT. 5136.' Every national banking association is authorized 'to exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidence of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this title.

'SECT. 5137. A national banking association may purchase, hold, and convey real estate for the following purposes, and for no others: First, such as may be necessary for its immediate accommodation in the transaction of its business. Second, such as shall be mortgaged to it in good faith by way of security for debts previously contracted. Third, such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. Fourth, such as it shall purchase at sales under judgments, decrees, or mortgages held by the association, or shall purchase to secure debts to it. But no such association shall hold the possession of any real estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it for a longer period than five years.' Rev. Stat. 1999; 13 Stat. 99.

Here the bank never had any title, legal or equitable, to the real estate in question. It may acquire a title by purchasing at a sale under the deed of trust; but that has not yet occurred, and never may.

Sect. 5137 has, there, no direct application to the case. It is only material as throwing light upon the point to be considered in the preceding section. Except for that purpose it may be laid...