First Nat. Bank of Hagerman v. Stringfield

• Citation: 235 P. 897,40 Idaho 587
• Parties: FIRST NATIONAL BANK OF HAGERMAN, IDAHO, a Corporation, Appellant, v. C. W. STRINGFIELD and C. L. NELSON, Respondents
• Decision Date: 14 April 1925
• Court: United States State Supreme Court of Idaho

235 P. 897

40 Idaho 587

FIRST NATIONAL BANK OF HAGERMAN, IDAHO, a Corporation, Appellant, v. C. W. STRINGFIELD and C. L. NELSON, Respondents

Supreme Court of Idaho

April 14, 1925

APPEAL-MOTION TO DISMISS-NATIONAL BANK-EXCESS LOAN-LIABILITY OF OFFICERS-PARTICIPATION BY DEPOSITOR-EFFECT OF-COSTS-EXPENSES OF TAKING DEPOSITION.

1. A motion for nonsuit admits the truth of plaintiff's evidence and of every fact which it tends to prove, and appellant is entitled to the benefit of all inferences in his favor which the jury would have been justified in drawing from the evidence.

2. The cashier of a national bank is liable for any loss that results to the bank from the making by him of a loan to any person from the funds of the bank of a sum in excess of ten per cent of the bank's capital and unimpaired surplus.

3. Where a promissory note is taken by a bank and is indorsed "without recourse" and held by the bank for months and is then delivered to one for the purpose of collection the indorsement is not binding on the collector and he may show the purpose for which the note was delivered to him.

4. An indorsement "without recourse" constitutes the entire contract between an indorser and indorsee when the note is delivered in pursuance of the indorsement.

5. Money deposited in a bank on general deposit belongs to the bank and not to the depositor.

6. The lending of money withdrawn from the account of a depositor with the authority of the depositor, does not constitute the making of an excess loan under U.S. Rev. Stats., sec. 5200 and the bank is not liable to the depositor in an action to recover the deposit.

7. A national bank cannot be held for the act of its cashier in lending money for a depositor, nor is the bank liable on a guarantee of the payment of such a loan.

8. Expenses of an attorney incurred in taking a deposition are not taxable as costs.

APPEAL from the District Court of the Fourth Judicial District, for Gooding County. Hon. H. F. Ensign, Judge.

Action for damages. Judgment of nonsuit. Reversed.

Motion to dismiss the appeal denied; judgment and Order denying the motion to retax the costs reversed. Costs to appellant.

Bissell & Bird, for Appellant.

The rule excluding parol evidence which tends to vary written instruments does not apply where the action is between one party to the writing and a third party, a stranger thereto. (22 C. J., p. 1292, and cases cited; 10 R. C. L., p. 1020 and cases cited.)

If the indorsement contract on a promissory note is not completed by a delivery to and acceptance by an indorsee, there is no present contract in writing which can prevent parol evidence to explain a blank indorsement on the notes. (Spencer v Carstarphen, 15 Colo. 445, 24 P. 882; Burke v. Dulaney, 153 U.S. 228, 14 S.Ct. 816, 38 L.Ed. 698.)

A cashier is bound to exercise reasonable skill, care and diligence in the exercise of his duties, and a loan made in excess of the amount prescribed by sec. 5200, U.S. Rev. Stats., is unlawful and ipso facto negligent, and the officer making the same is liable to his bank for consequent damages. (City National Bank v. Crow, 27 Okla. 107, Ann. Cas. 1912B, 647, 111 P. 210; Corsicana Nat. Bank v. Johnson, 251 U.S. 68, 40 S.Ct. 82, 64 L.Ed. 141; Solomon v. Bates, 118 N.C. 311, 54 Am. St. 725, 24 S.E. 478; Bowerman v. Hamner, 250 U.S. 504, 39 S.Ct. 549, 63 L.Ed. 1113; 3 R. C. L. 465; 7 C. J., pp. 172, 562; Seventeenth Ward Bank v. Smith, 51 A.D. 259, 64 N.Y.S. 888; Boyd v. Applewhite, 121 Miss. 879, 84 So. 16; San Joaquin Bank v. Bours, 65 Cal. 247, 3 P. 864; Magale v. Fomby, 132 Ark. 289, 201 S.W. 278; Vance v. Motley, 92 Tenn. 310, 21 S.W. 593; Fergus etc. Falls Woolen Mills Co. v. Boyum, 136 Minn. 411, 162 N.W. 516, L. R. A. 1918A, 919.)

An action against a bank cashier for damages sustained by the bank on account of a loan made by said cashier in contravention to sec. 5200, U.S. Rev. Stats., is an action in tort, and the bank need not prove actual payment of the damage so suffered as a condition precedent to recovery from the cashier. (Corsicana Nat. Bank v. Johnson, supra; Denning v. State, 123 Cal. 316, 55 P. 1000; Hallidie v. Enginger, 175 Cal. 505, 166 P. 1; Nelson v. Great Northern Ry. Co., 28 Mont. 297, 72 P. 642; 9 R. C. L., p. 966; 26 R. C. L., p. 758, sec. 4; 1 C. J., p. 1013, note 91; Solomon v. Bates, supra; 26 R. C. L., p. 494, note 9.)

Where it is not shown that a note is delivered to or accepted by an indorsee there is no contract by virtue of an indorsement in blank that appears on the notes; and if a third person later receives the note for the purpose of collection only, such suit does not constitute a ratification of the indorsement thereon. (Lewis County v. State Bank of Peck, 31 Idaho 244, 170 P. 98; Burke v. Dulaney, supra; Craig v. Palo Alto Stock Farm, 16 Idaho 701, 102 P. 393.)

