Farmers & Mechanics' Bank v. Baldwin

• Decision Date: 28 October 1876
• Citation: 23 Minn. 198
• Parties: FARMERS & MECHANICS' BANK <I>vs.</I> RUFUS J. BALDWIN, impleaded, etc.
• Court: Minnesota Supreme Court

23 Minn. 198

FARMERS & MECHANICS' BANKvs.

RUFUS J. BALDWIN, impleaded, etc.

Supreme Court of Minnesota.

October 28, 1876.

Action against the maker and endorser of the following promissory note:

                $3,000.           St. Paul, Minn., March 16, 1875
                

Three months (without grace) after date I promise to pay to the order of R. J. Baldwin three thousand dollars, at the Farmers and Mechanics' Bank, St. Paul, with interest at twelve per cent. per annum after maturity until paid. Value received.

                                            W. S. JUDD
                

[Endorsed] R. J. BALDWIN.

In its amended complaint the plaintiff, which is a corporation, organized in 1871 under Gen. St. c. 33, and amendatory acts, after averring the making of the note, alleged "that afterwards, and before the maturity of said note, the said Rufus J. Baldwin, by the name of R. J. Baldwin, for value received, and for an adequate consideration, in the regular course of business, endorsed, in blank, and wrote his name across the back of said note, whereby the same became and was payable to bearer, and delivered said note to said Judd; that afterwards, and before the maturity of said note, the said Judd, for value received, and for an adequate consideration, in the regular course of business, sold, transferred, and delivered said note to W. C. Patterson; that afterwards, and before the maturity of said note, in the regular course of business, for value received, and for an adequate consideration, the said W. C. Patterson sold, transferred, and delivered the said note to said plaintiff, who thereby became, and now is, the bona fide owner thereof."

The defendant Judd made default. The defendant Baldwin, in his amended answer, alleged that he endorsed the note for the accommodation of Judd, and not otherwise; that the plaintiff paid Judd no consideration therefor, except that it loaned him thereon a sum of money at the rate of 15 per cent. per annum, and upwards, and that the sum so loaned was the face of the note less interest thereon computed for the whole period from date to maturity

at the rate of 15 per cent. per annum; that, as a banking corporation, the plaintiff was prohibited by law from taking over 12 per cent. interest on loans or discounts; that the loan and consideration so paid by plaintiff was usurious, and contrary to the statutes of the state, and that the note was void. The defendant further denied that the note was ever sold or transferred by Judd or Baldwin to Patterson, or that Patterson was ever the owner or holder thereof, or had any interest therein, or that he ever sold or transferred the note to the plaintiff; and alleged that plaintiff had no authority under its charter, or under the laws of the state, to purchase the note, but was prohibited by law from so doing, and that the note was wholly void in the hands of the plaintiff.

At the trial in the court of common pleas of Ramsey county, before Simons, J., the plaintiff introduced evidence tending to prove the following state of facts: The note in suit, with others of like form, was made by Judd, endorsed by Baldwin, and then delivered by Judd to Patterson, to be used in payment of two notes made by Judd and endorsed by Baldwin, the one for $7,000, belonging to one White, and the other for $6,000, belonging to Patterson, both which last-mentioned notes had been made and negotiated to raise money to pay a debt of Judd to one Gluck. It was agreed between Judd and Patterson (who was a note-broker, and agent for White) that the notes (including that in suit) made to be used in payment of the $6,000 note and the $7,000 note should be disposed of by Patterson at a discount of 15 per cent., Patterson receiving for his services a commission of one-half of 1 per cent. On March 18, 1875, Patterson transferred the note in suit to plaintiff, receiving from plaintiff $2,881.25, being the face of the note less interest thereon from date to maturity at the rate of 15 per cent. per annum. Patterson was not asked to, and did not, endorse the note. The plaintiff knew that Patterson was a broker, and did not require him to endorse the note because it regarded the paper as perfectly good without the endorsement. The plaintiff had no dealings with Judd or Baldwin about the note before taking it, and there was no evidence that plaintiff, when it took the note, had any knowledge of the circumstances under which it was made and delivered to Patterson.

