Howard National Bank v. Loomis

The opinion of the court was delivered by Powers, J. The evidence in the case establishes the fact that at the time the petitioner’s mortgage was executed no loan of money was made to the defendant Loomis. Loomis was already a debtor to the bank for the full sum covered by the mortgage, [352] and, becoming insolvent, the bank procured the execution of the mortgage, not to secure a present loan, not to secure future advances, but to secure his old debt. No question can be made as to the good faith of the bank in taking the security. The provision for a renewal of the note does not have the effect to make the renewed notes evidence of new advances. The mortgage is executed to secure the past advance of money. The new notes are the evidence of the old debt. The mischief sought to be guarded against in the statute prohibiting the loan of money by national banks upon a pledge of real estate security is, the possible investment of their funds in real estate, and that hazard was incurred when the old debt was secured by this mortgage. The provisions for a renewal of the notes made it less probable that the title would vest in the bank than an immediate foreclosure of Loomis’s equity. In view of the case of Union National Bank v. Matthews, to appear in 97 U. S. Reports, is the defence here set up valid ? In that case the Supreme Court of the United States, whose construction of an act of Congress is paramount, seem to deny the right of the mortgagor and those claiming under him to avoid the mortgage deed on the ground of the want of power in the bank to take it. The doctrine of ultra vires, which is getting to be quite fashionable with the profession, ought not to be invoked to effectuate injustice, where it can be avoided, Farmer's Bank v. Burchard, 33 Vt. 346. The decree is affirmed, and the cause remanded.