O'Hare v. Second National Bank of Titusville

Citation77 Pa. 96
PartiesO'Hare <I>versus</I> Second National Bank of Titusville.
Decision Date04 January 1875
CourtUnited States State Supreme Court of Pennsylvania

Before AGNEW, C. J., SHARSWOOD, MERCUR and GORDON, JJ.

Writs of error to the Court of Common Pleas of Crawford county: Of October and November Term 1874, No. 40 and 41.

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B. J. Reid (with whom was J. A. Neill), for plaintiff in error, referred to Act of Congress, June 3d 1864, 2 Brightly's United States Digest 63, as follows: —

"The total liabilities to any association, of any person, or of any company, corporation or firm, for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, 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 or persons, corporation or firm negotiating the same, shall not be considered as money borrowed."

Courts will not assist a plaintiff in enforcing a contract arising out of an illegal transaction: Fowler v. Scully, 22 P. F. Smith 456; Coppell v. Hall, 7 Wallace 558; Holt v. Green, 23 P. F. Smith 198; Maybin v. Coulon, 4 Dallas 298. Although it may not be expressly prohibited but only a penalty imposed: Seidenbender v. Charles, 4 S. & R. 151; Columbia Bridge Co. v. Haldeman, 7 W. & S. 233; Burkholder v. Beetem, 15 P. F. Smith 496; Morris Run Coal Co. v. Barclay Coal Co. 18 P. F. Smith 174; Mitchell v. Smith, 1 Binney 110; Law v. Hodson, 11 East 300; Hall v. Franklin, 3 M. & W. 259; Foster v. Taylor, 5 Barn. & Ad. 887; Griffith v. Wells, 3 Denio 226; Wheeler v. Russell, 17 Mass. 258; Seneca Bank v. Lamb, 26 Barbour 595; Chilicothe Bank v. Swayne, 8 Ohio 254. A contract made by a corporation ultra vires or prohibited cannot be enforced: E. Anglian Railway v. E. Counties Railway, 7 Eng. L. & E. 505; McGregor v. Railway, 16 Id. 180; Norwich v. Norfork Railway, 30 Id. 120; Commonwealth v. Erie & N. E. Railroad Co., 3 Casey 339. The contract cannot be enforced whether the illegality be disclosed by the evidence of the plaintiff or defendant.

R. Sherman (with whom was M. C. Beebe), for defendant in error.—A mere omission of a direction or accidental commission of a prohibited act will not make the contract void: the affidavits do not aver that either the bank or Garfield knew of any violation of the law or intended any; such averment was necessary: 1 Parsons on Contracts 459; Kreis v. Seligman, 8 Barbour 439; Faickney v. Reynous, 4 Burrows 2069; Newbold v. Sims, 2 S. & R. 317. When the subject of a contract may be lawful or unlawful according to circumstances, the inference will not be that the contract was to do an unlawful act: Broom's Legal Maxims 518; Lewis v. Davidson, 1 B. & Ald. 463; Williams v. East India Co., 3 East 192. The consideration of the contract must be illegal to prevent the law from enforcing it; Armstrong v. Toller, 11 Wheaton 258; Story's Conflict of Laws, sect. 205-209; 2 Kent's Com. 597-601; Hill v. Manchester, 2 B. & Ad. 544. It is no defence to a suit by a corporation on a contract that the powers of the corporation were transcended: Silver Lake Bank v. North, 4 Johns. Ch. 370; Farnham v. Del. & Hud. Canal Co., 11 P. F. Smith 265; Goundie v. Northampton Water Company, 7 Barr 233.

Chief Justice AGNEW delivered the opinion of the court, January 4th 1875.

The main question in these cases is, whether the notes in suit are illegal, and cannot be recovered upon, because at the time they were discounted the bank had previously lent the drawer, for whose accommodation O'Hare endorsed, more than one-tenth part of its capital. It is contended that the discount was contrary to the 29th section of the National Bank Law of June 3d 1864, providing that "the total liabilities to any association, of any person, or of any company, corporation or firm for money borrowed, including in the liabilities of a company or firm, the liabilities of the several members thereof, shall at no time exceed one-tenth 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 business paper, actually owned by the person or persons, corporations or firms, negotiating the same, shall not be considered as money borrowed."

The affidavits of defence, upon which the question is raised, do not aver that the excess above one-tenth of the paid-in capital, was knowingly and voluntarily lent to the drawer of the note. This defect in the affidavit would support the judgment, for surely it cannot be contended that an accidental excess made in mistake or in ignorance would forfeit an honest loan. But without resting the case on this defect, we cannot think that an excess known to the bank only, is such an unlawful act, entering into the vitality of the loan, as will avoid it. The fact of an excess of indebtedness over one-tenth of the paid-in capital is a matter aside from the loan itself, not entering into its terms, and therefore collateral. The loan of the money is an act within the authorized power of the bank; a...

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