Ellis v. Citizens' Nat. Bank of Portales
| Decision Date | 21 November 1918 |
| Docket Number | 2193. |
| Citation | 183 P. 34,25 N.M. 319,1918 -NMSC- 126 |
| Parties | ELLIS et al. v. CITIZENS' NAT. BANK OF PORTALES. |
| Court | New Mexico Supreme Court |
On Motion for Rehearing, July 8, 1919.
Syllabus by the Court.
A contract of guaranty of the paper of a third person to which a national bank holds no title, and concerning which the contract of guaranty is not necessary or incidental to the transfer of title to the instrument, and the loan is for the benefit of a third person, is beyond the power of the bank as conferred by the National Banking Act, is ultra vires, and no suit can be maintained upon any such guaranty, and in no case is the bank estopped from pleading ultra vires of such a contract.
A national bank, however, has the power to borrow money, and to issue evidence of indebtedness therefor, and where a bank puts forward a third party as a borrower, and the bank guarantees the repayment of the loan, and all the proceeds of the loan go to the bank, and are converted to its own use such contract of guaranty is not ultra vires, and suit can be maintained upon the contract.
On Motion for Rehearing.
On appeal, a party must present all questions in his original brief which he desires the court to consider, and he will not be permitted to present new points in a petition for rehearing.
Appeal from District Court, Roosevelt County; Richardson, Judge.
Action by John Ellis and William I. Shriver, joint administrators of the estate of George Ellis, deceased, against the Citizens' National Bank of Portales, New Mexico. Judgment for defendant dismissing the complaint and plaintiffs appeal. Reversed and remanded with direction to enter judgment for plaintiffs.
George L. Reese and James A. Hall, both of Portales, for appellants.
Reid Hervey & Iden, of Roswell, and T. E. Mears, of Portales, for appellee.
Only a brief statement of the facts in this case will be necessary in view of the full statement made in the case of Ellis v. Stone, 21 N.M. 730, 158 P. 480, L. R. A. 1916F, 1228. That cause of action was instituted against Lula Stone, executrix of the estate of James P. Stone, deceased, upon a guaranty of a loan made by Ellis to W. W. Humble. The latter relied upon as constituting the guaranty is set out in full in the reported case. It is there held that the letter constituted a guaranty, but further held that it was not the individual undertaking of Stone; consequently, it would necessarily follow that it was the undertaking of the bank. This cause of action was instituted against the bank by the administrators of the estate of Ellis to recover on the guaranty. The bank received all the benefits from the loan, Humble getting no money, but simply receiving credit on the past-due note which he owed the bank.
The appellee bank answered the complaint, alleging that the guaranty was beyond the power of the bank and ultra vires, admitting that the complaint stated a cause of action in the alternative for money had and received, but as to this cause of action pleaded the statute of limitations. The court held that the suit could not be maintained upon the guaranty, and that as to the action for money had and received the statute of limitations had run. Judgment was entered for the appellee, dismissing the complaint.
If the suit can be maintained upon the written guaranty, concededly the statute has not run against the cause of action. On the other hand, if no cause of action is sustainable on the written guaranty, the statute has run against the action for money had and received. This, therefore, presents the only real question for determination in the case.
On behalf of appellee it is contended that a contract of guaranty of the paper of a third person, to which a national bank holds no title, and concerning which the contract of guaranty is not necessary or incidental to the transfer of title to the instrument, is beyond the powers of the bank, as conferred by the National Banking Act (Act Cong. June 3, 1864, c. 106, 13 Stat. 99), is ultra vires, and no suit can be maintained upon any such guaranty, and that in no case is the bank estopped from pleading its ultra vires to any suit brought thereon. The section of the National Banking Act defining the powers of national banks is as follows:
"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." Section 8 (1 U.S. Compiled Statutes, § 9661).
Many authorities are cited by appellee holding that a national bank has no power to guarantee the debt of another, and that its act in so doing is ultra vires, when such loan is for the benefit of a third person, and that the bank is not estopped from setting up the ultra vires character of the act, even though the contract has been executed on the part of the party receiving such guaranty. Bowen v. Needles National Bank, 94 F. 925, 36 C. C. A. 553; Commercial National Bank et al. v. Pirie, 82 F. 799, 27 C. C. A. 171, 49 U.S. App. 596; First National Bank of Moscow v. American National Bank of Kansas City, Mo., 173 Mo. 153, 72 S.W. 1059; California National Bank v. Kennedy, 167 U.S. 362, 17 S.Ct. 831, 42 L.Ed. 198; Merchants' Bank of Valdosta v. Baird, 160 F. 642, 90 C. C. A. 338, 17 L. R. A. (N. S.) 526; Fidelity & Deposit Co. v. National Bank, 48 Tex.Civ.App. 301, 106 S.W. 782; Norton v. Derry National Bank, 61 N.H. 589, 60 Am. Rep. 334; Citizens' Central National Bank v. Appleton, 216 U.S. 196, 30 S.Ct. 364, 54 L.Ed. 443; Rankin v. Emigh, 218 U.S. 27, 30 S.Ct. 672, 54 L.Ed. 915.
It is beyond question that the cases referred to sustain the contention of appellee, and many other cases might be cited to the same effect, but these cases do not reach the point involved in this case, and are distinguishable in this: In all these cases the bank did not receive the proceeds obtained in the transaction in which the guaranty was given. Consequently, a national bank being precluded from loaning its credit to another, its attempt to do so is beyond its power.
That a national bank has the power to borrow money is not questioned, and is liable in an action for money so borrowed, whatever may be the nature of the obligation given for the loan. The question always is, "Was it a loan to the bank and did it receive the benefits?"
In the present case all the benefits of the transaction accrued to the bank. Stripped of form, the transaction was simply this: The bank was hard pressed for money. Humble owed it past-due obligations which he was unable to meet. It put him forward as a borrower for the purpose of procuring money, and gave a written guaranty for the repayment of the loan to be made to Humble. The proceeds of the loan were all received by the bank and converted to its use. Under such circumstances we think, beyond question, that the contract was not ultra vires, and that the bank is liable on the same. The case of People's Bank of Belleville v. Manufacturers' National Bank of Chicago, 101 U.S. 181, 25 L.Ed. 907, while not exactly on all fours with the present case, clearly demonstrates, in our judgment, the liability of the bank on the guaranty in question here. The only difference between the two cases being that in the People's Bank of Belleville v. Manufacturers' National Bank of Chicago the notes in question passed through the bank. The court said:
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