Bowen v. Needles Nat. Bank

• Decision Date: 15 May 1899
• Docket Number: 499.
• Parties: BOWEN v. NEEDLES NAT. BANK et al.
• Court: U.S. Court of Appeals — Ninth Circuit

94 F. 925

BOWEN v. NEEDLES NAT. BANK et al.

No. 499.

United States Court of Appeals, Ninth Circuit.

May 15, 1899

Abner T. Bowen sued the Needles National Bank upon four causes of action, the first, second, and third of which were upon bills of exchange for $8,775, $8,300, and $5,364, which it was alleged in the complaint were drawn by the defendant at its place of business in the state of California upon the Chase National Bank of New York, and payable to the order of the plaintiff under the name of A. T. Bowen & Co., which bills of exchange had been dishonored by the drawee; and for a fourth cause of action the plaintiff alleged further that the defendant was indebted to him upon a check for $3,500, drawn by Isaac E. Blake upon the defendant bank, and payable to the order of the plaintiff. Upon the issues created by the answer the cause was tried before the court without a jury, and the court found for the defendant. 87 F. 430. No bill of exceptions is presented in the record, but it is contended by the plaintiff in error that upon the findings of fact made by the court the judgment should have been for the plaintiff. The findings are, in substance, as follows:

(1) That the defendant executed and delivered to the plaintiff the instruments called 'bills of exchange' in the first, second, and third causes of action for the several amounts following, to wit, September 10, 1894, $8,775 September 12, 1894, $8,300; September 18, 1894, $5,364; and that said bills of exchange were drawn upon the Chase National Bank, of New York.

(2) That neither at the time of the drawing of said drafts nor at the time of their receipt by the plaintiff were there funds in the hands of the drawee to pay the same; that said drafts were not presented to the drawee for acceptance or payment.

(3) That the defendant provided for the payment of said drafts by drawing counter drafts at the same time upon Isaac E. Blake payable at said Chase National Bank; that said counter drafts were not paid, but from the prior course of dealing between plaintiff and defendant and the said Chase National Bank and the said Blake the defendant had reason to believe, and did believe, that they would be paid.

(4) That the said drafts or bills of exchange mentioned in the first finding were made and transmitted by defendant to plaintiff in exchange for checks drawn by said Blake in favor of plaintiff and upon the defendant bank; that said Blake had no funds to his credit in the defendant bank, either at the time of drawing said checks or at the time of their presentation for payment.

(5) That the plaintiff is a citizen and resident of the state of New York doing business under the name and style of A. T Bowen & Co., and the defendant is a national banking corporation organized under the laws of the United States.

(6) That prior to April 25, 1894, the plaintiff had advanced moneys to the said Blake upon checks drawn by him upon the defendant bank, and, being unwilling to advance further sums without some guaranty from the defendant, the latter, on said April 25, 1894, executed and delivered to the plaintiff the following telegram and letter:

'To A. T. Bowen & Co., 71 Broadway, New York: We will pay checks signed 'Isaac E. Blake, by W. L. Beardsley.' The Needles National Bank.' 'A. T. Bowen & Co., New York City-- Gentlemen: We hereby beg leave to confirm our telegram to you of even date: 'We will pay checks signed 'Isaac E. Blake, by W. L. Beardsley," signed 'Needles National Bank.'

'Yours, truly, W. S. Greenlee, Cashier.'

That on August 22, 1894, the said bank sent the plaintiff the following letter:

'A. T. Bowen & Co., New York City-- Gentlemen: I am in receipt of telegraphic communication from Chase National Bank that our draft No. 2,200, for $7,500, payable to the order of Bowen & Co., has been refused payment until advices received from us guarantying the amount received. I immediately guarantied the amount to be $7,500,00, and I trust I have put you to no great inconvenience. It is simply a clerical error, which happens to us all some time or other, and in future we will endeavor to be more careful. I have telegraphed you to please pardon our error, and that we wish you to still continue your friendly relations with Mr. Blake and Mr. Beardsley, and that we guaranty absolutely the payment of Mr. Blake's checks as heretofore. I am truly sorry the mistake has occurred, and venture the assurance that it will not happen again. The Keystone mine has just uncovered a large body of high-grade ore, and, if the vein continues as it is now for the next thirty days, it will make a big showing. Again asking your pardon, I remain, with best wishes,

'Very truly yours,

W. S. Greenlee, Cashier.'

(7) That on the 4th, 5th, 10th, and 11th days of September, 1894, respectively, upon checks drawn by the said Blake upon the defendant bank, the plaintiff advanced said Blake the following sums of money: $8,750, $8,300, $5,300, $3,500, and transmitted the checks to the defendant for payment.

