Jemison v. Citizens' Sav. Bank of Jefferson

• Decision Date: 07 October 1890
• Citation: 25 N.E. 264,122 N.Y. 135
• Parties: JEMISON et al. v. CITIZENS' SAVINGS BANK OF JEFFERSON.
• Court: New York Court of Appeals Court of Appeals

122 N.Y. 135

25 N.E. 264

JEMISON et al.

v.CITIZENS' SAVINGS BANK OF JEFFERSON.

Court of Appeals of New York,

Second Division.

Oct. 7, 1890.

Appeal from a judgment of the general term of the supreme court, first department, affirming a judgment entered upon a decision of the special term dismissing the complaint.

Francis C. Barlow, for appellants.

Benjamin H. Bristow, for respondent.

HAIGHT, J.

The plaintiffs were commission merchants, and members of the cotton exchange of the city of New York. The defendant was a savings bank and trust corporation, organized under the laws of Texas. This action was brought to recover commissions, and for money claimed to have been expended for the defendant on the purchase and sale of cotton futures. The defense was that the defendant, as a savings bank and trust corporation, had no power or authority to deal in the purchase and sale of cotton for future delivery, or in contracts for the purpose of speculation; that, in the transaction alleged in the complaint, it acted as the agent of one Albert P. Clopton, of Jefferson, Tex., and that the fact that he was the principal for whom the defendant acted was disclosed and well known to the plaintiffs prior to the time of the transaction referred to. While the fact distinctly appears from the correspondence between the parties that the defendant was acting for ‘good, responsible customers,’ the general term was of the opinion that this defense could not be sustained, for the reason that the defendant did not disclose the name of his principal at the time of the giving of the orders complained of for the purchase and sale of cotton futures. Had this defense been sustained, the principal, and not the defendant, his agent, would have been liable. Without stopping to consider the evidence, we shall assume that this defense was not established, and proceed to consider the question as to whether the defendant was liable as a principal.

Transactions between the parties commenced in January, 1879, by a letter from J. H. Parsons, as cashier of the defendant, asking the plaintiffs the amount of margin and commission they required for the purchase of cotton futures. The plaintiffs answered giving the amount, and this was followed by an order by telegraph from Parsons, as cashier, under date of February 10th, to buy 100 bales, June delivery; and on the same day he wrote the plaintiffs that the order was made for one of their customers, who had deposited $250 as per their favor of the 27th ult. Other orders followed, the final result of which was a loss, to recover which this action was brought. At the time, Parsons was the cashier of the defendant, possessing the powers and duties incident to the office under the charter, constitution, and by-laws, having the general charge of the business of the bank, and the supervision of the concern; and, inasmuch as the answer alleges that the transactions referred to in the complaint were had between the plaintiffs and the defendant acting as agent, we shall treat him as possessing all of the authority to act in the premises that the directors of the defendant had the power to give. This brings us to the question whether or not the defendant had the power to make the orders in question. The defendant was incorporated and chartered in 1871, by an act of the legislature of the state of Texas entitled ‘An act to incorporate the Citizens' Savings Bank of Jefferson, Texas.’ The act, among other things, provides that ‘the general business and object of this corporation shall be to receive on deposit or in trust such sum or sums of money as may from time to time be offered therefor by tradesmen, merchants, clerks, laborers, servants, and others, to be repaid to such depositors when demanded, at such times, with such interest, and under such regulations, as the board of directors may from time to time prescribe,’ and also ‘this corporation may loan money according to the constitution and laws of the state, or may discount in accordance with bank usages, taking such security therefor, either real or personal, as the directors may deem sufficient. Said corporation shall have power to borrow money, buy and sell exchange, bullion, bank-notes, government stocks, and other securities.’ The act further provides that the business of the corporation shall be managed by 12 directors. Corporations are artificial creations, existing by virtue of some statute, and organized for the purposes defined in their charters. A person dealing with a corporation is chargeable with notice of its powers, and the purposes for which it was formed; and, when dealing with its agents or officers, is bound to know the extent of their power and authority. A corporation necessarily carries its charter wherever it goes, for that is the law of its existence. It follows that the plaintiffs must have known, or are chargeable with knowledge, of the corporate powers of the defendant, and of the extent to which its cashier could bind the corporation. Alexander v. Cauldwell, 83 N. Y. 480;Hoyt v. Thompson, 19 N. Y. 207-222;Relfe v. Rundle, 103 U. S. 222-226;Davis v. Railroad Co., 131 Mass. 258-260;Leonard v. Insurance Co., 97 Ind. 299. Savings banks are designed to encourage economy and frugality among persons of small means, and are organized with restrictions and provisions intended to secure depositors against loss. Speculative contracts entered into for the sale or purchase of stock by a savings bank at the stock board or elsewhere, subject to the hazard and contingency of gain or loss, are ultra vires, and a perversion of the powers conferred by its charter. People v. Institution, 92 N. Y. 7-9;Sistare v. Best, 88 N. Y. 527-531. Contracts of corporations are ultra vires when they involve adventures or undertakings outside and not within the scope or power...