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rant it to devote its efforts and capital to other purposes than such as its charter expressly authorizes, or to engage in collateral enterprises not directly but only remotely connected with its specific corporate purposes. A power which the law will regard as existing by implication must be one in a sense necessary—that is, needful, suitable and proper to accomplish the object of the grant, and one that is directly and immediately appropriate to the execution of the specific powers, and not one that has but a slight, indirect or remote relation to the specific purposes of the corporation.”
Although it has been said that,
“A corporation, in order to attain its legitimate objects, may deal precisely as an individual may who seeks to accomplish the same ends” (Barry v. Merchants’ Exchange Co. 1 Sandf. Ch. (N. Y.) 280, 289); yet manifestly a corporation organized to engage in a certain business can not do everything that can be done by a natural person engaged in a like business. The rights and powers of a natural person to enter into all kinds of contracts and to transact all character of business are inherent; and any limitations upon that power must be found in some law restricting such rights; and hence acts may be performed by a natural person which only remotely or indirectly affect a business in which he is engaged, and are not necessary, needful, or immediately appropriate to the transaction of the business, and which, if done by a corporation engaged in such business, would be ultra vires.
The fundamental principle here stated has been applied by some courts and textbook writers in connection with the establishment by banks of agencies for the transaction of a particular business, and also branches for the transaction of a general banking business; and it is well to review these authorities before applying the principle to national banks.
The leading case with reference to the power of a bank to transact a particular kind of business through an agency is Bank of Augusta v. Earle, 13 Pet. 519. The bank of Augusta was incorporated by a special act of the Legisla
ture of Georgia, and the corporation was given the general power to deal in bills of exchange. The principal office of the corporation was located in Augusta, Ga., but an agency was maintained in Mobile, Ala., for the purpose of trafficking in exchange. In the due course of business a bill of exchange drawn by a firm in Mobile on a firm in New York City in favor of the defendant Earle, accepted by the drawee and indorsed by the payee, was discounted by the Mobile agency with funds placed there for that purpose. The bill was protested for nonpayment and returned to the Bank of Augusta, whereupon suit was brought against Earle. The circuit court dismissed the suit upon the ground that the Bank of Augusta was without authority to make a contract in the State of Alabama. On appeal this judgment was reversed by the Supreme Court, the main question there discussed and determined being, whether a corporation had the power to make a contract outside of the State which had granted its charter. Upon this question the court said:
“The charter of the Bank of Augusta authorizes it, in general terms, to deal in bills of exchange; and consequently, gives it the power to purchase foreign bills as well as inland; in other words, to purchase bills payable in another State. The power thus given, clothed the corporation with the right to make contracts out of the State, in so far as Georgia could confer it. For whenever it purchased a foreign bill, and forwarded it to an agent to present for acceptance, if it was honored by the drawee, the contract of acceptance was necessarily made in another State; and the general power to purchase bills, without any restriction as to place, by its fair and natural import authorized the bank to make such purchases, wherever it was found most convenient and profitable to the institution; and also to employ suitable agents for that purpose. The purchase of the bill in question was, therefore, the exercise of one of the powers which the bank possessed under its charter; and was sanctioned by the law of Georgia creating the corporation, so far as that State could authorize a corporation to exercise its powers beyond the limits of its own jurisdiction” (p. 588).
“The corporation must, no doubt, show, that the law of its creation gave it authority to make such contracts, through such agents. Yet, as in the case of a natural person, it is not necessary that it should actually exist in the sovereignty in which the contract is made. It is sufficient, that its existence as an artificial person, in the State of its creation, is acknowledged and recognized by the law of the nation where the dealing takes place; and that it is permitted, by the laws of that place, to exercise there the powers with which it is endowed” (p. 589).
In Tombigbee Railroad Co. v. Kneeland, 4 How. 16, a Mississippi corporation vested with banking powers brought an action on a promissory note discounted at the branch office of plaintiff in Gainesville, Ala. The act of the legislature incorporating this company provided that it could establish branches when the directors deemed it expedient, at such places as might be designated by the legislature. It does not appear, however, whether Gainesville had been designated as such place; but the case was made to turn entirely upon the authority of Bank of Augusta v. Earle, it being held that the transaction in question was authorized by the company's charter, and was valid, though the transaction was had in the State of Alabama.