The defendant introduced evidence tending to prove that Patterson never had any interest in the note in suit, but was merely the agent of Judd to negotiate it.

The court instructed the jury, under exception by plaintiff, that the plaintiff had no power, under its charter, to buy the note in suit, or to become the owner thereof, except by discounting it or loaning money upon it; that the plaintiff had no power to discount the note, or to loan money upon it, at a rate of interest exceeding 12 per cent. per annum; and that, if the plaintiff discounted the note at a rate of interest exceeding 12 per cent. per annum, or became the owner of it as a security for a loan made at a rate of interest exceeding 12 per cent. per annum, the verdict must be for defendant. The jury found for defendant, a new trial was refused, and plaintiff appealed.

Morris Lamprey, for appellant.

Bigelow, Flandrau & Clark, for respondent.

CORNELL, J.

It is conceded that plaintiff's only title to the note in question rests upon its absolute purchase, as a chose in action, from one Patterson, the then owner, for a specific sum agreed upon and paid at the time of the purchase. Patterson did not endorse the note, nor expressly assume any obligation in connection with the transfer. Inasmuch as the ownership of the note by plaintiff is put in issue by the pleadings, the question necessarily arises whether the plaintiff had the corporate power to make the purchase in the manner it did, and whether, by such alleged purchase, it acquired any title which it could enforce against either the maker, or Baldwin, the endorser.

The doctrine that a corporation can only exercise such powers as are expressly granted, or as are incidental to its existence, or necessary to enable it to execute some one or more of its express powers, is too firmly established, both upon principle and authority, to admit of any doubt or discussion. This rule, by which courts must be governed in all enquiries into the existence of any corporate power, is aptly and justly declared to be axiomatic, in the opinion of the court in First Nat. Bank v. Ocean Nat. Bank, 60 N. Y. 278, 294; Dartmouth College v. Woodward, 4 Wheaton, 518, 636; 2 Kent, 299; School District v. Thompson, 5 Minn. 280, 286. So, when an express power is granted, and the specific mode or manner of its exercise is prescribed, it can only be exercised in that particular way. Bank of Augusta v. Earle, 13 Peters, 519, 587; 2 Kent, 290, 299.

Plaintiff derives its corporate existence and powers from Gen. St. c. 33, as it existed prior to the amendment in 1876, (Laws 1876, c. 92;) and, if it had the power in question at all, it must be found in some of the provisions of that chapter, which relates to banks and banking. Section 2 provides that "any person or association of persons may establish offices of discount, deposit, and circulation, and become incorporated, upon the terms and conditions, and subject to the liabilities, prescribed in this chapter." Section 11 prescribes the manner in which such corporation shall be formed, and declares that upon such its formation as a body politic and corporate, by its assumed name, it shall, by such name, "have power to contract and be contracted with, sue and be sued, and shall have all other powers, privileges, and immunities incident to corporations and applicable to the ends of such establishments, subject to the restrictions and provisions of this chapter." Section 13, which specifically defines the powers of such corporations, is as follows: "Such person or association has power to carry on the business of banking, by discounting bills, notes, and other evidences of debt, by receiving deposits, by buying and selling gold and silver bullion, foreign coin and foreign and inland bills of exchange, by loaning money on real and personal securities, and by exercising such incidental powers as may be necessary to carry on such business."¹ Section 33 provides that "such bank or banking association may demand and receive, for loans on real and personal security, or for notes, bills, or other evidences of debt discounted, such rate of interest as may be agreed upon by the parties, not exceeding 12 per cent. per annum; subject, however, to such general laws regulating and fixing the rate of interest as may hereafter be passed by the legislature; and it shall be lawful to receive the interest in advance, according to the ordinary usage of banking institutions, and in general to do all things, and have all the privileges, incident to banking associations or corporations." Section...