First National Bank of Monmouth v. Brooks.

the powers conferred upon the corporation by act of its creation, and are in violation of the trust reposed in the managing board by the shareholders, that the affairs shall be managed and the funds be applied solely for carrying out the objects for which the corporation was created. The plea of ultra vires should not as a general rule prevail, whether interposed for or against a corporation, when it would not advance justice; but, on the contrary, would accomplish a legal wrong." Whitney Arms Co. v. Barlow, 63 N. Y. 62; 20 Am. Rep. 504. In the above case it is laid down as a further rule, and as being well settled, "that a corporation cannot avail itself of the defense of ultra vires when a contract has been, in good faith, fully performed by the other party, and the corporation has had the full benefit of the performance and of the contract." "If an action cannot be brought directly upon the agreement, either equity will grant relief or an action in some other form will prevail." These rules presuppose that corporations may enter into contracts through their officers and perform them, and the party with whom they contract may perform them, and yet such contracts be without the powers granted, and if the corporation or either party receive a benefit, it or he must make compensation after the contract is performed. But while the contract is executory, it may be repudiated by either party. In the mean time, if either party has received a benefit, he must make compensation on the principles of natural equity. Applying these rules to the facts of this case, we find that the instructions presuppose that the cashier received the money in question on behalf of the bank from defendant in error as a general deposit and mingled it with the money of the bank, and that it became a part of the funds of the bank indistinguishable from any other funds. If the agreement to loan the money was ultra vires, either party to the contract might repudiate that part of it before the money was paid out or loaned under the agreement. If paid out or loaned, the bank could recover the usual compensation for its services, notwithstanding the acts performed might have been beyond its powers; on the other hand, defendant in error may recover from the bank the money received by it. The obligation, based alone on the grounds of estoppel, arose as soon as the money was received on deposit, and much more when

First National Bank of Monmouth v. Brooks.

mingled with the funds of the bank. It became a debt due from the bank which the law would not allow it to deny, and a cause of action arose after demand and refusal to pay. The cashier, by authority of the directors, had possession of all the bank's funds, not the money in question alone, but all; and he fraudulently appropriated a large amount of its cash capital to his own use, and much more than the amount of this deposit. Why should defendant in error be charged with the defalcation any more than any other depositor? Because he authorized appellant to pay John Brown? That could not be, for it was a part of the cashier's legitimate duties to draw money out of the bank to pay depositors, or the debts of the bank at the order of depositors, regardless of whether the order was made at the time of deposit or afterward; and if in performing this duty the cashier stole the money, the loss should fall on the bank and not the depositor. He was the servant of the bank. After this money was received by the cashier on deposit, and much more of it mingled with the funds of the bank, defendant in error's claim against it was a chose in action, and not the subject of larceny; therefore the theft by the cashier must be borne by the bank If it be contended that the bank had no notice that the money so mingled with the funds of the bank was not the money of the cashier, and that by reason thereof it had an equitable right to set off the amount of money wrongfully abstracted by the cashier against the deposit of the defendant in error, it is answered that the want of notice cannot be set up against his equitable claim as an estoppel, for the reason that it has been put in no worse condition on account of want of notice. The money was not paid out to the cashier supposing the bank owed him. As a matter of fact, the bank did not owe him, but owed defendant in error, and the want of notice, if there was such want, which is not admitted, had no effect to cause the larceny. The plaintiff in error is in no worse condition on the account of the want of notice. The bank however is held to notice where the cashier receives the money by virtue of his authority as cashier às here.

What is said here is said in reference to the form of the instructions complained of and to show that they are not erroneous. As there was no serious contradiction as to the proof, it is not

First National Bank of Monmouth v. Brooks.

necessary to discuss it further than to say it justifies the verdict. The judgment in the opinion of a majority of the court should be affirmed and is accordingly done.

WELCH, J. (dissenting.) I do not concur in the reasoning or conclusion reached by my brethren in this case. The eighth section of the act of Congress under which National banks are organized, makes them banking corporations with "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 or 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 the act." The powers of National banks, being enumerated in the act of Congress by which they are created, the expressio unius est exclusio alterius if applied in the interpretation of this act would prohibit National banks from entering into such a contract as that claimed to have been entered into in this case.

"The deposits referred to in the act are deposits of money received by banks in the usual course of business and have none of the qualities of a bailment. The money deposited becomes the money of the banks, and the relation of debtor and creditor is created between the depositor and the bank." Whitney v. First National Bank of Brattleboro, 50 Vt. 393; 28 Am. Rep. 508; 2 Nat. Bank Cas. 69; same rule announced in Wiley v. First National Bank of Brattleboro, 47 Vt. 546; 1 Nat. Bank Cas. 905; First National Bank v. Ocean National Bank, 60 N. Y. 278; 19 Am. Rep. 189; 1 Nat. Bank Cas. 728; Wickler v. First National Bank, 42 Ind. 581; 1 Nat. Bank Cas. 533.

