Norton v. Derry National Bank

The defendants' cashier had no authority to make the guaranty, and there was nothing in the acts, conduct, or course of business of the defendants' officers, by which he was held out as having authority to make it. The guaranty itself being false and a fraud upon both parties, the cashier undertook to cure one fraud by committing another, and recorded a false vote of authority to make the guaranty, and certified the false record to the plaintiff.

Had the forged record been a true one, had the directors voted as the record and certificate declared, or had they made the guaranty themselves, the defendants could not have been bound by their action, for a guaranty of that kind would have been beyond the scope of their powers. The power of corporations is limited by the purposes for which they are created, and which are named in the charter or act authorizing their existence. National banks derive their powers from what is known as the national banking law (Act of Congress, June 3, 1864, Rev. St. U.S., title, LXII), declaring that any association organized under the act shall be a body corporate, and "may exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as may 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 according to the provisions of this title." Real estate may be purchased and held for immediate accommodation in the transaction of business, and received in the collection of debts, and as security for previous indebtedness. Rev. St. U.S., ss. 5136, 5137. The power given by the law is to carry on the banking business, and includes such incidental powers as may be necessary to effect that object. It is nowhere mentioned that a bank may guarantee the performance of written contracts made for other purposes than the payment of money or the transfer of securities. If, in the course of their business, the bank find it necessary to endorse for transfer, or otherwise specially guarantee negotiable commercial paper (People's Bank v. National Bank, 101 U.S. 181), it will not be claimed that the guaranteeing of other written contracts is included within any of its powers, general or special, or is necessarily incidental. It is no part of the business of a bank, nor necessarily incidental to it, to guarantee a building contract, or one for furnishing building materials; and the defendants had no power to make the guaranty which is the subject of this action.

The plaintiff claims that the defendants are liable, because it was the duty of their cashier and clerk to record the votes and official acts of the directors, and the bank are bound by the false record as if it were true; or that the plaintiff in good faith parted with her property, relying upon the strength of the record and the guaranty, and the defendants are estopped from denying the truth of the record and the validity of the guaranty. The doctrine that principals are bound or made liable for the wrongs done by their agents or servants is confined to cases where the acts complained of, or relied on, are done in the employment of the principal as a part of the ordinary business of that employment, or are authorized or directed by the principal, or in some way ratified and adopted by him. Acts, though done by an agent or servant, unauthorized and unratified, and not being within the scope of the employment, nor a part of the ordinary business of the principal, cannot bind him nor make him liable; and the doctrine applies with special force to corporations, the business of which can be carried on only through the medium of agents. A. A. Corp., ss. 310, 311; Ad. Torts, s. 1197; Martin v. Great Falls Mfg. Co., 9 N.H. 51, 54; Salem Bank v. Gloucester Bank,17 Mass. 1; Foster v. Essex Bank, 17 Mass. 479, 508; Mechanics' Bank v. Bank of Columbia, 5 Wheat. 326; Bank v. Dunn, 6 Pet. 51; Bank v. Jones, 8 Pet. 16; United States v. City Bank of Columbus, 21 How. 356. The defendants' cashier had no authority to make the guaranty, nor was his act in making it ever ratified by the defendants. The directors, in fact, repudiated it as soon as it came to their knowledge. It was no part of the duty of the cashier to make the guaranty, nor was its making any part of the ordinary business of the bank. Nothing of the kind was shown to have ever been done before, either with or without express direction. It was not within the legalized powers of the defendants.

The fact that it was a part of the duty of the cashier to record the acts and votes of the directors, does not make his false record and certificate binding upon the bank. The cashier is not a public officer within the meaning of the term, appointed by the public to make and certify records, and whose duties are defined by law. If he was held out by the defendants as their agent to record and show the acts of their officers, the plaintiff was not relieved of the duty of making inquiry into the legality and want of authority of the acts. The doctrine, that of two innocent persons defrauded by a third, he shall suffer who has enabled a delinquent to commit the fraud, has no application here, where the act constituting the fraud was no part of the cashier's duty nor the defendants' legitimate business, and where the plaintiff neglected to make the necessary inquiry for ascertaining the validity of the act.

The doctrine of ultra vires is not usually applied where the party setting it up has received a benefit from the unempowered and unlawful act relied on as a defence. Rich v. Errol, 51 N.H. 350, 354; West v. Errol,58 N.H. 233; United States v. State Bank, 96 U.S. 33; Gold Mining Co. v. National Bank, 96 U.S. 640; National Bank v. Matthews, 98 U.S. 621; Bank v. Whitney, 103 U.S. 99. The defendants received a tract of land, which the plaintiff conveyed, relying for payment of the consideration on the guaranty of the defendants. The guaranty, the conveyance, and the pledge of the note and mortgage were parts of the same transaction, and though the land was not received directly from the plaintiff, it was the false guaranty which induced and made possible the conveyance, and which enabled the bank to collect the overdraft of Lamprey. It was a benefit received from the guaranty, and the defendants cannot be permitted to repudiate the unauthorized contract and retain the fruits of it. If the guaranty is denied, the benefit must be restored. The plaintiff cannot recover upon the guaranty. If he desires, he may amend his declaration by adding an appropriate count for the recovery of the land, or its value if sold.

Case discharged.

SMITH and CARPENTER, JJ., did not sit: the others concurred.