National Pemberton Bank v. Porter

• Decision Date: 28 September 1878
• Citation: 125 Mass. 333
• Parties: National Pemberton Bank v. Edward F. Porter
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

125 Mass. 333

National Pemberton Bank v. Edward F. Porter

Supreme Court of Massachusetts

September 28, 1878

Argued November 8, 1877

Essex. Contract on a promissory note dated January 11, 1876, for $ 10,000, signed by James O. Ives & Co., payable in four months from date to the order of the defendant, and indorsed by him, "waiving demand and notice." Writ dated June 28, 1876.

At the trial in the Superior Court, before Gardner, J., there was evidence that the plaintiff, a national bank established at Lawrence under the laws of the United States, purchased the note in Boston from one Benyon, the president of the Exchange Bank in Boston, a few days after its date, paying its face value, less interest, therefor.

The defendant asked the judge to rule that the plaintiff, being a national bank, had no power or authority, under the U.S. St of June 3, 1864, §§ 6, 8, 30, 39, and the U.S. Rev Sts. §§ 885, 3407, 5133-6, 5197, to purchase the note in suit, and therefore had no title to the note. The judge declined so to rule; but ruled that the action could be maintained, and ordered a verdict for the plaintiff. The jury returned a verdict accordingly; and the defendant alleged exceptions.

The case was argued at the bar in November 1877, and additional briefs were submitted to the court in May 1878.

Exceptions overruled.

L. W Howes, for the defendant.

D Saunders & C. G. Saunders, for the plaintiff.

OPINION

Lord, J.

The plaintiff bank brings this action against the defendant as the indorser of a promissory note. The note is in the possession of the bank as the holder of it. The defence is, that the plaintiff purchased the note of one Benyon; that the plaintiff is a national bank; that a national bank has no authority to buy a promissory note; that the purchase of it was therefore ultra vires; and the conclusion of law which the defendant claims to be the legal result of these facts is that no action can be maintained upon the note by the bank. It is important that we do not confuse our ideas by the use of words, and it is therefore necessary to determine what is the exact contract in suit. The contract is in writing. In form it is a negotiable promissory note. Its legal effect is an absolute agreement on the part of the maker to pay to the payee, or to any indorsee of the instrument, a sum certain on a day certain; while it is also a conditional promise, on the part of the indorser to the indorsee, to pay the same sum upon the default of the maker and due notice to himself. In this case, it is conceded that such condition has been performed or waived, so that the promise of the indorser has become absolute. On these points there is no controversy. The contract therefore, in itself, is one which may lawfully exist between these parties. It is the precise contract which exists between the parties to every note discounted by a bank in the ordinary course of banking business which national banks are authorized to transact. No claim is made that the promise was not made upon a full consideration; or that any fraud was practised upon any party to the contract; or that it has been paid; or that any equities exist between the maker or any indorser and the holder; or that, under the form of a lawful contract, was concealed any usurious device; so that the contract in itself has no taint of usury, of fraud or of illegality.

What is the contract which it is said is ultra vires? Not the contract in suit, but another contract, to wit, the contract with Benyon, who is not in any sense a party to the contract in suit; nor is it necessary to the maintenance of this action to connect him with it. The contract with Benyon, assuming such a contract to have been made, and, for the purposes of this discussion, assuming it to have been ultra vires, is not executory; this suit is not to enforce it; but it has been fully and completely executed. It is true that the contract with Benyon was one of which the contract in suit was the subject matter. The question then arises, Can a party to a contract in itself lawful, and into which all the parties to it had authority to enter, be made null or be incapable of enforcement, because the plaintiff has entered into and fully performed, with another and totally distinct party, a contract in reference to it which was unauthorized, even though by such contract he becomes a party to the contract in suit?

There is nothing of mystery or of sanctity in the use of the words of a dead language, ultra vires; and although it is a concise and convenient form by which to indicate the unauthorized action of artificial persons with limited powers, still it is as applicable to individual as to corporate action. An illegal act of an individual is as really ultra vires as the unauthorized act of a corporation. We do not see in what respect there is any difference, in legal effect, between the obtaining of a note by an individual and by a corporation, if it be obtained wrongfully.

Applying the rule to a natural person, Would it be a defence, by a maker of an unpaid promissory note, to prove that the plaintiff obtained the note in a fraudulent bargain? or that the plaintiff took it from one not a party to it, in payment for intoxicating liquors illegally sold? or that he took it from a third person in discharge of a gaming debt, or in any transaction in which the person had no right to be engaged? These are all cases in which the party would acquire his title by transactions beyond his authority. These are questions which, under the law of this Commonwealth, it is not necessary to decide or consider.

In this Commonwealth, it is not necessary that the plaintiff in a suit upon a promissory note should have the legal title or beneficial interest in the note, nor indeed that he should have any title or any interest in it. Adjudications of this point, commencing with Little v. Obrien, 9 Mass. 423, are scattered through more than a hundred succeeding volumes of reports, embracing a period of about seventy years, have been unquestioned during all that time and are daily recognized as the law of the Commonwealth. In Little v. Obrien, this very question of ultra vires was raised by the defendant, and both the questions, whether a contract with a corporation was ultra vires, and whether a plaintiff having no title could sue, were raised and elaborately argued for the defendant, by Mr. Story, who afterwards and for so long a time adorned the bench of the Supreme Court of the United States. The cause was argued before that eminent magistrate, Chief Justice Parsons, and his distinguished associates, Justices Sewall and Parker. In...