Angell and Ames Corporations, 256, says: "In deciding whether a corporation can make a particular contract, we are to consider in the first place whether its charter or some statute binding upon it forbids or permits it to make such a contract ; and if they 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 fulfill the purposes of its existence, or whether the contract is entirely foreign to that purpose."

First National Bank of Monmouth v. Brooks.

The contract, if any, between the plaintiff in error, is based upon this paper:

66

Deposited with the First National Bank by Wm. H. Brown:

'MONMOUTH, Ill., June 2, 1883.

Currency-$800. To be indorsed on his note held by John Brown, or loaned for his use in case Brown won't receive said money.

"B. T. O. HUBBARD, Ce." Judge WAYNE, in United States v. City Bank of Columbus, 21 How. 356, says: "The court defines the cashier of the bank to be an executive officer, by whom its debts are received and paid, and its securities taken and transferred, and that his acts, to be binding upon a bank, must be done within the ordinary course of his duties. His ordinary duties are to keep all the funds of the bank, its notes, bills and other choses in action, to be used from time to time in the ordinary and extraordinary exigencies of the bank. He usually receives directly, or through the subordinate officers of the bank, all the money and notes of the bank; delivers up all discounted notes and other securities when they have been paid; draws checks to withdraw the funds of the bank when they have been deposited, as the executive officer of the bank, transacts most of its business." After this summary of the duties and powers of the cashier, the same judge says, "that he may not make any contract involving the payment of money not loaned in the usual or customary way, or purchase or sell property, or create an agency of any kind for the bank unless expressly authorized by those to whom it has been confided to manage the business of the bank, both ordinary and extraordinary." The same rule as to the limits of the authority of bank officers, to bind the corporation to acts and contracts within the ordinary sphere of their duties and the scope of the ordinary business, is announced in the following cases: Minor v. Mechanics' Bank of Alexandria, 1 Pet. 46-70; Fleckner v. Bank of United States, 8 Wheat. 338; Fulton Bank v. New York and Sharon Canal Co., 4 Paige, 127. Under the rule announced in the authorities, supra, had Hubbard, as the cashier of the bank, authority to receive for the bank money on the terms stated in said paper, and to bind the bank therefor? As said in Whitney v. First National Bank of Brattleboro, 50 Vt., supra: "The deposits referred

First National Bank of Monmouth v. Brooks.

to in the act are deposits of money received by banks in the usual course of business, and have none of the qualities of a bailment. The money deposited becomes the money of the bank, and the relation of debtor and creditor is created between the depositor and the bank;" same rule announced in Commercial Bank of Albany v. Hughes, 17 Wend. 94; Maine Bank v. Fulton Bank, 2 Wall. 252. This is the character of deposit which by the National Bank Act, supra, the plaintiff in error was authorized to receive, and in receiving such a deposit the cashier would be acting within the scope of his authority, and the bank by his act. would become a debtor to the depositor. Does the paper signed by Hubbard, supra, show the reception by him of such a deposit for the bank? In my opinion the alleged contract is entirely foreign to the purpose of the plaintiff in error corporation, and is ultra vires and imposed no duty or obligation upon the bank. Bullard v. Banks, 18 Wall. 385; Hood v. Armory, 2 Cr. 107. The defendant in error in depositing his money with Hubbard was under the law required to know whether he had authority as cashier of plaintiff in error to receive it on the terms fixed by him, and, as I think, I have shown that no such authority exsted. The money must have been left with Hubbard as his agent, and not deposited with the plaintiff in error. This view is sustained by Hubbard, who says: "Brooks came to me and gave me the money, and requested me to pay it to Deacon Brown, and in case Deacon Brown would not receive it, to loan it out for him. It was a personal request to me." Brooks and Hubbard both seemed to realize that Hubbard had no authority to receive it for the bank on such terms. It was a "personal request" to Hubbard to make the application of the money. If Hubbard, as the cashier of plaintiff in error, was not acting in the limit of his duty as such cashier when he received the money from Brooks, then he received the money as the agent of Brooks. Man. Co. v. Lydig, 4 Johns. 377; Satislee v. Grant, 1 Wend. 272; Thatcher v. Bank of New York, 5 Sandf. 121; Lloyd v. Bank, 3 Harris (Pa.), 175; Lithbridge v. Phillips, 2 Stark. 544. Even if it should be conceded, which I do not, that the plaintiff in error could receive money on the terms stated in the paper signed by Hubbard, supra, that would make it a gratuitous un