Third National Bank v. Boyd

Bartol, C. J., delivered the opinion of the Court. This suit was brought by the appellee, to recover the value of certain coupon-bonds and stocks, that passed like bank notes, by delivery; which had been deposited by the plaintiff with the defendant, and which had been stolen from the defendant, in consequence of its alleged failure to exercise ordinary care in the custody of them. The case is one that, from its nature, depended at the trial below, mainly on the questions of fact arising upon the evidence, with regard to the manner in which the bonds were lost, and the vigilance and care exercised by the bank in their custody. These were questions exclusively for the jury, whose province it was to decide whether there was any want, or omission of ordinary care and diligence on the part of the bank, from which the loss of the plaintiff’s property resulted. These questions were submitted to the jury by the Circuit Court, were decided by them against the bank, and we have no authority or power to review their verdict. All the prayers asked by the defendant, being either conceded by the plaintiff’s counsel or granted by the Circuit Court except the tenth; the only matters presented for our consideration on this appeal, arise upon the defendant’s tenth prayer, which was refused ; and the first, fourth, fifth, — 58 — sixth and seventh prayers of the plaintiff, which were granted. It appears by the evidence that the appellant was a Bank organized under “ the National Currency Act of 1864.” The firm of William A. Boyd & Co., of which the appellee was senior member, was a large customer of the bank,' through which all the banking business of the firm was transacted, and from which it received accommodations as needed. On the 5th day of February, 1866, the firm was indebted to the bank about $5000, when the appellee voluntarily proposed to the president of the bank, to deposit with the bank a large amount of bonds, about $31,000, as collateral security for his present and future indebtedness. The terms of the deposit as agreed on between Mr. Boyd and the president, were dictated by the latter to the discount clerk — and were as follows : “Third National Bank, February 5th, 1866. William A. Boyd has deposited with the Third National Bank of Baltimore $20,000 in United States 5-20 bonds, and $1500 5-20 July, 1865; $5000 Hudson County, New Jersey; $5000 Town of Saratoga, New York, I per cent. bonds ; $5000 Stock of Third National Bank of Baltimore, as collateral security for the payment of all obligations of Wm. A. Boyd and Wm. A. Boyd & Co. to the Third National Bank of Baltimore, at present existing, or that may be incurred hereafter, with the understanding that the right to sell the above collaterals in satisfaction of such obligations, is hereby vested in the officers of the Third National Bank. [Signed] A. H. Barnitz, Discount Clerk.” This paper was kept by the cashier of the bank in the same envelope with the bonds, — afterwards memoranda were enclosed therein, signed by the appellee's attorney and by the cashier, showing that certain of the bonds orig — 59 — inally deposited had been withdrawn, and others deposited to replace them. It appears from the evidence “that while these collaterals remained in the bank, the firm kept a deposit account with the bank, having an average amount of about $4000 on deposit, and from time to time as it needed, obtained discounts ranging from $2000 to $15,000 on the security of the collaterals, but frequently, and lor considerable times, as much as five months at a time, it sometimes owed the bank nothing, but left the bonds in its vault; that at times when the firm wanted money for a very short time, it had obtained it from the bank, on the security of these collaterals on what were called ‘ call loans’ by checks such as the following: Baltimore, July 13, 1871. “Third National Bank of Baltimore pay to order of call loan on general collaterals, four thousand dollars. William A. Boyd & Co.” “ The firm was not indebted to the bank subsequent to July 1872, when it paid its last indebtedness; the bonds were not withdrawn, but left with the defendant, under the original agreement.” The bank was robbed and the bonds stolen in the manner described in the testimony, between Saturday evening the 17th and Monday morning the 19th of August 1872. It appears from the proof that the giving of the bonds as collateral security, was the voluntary act of the plaintiff, not done at the instance or request of the defendant; that the bank officers considered the account of the plaintiff’s firm a very desirable one, and considered the arrangement by which every liability of theirs was secured by the collaterals, very advantageous to the bank ; “which was under no obligation to lend them anything ; but the bonds and stocks were to be held as collateral security for all loans that might be made to them, and for their liability on any paper signed or — 60 — endorsed by them, which might at any time be held by the bank.” The defendant, by its tenth prayer, asked the Court to instruct the jury “That the defendant had no power, by the Act of Congress under which it was incorporated, to assume and undertake the keeping of the plaintiff’s bonds, while they were not held as collateral security for debts owing to it, and if the jury shall find that when the bonds were stolen ******* there was not and had not been for nearly three weeks, any indebtedness for which they were held as security, then the plaintiff cannot recover in this action.” This prayer raises the question of tbe power of the bank to accept and retain the deposit of the plaintiff’s bonds, in the manner and for the purpose disclosed in the evidence. Having been organized under the Act of Congress of 1864 ch. '106, the powers of the bank are limited and defined by the provisions of that Act. By sectihn 8, it is authorized “to exercise all such incidental powers as shall be necessary to carry on the business of banking by discounting 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 Act.” The construction of this section was considered by this Court in Weckler vs. First National Bank of Hagerstown, 42 Md., 581. The precise question however now presented, did not arise in that case. There the attempt was made to hold the bank responsible for alleged fraudulent representations made by its teller in the sale of bonds of