Smith v. Rennix

• Decision Date: 29 June 1925
• Docket Number: No. 4847.,4847.
• Citation: 204 N.W. 843,52 N.D. 938
• Parties: SMITH v. RENNIX et al.
• Court: North Dakota Supreme Court

52 N.D. 938

204 N.W. 843

SMITH

v.RENNIX et al.

No. 4847.

Supreme Court of North Dakota.

June 29, 1925.

Syllabus by the Court.

Under the laws of this state, a banking corporation is authorized to employ its money and other assets in the purchase of real estate in the following circumstances, only: (1) It may invest not to exceed a certain amount of its capital stock and unimpaired surplus in a banking house, including the land on which such banking house is situated. Section 5151, C. L. 1913. (2) It may “purchase, hold and convey such other real estate as shall be mortgaged to it in good faith by way of security for loans, or for debts previously contracted; such as may or shall be mortgaged to it in good faith in satisfaction of debts previously contracted in the course of its dealings; such as it shall purchase at sales under judgments, decrees or mortgages held by the corporation, or shall purchase to secure debts due it.” Section 5152, C. L. 1913. But such banking corporation has no authority to engage in the general real estate business, and employ its funds in the purchase of real estate or enter into contracts, and pledge its credit, for the purchase of real estate in any other circumstances than those so specified; and all contracts for the purchase of real estate in circumstances not so authorized are illegal and unenforceable. For reasons stated in the opinion, it is held, that the contract in suit is one violative of the express provisions of laws regulating banking; and hence is illegal and furnishes no basis for a cause of action.

Appeal from District Court, Richland County; McKenna, Judge.

Mortgage foreclosure suit by H. O. Smith against George W. Rennix and others, and the Farmers' & Merchants' Bank of Hankinson. Judgment for plaintiff and defendant Bank appeals. Reversed and remanded, with directions.Lauder & Lauder, of Wahpeton, for appellant.

Schneller & Heder, of Wahpeton, for respondent.

CHRISTIANSON, C. J.

This is an action for the foreclosure of a mortgage on real property and for a personal judgment against the defendants for any remaining deficiency. The material facts are as follows: On September 2, 1919, the plaintiff was the owner of the real property involved in this action. On or about that day he sold the same and conveyed it by warranty deed to the defendant George W. Rennix. In consideration therefor the said Rennix paid $1,000 in cash and assumed and agreed to pay a mortgage of $3,000 outstanding against the property, and he further executed and delivered to the plaintiff his notes for $5,000, and a mortgage upon the premises to secure such notes. At the time this transaction occurred, Rennix was cashier of the defendant bank. On March 4, 1920, said Rennix executed and delivered a special warranty deed, whereby he conveyed the said real property to the said defendant bank. This deed contained a clause to the effect that said premises “are free from all incumbrances except a first mortgage of $3,000.00 of record and a second mortgage of $5,000.00 which party of the second part (defendant bank) assumes as part of the purchase price.” It is this clause which gave rise to, and is involved in, this controversy. It is contended by the plaintiff that by virtue of this clause the appellant contracted to pay the indebtedness in question here, and that, consequently, plaintiff is entitled to judgment therefor. On the other hand, it is contended by the defendant bank that there is no legal obligation on the part of the defendant bank to pay such indebtedness. It is claimed that the deed from Rennix to the bank was not, in fact, intended to transfer and vest the title to the property in the bank; that certain stockholders of the bank were engaged in the business of buying and selling land, and that in carrying on this business they used the name of the bank as a matter of convenience in making transfers, but that the bank had no actual interest in and received none of the profits out of such transactions; that the transaction out of which this action arose is one of that kind; that the land in question was not purchased by the bank at all and that it received absolutely no consideration for the alleged contract on which this suit is brought; and that such contract is one which the bank is prohibited by express law from entering into. It is further contended that such clause did not appear in the deed at the time of the execution and delivery thereof, but that the clause was afterwards inserted, and that the same constitutes a material alteration of the deed and hence is not binding upon the defendant bank. The trial court made findings and conclusions in favor of the plaintiff. Judgment was entered accordingly, and the defendant bank has appealed to this court and demanded a trial anew. In our opinion the judgment is clearly erroneous and must be reversed.

The laws of this state provide:

“No bank shall as principal employ its money or other of its assets, directly or indirectly, in trade or commerce, nor employ or invest any of its assets or funds in the stock of any corporation, bank, partnership, firm or association, nor shall it invest any of its assets in speculative margins of stocks, bonds. grain, provisions, produce or other commodities, except that it shall be lawful for banks to make advances for grain or other products in store or in transit to market; provided, nevertheless, that this Act shall not be construed as in any way preventing a bank from investing such part of its funds in stock of the Federal Reserve Bank of this district as may be necessary to become a member of the Federal Reserve Association and from carrying such stock among its assets.” Section 5187, C. L. 1913, as amended by chapter 54, Laws 1915.

“It shall be unlawful for any corporation having banking powers and a...