By authority of the directors of a national bank in Chicago,
which had acquired some of its own stock, the individual note of
its cashier, secured by a pledge of that stock was, through a
broker in Portage, sold to a bank there. The note not being paid at
maturity, the Portage Bank sued the Chicago Bank in assumpsit,
declaring specially on the note, which it alleged was made by the
bank in the cashier's name, and also setting out the common counts.
The bank set up that the purchase of its own stock was illegal and
that money borrowed to pay a debt contracted
Page 160 U. S. 647
for that purpose was equally forbidden by Rev.Stat. § 5201.
The trial court was requested by the Chicago Bank to rule several
propositions of law, and declined to do so. Judgment was then
entered for the Portage Bank. The Supreme Court of the State of
Illinois held that the Portage Bank was entitled to recover under
the common counts, and that it was not necessary to consider
whether the trial court had ruled correctly on the propositions of
law submitted to it.
Held, that that court, in rendering
such judgment, denied no title, right, privilege, or immunity
specially set up or claimed under the laws of the United States,
and that the writ of error must be dismissed.
This was an action of assumpsit brought by the City Bank of
Portage against the Chemical National Bank of Chicago in the
Superior Court of Cook County, Illinois. The declaration contained
a special count upon a note signed by C. E. Braden, which it was
alleged was made by defendant in that name; and the common counts.
The defendant pleaded the general issue and a plea denying the
execution of the note described in the special count. A jury was
waived and the cause submitted to the court for trial.
Under the Practice Act of Illinois, where a trial is by the
court, either party may
"submit to the court written propositions to be held as law in
the decision of the case, upon which the court shall write
'refused' or 'held,' as he shall be of opinion is the law, or
modify the same, to which either party may except as to other
opinions of the court."
Rev.Stat.Ill. c. 110, § 42; 2 Starr & Curt. 1808.
Defendant requested the court to hold as law in the decision of
the case the eight propositions given in the margin.
*
Page 160 U. S. 648
Of these the court refused to hold propositions numbered one,
two, three, four, six, and eight, and also proposition numbered six
"if it appears that the bank, its officers knowing the facts, used
the money;" and defendant excepted. The court held propositions
numbered five and seven. The issues were found in favor of
plaintiff and judgment entered on the finding, and, the case having
been taken to the Appellate Court for the First District of
Illinois, the judgment of the superior court was affirmed. 55 Ill.
App. 251. And this judgment of the appellate court was affirmed by
the supreme court of the state on appeal. 156 Illinois, 149.
Thereupon a writ of error from this Court was sued out.
There was evidence tending to show that in 1893, the Chemical
National Bank had taken some of its own stock in payment
Page 160 U. S. 649
of a debt, that Hopkins, assistant cashier, had given to a firm
of brokers his note payable on call, secured by part of this stock
as collateral; that the brokers procured the money on the note and
paid it to the bank, the assistant cashier not getting any of it,
and that after the note had run fifteen days, the holders called it
in, and it was paid out of the moneys of the bank. It was then
agreed between Curry, president, Braden, cashier, and Hopkins,
assistant cashier, that the bank should raise five thousand dollars
through a broker in Minneapolis by giving a note in Braden's name,
payable to the broker and with the stock as collateral, and that,
as the bank was to have the money, the note should be the bank's
obligation and be paid by it. In carrying out this arrangement, the
note in suit was given, being signed by Braden in his own name, and
not as cashier, and made
Page 160 U. S. 650
payable to the Minneapolis broker; and fifty shares of the stock
held by the bank were issued in Braden's name and attached to the
note as collateral. Braden did not own this stock; received none of
the money; and had no personal interest in the transaction. The
note was sent to the broker at Minneapolis, who endorsed it without
recourse, procured the money from the City Bank of Portage, and
sent it to the Chemical National Bank. He advanced no money on the
note either to Braden or the bank, did not owe Braden anything, and
the note was given by Braden to him purely as a means of raising
money for the bank. There was also evidence that the board of
directors of the Chemical National Bank, at a meeting thereof, had
authorized the president to buy stock of the bank when offered for
sale at par up to $100,000, agreeing to take it as soon as they
could, but that no entry of this authority was made on the bank's
records; that the money obtained on Hopkins' note was used in
making such a purchase; and that the stock which was annexed to the
Hopkins note and to that in suit was a part of the stock purchased
under these circumstances, and not part of that taken by the bank
upon a debt, of all which the City Bank of Portage had no
notice.