the Northern Pacific Railroad Company, which the narr. alleged the bank was engaged in 'selling on commission. It was decided, that “ the business of selling bonds on commission was not within the scope of the powers of the corpo — 61 — ration,” under the Act of Congress to which we have referred. It was further held that the defence of ultra vires was open to the bank under the decision in “The Steam Navigation Co. vs. Dandridge, 8 G. & J., 318, 319 ; and consequently that the bank was not responsible for any false representations made by its teller to the plaintiff, whereby she was induced to purchase the bonds in question.” It is contended that the case now under consideration comes within that decision. In the argument of the cause, the counsel for the appellant has treated the transaction as a mere gratuitous deposit, simply for the convenience or accommodation of the appellee, and for the purpose of affording a place of safe-keeping for his bonds, and has argued that the bank had no power to accept a bailment of that kind, or in other words to become a mere safe deposit company, and was not therefore responsible for the loss. There is very strong ground, both upon reason and authority, in support of the proposition that a National Bank, deriving its existence and exercising its powers under the Act of Congress referred to, is not authorized to enter into a contract as a mere gratuitous bailee, by receiving on special deposit for safe-keeping merely, coin, jewelry, plate, bonds or other valuables. Such a contract does not appear to be authorized by the terms of the 8th section, as a transaction “within the ordinary course and business of banking or incident to it;” and has been decided by the Supreme Court of Vermont, to be unauthorized by the law, and beyond the scope of the corporate powers. Wiley vs. First National Bank of Brattleborough, 47 Verm., 546. The very well considered opinion by Judge Wheeler in this case, will be found in The American Law Register, N. S., Vol. 14, p. 342, accompanied by an able note from the pen of Judge Redeield, in which the cases are collected and reviewed. In the case of The First National Bank of Lyons vs. The Ocean National Bank, 60 N. Y., 278, the Court — 62 — of Appeals of New York have recently made a similar decision. Assuming these decisions to he correct, and we are not disposed to question their soundness ; it is clear that the contract entered into by the hank in this case, was not a mere gratuitous bailment. As shown by the paper of February 5th, 1866, the bonds were not received on special deposit, for safe-keeping merely, but were received as collateral security for a debt then existing, and for all obligations that might thereafter he incurred by the depositor. We entertain no doubt of the power of the bank to enter into a contract of that kind. To accept such collateral security for existing debts, and for future loans and discounts is a transaction within the usual course of the business of banking, and incident thereto, and therefore within the terms of the Act of Congress. The power of National Banks to receive such deposits, was distinctly recognized by the Supreme Court of Vermont, and the Court of Appeals of New York, in the cases before cited, and we are not aware that it has ever been questioned. On this point we refer to the able opinion of Judge Sharswood, in Erie Bank vs. Smith, Randolph & Co., 3 Brewster, 9. In Maitland vs. The Citizens’ National Bank, 40 Md., 540, this Court affirmed the right of a National Bank to receive on deposit, the note of a third person as collateral security for future loans or advances to the depositor. The original contract of bailment being valid and binding, the obligation of the hank for the safe custody of the deposit, did not cease when the appellee’s debt had been paid. There is no evidence that the contract was changed, on the contrary, the evidence shows “ the bonds remained with the bank under the original agreement,” as collateral security for any indebtedness of the appellee that might. thereafter accrue, and for any liability of himself or of the firm of which he was a member, or any paper signed or — 63 — endorsed by them, which might at anytime be held by the bank. For these reasons the Circuit Court committed no error in refusing the appellant’s tenth prayer. The appellant’s counsel have argued that the memorandum of February 5th, 1866, cannot be construed as a contract made by the appellant, because it does not appear that the officers by whom it was made, were authorized to bind the bank. This point is not properly before us, was not made in the Circuit Court, and is not presented by the bill of exceptions. All the prayers of the appellant go upon the theory, that the bonds were held by the bank as collateral security. But even if the question of the authority of the officers to bind the appellant, were open on this appeal, it may be observed that the contract of bailment being one which it was competent for the corporation to make, and having been made by its officers, acting within the scope of their general powers and apparent authority, and in the exercise of powers usually delegated to like officers, the bank would be estopped to deny their authority. .It may be added further, that there was evidence from which the jury might properly have inferred, that the authority had been conferred upon the president and cashier, and that their acts were known to and sanctioned by the directors. Union Bank vs Ridgely, 1 H. & G., 325, 413, 430. But as we have before said, the question of the authority of the officers to act for the bank in the transaction is not before us. 29 Md., 2, Rule 4. With respect to the several prayers of the appellee which were granted by the Circuit Court, and referred to in the bill of exceptions, we do not understand that any objection is made to them by the appellant, so far as they instructed the jury upon the question of the degree of care which the appellant’s officers were bound by law to exercise in the custody of the appellee’s bonds. In this respect — 64 — they do not differ from the prayers granted at the instance of the appellant. By the appellee’s first prayer, the jury were instructed that the defendant would he responsible if the jury found from the evidence that the bonds had been stolen, “ in consequence of the failure on the part of the defendant, to exercise such