Fowler v. Scully

• Decision Date: 06 January 1873
• Parties: Fowler and Vankirk, his assignee, v. Scully, for use of First National Bank of Pittsburg.
• Court: Pennsylvania Supreme Court

72 Pa. 456

Fowler and Vankirk, his assignee, v. Scully, for use of First National Bank of Pittsburg.

Supreme Court of Pennsylvania.

January 6, 1873

Nov --, 1872.

1. Fowler gave to a national bank, & c., not then being indebted to it, a mortgage to secure the bank for notes, & c thereafter to be discounted for him. Held, that under the National Currency Act, June 3d 1864, the mortgage was void.

2. Corporations both for their powers and the mode of exercising them depend upon the statute creating them.

3. Under the Currency Act no other than personal security can be taken by a bank for a loan.

4. Lending money by a national bank on mortgage or real estate security is ultra vires and forbidden.

5. The 52d section of the National Currency Act refers to mortgages taken for pre-existing debts.

6. Fowler gave a mortgage to a national bank to secure future advances and afterwards assigned for the benefit of creditors. Held, that the assignee might resist the mortgage on the ground of its invalidity.

7. The mortgage being void, no action on it could be sustained.

8. Courts, even with the consent of the defendant, will not enforce a contract in violation of a statute although not expressly made void.

9. If a plaintiff cannot open his case without showing that he has broken the law, courts will not assist him to recover whatever his justice may be.

Before THOMPSON, C. J., READ, AGNEW, SHARSWOOD and WILLIAMS, JJ.

Error to the District Court of Allegheny county: No. 171 to October and November Term 1871.

On the 31st of May 1871, John D. Scully, in trust for The First National Bank of the city of Pittsburg, issued a scire facias sur mortgage against Silas S. Fowler with notice to William Vankirk, terre-tenant.

The mortgage, dated October 21st 1869, was between Silas S Fowler and John Scully, in trust for The First National Bank of the city of Pittsburg. It recited: " Whereas, the said bank hath agreed to discount for said Fowler an amount in the aggregate not exceeding $100,000, such negotiable business paper as he shall offer for that purpose, consisting chiefly of bills of exchange, or drafts drawn by him on his customers on account of work, & c., done, and orders filled by him for them from time to time in the course of his business; and Whereas, said Fowler wishes to avoid the necessity of procuring the additional endorsement to said paper by a third party." * * *

" And in consideration of the premises, and for the better securing the said drafts, bills, & c., and other negotiable paper unto" the bank, Fowler conveyed the premises named in the mortgage to Scully. The defeasance was the payment by Fowler to the bank of " the aforesaid debt or sum of all bills of exchange, drafts and other negotiable paper discounted by said bank for said Fowler, as aforesaid, on the days and times mentioned and appointed for the payment thereof, according to the tenor and effect of said bills, drafts, & c., and in satisfaction and discharge thereof; " and then, " as well this present indenture, and the estate hereby granted, as the said recited bills, drafts, & c., shall become void, & c.," with a further proviso that a scire facias might issue upon default of payment for 30 days after maturity," of any bill, draft or other negotiable paper discounted by the bank for said Fowler."

The plaintiff's affidavit of claim was upon a large amount of paper discounted for Fowler contained in a schedule attached to the affidavit. The first was discounted April 23d 1870, and the last October 22d in the same year; the whole amount, principal, interest and costs to April 30th 1871 was $77,452.87.

The affidavit further set out " that all said bills of exchange were discounted by said bank for said Silas S. Fowler, in pursuance of and under the said recited mortgage, and that they were severally duly presented for payment according to the tenor thereof, and payment by the respective drawees and acceptors was duly demanded and payment was refused; of all which due notice was given the drawer, the said Silas S. Fowler. Said bills of exchange remain wholly unpaid, and they are all overdue more than thirty days."