The defense was that the purchase by the bank of its own stock
was illegal; that it was equally illegal for tile bank to borrow
money to replace money paid out in making such a purchase; that
that was what this transaction amounted to; and that plaintiff
could not recover because the money was obtained and used for a
purpose forbidden by section 5201 of the Revised Statutes of the
United States, which is as follows:
"No association shall make any loan or discount on the security
of the shares of its own capital stock, nor be the purchaser or
holder of any such shares, unless such security or purchase shall
be necessary to prevent loss upon a debt previously contracted in
good faith, and stock so purchased or acquired shall, within six
months from the time of its purchase, be sold or disposed of at
public or private sale or, in default thereof, a receiver may be
appointed to close up the business of the
Page 160 U. S. 651
association, according to section fifty-two hundred and
thirty-four."
The supreme court held that the plaintiff was entitled to
recover under the common counts; that it was unimportant to
consider whether the superior court ruled correctly on the
propositions of law requested on behalf of defendant, since they
all related to the right of recovery on the note; and the court
said:
"Curry, president of the Chemical National Bank, was called as a
witness, and it may be inferred from his evidence, although he does
not state the fact, that the bank stock procured by the bank was
not taken in on a debt, but was purchased. Conceding that the
Chemical National bank purchased fifty shares of its own stock,
contrary to the provisions of the National Banking Act, does that
unlawful act so pollute the transaction between plaintiff and
defendant under which plaintiff loaned its money that the defendant
may keep the money and the plaintiff bear the loss? If the facts
were as claimed by counsel, they would not defeat a recovery on the
part of plaintiff. The purchase of the stock and the borrowing of
the money from plaintiff were two distinct transactions. In the
purchase of the stock, the money used by the defendant in payment
was raised on the note of Hopkins, assistant cashier. Afterwards
the bank paid the Hopkins note with its own funds, and this ended
the transaction so far as the purchase of stock was concerned.
After this transaction was ended, the bank applied to the plaintiff
for a loan of money and obtained it, placing the bank stock
previously obtained in the hands of plaintiff as collateral. The
plaintiff did not know where, of whom, or in what manner the
Chemical National Bank had acquired the bank stock turned over as
collateral, nor did it know what use that bank would make of the
money loaned. Moreover, this money was not loaned by plaintiff to
pay for bank stock, and, so far as appears, it was never used for
that purpose. So far as appears from the evidence, there was
nothing illegal in the transaction between plaintiff and defendant
which resulted in the loan of $5,000. "
Page 160 U. S. 652
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
We are of opinion that the Supreme Court of Illinois, in
rendering judgment, denied no title, right, privilege, or immunity
specially set up or claimed by defendant under the laws of the
United States, and that this writ of error cannot be
maintained.
The contention of plaintiff in error is that the state court
decided
"either, first, that the cashier, Braden, by virtue of his
office, had, under the laws of the United States regulating
national banks, implied authority to borrow money in the name of
the defendant and bind it to repayment thereof, or second that the
transaction out of which the discounting of the Braden note arose,
which transaction consisted of the original purchase of the fifty
shares of the bank's stock, the giving of the Hopkins note, and the
payment thereof out of the moneys of the bank, was one which, in
law, could be regarded as a transaction of the bank,"
and that therefore the state court decided against an immunity
from liability expressly set up or claimed by the Chemical National
Bank under the laws of the United States.
The appellate court reviewed the judgment of the superior court
for errors committed on the trial, and, finding none, affirmed it,
and the supreme court affirmed the judgment of the appellate court,
and if no such claims were set up in the trial court, the supreme
court, in approving the affirmance of its judgment by the appellate
court, could not be held to have decided against a claim with which
the trial court had not been called upon to deal. It does not
appear that the immunity from liability was expressly claimed by
plaintiff in error in the trial court on the ground that the bank
could retain the money because it was obtained by means in excess
of the powers of its cashier or other officers.
Page 160 U. S. 653
The propositions on which the trial court was asked to rule were
manifestly directed to the right of recovery on the note as such,
under the special count, and certainly fell far short of a claim of
the character suggested as a defense to a recovery under the common
counts. Moreover, the question of liability, whatever the authority
of these bank officers to borrow this money for the bank, depended
upon general principles of law applicable under the particular
facts.
Western National Bank v. Armstrong, 152 U.
S. 346,
152 U. S.
352-353.
Nor can we perceive that the supreme court denied any immunity
from liability claimed as arising out of the purchase by the bank
of its own stock, other than to prevent loss on previous
indebtedness. The decision of the supreme court rested on the fact
that that purchase of stock and the loaning of the money from the
City Bank of Portage were two distinct transactions, and this was a
ground broad enough to sustain the judgment, without deciding any
federal question at all.
It is said that the supreme court had no power to decide any
controverted question of fact, but we cannot review the decision of
that court in that respect, even if the position were well taken;
but we do not understand that the supreme court did so decide. It
is true that, under sections 87 and 89 of the Practice Act, the
Supreme Court of Illinois does not reexamine controverted questions
of fact; but it nevertheless examines the evidence bearing upon the
issues of fact determined, to see what principles of law are
involved in a controversy and whether they are properly applied by
the trial court.
