First National Bank of Moscow v. American National Bank of Kansas City
| Decision Date | 18 March 1903 |
| Parties | FIRST NATIONAL BANK OF MOSCOW, Appellant, v. AMERICAN NATIONAL BANK OF KANSAS CITY |
| Court | Missouri Supreme Court |
Transferred from Kansas City Court of Appeals.
Affirmed.
Wollman Solomon & Cooper for appellant.
(1) The defense of ultra vires can not be successfully interposed by defendant in this case for the reasons: first, the National Banking Act does not prohibit a national bank from entering into contract such as is contained in the two telegrams of May 18th and 19th, and the contract has been fully performed by the plaintiff; second, Clemons & Company are the real parties in interest, having indemnified the defendant and assumed full charge and control of the defense, and having deposited sufficient money with defendant to take care of the drafts. Hutchins v. Bank, 128 N.C. 72; People's Bank v. Nat. Bank, 101 U.S. 183; Railroad v. McCarthy, 96 U.S. 267; Railroad v Transp. Co., 83 Pa. 160; Bushnell v. Bank, 10 Hun 378; Arms Co. v. Barlow, 63 N.Y. 62; Wat. Corp., 604; West. Nat. Bank v. Armstrong, 152 U.S. 470. The contract sued on is not ultra vires the corporation. Authority is given by the National Banking Act to national banks to transact such banking business as is specified in the act, and all incidental powers necessary to carry on the business. These powers are such as are required to meet all the legitimate demands of authorized business and to enable the bank to conduct its affairs within the scope of its charter safely and prudently. There is no specified authority given in the act of Congress for a bank to certify checks. Yet it was said by Judge Swayne, in the case of Bank v. Bank, 10 Wall. 604: (2) It is well-established principle that where contracts made by or with corporations are not expressly prohibited by statute, and have been fully, or even partially, executed so that it would be unjust to allow a repudiation thereof by either party, the defense of ultra vires will not be sustained by the courts. The defense should not prevail when it would not advance justice, but, on the contrary, work a legal wrong. Ins. Co. v. Smith, 117 Mo. 289; Bank v. Matthews, 98 U.S. 621; Bank v. Pierson, 24 Minn. 141; Martindale v. Railroad, 60 Mo. 508; Bradley v. Ballard, 55 Ill. 417; 27 Am. and Eng. Ency. of Law (1 Ed.), p. 378; Root v. Godard, 3 McLean (U.S.) 102; Kinealy v. Railroad, 69 Mo. 663; Hovelman v. Railroad, 79 Mo. 663. (3) Clemons & Company are the real parties in interest. The admission made by defendant at the trial and the testimony of the defendant's cashier showed that Clemons & Company assumed absolute charge of the case, and obligated themselves by contract to pay the judgment and all costs and expenses and employ attorneys to take charge of and conduct the defense. Under this state of facts, Clemons & Company would be estopped to deny the binding force against them of the judgment in this case in an action over by the bank against them. Littleton v. Richardson, 34 N.H. 187; Boston v. Worthington, 10 Gray 486; Landis v. Hamilton, 77 Mo. 565; Lovejoy v. Murray, 70 U.S. 129. (4) It has come to be regarded as a settled rule in this State that the State itself is the only one who can question the validity of an ultra vires act of a corporation. Sav. Ins. v. Board of Education, 75 Mo. 412; Ins. Co. v. Smith, 117 Mo. 261. The same rule has been adopted by the Supreme Court of the United States with reference to national banks. Thompson v. Bank, 146 U.S. 958.
Hamner & Hamner for respondent.
(1) This court will follow the United States Supreme Court's construction of the National Banking Act. Haseltine v. Bank, 155 Mo. 66. (2) Respondent had the right to set up the defense of ultra vires. Bank v. Kennedy, 167 U.S. 165; McCormick v. Bank, 165 U.S. 538; Transp. Co. v. Pullman's Palace Car Co., 139 U.S. 48; Pearce v. Railroad, 62 U.S. (21 How.) 441; Railroad v. Railroad, 163 U.S. 564; Thomas v. Railroad, 101 U.S. 71; Railroad v. Railroad, 118 U.S. 290; Oregon R. & Nav. Co. v. Railroad, 130 U.S. 22; Bacon, Dawson & Co. v. Bank, 79 Mo.App. 406. (3) The alleged guaranties, even if guaranties, are ultra vires and void. Bacon, Dawson & Co. v. Bank, supra; Bowen v. Bank, 87 F. 430; 94 F. 925; Flannagan & Bennett v. Bank, 56 F. 959; Seligman v. Bank, 3 Hughes 647; Johnston v. Bank, 13 Fed. Cases 885; Bank v. Atkinson, 55 F. 465; 61 F. 809; 27 U.S. App. 88; 10 C. C. A. 87; Bank v. Pirie, 82 F. 799; 49 U.S. App. 596; Bank v. Kennedy, 167 U.S. 368; Pearce v. Railroad, supra; Groos v. Brewster, 55 S.W. 590; Thilmany v. Paper Bag Co., 108 Iowa 333; 1 Morse on Banks and Banking, pp. 144, 145, sec. 65. (4) The telegrams were, as a matter of law, and should be construed as, mere expressions of opinion, and respondent received no pay or security from any one to send them, and they were such. Case v. Luse, 28 Iowa 527; 1 Brandt on Surety & Guaranty (2 Ed.), pp. 154, 155, secs. 103 and 104; Nichols v. Bank, 55 Mo.App. 81.
This is an action to recover upon three drafts drawn by Lieuallen, of Idaho, upon Clemons & Company, 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 & Company entered into negotiations with Lieuallen to ship them certain potatoes, agreeing to advance fifty cents per hundred pounds thereon. Lieuallen applied to the plaintiff bank to cash his drafts on Clemons & Company, therefor, and that bank refused to do so unless Clemons & Company's bank would telegraph it to pay the drafts. Accordingly the defendant bank telegraphed the plaintiff bank on May 18th and 19th, 1898, as follows:
Upon receipt of these telegrams the plaintiff bank cashed three certain drafts drawn by Lieuallen on Clemons & Company, with bills of lading, for the potatoes shipped, attached. The drafts were payable to the plaintiff bank. The drafts were dishonored by Clemons & Company, and payment was likewise refused by the defendant bank. Clemons & Company 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 & Company's standing and financial responsibility.
It was admitted that Clemons & Company 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 & Company afterwards gave the defendant a bond of indemnity against loss, and employed counsel and are defending this case at their own expense.
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. 362, 17 S.Ct. 831; Bank v. Haseltine, 155 Mo. 58, 55 S.W. 1015; affirmed, 183 U.S. 132, 46 L.Ed. 118, 22 S.Ct. 50.]
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...
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