First Nat. Bank v. National Exchange Bank

• Decision Date: 03 March 1874
• Citation: 39 Md. 600
• Parties: THE FIRST NATIONAL BANK OF CHARLOTTE v. THE NATIONAL EXCHANGE BANK OF BALTIMORE.
• Court: Maryland Court of Appeals

39 Md. 600

THE FIRST NATIONAL BANK OF CHARLOTTE v. THE NATIONAL EXCHANGE BANK OF BALTIMORE.

Court of Appeals of Maryland

March 3, 1874

APPEAL from the Superior Court of Baltimore City.

This was an action of assumpsit on the common counts to which the general issue was pleaded, and errors of pleading were waived.

In addition to the facts stated in the opinion of the Court, the following were shown by the record: When the case was called for trial, the plaintiff tendered in open Court all it had received under the contract made in September, 1866, which it disavowed, offering to annul the cancellation of the certificate of deposit, and to agree not to plead limitations in event of a suit being brought on it. The defendant declined the proffer. The plaintiff also proved, that Wilkes through whom the contract aforesaid was made with the defendant, and who was then the plaintiff's president continued to be a director till some time in 1868. It also produced and read the following letters which passed between the parties at the period of their respective dates:

BALTIMORE August 7 th, 1869.

To the President and Board of Directors of the National Exchange Bank of Baltimore.

Gentlemen:--As attorney of the First National Bank of Charlotte, N. C., I am instructed to notify your bank association that the Charlotte Bank repudiates in whole and in part the transactions by which John Wilkes, its late president, made a certain certificate of deposit for $55,000 of 5-20 United States bonds, and which was afterwards, by one L. P. Bayne fraudulently delivered to the officers of your bank in the course of illegal transactions had between them. And the Bank of Charlotte especially repudiates as unauthorized, illegal fraudulent and void, the pretended sale made by the officers of your bank of certain so-called stock (which is still in the hands of your bank) to said Wilkes, and the payment made by the officers of the Charlotte Bank of the sum of $40,000, which went into the funds of the Exchange Bank.

On behalf of the Bank of Charlotte, I hereby demand the immediate repayment of said sum of $40,000 and interest from the date at which the same was paid into your bank.

The foregoing notification of repudiation and demand for restitution of said sum is made for the following among other reasons:

1st. The certificate of deposit was void ab initio. The Charlotte Bank was forbidden, by the 36th section of the Banking Act, from creating any such liability. Wilkes had no power or authority to make it, either general or special. It certified to what both Wilkes and Bayne knew was false.

2nd. The certificate was obtained by fraud, was worthless in Bayne's hands, and was not a negotiable instrument. Bayne's assignment to you carried the equities with it.

3rd. The officers of your bank had constructive notice of the above, and took the certificate in transactions expressly forbidden by the 29th section of the Banking Act, and therefore void, as was for the same reason the taking of this paper.

4th. The money of the Bank of Charlotte was paid to your bank under false representations of the officers of your bank as to the title of the Exchange Bank to the stock of the Railroad Company and the Coal Company. The bank, in fact, has no title whatever to the stock, and the only title it could by any possibility have had, was that of a mere pledge, which cannot be sold or conveyed.

5th. The Washington, Alexandria and Georgetown Railroad stock is spurious and fraudulent, and not worth the paper it is printed on.

I trust that the due consideration of the above will induce you to order the immediate restitution of said sum of $40,000, with interest, to the Bank of Charlotte, and thus save the exposure and expense of litigating what is so plainly, according to the fundamental rules of law and business honesty, indefensible.

Respectfully,

J. DEAN SMITH,

Atty. of First National Bank of Charlotte.

BALTIMORE, 43 Lexington St., Aug. 16, 1869.

J. D. SMITH, ESQ., Atty., &c.

Dear Sir:--Your communication as attorney of the First National Bank of Charlotte, N. C., addressed to the President and Directors of the National Exchange Bank of Baltimore, has been referred to me, as the attorney of the latter bank, with the request that I should reply to it. I am instructed to say that the President and Directors of the National Exchange Bank, in view of all the circumstances connected with the settlement of their claim against the Bank of Charlotte, are surprised at the attempt now made to repudiate that transaction; and they are especially astonished at the manner in which the Bank of Charlotte has seen fit, through you, to impute fraud to the agents of the National Exchange Bank in the making of the settlement in question. The National Exchange Bank recognizes no right, legal, equitable or honest, in the National Bank of Charlotte, to claim restitution of money paid upon a fair, valuable, and perfectly well understood consideration. It declines to entertain your proposition to return that fund upon any of the grounds set forth in your letter, and leaves the Bank of Charlotte to take such course as it may be advised to pursue in this matter.