Sexton v. Chicago, 107 Ill. 323, 326;
Postal Telegraph Co. v. Lathrop, 131 Ill. 575, 580. In
this case, the supreme court recapitulated the evidence as being
that on which the trial court rendered judgment in order to
disclose the basis of the ruling that plaintiff was entitled to
recover.
The affirmance by the appellate court of the judgment of the
trial court, without any recital of the facts found, conclusively
settles all controverted questions of fact necessary to support the
judgment.
Utica & Deer Park Bridge Co. v. Commissioners of
Highways, 101 Ill. 518;
Bernstein v. Roth, 145 Ill.
189. If the appellate court disposes of a cause on
Page 160 U. S. 654
a finding of facts different from the finding of the trial
court, it is its duty to recite in its final judgment the facts so
found (Rev.Stat.Ill. c. 110, § 87; 2 Starr & Curt. 1842);
but there was no such finding of facts by the appellate court here,
and it is to be presumed that that court found the facts in the
same way as did the trial court. As the supreme court proceeded to
judgment upon the facts as thus determined, we must accept its view
as controlling.
Writ of error dismissed.
*
"1. If the court finds from the evidence that some of the
directors of the Chemical National Bank of Chicago were desirous of
purchasing shares of the capital stock of said bank for themselves
individually; that in pursuance of such desire, they instructed the
president of said bank to purchase such an amount of said shares of
stock not exceeding $100,000 par value, as might be offered at par,
stating to him that they would take the stock so purchased at
different times as their money came in; that, in pursuance of such
instruction, the president of said bank caused a broker to purchase
fifty shares of said capital stock, and in payment for said stock,
one Hopkins, assistant cashier of said bank, gave to said broker
his individual note for the purchase price of said stock, payable
on demand; that thereafter, payment of said note being demanded of
said Hopkins, the president and cashier of said bank paid said note
out of the moneys of said bank, and thereupon it was arranged by
and between the president, the cashier, and the assistant cashier
that the cashier, Braden, should execute his individual note for
$5,000 to a broker; that fifty shares of said stock so purchased
should be transferred upon the books of the bank to said Braden,
and attached to said note to be given to said broker as collateral
security; that said broker should procure said note to be
discounted, and that the money realized by discounting said note
should be paid into the moneys of the bank to replace the money of
the bank used in paying the Hopkins note, and that, in pursuance of
such arrangement, said Braden gave the note in controversy, and the
same was discounted and the proceeds were deposited with the moneys
of the Chemical National Bank of Chicago, then the court should
find that said note was the individual note of said Braden, and not
the note of the defendant, and should find the issues in favor of
the defendant."
2. If the court believes the testimony given by J. O. Curry in
this case to be true and to be a correct statement of the
circumstances connected with the execution by Braden of the note
sued on, then the court must find the issues joined in favor of the
defendant.
3. Although the court may believe the testimony of Braden to be
true, yet his testimony with all inferences that may be justifiably
drawn therefrom in favor of the plaintiff does not justify a
finding; in favor of the plaintiff.
4. The fact that the money realized upon the note in suit was
received by the Chemical National Bank of Chicago does not make
said Chemical National Bank of Chicago liable upon said note, and
this is true notwithstanding it was agreed by and between Carry,
Braden, and Hopkins that the note should be treated as a note of
the Chemical National Bank of Chicano and paid by it.
"5. A national banking association is prohibited by law from
purchasing shares of its own capital stock unless such purchase
shall be necessary to prevent loss upon a debt previously
contracted in good faith."
"6. The purchase by officers of a national banking association
of shares of its own capital stock, unless such purchase is
necessary to prevent loss upon a debt previously contracted in good
faith, cannot be regarded as a transaction of the association
itself unless expressly authorized by its board of directors, and a
note executed by an officer in his own individual name for the
purpose of borrowing money to make such a purchase cannot be
regarded as the note of the association unless recognized as such
by its board of directors and unless the lender parted with his
money upon the faith of the liability of the association."
"7. There is no evidence in this case legally sufficient to
justify a finding that the plaintiff, at the time it accepted the
note in controversy and advanced money on the same, had any
knowledge whatever that Braden was not the real principal or that
it advanced any money on the note upon the faith of any supposed
liability of the defendant upon said note."
"8. Although a corporation may be held liable upon a contract
that is
ultra vires or prohibited by law when such
contract has been fully executed by the other party, yet where such
contract has been entered into by an officer of the corporation in
his own individual name, and the other party, at the time he
performed the same on his part, had no knowledge that the same was
for the benefit of the corporation and did not part with any money
or property on the faith of the liability of the corporation upon
the contract, but, on the contrary, executed the contract on his
part in reliance solely upon the individual liability of such
officer, such other party cannot enforce such contract against the
corporation as an undisclosed principal."