A national bank possesses the inherent power to guarantee payment of its commercial paper, either orally or by writing, when such paper is disposed of to a third party. (Commercial Nat. Bank v. Pirie, 82 F. 799, 27 C. C. A. 171; 7 C. J., p. 815, sec. 746; People's Bank v. National Bank of Chicago, 101 U.S. 181, 25 L.Ed. 907; Hanover Nat. Bank v. First Nat. Bank, 109 F. 421, 48 C. C. A. 482.)

No costs are recoverable except those provided for by statute or rule of court, and the fact that costs may have been necessarily incurred in connection with the trial of a cause is not alone sufficient to render such items proper. (C. S., secs. 7209, 7218; Cronan v. District Court, 15 Idaho 462, 98 P. 614; Sime v. Hunter, 55 Cal.App. 157, 202 P. 967; McDonald v. Burke, 3 Idaho 266, 35 Am. St. 276, 28 P. 440; 15 C. J., pp. 137 and 144; Aldrich v. Maher, 153 Ill.App. 413.)

James & Ryan, for Respondent Stringfield.

Any loan to be excess and prohibited by sec. 5200, U.S. Rev. Stats., must be a loan of the funds of the bank and the indebtedness must extend to the bank. (Albitztigui v. Guadalupe Y. Caloo Min. Co., 92 Tenn. 598, 22 S.W. 739.)

If a statute limits the amount of indebtedness which a corporation may lawfully incur but does not impose personal liability for violation thereof upon directors or other officers, there is no personal liability, since it did not exist at common law. (4 Fletcher, Ency. Corp., pp. 3871, 3872, sec. 2630; Frost Mfg. Co. v. Foster, 76 Iowa 535, 41 N.W. 212; Randolph v. Ballard County Bank, 142 Ky. 145, 134 S.W. 165; Fusz v. Spaunhorst, 67 Mo. 256; Zinn v. Mendel, 9 W.Va. 580.)

The president and cashier of a national bank have no power to bind the bank except in the discharge of their ordinary duties. (Bank of United States v. Dunn, 31 U.S. 51, 8 L.Ed. 20; Boone on Banking, secs. 101, 119, 353 and 688; Western Nat. Bank v. Armstrong, 152 U.S. 346, 14 S.Ct. 572, 38 L.Ed. 470.)

A national bank has no power to engage to make loans for others or to act as brokers. (Grow v. Cockrill, 63 Ark. 418, 39 S.W. 60, 36 L. R. A. 89; Weckler v. First Nat. Bank, 42 Md. 581, 20 Am. Rep. 95; First Nat. Bank v. Hoch, 89 Pa. 324, 33 Am. Rep. 767; First Nat. Bank v. National Exchange Bank, 92 U.S. 122, 23 L.Ed. 679; Dresser v. Traders Nat. Bank, 165 Mass. 120, 42 N.E. 567; Ruohs v. Third Nat. Bank, 44 Tenn. 57; Farmers & Merchants' Nat. Bank v. Smith, 77 F. 129, 23 C. C. A. 80.)

The loaning of money for depositors or other persons is not within the authority of a national bank and such bank cannot be held liable for the acts of its president and cashier in making such a loan. (7 C. J., p. 560 (96), 788 (61); Pollock v. Lumbermen's Nat. Bank, 86 Ore. 324, 168 P. 616, L. R. A. 1918B, 402; American Nat. Bank v. E. W. Adams & Co., 44 Okla. 129, 143 P. 508, L. R. A. 1915B, 542; 3 R. C. L., p. 423, sec. 51.)

A national bank has no power to guarantee the debt of another and its act in so doing is ultra vires, when such loan is for the benefit of a third person, and the bank is not estopped from setting up the ultra vires character of the act even though the contract is fully executed. (Bowen v. Needles Nat. Bank, 94 F. 925, 36 C. C. A. 553; Commercial Nat. Bank v. Pirie, 82 F. 799, 27 C. C. A. 171; First Nat. Bank v. American Nat. Bank, 173 Mo. 153, 72 S.W. 1059; California Nat. 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 & D. Co. v. National Bank, 48 Tex. Civ. 301, 106 S.W. 782; Norton v. Derry Nat. Bank, 61 N.H. 589, 60 Am. Rep. 334; Citizens' Cent. Bank of 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.)

A cashier of a bank cannot render such bank liable on a guaranty given in connection with a transaction not within the scope of the bank's powers. (7 C. J. 787; Farmers & Merchants' Nat. Bank v. Smith, supra.)

A person seeking indemnity from a person alleged to have caused the injury must have been legally liable to the injured party, that is, the injured party's claim must be a valid one. (22 Cyc. 98, and notes; 31 C. J., p. 453, sec. 52 and notes; Mann's Merc. Co. v. Smith, 107 Miss. 16, 64 So. 929.)

The statutory liability of an officer of a corporation extends only to corporate debts which are enforceable against the corporation. (7 R. C. L., p. 516, sec. 502.)

A judgment recovered against a corporation is not itself proof of an indebtedness on the part of the corporation to the judgment creditor in so far as the liability of its officers is concerned. It is not even prima facie evidence of the existence of a debt due from the corporation. (7 R. C. L., p 516; Chase v. Curtis, 113 U.S. 452, 5 S.Ct. 554, 28 L.Ed. 1038; Thompson on Corporations, pp. 413, 414, sec. 1378; Dabney v. Stevens, 40 How. Pr. (N. Y.) 341; Miller v. White, 50 N.Y. 137; Whitney Arms Co. v. Barlow, 63 N.Y. 62...