(8) That in exchange for the checks for the first three sums of money the defendant transmitted to the plaintiff the bills of exchange mentioned in the first finding above, and returned to the plaintiff the fourth check, for $3,500, unpaid.

(9) That at the time of drawing said checks and at the time of their presentation to the defendant bank the said Blake had no funds whatever on deposit with the bank with which to pay the same, nor did he have any funds on deposit with the bank at the time when said letters and telegrams were sent, or at any time thereafter.

(10) That the bills of exchange mentioned in the first finding are in fact checks, and that defendant bank suffered no injury by the failure of the plaintiff to present the same to the said Chase National Bank for payment.

(11) That at the time of the drawing of said checks the plaintiff had constructive notice that the said Blake had no funds on deposit with the defendant bank to meet the same, and knew that the defendant was a national bank.

Upon these findings of fact the court found as conclusions of law that the undertaking of the Needles National Bank to guaranty the checks of Blake was ultra vires, and was void; and that the bills of exchange, having been made and executed to plaintiff under such void contract are null and void in the hands of the plaintiff, and that no cause of action can arise thereon.

John D. Works and Bradner W. Lee, for plaintiff in error.

Henry C. Dillon and Eber T. Dunning, for defendants in error.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

GILBERT Circuit Judge, after stating the facts as above, .

It may be stated in general that no banking corporation has the power to become a guarantor of the obligation of another, or to lend its credit to any person or corporation, unless its charter or governing statute expressly permits it. Farmers' & Mechanics' Bank v. Butchers' & Drovers' Bank, 16 N.Y. 125; Morford v. Bank, 26 Barb. 568; Thomp. Corp. Sec. 5721. Under section 5136 of the Revised Statutes, national banking associations are given the power to 'make contracts' and '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 evidences 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. ' There is in these provisions no grant of power to guaranty the debt of another, nor can such guaranty be said to be incidental to the business of banking. It has been so held in Seligman v. Bank, 3 Hughes, 647, Fed. Cas. No. 12,642. Norton v. Bank, 61 N.H. 589, and Bank v. Pirie, 27 C.C.A. 171, 82 F. 799. An apparent exception is recognized in the case of the discount of promissory notes by national banks which may be transferred with a guaranty, but it rests upon the ground that the guaranty of such paper is but an ordinary incident to its transfer in the course of banking. In People's Bank v. National Bank, 101 U.S. 181, the court said: 'To hand over with an indorsement and guaranty is one of the commonest modes of transferring the securities named. ' There can be no doubt that the guaranty in the present case was ultra vires. It was aside and apart from the business of banking. The case is not that of an officer of a bank exceeding the powers delegated to him, but it is a case where the banking association itself has exercised powers in excess of those which were conferred upon it by statute. The plaintiff, equally with the defendant bank, was bound to take notice of the statute. He had notice also that there were no funds in the bank to meet the checks, and he knew that the contract was one of guaranty pure and simple. The transaction cannot be deemed a certification of checks, as urged by the plaintiff in error. The checks were not certified. They did not bear the acknowledgment of the bank of funds in its possession equal in amount to the checks, and available for their payment. The certification of checks is in the line of banking business, and is not prohibited to national banks. The only prohibition is that the bank shall not certify a check unless the drawer has on deposit at the time sufficient money to meet the same. The penalty for violation of the prohibition is to render the bank liable to the forfeiture of its charter, and to have its affairs wound up. Rev. St. Sec. 5208; Thompson v. Bank, 146 U.S. 240, 13 Sup.Ct. 66.

But the present case is complicated by the fact that the plaintiff in error relied...