Citizens Nat. Bank of Merridian v. Pigford

• Decision Date: 23 March 1936
• Docket Number: 32166
• Citation: 166 So. 749,176 Miss. 517
• Court: Mississippi Supreme Court
• Parties: CITIZENS NAT. BANK OF MERRIDIAN v. PIGFORD

166 So. 749

176 Miss. 517

CITIZENS NAT. BANK OF MERRIDIAN v. PIGFORD

No. 32166

Supreme Court of Mississippi

March 23, 1936

Division B

Suggestion of Error Overruled April 20, 1936.

APPEAL from circuit court of Lauderdale county HON. ARTHUR G. BUSBY Judge.

Suit by Lamar Pigford against the Citizens National Bank of Meridian. Judgment for plaintiff, and defendant appeals. Affirmed.

Appealed to Supreme Court of United States, see 299 U.S.

Affirmed.

Wilbourn, Miller & Wilbourn, of Meridian, for appellant.

The court should have overruled the demurrer of appellee to appellant's special plea No. 1, and at the conclusion of the testimony should have directed a verdict in favor of appellant.

The proviso to paragraph 7 of section 5136 of the Revised Statutes of the United States, as amended February 24, 1927 reads as follows: "Provided, That the business of buying and selling investment securities shall hereafter be limited to buying and selling without recourse marketable obligations evidencing indebtedness of any person . . . or corporation, in the form of bonds, notes and/or debentures, commonly known as investment securities." It was in full force and effect at the time of the sale here involved.

Awotin v. Atlas Exchange National Bank of Chicago, 55 S.Ct. 674, 79 L.Ed. 1393.

It is undisputed that the bonds here involved are of the class of securities dealt with by the statute, and that the statute was in force when appellant sold them. The pleadings of appellee cannot be construed as alleging an intentional or wilful misstatement, nor any purpose to defraud.

The case here before the court is not materially different from that of Awotin v. Atlas Exchange National Bank, supra. In the Awotin case, contemporaneously with the purchase, and as an inducement, and part consideration for it, the bank agreed in writing at the purchaser's option to repurchase the bonds at maturity at par and accrued interest. The Supreme Court of the United States held such a contract invalid as being one prohibited by the statute; and declared that the purchaser could not invoke estoppel to impose a liability which the statute forbids

In the instant case, both parties were then and there charged with knowledge of the prohibition of the statute, and legally knowing the subject of the sale could only be sold by the bank without recourse on it, to award recovery under such circumstances is to grant the purchaser recourse against the bank in violation of the statute. If the bank could not be liable in view of the statute where it expressly and intentionally agreed to restore the price, how can it be held to be liable to restore the price, where it neither intended nor agreed to do so, on the ground of misstatement of its agent. The purpose of the statute was to prohibit liability of any form growing out of the sale. This the parties each legally knew.

Logan County National Bank v. Townsend, 139 U.S. 67, 11 S.Ct. 496, 35 L.Ed. 107.

No act or representation of an agent or officer of the bank in negotiating a sale of such securities, can be held to bind the bank so as to make the sale of such securities, which the statute says must be "without recourse," one with recourse; for the reason that a sale "with recourse," express or implied, or by estoppel is ultra vires.

A sale with recourse being ultra vires, the appellant cannot be bound by the representation which its officer may have made in its behalf, any more than a contract entered into by such officer.

Tome v. Parkersburg Branch Railroad Co., 39 Md. 36; Penn's Del. & Md. Steam Navigation Co. v. Dandridge, 8 Gill & John. 248; Duncan v. Md. Savings Institution, 10 Gill & Johns. 299; U. S. v. City Bank of Columbus, 21 How. 356; Merchants Bank v. Marine Bank, 3 Gill. 125; Minor v. Mechanics Bank of Alexandria, 1 Pet. 46; Weckler v. First National Bank of Hagerstown, 42 Md. 581, 20 Am. Rep. 95; Third National Bank of Baltimore v. Boyd, 44 Md. 47, 22 Am. Rep. 35; Wiley v. First National Bank, 47 Vt. 546; First National Bank of Lyons v. Ocean National Bank, 60 N.Y. 278; Lazear v. National Union Bank of Maryland, 52 Md. 78, 36 Am. Rep. 355; Central Transportation Co. v. Pullman Palace Car Co., 139 U.S. 24, 35 L.Ed. 55.

If a national bank, therefore, is without power, in the sale of securities such as are here involved, to make any endorsement thereof, or to assume any liability with reference thereto, on the basis of which recourse may be had against it, then we submit it logically follows that no character of recourse may be had against the bank on any such sale, predicated either upon implication, or misrepresentation, or estoppel, since the bank could only sell such securities without recourse upon itself. And, since all who dealt with it were equally charged with the law in that respect, as is held in Awotin v. Atlas Exchange National Bank, supra, and many other cases, then the bank cannot be made liable on any theory to make good what is received by virtue of such a sale, without defeating the purpose of the federal law on the subject.

