First Nat Bank of Concord v. Hawkins

• Decision Date: 15 May 1899
• Docket Number: No. 187,187
• Citation: 19 S.Ct. 739,174 U.S. 364,43 L.Ed. 1007
• Parties: FIRST NAT. BANK OF CONCORD, N. H., v. HAWKINS
• Court: U.S. Supreme Court

174 U.S. 364

19 S.Ct. 739

43 L.Ed. 1007

FIRST NAT. BANK OF CONCORD, N. H.,

v HAWKINS.

No. 187.

May 15, 1899.

In May, 1895, Edward Hawkins, as receiver of the Indianapolis National Bank, brought a suit in the circuit court of the United States for the district of New Hampshire against the First National Bank of Concord. At the trial a jury was waived, and the court found the following facts:

'The plaintiff is receiver of the Indianapolis National Bank of Indianapolis, which bank was duly organized and authorized to do business as a national banking association. The bank was declared insolvent and ceased to do business on the 24th day of July, 1893. The plaintiff was duly appointed and qualified receiver of the bank on the 3d day of August, 1893, and took possession of the assets of the bank on the 8th day of the same month.

'The capital stock of the bank was 3,000 shares, of the par value of $100 each. On the 25th day of October, 1893, an assessment was ordered by the comptroller of $100 per share on the capital stock of the bank, to enforce the individual liability of stockholders, and an order made to pay such assessment on or before the 25th day of November, 1893; and the defendant was duly notified thereof.

'The defendant, being a national banking association, duly organized and authorized to do business at Concord, N. H., on the 21st day of May, 1889, with a portion of its surplus funds, purchased of a third party, authorized to hold and make sale, 100 shares of the stock of the Indianapolis National Bank, as an investment, and has ever since held the same as an investment. The defendant bank has appeared upon the books of the Indianapolis bank as a shareholder of 100 shares of its stock from the time of such purchase to the present time. During such holding the defendant bank received annual dividends declared by the Indianapolis bank prior to July, 1893. The defendant has not paid said assessment, or any part thereof.'

After argument, the court, on July 28, 1896, entered judgment in favor of the plaintiff for the sum of $11,646.67 and costs. From that judgment a writ of error from the United States circuit court of appeals for the First circuit was sued out, and by that court the judgment of the trial court was on March 5, 1897, affirmed. 33 U. S. App. 747, 24 C. C. A. 444, and 79 Fed. 51. From the judgment of the circuit court of appeals a writ of error was allowed to this court.

Frank S. Streeter, for plaintiff in error.

John G. Carlisle and John W. Kern, for defendant in error.

Mr. Justice SHIRAS, after stating the facts in the foregoing language, delivered the opinion of the court.

The questions presented for our consideration in this case are whether one national bank can lawfully acquire and held the stock of another as an investment, and, if not, whether, in the case of such an actual purchase, the bank is estopped to deny its liability, as an apparent stockholder, for an assessment on such stock ordered by the comptroller of the currency.

By section 5136 of the Revised Statutes a national banking association is authorized 'to exercise by its board of directors, or duly authorized officers and 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 evidences of indebtedness; 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.'

In construing this provision, it was said by this court in First Nat. Bank of Charlotte v. National Exch. Bank of Baltimore, 92 U. S. 122, that 'dealing in stocks is not expressly prohibited, but such prohibition is implied from the failure to grant the power. In the honest exercise of the power to compromise a doubtful debt owing to a bank, it can hardly be doubted that stocks may be accepted in payment and satisfaction, with a view to their subsequent sale or conversion into money, so as to make good or reduce an anticipated loss. Such a transaction would not amount to a dealing in stocks.'

And in the recent case of Bank v. Kennedy, 167 U. S. 362, 17 Sup. Ct. 831, it was said to be 'settled that the United States statutes relative to national banks constitute the measure of the authority of such corporations, and that they cannot rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established. No express power to acquire the stock of another corporation is conferred upon a national bank, but it has been held that, as incidental to the power to loan money on personal security, a bank may, in the usual course of doing such business, accept stock of another corporation as collateral, and by the enforcement of its rights as pledgee it may become the owner of the collateral, and be subject to liability as other stockholders. So, also, a national bank may be conceded to possess the incidental power of accepting in good faith stock of another corporation as security for a previous indebtedness. It is clear, however, that a national bank does not possess the power to deal in stocks. The prohibition is implied from the failure to grant the power.'

Accordingly it was held in that case that a provision of the laws of the state of California which declared a liability on the part of stockholders to pay the debts of a savings bank, in proportion to the amount of stock held by each, could not be enforced against a national bank, in whose name stood shares of stock in a savings bank; it being admitted that the stock of the savings bank had not been taken as security, and that the transaction by which the stock was placed in the name of the national bank was one not in the course of the business of banking, for which the bank was organized.

It is suggested by the learned circuit judge, in his opinion overruling a petition for a rehearing in the circuit court of appeals, that the question considered in the case of Bank v. Kennedy was the liability of a national bank as a stockholder in a state savings bank, while the question in the present case is as to its liability as a stockholder in another national bank, and that, therefore, it does not follow, beyond question, that the decision in the former case is decisive of the present one. 50 U. S. App. 178, 27 C. C. A. 679, and 82 Fed. 301.

No reason is given by the learned judge in support of the solidity of such a distinction, and none occurs to us. Indeed, we think that the reasons which disqualify a national bank from investing its money in the stock of another corporation are quite as obvious when that other corporation is a national bank as in the case of other corporation. The investment by national banks of their surplus funds in other national banks, situated, perhaps, in distant states, as...