E. Swindell & Co. v. Bainbridge State Bank

• Decision Date: 15 January 1908
• Docket Number: 562,563,564.
• Citation: 60 S.E. 13,3 Ga.App. 364
• Parties: E. SWINDELL & CO. et al. v. BAINBRIDGE STATE BANK (three cases).
• Court: Georgia Court of Appeals

60 S.E. 13

3 Ga.App. 364

E. SWINDELL & CO. et al. v. BAINBRIDGE STATE BANK (three cases).

Nos. 562, 563, 564.

Court of Appeals of Georgia

January 15, 1908

Syllabus by the Court.

By statute, no bank or corporation doing a banking business in this state is allowed to lend to any one person more than 10 per cent. of its capital stock and surplus, unless the loan is amply secured by good collateral security. Therefore, to entitle one to recover damages because of a failure of a bank to lend him an amount promised, it must be alleged and proved that the amount so promised did not exceed 10 per cent. of the capital stock and surplus of the bank, or that the loan was to be amply secured by good collateral security.

The cashier of a bank, unless authorized by the charter or by-laws, has no authority to lend the money of the bank. The bank cannot be held liable in damages for a breach of a contract entered into by its cashier to lend its money without authority from the bank, and in direct violation of the banking laws of the state.

[Ed Note.-For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 264.]

An act positively forbidden by statute cannot be made legal and binding by ratification or estoppel. Therefore, where the cashier of a bank entered into a contract to lend to one person more than 10 per cent. of its capital stock and surplus, said loan not amply secured by good collateral security, the contract could not be rendered legal by ratification or binding by estoppel.

[Ed Note.-For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 277.]

Allegations that a bank had agreed to lend defendants $20,000 from time to time as they might desire the money, and that the bank had, in pursuance of such agreement, loaned them $18,000, but had refused to lend the additional $2,000, which refusal resulted in damages to the amount of $20,000 because of the inability of the defendants to make immediately other financial arrangements, and because of its making necessary the cancellation of valuable contracts and the curtailment of business, are too general, vague, indefinite, and uncertain. The amount and duration of each loan should be given, the extent of the delay in making other financial arrangements should be stated, and it should appear specifically how the failure to get the additional $2,000 resulted in the damages claimed.

The president of a bank has no power to bind it, except in the discharge of his ordinary duties; and it is not one of his ordinary duties to release debtors of the bank from the payment of their obligations to it. Release from the payment of notes executed to the bank is made under the authority of the directors, and an unauthorized agreement by the president of the bank that the maker of promissory notes made payable to the bank shall be released from payment does not bind the bank.

[Ed Note.-For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 263.]

Where ratification by the bank of an unauthorized agreement, made by its president to release its debtor, is relied upon, some specific act or acts of ratification should be alleged. If acquiescence in and benefits from such unauthorized agreement are relied upon as an estoppel, knowledge of such agreement by the directors of the bank, and the beneficial results accruing to the bank under the agreement, must be alleged and proved. Mere delay in enforcing payment of notes does not tend to show a ratification of an unauthorized agreement to release from payment.

[Ed Note.-For cases in point, see Cent. Dig. vol. 6, Banks and Banking, §§ 273-275.]

The pleas set up no defense, and were properly stricken on demurrer, and the judgment rendered for the plaintiff on the notes was in accordance with law.

Error from City Court of Bainbridge; W. M. Harrell, Judge.

Action by the Bainbridge State Bank against E. Swindell & Co. Judgment for plaintiff. Defendants bring error. Affirmed.

Bower & Bower and R. G. Hartsfield, for plaintiff in error.

Russell & Hawes, for defendants in error.

HILL C.J.

The Bainbridge State Bank brought three suits against Swindell & Co., a partnership, as makers, and the other defendants as indorsers, on certain promissory notes, the suits being for the principal of the notes with interest and attorney's fees, and the petition alleging that notice of an intention to bring suit had been given to the defendants as provided by the statute. Swindell & Co. filed pleas, which, as amended, set up substantially the following facts: That Swindell, a member of said partnership, made an agreement with one Perry, the cashier of the bank, that the bank would lend to the defendants from time to time money up to the limit of $20,000 in such amounts as said firm might desire, the loans to be evidenced by the notes of said firm, and the defendants agreed to give to the bank all their domestic business, which amounted to a very large sum; that the bank, in pursuance of this agreement, did lend the defendants between $16,000 and $18,000, and refused to lend them the balance of the $20,000, and by such refusal damaged the defendants in the sum of $20,000, as by such refusal they were compelled to cancel contracts, and to operate their business at a loss for a lack of funds, and were compelled also to curtail their business, all of which results were caused by the breach of the bank's contract to lend said firm the sum of $20,000; that on the refusal of the bank to lend the additional amounts up to $20,000 Swindell & Co. notified the president of the bank that they would sue the bank for damages, and the said president thereupon agreed that if they would not sue the bank the bank would not sue them on their promissory notes which the bank held. The damages were set up by way of recoupment against said notes, and the agreement not to sue the firm, made by the president of the bank, was set up as a complete release from the notes sued on. Demurrers both general and special to the original pleas and to the pleas as amended were sustained, and the pleas stricken. The judgment sustaining these demurrers and striking the pleas is brought to this court for review.

1. The agreement alleged to have been made by the cashier of the bank to lend Swindell & Co. $20,000 was in violation of section 1916 of the Civil Code of 1895, unless the capital and surplus of the bank amounted to $200,000 or more, or unless the loan was to be amply secured by good collateral security. A special demurrer was filed to the plea on the ground that it did not set up that the plaintiff bank had a sufficient capital and surplus to authorize the agreement to lend $20,000, or that the loan was amply secured by good collateral security. This court would judicially know that the capital stock of this bank was less than $200,000. I would not judicially know whether the capital stock and surplus amounted to $200,000. Therefore this was good ground for special demurrer, and as no amendment was made to meet this defect, the plea was properly stricken. An affirmative plea, such as the one in question, lacking in certainty or definiteness, is subject to special demurrer pointing out such defect. Atlantic Coast Line Ry. Co. v. Hart Lumber Co. (Ga.App.) 58 S.E. 316. The alleged contract, therefore, to lend the defendants $20,000 being in positive violation of the express terms of the statute, could not constitute a valid defense, and as such illegal contract is relied upon as the foundation of the defense, the entire superstructure erected thereon must fall. This court might well content itself with this declaration of the law; but, besides this mortal malady, there are several other serious infirmities in the defense.

2. The cashier of the bank had no authority to make an agreement to lend $20,000 of the bank's money. If he had such authority, what limitation was there upon his right to lend all of the bank's assets to one individual? The direction of the bank is in its board of directors; and, even if the directors could delegate to a merely ministerial officer such as a cashier their legislative and judicial functions, they could not do so, unless expressly so authorized either by the general law or by the charter or by-laws of the bank. It is not claimed that the charter or by-laws of the plaintiff bank...