Smith v. Bank of New England

• Decision Date: 07 January 1903
• Citation: 54 A. 385,72 N.H. 4
• Parties: SMITH et al. v. BANK OF NEW ENGLAND.
• Court: New Hampshire Supreme Court

54 A. 385

72 N.H. 4

SMITH et al.

v. BANK OF NEW ENGLAND.

Supreme Court of New Hampshire. Hillsborough.

Jan. 7, 1903.

Transferred from Superior Court; Young, Judge.

Bill in equity by Anna L. Smith and others against the Bank of New England. Verdict for the plaintiffs, and defendants except. Transferred from the superior court by Young, judge. Exceptions overruled.

March 29, 1892, the Union Trust Company and the defendants entered into a contract, for the benefit of all parties who should become interested in the subject-matter, wherein it was provided that the trust company should issue certificates of deposit, and as security therefor should assign and transfer to the defendants, as trustees, real estate mortgages, stocks, bonds, and tax-sale certificates, the face value of which should exceed by 10 per cent. the amount of certificates isused; and the defendants agreed to rate and hold such securities at their actual worth, according to their best judgment, to certify upon each certificate of deposit that it was so secured, and to faithfully discharge all the duties imposed upon them. The Union Trust Company failed in June, 1893. The plaintiffs, who are holders of unpaid certificates of deposit issued by the trust company and countersigned by the defendants, sought to recover from the defendants upon the ground that the latter were negligent in their management of the trust estate, and in approving stock of certain Iowa and Missouri corporations which was deposited with them as a part thereof. After the question of negligence had been determined in the plaintiffs' favor by the verdict of a jury, and the exceptions taken at the former trial had been overruled (Smith v. Bank, 70 N. H. 187, 46 Atl. 230), certain shareholders in the defendant corporation were permitted to intervene and contest the validity of the trust agreement, upon their claim that the contract was ultra vires, and that the officers by whom it was executed acted without authority from the corporation. Upon a trial of the issue thus presented, the plaintiffs' evidence tended to show the following facts, in addition to those stated in the opinion: The defendants' business consisted of a savings-bank department, a banking department, and a trust department, all carried on in the same banking rooms in Manchester, under the general superintendence of Elliott, the treasurer and active manager. Briggs, the president, was frequently about the bank, and advised and assisted Elliott to some extent. The board of directors consisted of 24 members, and held monthly meetings, at which times the treasurer made general reports concerning the business of the bank. These meetings were not largely attended, and it was frequently difficult to secure a quorum. An executive committee of five directors had charge of the investment of funds, the negotiation of securities, and such other business as the directors might determine. The president and treasurer acted generally for the bank in the transaction of routine business. It was admitted that the execution of the trust agreement was neither authorized nor ratified by vote of the stockholders or directors of the bank. For this reason, and upon the further ground that the evidence was insufficient to warrant a finding that Briggs and Elliott were authorized to execute the contract in behalf of the bank, at the close of the plaintiffs' evidence the defendants moved for a nonsuit; at the close of all the evidence they moved that a verdict be directed in their favor; and, after a verdict for the plaintiffs, they moved to set the same aside as against the law and the evidence. These motions were severally denied, and the defendants excepted. The following questions were submitted to the jury, the words in brackets being requested modifications which were refused, subject to the defendants' exception: "Did the bank give the Union Trust Company reason to believe that Briggs and Elliott were authorized to make this contract [except what was said and done by Briggs and Elliott at the time; if so, by whom and in what way]? Did the bank know, or ought it to have known, of this contract when it was made [except such knowledge as Briggs and Elliott had at the time; if so, what was it, and who had knowledge thereof other than Briggs and Elliott]? Did the bank know, or ought it to have known, of this contract before the failure of the Union Trust Company [except such knowledge thereof as Briggs and Elliott had; if so, how and when and by whom did it obtain such knowledge]? Did the bank know, or ought it to have known, of this contract before January 1, 1896 [except such knowledge thereof as Briggs and Elliott had; if so, how and when and by whom did it obtain such knowledge]?" The defendants also excepted to the denial of a request for certain specific instructions; to an instruction that the execution of the contract by Briggs and Elliott might be considered as bearing on the question of implied authority; to the admission of oral testimony as to proceedings at meetings of the board of directors of the defendant bank; and to the exclusion of evidence tending to show that the amount received by the defendants, as compensation for their services as trustees, was no more than sufficient to pay for the clerical work required to be done.

David A. Taggart and Thomas G. Frost, for plaintiffs.

Mitchell & Foster and Oliver E. Branch, for defendants.

REMICK, J. This case has been here twice before. First it came up on demurrer to the bill, and the demurrer was overruled. Smith v. Bank, 69 N. H. 254, 45 Atl. 1082. A trial upon the merits followed; verdict for the plaintiff, exceptions to this court, and the exceptions were overruled. Smith v. Bank 70 N. H. 187, 46 Atl. 230. The case was then in order for judgment for the plaintiff; but as the validity of the trust contract, out of which the rights and obligations of the parties arise, was admitted at the former trial, the sole question there being whether the defendants as trustees had exercised due care in the performance of the duties imposed by it, certain shareholders of the defendant corporation moved for leave to intervene and contest the validity of the contract, claiming (1) that it was not authorized by the charter of the corporation, and (2) that it was not authorized by the corporation. The motion was granted, and there was a jury trial of the questions of fact involved. The jury found for the plaintiff—that the contract was authorized by the corporation— and the case is now here for the third time upon exceptions.

The substantial questions presented for our consideration are: First, was the contract ultra vires of the defendants' charter? Second, if not, was the evidence that its execution was authorized by the corporation sufficient to warrant the court in leaving that question to the jury?

1. Was the contract ultra vires? The charter expressly confers upon the defendants "all the powers and privileges * * * of a loan, trust, and guarantee company," including power to act "as a trustee for persons, firms, corporations, or estates of deceased persons." Laws 1887, p. 646, c. 280, § 1. In view of such general and comprehensive terms of authorization, there would seem to be no room for doubt that the trust contract in question is within the letter of the charter. But it is urged with much earnestness and ability that the contract constituted the defendants guarantors of the actual worth of the collateral deposited with them, and in effect required them to make examination and appraisal, in the West, of each piece of property behind the collateral deposited, and constant re-examination and reappraisal to guard against subsequent depreciation; that even then the actual worth of the property would be subject to so many contingencies that the assets of the defendants would be in continual jeopardy; and that the Legislature could not have intended to authorize a guaranty so hazardous. Without considering the authority of the court to declare a contract of guaranty ultra vires of a charter conferring, in general terms, all the powers and privileges of a guaranty company, upon the ground that the particular contract is so hazardous in nature the...