The affidavit of defence was as follows, viz.:--

" William Vankirk, terre-tenant, and owner in fee of the real estate described in the mortgage sued on in the above case, under and by virtue of a certain deed of assignment duly executed by the said Silas S. Fowler, bearing date the 7th day of November, 1870, & c., says, that he is advised and believes he has a just and full defence to said action, consisting in this, to wit, that said mortgage was given at the time of its date, by the said Silas S. Fowler to the said First National Bank, as security, not for any previous indebtedness of the said Silas S. Fowler, but for future advances and for liabilities thereafter to be contracted, and was given for no other purpose, as by said mortgage will more fully appear. That said bank was created under, and derives all its powers and privileges from, the Act of Congress relative to banking companies, approved the 3d day of June 1864. And deponent is advised and believes that by the 28th section of said act the said bank was prohibited from taking said mortgage, and that according to the provisions thereof the same was and is utterly null and void."

The court (Hampton, P. J.) on the 11th of September 1871, entered judgment for the plaintiff for $79,118.70, for want of a sufficient affidavit of defence.

The defendant took a writ of error, and assigned for error, entering judgment for want of a sufficient affidavit of defence.

The following are sections of the National Currency Act of June 3d 1864: 2 Bright. U. S. Dig. 53, 57, 58, 63, 64, pl. 8, 28, 29, 52, 53, 54.

" Sect. 8. Every association formed pursuant to the provisions of this act, shall, from the date of the execution of its organization certificate, be a body corporate, but shall transact no business except such as may be incidental to its organization and necessarily preliminary, until authorized by the comptroller of the currency to commence the business of banking. Such association shall have power to adopt a corporate seal, and shall have succession by the name designated in its organization certificate, for the period of twenty years, * * * by such name it may make contracts, sue and be sued, & c., * * * and exercise under this act 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 debt; by receiving deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; by obtaining, issuing and circulating notes according to the provisions of this act; and its board of directors shall also have power to define and regulate by by-laws, not inconsistent with the provisions of this act, & c. * * * and its usual business shall be transacted at an office or banking-house located in the place specified in its organization certificate.

Sect. 28. It shall be lawful for any such association to purchase, hold and convey real estate as follows:--

First. Such as shall be necessary for its immediate accommodation in the transaction of its business.

Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted.

Third. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings.

Fourth. Such as it shall purchase at sales under judgments, decrees or mortgages held by such association, or shall purchase to secure debts due to said association.

Such association shall not purchase or hold real estate in any other case or for any other purpose than as specified in this section; nor shall it hold the possession of any real estate under mortgage, or hold the title and possession of any real estate purchased to secure any debts due to it for a longer period than five years.

Sect. 29. The total liabilities to any association, of any person, & c., for money borrowed, & c., shall at no time exceed one-tenth part of the amount of the capital stock of such association actually paid in: Provided, That the discount of bonâ fide bills of exchange drawn against actually existing values, and the discount of commercial or business paper actually owned by the person, & c., negotiating the same, shall not be considered as money borrowed.

Sect. 52. All transfers of the notes, & c., owing to any association, or of deposits to its credit; all assignments of mortgages, & c., to prevent the application of its assets in the manner prescribed by this act, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void.

Sect. 53. If the directors of any association shall knowingly violate, & c., any of the provisions of this act, all the rights, privileges and franchises of the association derived from this act shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, district or territorial court of the United States, in a suit brought for that purpose by the comptroller of the currency, in his own name, before the association shall be declared dissolved.

Sect. 54. * * And the association shall not be subject to any other visitorial powers than such as are authorized by this act, except such as are vested in the several courts of law and chancery."

G Shiras, Jr., and Hopkins & Lazear, for plaintiff in error.--The mortgage under the provisions of the Act of Congress is absolutely void, and therefore a suit could not be maintained on it: E. Anglian Railway v. E. Counties Railway, 7 Eng. L. & E. 505; McGregor v. Railway, 1...