First National Bank v. Stokes

HART, J., (after stating the facts). In any event the judgment must be reversed because the court erred in refusing to give instruction number one asked by the plaintiff and in giving instruction number two at the request of the defendants. (1) Instruction number one is as follows: “I charge you that if you find by a preponderance of the testimony that the defendants, Ed Mays and J. C. Stokes, entered into a contract by which Mays was to secure money with which Stokes was to purchase cattle and to own the cattle jointly and to share the profits, and that Mays did furnish the money directly or indirectly, and that Stokes purchased the cattle, that under the law would constitute them partners. ’ ’ This instruction should have been given. It was the theory of the plaintiff that Mays and Stokes entered into a contract of partnership for the purchase and sale of cattle at a profit and borrowed money from the bank to use in the business of the partnership. On the other hand it was contended by the defendants that a partnership for the purchase and sale of the cattle was made between Stokes and the bank and that Mays simply acted as agent for the bank in making the contract. The instruction asked for submitted the plaintiff’s theory of the case as to the partnership, and should have been given. Beebe v. Olentine, 97 Ark. 390. The court also erred in giving instruction number two at the request of the defendants. It reads as follows : “You are instructed that if you should find from the preponderance of the evidence that the money was secured by the defendant Ed Mays from the First National Bank to be used by the defendant, J. C. Stokes to buy cattle and the bank made the loan to said Stokes for that purpose, and that a contract was made to give either the defendent Mays or the bank one-half the profits on said cattle in .addition to the payment of legal interest, this alone would not make the parties partners and you will return a verdict for the defendant Ed Mays. ’ ’ This instruction was erroneous because the concluding part of it makes it peremptory in its nature. It is true that an agreement to share profits alone is not the test of .a partnership, still if the contract was made between Stokes and Mays for himself instead of the bank, these parties would be liable to the bank for the money borrowed, whether there was a partnership or not. Hence it is obvious that the concluding part of the instruction was misleading and prejudicial to the rights of the bank. (2) Moreover the plaintiff was a national bank, and had no authority to engage in the speculative business of buying and selling cattle. Even if it be assumed that Mays made the contract for the bank, the contract was ultra vires and there was no estoppel on the part of the bank. It is settled that the United States statutes relative to national banks constitute. the measure of authority of such corporations, and that they can not rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established. McCormick v. Market Bank, 165 U. S. 538; California Bank v. Kennedy, 167 U. S. 362; Concord First National Bank v. Hawkins, 174 U. S. 364; First National Bank of Ottawa v. Converse, 200 U. S. 425, and Merchants’ National Bank of Cincinnati v. Wehrmann, 202 U. S. 295. Section 5136 of the Revised Statutes of the United States defines the corporate power of national banks. Sub-section 7 provides that it shall ‘ ‘ exercise by its board of directors, or duly authorized officers or agents, subject to law, 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, and 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 this title.” It is manifest that the power to enter into a partnership for the purpose of buying and selling cattle at a profit is not expressly conferred upon national banks, nor is it an act which may be exercised as incidental to the powers expressly conferred. Consequently such a partnership would be an ultra vires act. In the cases above cited it is said that the reason that such contracts are unlawful and void rests upon three distinct grounds; the obligation of any one contracting with the corporation to take notice of the legal limits of its powers, the interest of the share holders 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 power conferred upon it by law. (3) It is also well settled by the above authorities that there is no estoppel on the part of the bank. Neither can it be urged that the facts of this case bring it within that class of decisions of this court where it has been held that when an ultra vires contract entered into by a corporation has been fully performed by the other party and the corporation has had the benefit thereof, the contract is binding upon such corporation. Richeson v. Na tional Bank of Mena, 96 Ark. 594; Dunbar v. Gasort & McGehee Co., 96 Ark. 308; Bloom v. Home Insurance Agency, 91 Ark. 367, and Western Development & Investment Co. v. Caplinger, 86 Ark. 287. The record does not show that the national bank in any wise profited by the transaction. Neither can it be said that it retained any benefits from it. There was no profit to the bank from the transaction. It resulted in a material loss to the bank. It follows- that the judgment must be reversed. Inasmuch as there is no dispute about the amount of the indebtedness, there is no necessity to remand the case. The case was tried on the 27th day of August, 1917, and at that time there was a balance due the plaintiff of $1,331.87 with interest at the rate of 10 per cent, per1 annum frorr the 30th day of December, 1916. Judgment will be entered here for that amount. It is so ordered.