Brandenburg v. First Nat. Bank of Casselton

• Court: North Dakota Supreme Court
• Writing for the Court: BRONSON, J.
• Citation: Brandenburg v. First Nat. Bank of Casselton, 183 N.W. 643, 48 N.D. 176 (N.D. 1921)
• Decision Date: 06 June 1921
• Docket Number: 358

183 N.W. 643

48 N.D. 176

JOHN BRANDENBURG, Appellant, v. FIRST NATIONAL BANK OF CASSELTON, NORTH DAKOTA, Respondent

No. 358

Supreme Court of North Dakota

June 6, 1921

Action in District Court, Cass County, Cooley, J. From a judgment of dismissal the plaintiff has appealed.

Reversed.

Judgment for the plaintiff entered, upon the special verdict pursuant to plaintiff's motion, and case remanded.

Lawrence Murphy & Nilles, for respondent.

Pierce Tenneson, Cupler & Stambaugh, for appellant.

National banks have power to receive special deposits and their officers have authority to bind the bank by agreements made in relation thereto. First Nat'l. Bank of Carlisle v. Graham, 100 U.S. 699; 25 L. ed. 750; 36 Am. Rep. 592; McCormick v. Market Nat'l. Bank; 165 U.S. 538; 41 L. ed. 817 Minn. Mutual Life Ins. Co. v. Tagus, 34 N.D. 566; 158 N.W. 1063; L.R.A. 1917A 519; Citizens Nat'l. Bank v. Davisson, 229 U.S. 213.

The lending of money for its customers is an every day transaction with all banks, and it has been held that for negligence or for fraud and deceit in selection of investments for its customers, the bank is liable for the acts of its officers who represented it in the transaction. 7 C. J. 719 and cases cited in notes 90 to 95.

It is well settled that a corporation cannot escape liability upon a plea that the tortious acts were ultra vires.

"It is the policy of the law to look with disfavor upon the defense of ultra vires, especially when interposed by a corporation to avoid an obligation otherwise legal and equitable. It has been said by an English judge that "the safety of men in their daily contracts requires that this doctrine should be confined within narrow bounds." 3 Fletcher Cyclopedia Corporations, § 1520, p. 2581. Seeber v. Commercial Nat. Bank, 77 F. 957, 960.

Corporations have been held liable in these cases by attributing to them the conduct of their agents:

Assault and battery with a deadly weapon by a railroad company. Railway v. Harris, 122 U.S. 597, 7 S.Ct. 1286, 30 L. ed. 1146).

Libel by a railroad company, (Railroad v. Quigley, 21 How. 202, 1 L. ed. 73.)

Fraud and deceit, assault and battery, malicious prosecution, nuisance and libel, (National Bank v. Graham, 100 U.S. 699, 702, 25 L. ed. 750.)

Fraud by a municipal corporation in reports of distilled spirits to revenue collector, (Salt Lake City v. Hollister, 118 U.S. 256, 6 S.Ct. 1055, 30 L. ed. 176.)

Fraud and deceit by a manufacturing company, (Butler v. Watkins 13 Wall, 457; 463, 20 L. ed. 629.)

Maintenance of a nuisance, (Railroad v. Baptist Church, 108 U.S. 317; 2 S.Ct. 719; 27 L. ed. 739.)

Assault and battery by an express company, (Southern Ex. Co. v. Platten, 36 C. C. A. 46; 93 F. 936.)

Malicious prosecution by a manufacturing company, (Copley v. Sewing Machine Co., 2 Woods 494; F. Cas. No. 3213.)

Boycotting by a corporation of which the members were mercantile firms, (Hartnett v. Plumber's Supply Assn. 169 Mass. 229; 47 N.E. 1002 38 L.R.A. 194.)

Malicious prosecution by a savings bank, (Red v. Home Savings Bank, 130 Mass. 443; 39 Am. Rep. 469.)

It is also well settled that a corporation cannot escape liability upon a plea that the tortious acts were ultra vires. Citing in support the following authorities:

Railroad v. Quigley, 21 How. 202; 16 L. ed. 73. Merchants Bank v. State Bank, 10 Wall. 604; 645, 19 L. ed. 1008. County of Calhoun v. Emigrant Company, 93 U.S. 124; 130; 23 L. ed. 826. National Bank v. Graham, 100 U.S. 699, 702, 25 L. ed. 750. Salt Lake City v. Hollister, 118 U.S. 256; 6 S.Ct. 1055 30 L. ed. 176. Railway v. Harris, 122 U.S. 597, 7 S.Ct. 1286; 30 L. ed. 146; Railway Co. v. Howard, 178 U.S. 153; 160; 20 S.Ct. 880 44 L. ed. 1015. Alexander v. Relfe, 74 Mo. 517.

"Corporations are liable for every wrong they commit, and in such cases the doctrine of ultra vires has no application."

"They are also liable for the acts of their servants while such servants are engaged in the business of their principal, in the same manner and to the same extent that individuals are liable under like circumstances."