care and diligence in the custody or keeping of them as at the time, banks of common prudence in like situation and business, usually bestowed in the custody and keeping of similar property belonging to themselves ; that the care and diligence ought to have been such as was properly adapted to the preservation and protection of said property, and to have been proportioned to the consequence likely to arise from any improvidence on the part of the defendant.” No objection has been made, nor could any be justly urged against this proposition. The prayer further instructed the jury, that in determining whether or not such care and diligence were used, “ the jury may take into consideration whether it was a proper precaution for the defendant to have had an inside watchman at night, and on Sundays, whether such watchman ought to have kept awake at night, and whether the bank ought ever to have been without an inside watchman at any part of the day on Sunday, and that they may take into consideration the nature and value of said bonds, their liability to loss, the'temptation they offered to theft, the difficulty of recovering them if stolen, the situation of the building and vault, and the sufficiency of the safe in which the defendant kept them at the time they were stolen.” Exception has been taken to the last part of the prayer, because of the enumeration of certain questions, as proper to be considered by the jury, in determining whether such care and diligence had been used by the bank, as was defined in the prayer. But we find no error in this part of the instruction, the particular subjects of inquiry mentioned, were proper for the consideration of the jury; their — 65 — province was not invaded, nor was there anything to mislead them, they were not told that in any of the particulars mentioned, the evidence showed a want of due and ordináry care on the part of the hank ; and by the appellee’s seventh prayer, they were instructed, “that it was a question to be determined by them from all the facts and circumstances in the case, whether there was or was not that degree of care and diligence used by the defendant, in the protection and preservation of the plaintiff’s property which is defined in the plaintiff’s first prayer.” The degree of care and diligence required by the law, was properly defined by the Circuit Court; the question whether it had been exercised by the defendant, was fairly submitted to the jury upon all the facts and circumstances of the case — this was a question of fact, exclusively within the province of the jury to decide; we have no power to disturb their verdict; and we have refrained from stating the facts and circumstances showing the manner in which the most extraordinary and unforseen robbery was committed upon the bank. The only question left for us to consider is, as to the proper measure of damages. This was decided by the Circuit Court to be, “the value of the bonds at the time they were stolen.” The appellant contends that this was error, and insists that the true measure is their value on the 9th day of September, 1872, when they were demanded by the appellee. It appears by the agreement of counsel, that the bonds had slightly diminished in value, between the time of the robbery and the time they were demanded. At the former date, they were worth $25,911.25, and at the latter, their value was $25,400.63. In our opinion, the rule laid down by the Circuit Court is correct. In a case of this kind, the measure of damages is the value of the property lost, the only question is at what time is this value to be computed. Its value not being fixed and permanent, but liable to fluctuate, the — 66 — time fixed for ascertaining it, may become of much importance, and has been the subject of considerable discussion in the Courts, and the decisions are by no means uniform. In Maryland the measure of damages in trover, is ordinarily the value of the property at the time of the conversion, Hepburn vs. Sewell, 5 H. & J., 211; Sterling vs. Garritee, 18 Md., 468, and we think the same rule may, by analogy, be applied to the present case. Here the ground of the action is the alleged breach of the contract of bailment, by reason of the failure on the part of the bank to exercise due care in the custody of the bonds, whereby they were lost; the true measure of damages would seem to be their market value, computed at that time. This question arose in Balto. Marine Ins. Co. vs. Dalrymple, 25 Md., 244. In that case there was a pledge or hypothecation of stock as collateral, the contract of bailment having been broken by the illegal sale of the stock by the bailee, the other party being cognizant of the breach, waited for two years, and the stock having risen in the market, demanded the same offering to redeem, and claimed that the value' of the stock should be computed at the time of his demand. But it was held that the measure of damage was its value at the time of the breach. Without repeating the reasons and authorities upon which that decision was placed, we refer to the opinion of the Court, at pages 305, 306, 307, 308. In Maury and Osbourn vs. Coyle, 34 Md., 235, cited by the appellant, it was ruled that the plaintiff was entitled to recover the value of the bonds deposited, ascertained at the date they were demanded. But that case is not applicable here, there was no evidence of the time when they had been lost, or that they had changed in value; and the contract there sued on, was not the same as this. In that case, by the contract of bailment, the bailee had the option to return the securities deposited, or their value in money on demand. In this case, the legal obligation — 67 — of the bailee, was to keep the bonds of the appellee safely, and to return them, to him when the contract ended. Strictly, this obligation could not he discharged by the payment to the appellee of their value in money; after the bonds had been lost, and it had become impossible to return them, there was no necessity for a demand, and when made, it could have no significance or effect, in determining the rights of the parties, these had become fixed when the breach occurred by the loss of the bonds, and in our judgment, the proper measure of damages is their value computed at that time. Finding no error in the rulings of the Circuit Court, the judgment must he affirmed. (Decided 1st March, 1876.) Judgment affirmed.