Pollock v. Lumberman's Nat. Bank

Mr. Justice Benson delivered the opinion of the court. There are two assignments of error. The first is based upon the fact that the defendant bank filed an amended answer before trial, without first obtaining leave of the court, which amendment set up the defense that defendant-as a national bank had no authority or power to enter into such an agreement as that set out in the complaint. Plaintiff moved to strike such amended answer from the files for the reasons that it was filed without leave of the court and that it changed the ground of defense and the issues of the cause. The motion was denied and an exception to the ruling presents the question here. 1. It will be noted that the amended answer does not set up a substituted but an additional defense. To permit such an amendment is within the discretion of the trial court and its exercise of such discretion will not be interfered with except in case of abuse and there is no showing here to indicate that the court erred in permitting the amended answer to remain in the records as the defendant’s final pleading: Talbot v. Garretson, 31 Or. 256 (49 Pac. 978). 2. It is also contended that the court erred in entering a judgment of nonsuit. It ivill be noted that the complaint alleges a contract whereby the bank was to act as broker for the purpose of lending plaintiff’s money. A breach of such agreement is then asserted [327] and there is a prayer for damages for such breach. It has been uniformly held that national banks have no power to negotiate loans for others: 3 R. C. L., p. 423, § 51; Farmers & Merchants’ Nat. Bank v. Smith, 77 Fed. 129 (23 C. C. A. 80); First Nat. Bank of Allentown v. Hoch, 89 Pa. St. 324 (33 Am. Rep. 769); Grow v. Cockrill, 63 Ark. 418 (39 S. W. 60, 36 L. R. A. 89). In addition to the authorities cited this court in Byron v. First Nat. Bank, 75 Or. 296 (146 Pac. 516), through Mr. Justice McBride says: “It may be conceded, and it is the law, that a national bank cannot act as a broker; so, if the contract is to be construed in that aspect plaintiff’s case must fail.” Our attention has been called to Chapman v. First Nat. Bank, 72 Or. 492 (143 Pac. 630), and Doerstler v. First Nat. Bank, 82 Or. 92 (161 Pac. 386). The former is a case wherein the complaint alleges a deposit by plaintiff and a refusal by the bank to honor his check or refund his money. The bank answered that he had withdrawn his deposit. The evidence disclosed that without authority the president of the bank obtained plaintiff’s money by means of a memorandum check and appropriated it to his own use. The question of ultra vires was not involved and not discussed. The latter case was one wherein the complaint, as in the former, alleged a deposit and a refusal to repay. After denials the answer asserted that plaintiff had requested the president of the bank to lend his money; the reply being that plaintiff had authorized the bank and not its president to act as broker. In the opinion we find this language: “Whether the bank under the circumstances could lawfully have loaned the money for plaintiff is a matter of no importance. It says that it did not loan it, [328] and plaintiff says it did not loan it, so the whole question comes down to this: Did plaintiff authorize Sheridan personally as his agent to draw out and loan the amount of Ms deposit? This the court left to the jury, and it has found that he was not so authorized.” We have italicized a part of the above quotation for the purpose of calling attention to an error in the published report of the. case, wherein the second use of the word “not” is through some oversight omitted. 3. Counsel for appellant does not seriously contend that the agreement upon which the action is based is within the ^powers of the defendant bank, but insists that its want of authority can be raised only by the sovereign and cannot be made available as a defense in this proceeding. In California Nat. Bank v. Kennedy, 167 U. S. 362 (42 L. Ed. 198, 17 Sup. Ct. Rep. 831), Mr. Justice White says: “Whatever divergence of opinion may arise on this question from conflicting adjudications in some of the state courts, in this court it is settled in favor of the rigid of the corporation to plead its want of power, that is to say, to assert the nullity of an act which is an ultra vires act.” In Central Transp. Co. v. Pullman’s Palace Car Co., 139 U. S. 24, 60 (35 L. Ed. 55, 11 Sup. Ct. Rep. 478), we find this language: “A'contract of a corporation, which is ultra vires, in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the "legislature, is not voidable only, but wholly void, and of no legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be ratified by either party, because it could not have been authorized by either. No performance on either side can give the unlawful con [329] tract any validity, or be tbe foundation of any right of action upon it.” In McCormick v. Market Nat. Bank, 165 U. S. 538 (41 L. Ed. 817, 17 Sup. Ct. Rep. 433), these words are used: “The doctrine of ultra vires, by which a contract made by a corporation beyond the scope of its corporate powers, is unlawful and void, and will not support an action, rests, as this court has often recognized and affirmed, upon three distinct grounds: the obligation of anyone contracting with a corporation, to take notice of the legal limits of its powers; the interest of its stockholders, not to be subject to risks which they have never undertaken; and, above all, the interest of the public, that the corporation shall not transcend the powers conferred upon it by law.” We conclude that the complaint herein does not state facts sufficient to constitute a cause of action, and the judgment is therefore affirmed. Affirmed. Mr. Chief Justice McBride, Mr. Justice Burnett and Mr. Justice Harris concur.