Merchants Bank v. State Bank, 10 Wall 604; 19 L. ed. 1008. Ultra vires is no defense to an action for fraud and deceit. Morawetz on Private Corporations, §§ 726-7. Morse on Banks and Banking, (4th Ed.) § 727.

"The proposition is sustained by the authorities that a corporation may be charged with any wrong that may be committed through an agent, and may be held liable for any damages caused by his deceit or false representations. In such case the doctrine of ultra vires has no application." Dorsey Mach. Co. v. McCaffey, 139 Ind. 545; 38 N.E. 208; 47 Am. St. Rep. 290 cited by the court.

"There is no rule of law which requires men in their business transactions to act upon the presumption that all men are knaves and liars, and which declares them guilty of negligence, and refuses them redress, whenever they fail to act on that presumption." Strand v. Griffith, 97 F. 856-7. 12 R. C. L. 360. Pronger v. Old National Bank, 56 P. 391 (Wash.)

"If the officer purports to represent the bank in making reply to the inquiry, the inquirer has a right to rely upon the statement as being the statement of the bank, and "ultra vires" will not shield the bank from liability for the officer's fraud. Such is the holding of the courts. Nevada Bank v. Portland Nat'l. Bank, 59 F. 338. Hindman v. First Nat'l. Bank of Louisville, 98 F. (6th Cir.) 562; 39 C. C. A. 1; 48 L.R.A. 210, opinion by Taft, Judge. Same case 112 F. 931, on second appeal opinion by Lurton, Judge.

"It is enough to entitle plaintiff to recovery if the false representation complained of was a material inducement to the contract or transaction which occasioned the jury, although there may have been other co-operating inducements." Sioux National Bank v. Norfolk State Bank 56 F. 139.

Lawrence, Murphy & Nilles, for respondent.

One who deals with the President of a National Bank in a transaction known to be outside the legitimate sphere of its administration, has no right to presume that the act of the officer has been sanctioned by the Board of directors or other governing body as an act done by an officer of such bank in furtherance of his business venture which is in excess of the corporate powers cannot be said to be an act which is within the scope of the customary powers of such officer. Bank v. Smith, 77 F. 129; Bank of Manistee v. Bank of Milwaukee, 83 F. 725; Gas Company v. Lansden, 172 U.S. 534; 43 Law. ed. 543; Wilkin-Hale Bank v. Herstein, 149 P. 1109.

It is elementary of course that false and fraudulent representations for which any principal is responsible when made through an agent must have been made in the course of his service for the principal or by the principal's authority. In Gas Company v. Lansden, 172 U.S. 534; 43 L. ed. 543.

That a transaction which is ultra vires is void and that no rights grow out of it and no liability is incurred in such transaction except that if the corporation or its agents have received money or property in such unlawful transaction and an accounting must be made therefor. Bank of Manistee v. Bank of Milwaukee, 83 F. 725; Wilkin-Hale Bank v. Herstein, 149 P. 1109; Commercial Bank v. Pirie, 82 F. 799; Merchants Bank v. Baird, 160 F. 642.

BRONSON, J. CHRISTIANSON and BIRDZELL, JJ., concur, GRACE, J. (specially concurring). ROBINSON, C. J., dissents.

OPINION

Statement.

BRONSON J.

This is an action to recover damages for fraud and deceit in the sale and negotiation of a real estate mortgage. The complaint alleges that the defendant, through deceitful and fraudulent practices, loaned $ 2,000 of plaintiff's money, in its custody, upon a worthless real estate mortgage. The answer asserts that the transaction was a brokerage transaction and was ultra vires, under the National Banking Act (13 Stat. 99).

The action was submitted to a jury upon a special verdict comprising 56 questions. The verdict was favorable to the plaintiff. The plaintiff thereafter moved for judgment upon the special verdict. The defendant likewise moved for judgment in its favor upon the special verdict, or, in the alternative, for judgment notwithstanding the verdict. The trial court denied the motion of the plaintiff and made an order dismissing the action with prejudice. Judgment was so entered. The plaintiff has appealed. The facts are substantially as follows:

For many years, from 1891 to 1906, the plaintiff resided in Arthur, a town tributary to Casselton, engaged in the mercantile business. During this time he did a banking business with the defendant. He had a checking account, a merchandise checking account, and an account of borrowed money. The checking account extended from 1891 to 1908, and the loan account from 1891 until it was closed in 1905. R. C Kittel was the president of the bank for some 10 or 12 years prior to the latter part of November, 1915. He was actively in charge of the business of the bank generally. The plaintiff became acquainted with Kittel after Kittel's connection with the bank. In 1906, the plaintiff, retiring from business, removed to his former home in Lebanon, Ohio. He continued to do business with the bank. He left certain moneys upon time certificates of deposit. Other moneys were paid into the bank to his credit. Later, when the time deposits matured, he received payment and then left $ 2,000 in the bank to be loaned for him upon real estate. The concern of this action is the manner in which this $ 2,000, left with the bank, was handled. The defendant went into the hands of a receiver in December, 1915, but thereafter it was reinstated and has since continued as a national bank. The correspondence between the parties is voluminous; it dates from 1906 to about 1915; it is largely...