Hotchkin v. Third Nat. Bank of Syracuse, N. Y.

• Decision Date: 24 November 1914
• Parties: HOTCHKIN v. THIRD NAT. BANK OF SYRACUSE, N. Y.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

219 Mass. 234

106 N.E. 974

HOTCHKIN v. THIRD NAT. BANK OF SYRACUSE, N. Y.

Supreme Judicial Court of Massachusetts, Suffolk.

November 24, 1914

COUNSEL

Whipple, Sears & Ogden H. W. Ogden, and E. O. Proctor, all of Boston, for plaintiff.

Gaston Snow & Sastonstall, of Boston (Geo. M. G. Nichols and Jos. A Locke, both of Boston, of counsel), for defendant.

OPINION

BRALEY J.

The jury specially found that the defendant contracted to sell and deliver 100 shares of the capital stock of the Syracuse Rapid Transit Company. It having failed to perform the contract the plaintiff contends that he is entitled to damages for the breach. It appears from the record to have been uncontroverted that at the time of the negotiations the bank did not have any of the stock but it was acting for a 'client,' who owned the shares. The letter of the cashier, on which the plaintiff relies as an acceptance in writing of the offer to purchase, recites that the sale 'was upon condition that our client would fill and he has been unable to so far, and it is the impression of his broker that he sold the stock to you through another channel,' and in the second letter, two days later, in reply to the plaintiff's demand for delivery, the cashier states:

'Our client has not filled. * * * His broker informs me now that his client sold the stock to you direct the same day that we were negotiating with you.'

If without deciding it is assumed that the sale was unconditional, as the plaintiff urges, and if made here the R. L. c. 74, § 5, were satisfied, the answer avers the lack of corporate power to make the contract. And by the third request the defendant asked the trial court to rule that:

'If any contract be found to have been made for the sale to the plaintiff of the stock in question, such contract is ultra vires the defendant corporation, and the plaintiff cannot recover under such contract.'

We are of opinion that the ruling should have been given. The defendant is a national bank, organized under Rev. St. U.S. § 5133 (U. S. Comp. St. 1913, § 9658), and Act April 12, 1902 c. 503, 32 Stat. 102 (U. S. Comp. St. 1913, § 9673). Its corporate powers are defined in section 5136 (9661), and the question whether a national bank can deal in the stock of other corporations was fully considered in California Nat. Bank v. Kennedy, 167 U.S. 362, 17 S.Ct. 831, 45 L.Ed. 198. If the defendant had held the stock as collateral security for a loan it could upon default of the debtor have made the security available by enforcing its rights as pledgee and, if necessary for its protection, it could become the owner at the sale and hence a shareholder in the transit company. It would have acquired title in the exercise of a power incidental to the making of the loan. Germania Nat. Bank v. Case, 99 U.S. 628, 25 L.Ed. 448; First Nat. Bank v. Nat. Exchange Bank, 92 U.S. 122, 23 L.Ed. 679. The stock when accepted as payment or in satisfaction of the loan can be subsequently converted into money, although so long as the bank remains a shareholder it is subject to the same liability as the other shareholders. First Nat. Bank v. Hawkins, 174 U.S. 364, 368, 19 S.Ct. 739, 43 L.Ed. 1007. But such transactions are obviously distinguishable from the business of buying and selling stocks, as a source of revenue or profit, which would subject the capital contributed by the stockholders to the hazards of speculation, independently of the ordinary risks of banking. The...