Yours, respy.,

WM. F. FRICK.

The cause was argued before BARTOL, C.J., STEWART, GRASON, MILLER, ALVEY and ROBINSON, J.

J. Upshur Dennis and John Scott, Jr., for the appellant.

I. The opinion of the Court below embodies a proposition of law, and is therefore the subject of an appeal. Tinges vs. Moale, 25 Md., 454; Thomas vs. Hunter, 29 Md., 411.

II. The judgment of the Superior Court is erroneous, because, while admitting that a National Bank has no power to purchase stocks, it, in effect, affirms that it has the power to purchase in order to make by a re-sale. If the power to purchase is not given, the fact that the purchase was made to procure the settlement of a claim held against it did not enure to make it void. Philpot vs. Gruninger, 14 Wallace, 574 and 577. The motive which induced the contract does not affect its legality. Moreover, the power is not to be found in the Banking Act, and the only power to which it can be incident, is the power to settle and discharge a disputed claim. Of course, all means of settlement must tend in that direction; must be a transfer of something already owned by the plaintiff, and it is simply paradoxical and absurd to say, that, as an incident to the right to pay, a bank can buy stocks from its alleged creditor to make a profit by the re-sale. Tallmage vs. Pell, 3 Selden, (N. Y., 342, &c.,;) Pearce vs. Madison & Ind. R. R., 21 Howard, 442; East Anglican Railways vs. Eastern Counties Railway, 1 Eng. L. & Eq., 588; Hood vs. N.Y. & N.H. R. R., 22 Conn., 16; same case, 22 Conn., 508; Russell vs. Topping, 5 McLean, 197, &c.

In the next place the power is opposed to public policy as well as to the particular policy of the Act. The case of Fowler vs. Schultz, 72 Pa. St., 462, establishes that it was not intended by the Act of Congress, for a bank to deal in stocks, and the power to make such a contract as this, would allow a bank to give its money for stocks without limit to every one of its creditors, provided it intended to apply the money made on their re-sale to replace that which discharged their claims. Foreman vs. Maryland Hospital, 29 Md., 530.

III. The contract being void, its execution is no defense to this suit. Foreman vs. Md. Hospital, 29 Md., 531. There is no delictum of any kind in the case, and moreover, the defendant had full notice of the limitations imposed on the plaintiff's agents by the Act of Congress, and dealt with him, knowing he transcended his authority. The principal can undoubtedly disavow his acts in all such cases.

IV. The striking out of the verdict quashed it, and no new judgment could be entered except on a new verdict, either by a jury or by the judge on a fresh submission. The judge was undoubtedly mistaken in supposing that the plaintiff waived its right to a non pros, and had distinct notice of the fact in the course of the argument. The right was perfectly valueless if the defendant was aware of the verdict, because the plea of limitations would have barred a second action. To grant the right of non pros, after the defendant knew the Court's decision on the facts, prevented the plaintiff from obtaining an agreement waiving the Statute of Limitations, and obliged it to prosecute the case. It was thus an empty form and an idle ceremony after taking away the essence of the right, viz: the uncertainty of the defendant as to what the Court's decision would be. Had the plaintiff's prayers been first granted, and the plaintiff called, the defendant might well have been in doubt as to the Court's views of the facts, and agreed not to plead limitations, if the plaintiff suffered non suit. Hall vs. Schuchardt, 34 Md., 19.

William F. Frick and I. Nevett Steele, for the appellee.

There is no appeal from the decision of the Court, either on the prayers as they were granted, or on its opinion giving reasons for its finding on the facts.

If it were possible to consider any question of law, the decision of the Court was correct, because the contract had been fully executed, and it was impossible to put the defendant in statu quo. The stocks had greatly depreciated, and the verbal offer not to plead limitations to an action in the certificate of deposit amounted to nothing

The letter of the appellee did not waive tender, because it refused to return the money on the grounds stated in the letter of the appellant's attorney, and did not refer to those on which the suit was brought.

The bank had power to procure the stocks under the circumstances stated in the judge's finding, as incidental to the undoubted rights of discharging and...