Thilmany v. Iowa Paper-Bag Co.

• Decision Date: 12 May 1899
• Citation: 108 Iowa 333,79 N.W. 68
• Parties: THILMANY v. IOWA PAPER-BAG CO. ET AL.
• Court: Iowa Supreme Court

108 Iowa 333

79 N.W. 68

THILMANY

v.IOWA PAPER-BAG CO. ET AL.

Supreme Court of Iowa.

May 12, 1899.

Appeal from district court, Wapelle county; F. W. Eichelberger, Judge.

Action at law to recover the contract price of a car load of bag paper sold and delivered to the Iowa Paper-Bag Company, and which it is claimed the Iowa National Bank guarantied. The paper-bag company made default, and the issue was between plaintiff and the bank. The bank alleged that the guaranty was without consideration, ultra vires, and void. The case was tried to a jury, and at the conclusion of the evidence the trial court directed a verdict for the bank, and plaintiff appeals. Affirmed.Seneca Cornell, for appellant.

McNet & Tisdale, for appellee.

DEEMER, J.

Plaintiff is a manufacturer of paper, doing business at Kaukauna, Wis.; and the defendant, the Iowa Paper-Bag Company, is a manufacturer of paper bags, doing business at the city of Ottumwa, in this state. In the year 1894 the paper-bag company, desirous of purchasing paper of plaintiff, secured from the vice president of defendant bank the following guaranty: “Edwin Manning, Prest. Wm. Daggett, Vice Prest. Calvin Manning, Cashier. W. R. Daggett, Asst. Cashier. No. 1,726. Iowa National Bank. Capital Stock, $200,000.00. Ottumwa, Iowa, December 8, 1894. Thilmany Pulp and Paper Company, Kaukauna, Wis.--Dear Sirs: The Iowa Paper-Bag Company, of this city, desire to establish business relations with you, and request us to write you. We will guaranty the fulfillment of their obligations to you, to the extent of the cost of a car load of bag paper, for the next twelve months. They are doing a good and safe business, and changed from an Ohio paper mill to your mill at our request. We hope you will give them all advantage possible, as their competition comes from Ohio bag factories, and is sharp in this district; looking, doubtless, to driving this bag company out of the Southern Iowa market. Yours, etc., Iowa National Bank, by Wm. Daggett, V. P.” This letter it inclosed, with an order for a car of paper, in a letter addressed to the plaintiff; and plaintiff thereupon shipped a car of paper to the bag company. The purchase price for this car was promptly paid, and thereafter plaintiff shipped five other cars, all of which were paid for, except the last. This action is to recover the purchase price of the last car, from the bag company on its order, and from the bank on the letter of credit above set out. When plaintiff offered the letter in evidence, it was objected to by the bank on the following grounds: “Incompetent, immaterial, and because the national bank has no authority or power to guaranty the payment of commercial bills, or to bind itself by a guaranty such as [the letter referred to].” This objection was sustained, and the ruling is assigned as error.

Counsel concede that the controlling question in the case is whether or not a national bank has power to issue such a letter of credit or of guaranty as the one offered in evidence. National banks are creatures of the general government, and their powers are enumerated as follows: A national bank can “exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt; by receiving deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtaining, issuing and circulating notes.” Rev. St. § 5136. This act expressly confers upon such banks all incidental powers necessary to carry on the banking business. “These powers,” as said by the supreme court of the United States in Bank v. Armstrong, 152 U. S. 351, 14 Sup. Ct. 574, “are such as are required to meet all the legitimate demands of the authorized business, and to enable a bank to conduct its affairs, within the scope of its charter, safely and prudently. This necessarily implies the right of a bank to incur liabilities in the regular course of its business, as well as to become the creditor of others.” The statute we have quoted does not give national banks express authority to issue letters of credit or to make instruments of guaranty. Neither does it expressly authorize the indorsement of notes or bills of exchange. But, as indorsement is often necessary to the transfer of negotiable instruments, it is clearly within the power of such banks to make this kind of contract. And so it has...