Carlton Mining & Power Co. v. W.Va. Northern R. R. Co., 145 S, E. 42.

To hold the bank liable here for the alleged statement of Blanks about the bonds would defeat the sovereignty of the federal government in the matter of the establishment and regulation of national banks.

Tucker v. Hibernia Bank & Trust Co., 251 S.W. 406.

It is held, without dissent, that no shipper can recover of a carrier, where the carrier misquotes a scheduled freight rate. The carrier's rates are fixed according to law, and cannot be voided by misquotation, or misrepresentation or estoppel. If it were not so, federal control of interstate freight rates would be nullified.

Southern Ry. in Miss. v. Buckeye Cotton Oil Co., 126 Miss. 562, 80 So. 228; Brookhaven Lbr. Mfg. Co. v. Miss. Central R. R. Co., 122 So. 472; G. M. & N. R. R. Co. v. Riverside Brick & Mfg. Co., 107 So. 193, 141 Miss. 505; Lexington Compress & Oil Mill Co, v. Y. & M. V. R. R. Co., 131 Miss. 49, 95 So. 92; Central Warehouse Co. v. Chicago R. I. R. Co., 20 F.2d 828; Wheeling & L. E. Ry. v. Standard Envelope Mfg. Co., 2 F.Supp. 637.

We earnestly insist that to hold the appellant liable on this record will strike down the statute of the United States governing the liability of national banks in such matters, and indeed nullify federal sovereignty over the national banking system.

The overruling of appellant's motion to strike Exhibit "A" to the first count of the declaration and the allegations of the first count of the declaration with reference to the suit filed in the federal court at Richmond, Virginia, and admitting in testimony the purported copy of the declaration in the suit in federal court in Richmond, Virginia, Exhibit "A" to the declaration in this cause and in permitting it to be read to the jury was error.

Appellee was not a party to the suit in Richmond. He had nothing whatever to do with it. It was something that was filed as a mere pleading by the Bondholders' Protective Committee long after appellee's purchase. Under the facts in this record it was incompetent for any purpose and its admission was highly prejudicial.

The testimony of the witnesses, Golden and others, as to their independent and unrelated transactions with R. L. Blanks out of the presence of the appellee and which were never communicated to the appellee were under the facts and the pleadings in this case and the law applicable thereto inadmissible for any purposes Whatever.

All the testimony about the transactions between Golden, the Massengales, Miss Hosey, Miss Allen and Touchstone was not within the pleadings, was not admissible, we submit for any purpose whatever, and was highly prejudicial, and reversible error.

Rex Motor Co. v. Dupont, 132 Miss. 504, 96 So. 684; Stowe v. Wooten, 62 S.W.2d 67; Standard Mfg. Co. v. Slot, 98 N.W. 923, 105 Am. St. Rep. 1016; J. H. Clark & Co. v. Rice, 106 N.W. 231; West Florida Land Co. v. Lewis, 25 So. 274; Johnson v. Gulich, 46 Neb. 817, 65 N.W. 883; May v. Roberts, 219 P. 55; 12 R. C. L., sec. 182, page 345.

It seems to be overwhelmingly shown that Pigford was advised before he bought the bonds that they themselves were not guaranteed. The verdict in this case is not supported by the evidence, but is at least against the overwhelming weight of the evidence.

McCain v. Cochran, 153 Miss. 237, 120 So. 823; Carter v. Eastman Gardner & Co. , 48 So. 615, 95 Miss. 651.

We contend the testimony of E. J. Gallagher ought not to have been admitted. It relates to the question of damages. Gallagher went to Asheville, North Carolina, in March 1931, and looked at some records there and interviewed parties in Asheville and got some statements from records there. Without producing these records or the parties who made them, appellee introduced the purely opinion and hearsay testimony of Gallagher as to what he found on the occasion of his visit to Asheville in March, 1931. The appellee bought his bond November 1, 1929, and that was the date as to which the value of the bonds should have been determined. Then both Central Securities Co., Inc., and Central Bank & Trust Co. were going concerns. There is no competent testimony to show either of them insolvent then.

The general rule applicable to the measure of damages for fraud is that such an amount should be awarded to plaintiff as will compensate him for the loss occasioned by the fraud or, as it has been expressed, plaintiff is entitled to recover damages adequate to the injury which he has sustained. Plaintiff can recover the entire amount of his loss occasioned by the fraud, but the recovery must be limited to the actual loss. The number of false representations made does not affect the measure of damages.

27 C J. 89,...