Lebanon Savings Bank v. Hollenbeck

• Decision Date: 25 July 1882
• Citation: 29 Minn. 322
• Parties: LEBANON SAVINGS BANK <I>vs.</I> LEONIDAS R. HOLLENBECK and others.
• Court: Minnesota Supreme Court

Page 322

29 Minn. 322

LEBANON SAVINGS BANK vs. LEONIDAS R. HOLLENBECK and others.

Supreme Court of Minnesota.

July 25, 1882.

Appeal by defendants Booge and Goewey from a judgment of the district court for Nobles county, where the action was tried by Dickinson, J., without a jury.

Daniel Rohrer, for appellants.

Waite & Freeman, for respondents.

VANDERBURGH, J.^*

By an act of the legislature of the state of New Hampshire, the plaintiff was duly incorporated as a savings bank, and was by its charter "vested with all the powers and privileges * * * of corporations of a similar nature," and was thereby further expressly authorized "to take, hold, and dispose of any real estate whatever that may be bona fide conveyed to or taken by said corporation in satisfaction or discharge of debts, demands or liabilities which shall have been previously contracted or incurred;" and, in reference to the deposits of money received by it, to "use, manage, and improve the same for the benefit and best advantage" of the depositors. There is in the charter no prohibition or other limitation, express or implied, upon its power to loan money upon security in or out of the state of New Hampshire.

The plaintiff corporation, in July, 1875, loaned the sum of $400 to defendant Leonidas R. Hollenbeck, who was then owner in fee of the land in question in this action, being in the county of Nobles, in this state, and took his note therefor, with interest at 10 per cent., payable annually, secured by a mortgage of the land, which was actually recorded in that county July 23, 1875. But the instrument, though otherwise duly executed and acknowledged by Hollenbeck and wife, as disclosed by the record, was not sealed, and, for the purposes of this case, must be treated as not having been originally sealed. It was afterwards, however, duly sealed, and again recorded September 5, 1877.

On the 29th day of September, 1876, Hollenbeck and wife conveyed the mortgaged premises to the defendant Morse, who took with full knowledge of the mortgage, and as the consideration of such conveyance to him, undertook to assume and pay off the mortgage. His deed was not, however, recorded until May 14, 1877. Previous to this last date, the plaintiff, as by the terms of the mortgage it might do on default of payment of the interest, had commenced a foreclosure thereof by action, making Hollenbeck and wife and Morse defendants, neither of whom has appeared in the action.

On the date of the commencement of the action, April 27, 1877, a notice of the pendency thereof, as affecting the real estate in question, was duly recorded. The defendants Booge, judgment creditors of Morse, and defendant Goewey, assignee in bankruptcy of two of such creditors, were afterwards duly joined as defendants in the foreclosure action. Prior to the record of Morse's deed, and on or about March 17, 1877, the defendants Booge recovered and docketed their judgment against Morse in the sum of $533, and afterwards bid in these premises on a sale upon execution issued upon such judgment, from which there has been no redemption. These judgment creditors resist the foreclosure, and insist (1) that the plaintiff corporation had no power or authority under its charter to take or hold security by mortgage upon real estate; (2) they deny that the mortgage was properly executed or recorded, or that it has any validity as against them; (3) they deny notice, actual or constructive, of the same, and insist upon the priority of the lien of their judgment over any lien, charge, or claim of plaintiffs by virtue of the mortgage. The court ordered judgment for the plaintiffs, declaring the lien of the mortgage superior to that of the judgment, and directing a foreclosure as prayed in the amended complaint; and from the judgment entered therein the said defendants, judgment creditors, appeal.

1. Unless restricted by its charter, expressly or by implication, a banking corporation may secure its loans by taking either real or personal security therefor, as any other creditor may do, and such authority is clearly within the general powers conferred by the first section of plaintiff's charter, quoted above. Whether it was a wise or proper exercise of discretion for the plaintiff to have made this particular loan upon the security in question is not material. It is responsible to the proper authorities for its management, and to the sovereignty which created it for any misuser of its franchises. But we do not think that, by any fair construction, the provisions we have quoted, which impliedly limit the powers of the bank in the matter of purchasing and dealing in real estate to the cases enumerated, amount to a restriction of its right to loan money upon security, real or personal. The object of the restriction was to prevent the capital of the bank from being unduly absorbed in real-estate investments, and the bank from engaging in land speculations, and not to prevent its making loans upon interest-bearing...