Southern Exchange Bank v. First National Bank

Broyles, C. J.

(After stating the foregoing facts.)

It is well settled by numerous and repeated decisions of all courts that a national bank can not bind itself by a contract of guaranty made solely for the benefit of another. However, it is equally well settled that a contract of guaranty made by such a bank for its own benefit is valid and binding and is not ultra vires. The power to malee such a contract is one of the implied or incidental powers arising from the express or specific powers granted to national hanks by the provisions of section 5136- of the Revised Statutes of the United States. Under that section a national bank has all the incidental powers to carry on the banking business, and the petition in the instant casé alleges, in substance, that the contract in question was made to protect and preserve the banking business of the defendant bank and to save it from a probable monetary loss and financial ruin. See, in this connection, People’s Bank v. National Bank, 101 U. S. 181 (25 L. ed. 907); Cochran v. United States, 157 U. S. 286, 297 (15 Sup. Ct. 628, 39 L. ed. 704); Schofield v. State National Bank, 97 Fed. 282 (3) (38 C. C. A. 179).

Moreover, even if it be conceded that the contract in question was ultra vires on the part of the defendant bank, under the facts set forth in the petition and the allegations therein showing that the plaintiff bank had fully performed its part of the contract, and that by reason of such performance a substantial benefit had accrued to the defendant bank, which benefit it still retained, the defendant bank is estopped from setting up such a defense. People’s Bank v. National Bank, supra; National Bank v. Graham, 100 U. S. 699 (25 L. ed. 750); Johnson v. Mercantile Trust &c. Co., 94 Ga. 324 (21 S. E. 576); Towers Excelsior &c. Co. v. Inman, 96 Ga. 506, 509 (23 S. E. 418); Bank of Garfield v. Clark, 138 Ga. 798 (2), 801, (76 S. E. 95); Savannah Ice Co. v. Canal-Louisiana Bank &c. Co., 12 Ga. App. 818 (8) (79 S. E. 45).

It follows from the foregoing rulings that the petition in this case sets out a cause of action and that the court erred in dismissing it on demurrer.

Judgment reversed.

Luke and Bloodworth, JJ., concur.