Weckler v. First National Bank

Miller, J., delivered the opinion of the Court. A question of importance and of first impression in this State arises on this appeal. The suit was instituted by the appellant against the appellee, a Rational Bank organized under the Act of Congress approved June 3rd, 1864, known as the “Rational Currency Act.” The first and second counts of the declaration aver in substance, that the defendant as part of its business as such banking association, was engaged in the sale of the bonds of the Northern Pacific Railroad Company, and in soliciting orders for the purchase of the same and receiving commissions for such sales and orders, and by means of certain specified false, fraudulent and deceitful representations made by its teller, the plaintiff was induced to and did purchase from the bank two of said bonds of $500 each, and paid the bank therefor the sum of $1000 and was thereby damnified. The case was tried upon issue joined on the plea of not guilty.

There was conflicting proof as to the making of the alleged false representations by the teller. The Court rejected all the prayers offered on both sides and instructed the jury in effect that the Rational Banking Act under which the defendant was organized, limits the action of the bank to the pursuit of the objects specified in the Act. of Congress, and that the purchase and sale of such bonds is not within the chartered powers of the defendant, and that the plaintiff cannot recoyer against the defendant in this action, although the jury may find from the evi ⁵⁹⁰ dence that the teller of the bank fraudulently induced the plaintiff to purchase the bonds in question by making the alleged false representations, and that she suffered loss thereby. This presents broadly and clearly the question whether the hank has authority under the Act of Congress to engage in the business of selling bonds of railroad companies on commission. A hank, like other private corporations, is confined to the sphere of action limited by the terms and intention of its charter.

The Supreme Court, in the case of the Bank of the United States vs. Dandridge, 12 Wheat., 68 , states the rule by which the powers of the hank are'to he determined thus : “ Whatever may he the implied powers of aggregate corporations by the common law, and the modes by which those powers are to he carried into operation, corporations created by statute must depend both for their powers and the mode of exercising them, upon the true construction of the statute itself.” And in that case the Court adopt, as entirely correct and applicable to the hank, the doctrine laid down by Ch. J. Marshall, in 2 Oranch, 167, in reference to an Insurance Company, viz: “ Without ascribing to this body, which in its corporate capacity is the mere creature of the Act to which it owes its existence, all the qualities and disabilities annexed by the common law to ancient institutions of this sort, it may he correctly said to he precisely what the incorporating Act has made it, to derive all its powers from that Act, and to be capable of exerting its faculties only in the manner in which that Act authorizes.” And in this State the law is well-settled that a corporation created for a specific purpose not only can make no contract forbidden by its charter, hut in general can make no contract which is not necessary either directly or incidentally, to enable it to answer that purpose. In deciding, therefore, whether a corporation can make a particular contract, it must he considered in the first place, whether its charter or some ⁵⁹¹ statute binding úpon it forbids or permits it to make such a contract; and if the charter and valid statutory law are silent upon the subject, in the second place, whether the power to make such a contract may not be implied on the part of the corporation as directly or incidentally necessary to enable it to fulfil the purpose of its existence; or whether the contract is entirely foreign to that purpose ; a corporation has no other powers than such as are specifically granted, or such as are necessary for the purpose of carrying into effect the powers expressly granted. Steam Nav.

Co. vs. Dandridge, 8 G. & J., 318, 319 . We must, therefore, determine the true construction of the Act of Congress authorizing the formation of these banking associations, and whether the power to make contracts like the one in question is expressly conferred upon them, or is directly or incidentally necessary to enable them to fulfil the purpose of their creation, or is entirely foreign to that purpose. So far as the purpose of the law is indicated by its title, it is, “ to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof.” After prescribing in previous sections the mode by, and the conditions under which banking associations may be formed, the 8th section declares that every association so formed shall become a body corporate, from the date of its certificate of organization, but shall transact no business ‘ ‘ except such as may be incidental to its organization, until authorized by the Comptroller of the currency to commence the business of banking.” Power is then given it to adopt a corporate seal, to" have succession by the name designated in its organization certificate, and in that name to make contracts and sue and be sued, to elect directors and other officers, “and exercise under this Act all such incidental powers as shall be necessary to carry on the business of banking by discounting and negotiating promissory notes, ⁵⁹² 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 according to the provisions of this Act." This is the only portion of the statute to which, for the purposes of this case, it is necessary to refer. By it the associations are not simply incorporated as banks, and the scope of their corporate business left wholly to implication, but the kind of banking which they may conduct is limited and defined.

As we read the language of this 8th section, it authorizes the associations to carry on banking “by discounting and negotiating promissory notes," &c., and to exercise “all such incidental powers” as shall be necessary to conduct that business. The mode in which the incidental powers may be exercised is not defined, but all incidental powers which they can exercise must be necessary or incidental to the business of banking, thus limited and defined. To the usual attributes of banking, consisting of the right to issue notes for circulation, to discount commercial paper and receive deposits, this law adds the special power to buy and sell exchange, coin and bullion, but we look in vain for any grant of power to engage in the business charged in this declaration. It is not embraced in the power to “discount and negotiate” promissory notes, drafts, bills of exchange and other evidences of debt.

The ordinary meaning of the terms “to discount," is to take interest in advance, and in banking is a mode of loaning money. It is the advance of money not due till some future period, less the interest which would be due thereon when payable. The power “to negotiate" a bill or note is the power to endorse and deliver it to another so that -the right of action thereon shall pass to the endorsee or holder. No construction can be given to these terms as used in this statute, so broad as to comprehend the -authority to sell bonds for third parties on commission, or ⁵⁹³ engage in business of that character.

The appropriate place for the grant of such a power would be in the clause conferring authority to “ buy and sell,” but we find that limited to specific things, among which bonds are not mentioned, and upon the maxim, expressio unius esi ex-clusio altering, and in view of the rule of interpretation of corporate powers before stated, the carrying on of such a business is prohibited to these associations. Yor can we perceive it is in anywise necessary to the purpose of their existence, or in any sense incidental to the business they are empowered to conduct, that they should become bond-brokers or be allowed to traffic in every species of obligations issued by the innumerable corporations, private and municipal, of the