Farmers' Bank v. Garten

• Decision Date: 31 July 1863
• Citation: 34 Mo. 119
• Parties: THE FARMERS' BANK, Defendant in Error, v. ANDREW GARTEN et al., Plaintiffs in Error.
• Court: Missouri Supreme Court

34 Mo. 119

THE FARMERS' BANK, Defendant in Error,

v.ANDREW GARTEN et al., Plaintiffs in Error.

Supreme Court of Missouri.

July Term, 1863.

Error to Clay Circuit Court.

Doniphan and Lawson, for plaintiffs in error.

I. The act chartering the banks with branches made by the General Assembly in said act of 1856-7, p. 14, is unconstitutional as far as the Farmers' Bank and its branches are concerned, as each branch exercises all the powers of a separate bank as far as all banking privileges are concerned. (Acts 1856-7; Const. Amend. Id. p. 6.)

II. The charters of the banks are forfeited upon their failing and refusing to redeem their issues in gold or silver for ten days after demand. (Acts 1856-7, p. 14; § 9, p. 17.)

III. The banks had no power to protest paper, or do any other act, until revived by acts of March 18, 1861, and act of May 15, 1861, both of which are unconstitutional and void. (Acts 1856-7, p. 6.) The act of 1858-9, p. 16, is in violation of the constitution. (31 Mo. 528.)

IV. The taking of usury, by charging a greater rate of exchange than was reasonable on the bill of exchange, rendered the bill sued upon void, and the respondent is prohibited from collecting the said note. (Acts 1858-9, p. 16, and § 14.)

V. The pleadings admit that the bank took and received a large sum as usury, and that the contract as such was usurious and void. When the original loan is usurious, all the securities are void. (9 Cow. 647; 2 Cow. 678-712; 2 Pet. 527; 11 Ohio, 489-98; 8 Ohio, 257; Angell & Ames, § 256; 12 Ohio, 544; 13 Ohio, 1; 2 Cranch, 167; 4 Pet. 168; 9 Mo. 513; 10 Mo. 564; 31 Mo. 528; 29 Mo. 68; 26 Barb. 595; 7 Wheat. 57; Sto. Eq. § 1232; 13 Pick. --.)

Ryland & Son, Merryman, Wolff & Burnes, for defendant in error.

I. For a violation of the charter, the party must resort to a different remedy-- quo warranto; and cannot set such a violation up in his answer when sued on a bill of exchange or note.

II. Where the power creating the charter has also afterwards released the corporation from any supposed violation or forfeiture, by any act of legislation, there can be no quo warranto or other process to enforce the forfeiture.

III. Whenever the corporation acts within its sphere, or within the bounds of the business affairs of its creation, its acts may be illegal, but not void. Usury does not, by any clause in the charter of the bank, render the contract void.

BATES, Judge, delivered the opinion of the court.

This is a suit brought upon a bill of exchange, drawn by Andrew Garten upon Strader, Evans & Co., (and accepted by them) in favor of John Minter; endorsed by Minter to Scraggs, and by Scraggs to the plaintiff. Minter answered. The other defendants made no defence. Upon plaintiff's motion, Minter's answer was stricken out, and judgment rendered against all the defendants. Minter preserved exceptions to the striking out of his answer, and the questions that arise here relate to the validity of that answer; the answer sets up several defences, which will be considered in their order.

The first defense is, that the plaintiff (which is one of the ten banks chartered by the act of 1857) has no legal existence, because that act is unconstitutional in chartering a greater number of banks than ten. This conclusion is arrived at by regarding the branches authorized to be established by the parent banks as themselves banks, within the meaning of that word as employed in the constitution. It is not plain to us that they should be so regarded, and we will not hold an act of the General Assembly void upon the ground that it is in violation of the constitution, unless it plainly appears to be so. We think it unnecessary to attempt any definition of what constitutes a bank, thinking it sufficient to say, that it is not clear to us that the branches are banks within the meaning of the constittion.

The second defence is, that the plaintiff suspended payment of its notes in specie on the 13th day of November, 1857, and also about the middle of December, 1860; at each time, for a longer period than ten days, and that at the time said bill of exchange was protested the bank had been in a state of suspension for more than ten days. The bill was dated 21st January, 1861, and was protested 24th May, 1861. This is not a good defence. The bank act provides, “that upon such suspension of specie payments the charter of the bank shall cease and determine;” but we hold that such forfeiture cannot be enforced against the bank collaterally, but only by a direct proceeding for the purpose by scire facias, quo warranto, or information. (See Bank of the State of Mo. v. Bredow, 31 Mo. 528.)

The third defence is, that he, the defendant Minter, endorsed the bill at the request of Schrader, one of the acceptors, whilst the amount of it was blank, with the agreement that it was to be filled up for about twelve hundred dollars, and also was to have put upon it the prior endorsement of Rice Davenport, and that Schrader filled it up for a larger sum, and also used and disposed of the bill without getting the endorsement of Davenport upon it. This is not a good defence against the endorsee. The defendant having endorsed the bill in blank, has thereby given to the holder the right to fill up the blanks; and the bill having passed to the plaintiff for value, the defendant cannot deny that the blanks were properly filled.

The fourth defence is, that the bill did not belong to the plaintiff, but to its branch at Liberty, and that both the parent bank and the branch had suspended specie payments for more than twenty days before the protest of the bill. The objections to this defence are stated before in the remarks upon the first and second defences.

The fifth defence is, that, about the 15th day of January, 1861, and on divers other days before and since, the plaintiff received and paid out bills of the Western Bank, Union Bank, Bank of St. Louis, and Mechanics' Bank, while the said banks were suspended, and at a depreciated value, contrary to the provisions of the statute against illegal banking, approved December 8, 1855. This defence (though not...