City Bank of Columbus v. Beach, Fed. Case No. 2736, was an action brought to recover the amount of two bills of exchange discounted at an agency maintained in Cleveland, Ohio, by the City Bank of Columbus. The bank was incorporated under the laws of Ohio, and was vested with express power to buy, sell, and discount bills of exchange, and it maintained the agency at Cleveland for the purpose of dealing in bills of exchange. In passing upon the legality of such agency, Circuit Judge Nelson said:
"The acts under which the bank became a corporation, conferred upon it the power to deal in exchange, without restriction, and hence the purchase of bills at the city of Cleveland, for the purpose of remitting the proceeds of paper belonging to the bank collected at that place, or even the dealing generally in exchange at that place by an agent, with the funds thus collected and remitted, was not
in contravention of the charter of the bank, or of any law of the State of Ohio. I think this case falls within the principle of the case of Bank of Augusta v. Earle, 13 Pet. (38 U. S.) 519, and of Tombigbee R. Co. v. Kneeland, 4 How. (45 U. S.) 16, and that a new trial ought not be granted.”
And District Judge Conkling thus stated the question presented:
“The question, then, is resolved into the simple inquiry whether a State bank, having power by its charter to deal in bills of exchange, without any express restriction as to place, can lawfully establish an agency, for the purpose of buying and selling bills of exchange, in a part of the State other than that of its location;" and the question was answered by the learned judge in the affirmative.
Many cases might also be cited wherein it has been held that banking corporations have the power to establish clearing-house agencies.
These authorities are conclusive of the proposition that a bank may maintain an agency, the power of which is restricted to dealing in bills of exchange, or possibly to some other particular class of business incident to the banking business. But are they authority for the proposition that a bank may establish a branch for the transaction of a general banking business?
In none of the cases cited has it been suggested that the principle declared can be extended to include such a power. On the other hand, the case of People v. Oakland County Bank, 1 Douglass, 282, 288, decided by the Supreme Court of Michigan, is clearly to the contrary. The Oakland County Bank was organized under a special act of the legislature, and the only reference therein to its place of business was that the parties mentioned might receive subscriptions to the capital stock of a bank to be located at such place in the county of Oakland as the majority of the stockholders might direct; and again, upon the paying in of $20,000 of the capital stock of the bank, the commissioners or directors should procure a convenient place in said county of Oakland and commence operations. There was no prohi
bition in the act against the bank doing business anywhere in the State, or against its establishing a branch. However, the bank did establish a branch in Detroit, in which was carried on a regular banking business, and the action was brought to revoke the charter of the bank because of the maintenance of this branch. The court held that the corporation was wholly without authority to establish the branch, saying:
“By the act of incorporation, the stockholders were authorized to locate the bank in the county of Oakland. It follows, therefore, that, if the corporation has undertaken to exercise any of its franchises without that county, it has usurped an authority in violation of law, and must suffer the penalty which that law inflicts."
In Bank of Augusta v. Earle it was held that, though the Legislature of the State of Georgia did not undertake to authorize the corporation to do a banking business outside of that State, yet the bank could transact a particular business in the State of Alabama through an agency; while in the Oakland County Bank case it was held that under a like limitation in its charter powers the establishinent of a branch wherein a general banking business was carried on was unauthorized and unlawful.
If in the former case a branch bank had been established in Mobile for the purpose of conducting a general banking business instead of a mere agency for the purchase of bills of exchange, there is nothing in the opinion of the supreme court to indicate that, in a direct attack upon such institution, it would have been held as authorized by the bank's charter; while in the latter case, if a mere agency for the purchase of bills of exchange had been established in Detroit, the Supreme Court of Michigan would, in all probability, have sustained the validity of its transactions.
These cases clearly indicate that the courts recognize a vital distinction between a mere agency for the transaction of a particular business and a branch bank wherein is carried on a general banking business.
That such a distinction does exist in fact is obvious.
An agency requires no division of the capital stock, and the details of the business are few and are easily supervised