First Nat. Bank v. American Nat. Bank

Decision Date18 February 1903
Citation72 S.W. 1059,173 Mo. 153
PartiesFIRST NAT. BANK OF MOSCOW, IDAHO, v. AMERICAN NAT. BANK OF KANSAS CITY.
CourtMissouri Supreme Court

Appeal from Circuit Court, Jackson County; Edw. P. Gates, Judge.

Action by the First National Bank of Moscow, Idaho, against the American National Bank of Kansas City. From an order granting a new trial after judgment in favor of the plaintiff, it appeals. Transferred from the Court of Appeals on a federal question involved. Affirmed.

This is an action to recover upon three drafts drawn by Lieuallen, of Idaho, upon Clemons & Co., of Kansas City, for certain merchandise bought by the latter from the former, and which drafts were discounted by the plaintiff on the faith of a telegram to it by the defendant that they would be paid. The plaintiff recovered a judgment in the trial court. The court granted a new trial, assigning as a reason "that the court erred in refusing defendant's instructions as demurrer to the evidence and in refusing defendant's instruction requesting the court to find for the defendant." The plaintiff appealed to the Kansas City Court of Appeals, and that court transferred the case to this court on the ground that a federal question is involved.

The facts are these: Both of the parties hereto are national banks. In May, 1898, Clemons & Co. entered into negotiations with Lieuallen to ship them certain potatoes, agreeing to advance 50 cents per 100 pounds thereon. Lieuallen applied to the plaintiff bank to cash his drafts on Clemons & Co. therefor, and that bank refused to do so unless Clemons & Co.'s bank would telegraph it to pay the drafts. Accordingly the defendant bank telegraphed the plaintiff bank on May 18 and 19, 1898, as follows:

                        "Kansas City, Mo., May 18, 1898
                

"First National Bank, Moscow, Idaho: Drafts of C. C. Lieuallen drawn on C. C. Clemons and Company with bills lading attached for three cars choice sacked potatoes, valuation fifty cents per hundred pounds, will be paid.

                   "[Signed]    J. R. Dominick, Cashier."
                          "Kansas City, Mo., May 19, 1898
                

"First National Bank, Moscow, Idaho: Drafts C. C. Lieuallen on C. C. Clemons and Company, with bills lading attached for three more cars choice sacked potatoes, valuation fifty cents per hundred pounds, will be paid.

                   "[Signed]    J. R. Dominick, Cashier."
                

Upon receipt of these telegrams the plaintiff bank cashed three certain drafts drawn by Lieuallen on Clemons & Co., with bills of lading for the potatoes shipped attached. The drafts were payable to the plaintiff bank. The drafts were dishonored by Clemons & Co., and payment was likewise refused by the defendant bank. Clemons & Co. received all the potatoes, and sold them, and never paid for them. Thereupon this suit was brought. The defendant set up three defenses: First, want of power in the cashier of the bank to send the telegrams, and that they were not sent in course of the business it was authorized to do, and were not intended by the cashier to bind the defendant as surety or guarantor, nor to induce the plaintiff to cash the drafts; second, that the potatoes did not come up to the quality agreed to be purchased; third, that as a national bank the defendant had no power to bind itself to pay the drafts. The reply pleads estoppel on the part of the defendant to plead ultra vires. The trial took a wide range as to the character of the potatoes, the custom of banks in like cases, and the meaning of the telegrams themselves—as to whether they would be taken in banking circles to be a promise by the bank to pay the drafts or that Clemons would pay them, or simply as an expression of opinion as to Clemons & Co.'s standing and financial responsibility. It was admitted that Clemons & Co. were customers of the defendant bank, and had on general deposit with the defendant at the time more than enough money to pay the drafts, though it had not been specially set apart for that purpose; and that Clemons & Co. afterwards gave the defendant a bond of indemnity against loss, and employed counsel, and are defending this case at their own expense.

Wollman, Solomon & Cooper, for appellant. Hamner & Hamner, for respondent.

MARSHALL, J. (after stating the facts).

1. The case necessarily involves the power of a national bank to bind itself to a third person to pay a draft on one of its customers. The answer pleads want of power in the defendant under the national banking act. A federal question is, therefore, directly raised by the record, and therefore this court has jurisdiction, and the Kansas City Court of Appeals properly transferred the case to this court. California Bank v. Kennedy, 167 U. S., loc. cit. 365, 17 Sup. Ct. 831, 42 L. Ed. 198; Bank v. Haseltine, 155 Mo. 62, 55 S. W. 1015, 85 Am. St. Rep. 531; affirmed Haseltine v. Bank, 183 U. S. 132, 22 Sup. Ct. 50, 46 L. Ed. 118.

2. The powers of a national bank under the national banking act are essentially matters for federal construction and interpretation, and, whatever rules may obtain in the several states as to the powers of corporations under state statutes, all state courts must yield to the decisions of the Supreme Court of the United States construing the powers of national banks under the national banking act. In this case the defendant pleads that it had no power under the national banking act to enter into a contract with the plaintiff bank—which is likewise a national bank—that the draft of Lieuallen on Clemons & Co. would be paid, because such a contract was a mere guaranty, and that it was ultra vires of its power to make such a contract. The plaintiff replies that the defendant is estopped to plead ultra vires, among other reasons because the contract is an executed contract on the part of the plaintiff, and because only the government can question the power of the defendant to enter into such a contract. This, therefore, raises the question of the power of a national bank to interpose a plea of ultra vires as to any contract it may make, when sued on the contract by the other party thereto. Speaking to this proposition, the Supreme Court of the United States, through Mr. Justice White, in California Bank v. Kennedy, 167 U. S., loc. cit. 367, 17 Sup. Ct. 833, 42 L. Ed. 198, said: "Whatever divergence of opinion may arise on this question from conflicting adjudications in some of the state courts, in this court it is settled in favor of the right of the corporation to plead its want of power; that is to say, to assert the nullity of an act which is an ultra vires act. The cases of Thomas v. Railroad Company, 101 U. S. 71 ; Pennsylvania Railroad v. St. Louis, Alton, etc., Railroad, 118 U. S. 290 [6 Sup. Ct. 1094, 30 L. Ed. 83]; Oregon Railway & Navigation Co. v. Oregonian Railway Co., 130 U. S. 1 [9 Sup. Ct. 409, 32 L. Ed. 837]; Pittsburgh, Cincinnati, etc., Railway v. Keokuk & Hamilton Bridge Co., 131 U. S. 371 [9 Sup. Ct. 770, 33 L. Ed. 157]; Central Transp. Co. v. Pullman's Car Co., 139 U. S. 24 [11 Sup. Ct. 478, 35 L. Ed. 55]; St. Louis, etc., Railroad v. Terre Haute & Indianapolis Railroad, 145 U. S. 393 [12 Sup. Ct. 953, 36 L. Ed. 748]; Union Pacific Railway v. Chicago, etc., Railway, 163 U. S. 564 [16 Sup. Ct. 1173, 41 L. Ed. 265]; and McCormick v. Market Nat. Bank, 165 U. S. 538 [17 Sup. Ct. 433, 41 L. Ed. 817]—recognize as sound doctrine that the powers of corporations are such only as are conferred upon them by statute, and that— to quote from the opinion of the court in Central Transp. Co. v. Pullman's Palace Car Co., 139 U. S. 24, 59 to 60 [11 Sup. Ct. 478, 488, 35 L. Ed. 55]: `A contract of a...

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