Greene v. First National Bank of Thief River Falls
| Decision Date | 29 July 1927 |
| Docket Number | 26,148 |
| Citation | 215 N.W. 213,172 Minn. 310 |
| Parties | F. P. GREENE v. FIRST NATIONAL BANK OF THIEF RIVER FALLS |
| Court | Minnesota Supreme Court |
Defendant appealed from a judgment of the district court for Pennington county, Grindeland, J. Reversed.
A national bank, in selling a real estate mortgage, has no authority to agree to repurchase it.
1. Under the act of congress providing for the organization and defining the powers of national banking associations, a national bank, in selling a real estate mortgage held by the bank, has no authority to enter into a contract for the repurchase of the mortgage.
No estoppel against bank's setting up its defense.
2. Although the bank has received the benefits of such a contract, it is not estopped, when sued thereon, from setting up as a defense the want of authority to make the contract.
Banks and Banking, 7 C.J. p. 758 n. 65, 67; p. 760 n. 98; p. 807 n 24; p. 833 n. 80; p. 834 n. 81.
Theodore Quale, Fowler, Carlson, Furber & Johnson, and Ralph H. Comaford, for appellant.
W. E. Rowe, Perl W. Mabey, and H. O. Chommie, for respondent.
This action is founded on alleged contracts made by the defendant's president when he sold certain real estate mortgages to the plaintiff.
The complaint alleges that defendant agreed to repurchase the mortgages whenever plaintiff requested defendant to take them off his hands. The answer was a general denial. The jury returned a verdict in plaintiff's favor. The defendant moved for judgment notwithstanding the verdict. The motion was denied, and from the judgment subsequently entered this appeal is prosecuted.
The defendant is a national bank. The authority of such banks is derived from the act of congress under which they are organized, it being established law that they are instrumentalities of the federal government, created for a public purpose, are necessarily subject to the paramount authority of the United States, and that congress is the judge of the extent of the powers which should be conferred on them and has the sole power to regulate and control them. Davis v. Elmira Sav. Bank, 161 U.S. 275, 16 S.Ct. 502, 40 L.Ed. 700; Easton v. Iowa, 188 U.S. 220, 23 S.Ct. 288, 47 L.Ed. 452; State v. Clement Nat. Bank, 84 Vt. 167, 78 A. 944, Ann. Cas. 1912D, 22.
The act of congress defining the powers of national banks provides:
" That in addition to the powers now vested by law in national banking associations organized under the laws of the United States any such association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by th Comptroller of the Currency, * * * act as the broker or agent for others in making or procuring loans on real estate located within one hundred miles of the place in which said bank may be located, receiving for such services a reasonable fee or commission: Provided, however, That no such bank shall in any case guarantee either the principal or interest of any such loans." 39 U.S. St. c. 461, p. 753.
In the case at bar the defendant did not act as a broker or agent. It made the loans for itself and they became part of its assets. In selling the mortgages defendant dealt with its own property. Nevertheless we think that defendant was prohibited by the act from guaranteeing payment of the principal or interest of the loans. The words italicized indicate that it was the policy of congress to prohibit national banks from guaranteeing notes secured by real estate mortgages in any case whatever. If we are right in this conclusion, the bank had no authority to enter into contracts for the repurchase of such notes and mortgages, for the objections to such contracts are even greater than to those of one of guaranty.
In Picha v. Central Met. Bank. 161 Minn. 211, 201 N.W. 315, 203 N.W. 617, it was sought to charge a state bank with liability for the fraudulent representation of its assistant cashier to the effect that plaintiff could at any time return mortgages purchased from the bank and receive the amount due on them. It was held that the bank was bound by the representation of its officer whom it had clothed with apparent or ostensible authority to sell its mortgages in such a way as to make it liable as a party to the contract of sale.
In Eberlein v. Stockyards Mtg. & Tr. Co. 164 Minn. 323, 204 N.W. 961. it was held that an officer of a trust company, having express authority to buy and sell securities, has no implied power in selling such securities to bind the company by a contract to repurchase them on demand, and the dangers attending the exercise of such authority by officers of trust companies and banks were pointedly referred to.
Farmers & Mech. Sav. Bank v. Crookston State Bank, 169 Minn. 249, 210 N. W. 998, involved a guaranty of loans made by a state bank as a broker and not on its own account. It was held that such a guaranty was...
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