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Weckler v. The First National Bank of Hagerstown.

upon this question, for it has been directly settled by several decisions. Caldwell v. The National Mohawk Valley Bank, 64 Barb. 333; Van Leuven v. First National Bank of Kingston, 54 N. Y. 671 (post), and 6 Lans. 373; Leach v. Hale, 31 Iowa, 70 (ante, p. 466.), Matthews v. The Mass. National Bank, 1 Holmes, 396; Foster v. Essex Bank, 17 Mass. 498.

Albert Small and George Schley, for appellee. Two questions only are involved in this issue. First. Does an action of deceit lie against a corporation? and Second. Conceding the facts alleged, and that the action will lie, is the appellee liable, the acts complained of being clearly ultra vires.

1. An incorporated company cannot, in its corporate character, be called on to answer in an action for deceit. Western Bank of Scotland v. Addie, L. R., 1 H. L. Sc. 145. The only late case in conflict (Swift v. Winterbottom, P. O., L. R., 8 Q. B. 244) is expressly overruled on appeal to the Exchequer Chamber in same case sub nom., Swift v. Jewsbury, P. O., L. R., 9 Q. B. 301. See Benjamin on Sales, B. 3, ch. 2, § 3, pages 336-350, and 8 Am. Law Rev. 631

648.

2. The acts complained of are ultra vires, and the appellee cannot be bound by any act or representation of its officer in this behalf. Tome v. Parkersburg Branch Railroad Company, 39 Md. 36; Penn., Del. & Md. Steam Navigation Company v. Dandridge, 8 Gill & J. 248; Duncan v. Maryland Savings Institution, 10 id. 299; U. S. v. City Bank of Columbus, 21 How. 356; Merchants' Bank v. Marine Bank, 3 Gill, 125; Minor v. Mechanics' Bank of Alexandria, 1 Pet. 46; Head v. Providence Ins. Co., 2 Cranch, 127, 169; Dartmouth College v. Woodward, 4 Wheat. 518; Bank of the U. S. v. Dandridge, 12 id. 64.

Banking, apart from the very elaborate definition given in the act of Congress, is defined in Duncan v. Maryland Savings Institution, supra, as "consisting of the right of issuing negotiable notes, discounting notes and receiving deposits," citing The People v. The President, etc., of the Manhattan Co., 5 Conn. 383; The People v. The Utica Insurance Co., 15 Johns. 390. And see Angell & Ames on Corp., § 55, n. 3; Grant on Banking, 1, 6, 381, 614; Bank for Savings v. The Collector, 3 Wall. 495. To this general definition. the act of Congress adds, "buying and selling exchange, coin and bullion."

Weckler v. The First National Bank of Hagerstown.

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The construction of the act, since banking is not in itself a corporate franchise, but a limitation upon and in derogation of common-law rights, must be strict and exclusive. Curtis v. Leavitt, 15 N. Y. 52; Bullard v. Bank, 18 Wall. 589 (ante, p. 93). This section is a rescript of section 18 of the General Banking Law of New York, passed in 1838, and as to these provisions is in totidem verbis. The New York act has passed under careful scrutiny, and has met with frequent judicial interpretation. The question in this issuethe power of a bank to traffic in stocks arose under the New York act, in Talmage v. Pell, 7 N. Y. (3 Seld.) 327, and the court, after conceding that stocks might be legitimately bought or taken for many purposes incident to the express power to conduct the business of banking, at p. 343, says: "The proposition, however, to be established, is the right to traffic in them, or to acquire them for the special objects contemplated by the arrangement of the parties in this case; and these sections neither prove nor tend to prove any authority of that nature." "I am, for the reason suggested, of the opinion that this bank had no authority to traffic in stocks as an article of merchandise."

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The same point was ruled in Bank Commissioners v. St. Lawrence Bank, 7 N. Y. 513; Curtis v. Leavitt, 15 id. 168, and in Barnes v. Ontario Bank, 19 id. 152.

In the construction of the powers of National banking associations, in other matters, as given in section 8 of the act, similar views are held by the Supreme Court of Pennsylvania, in Fowler v. Sculley, 72 Penn. St. 516 (post), and in The First National Bank of Lyons v. The Ocean National Bank, 60 N. Y. 278 (post); Shinkle v. The First National Bank of Ripley, 22 Ohio, 516 (post); Shoemaker v. The National Mechanics' Bank, 2 Abb. (U. S.) 416 (ante, p. 169); and Stewart v. The National Union Bank, id. 424 (ante, p. 175). And the principle announced in these cases is fully recognized by this court in The First National Bank of Charlotte v. The National Exchange Bank of Baltimore, 39 Md. 610.

The only case in conflict is Leach v. Hale, 31 Iowa, 69 (ante, p. 466), and that is so evidently a case of bailment, and nothing more, that not even the positive assertion of the court can avail against the facts. The view taken in this case, too, is fully and satisfactorily controverted in the analogous case of Wiley v. The First National Bank of Brattleboro, 47 Vt. 546 (post). The cases of Caldwell v. The National Mohawk Valley Bank, 64 Barb. 333, a State bank at

Weckler v. The First National Bank of Hagerstown.

the time of the contract, and Van Leuven v. The First National Bank of Kingston, 6 Lans. 373, and 54 N. Y. 671 (post), a designated depositary under section 45 of the act (Rev. Stat. U. S., § 5153)—are for these reasons not in point, and the former is ignored, and the latter explained by the Court of Appeals of New York in its latest utterance in 60 N. Y. 278.

The construction thus given is alike applicable to the purchase or sale of all kinds of marketable securities other than bills of exchange, where gain or any other purpose than those specially mentioned is the object of its dealing. Inasmuch, then, as the corporation itself could not lawfully engage in such purpose or sale, it could not authorize its agents so to deal, and the contracts or representations of the agent could not fall within the scope of his authority. U. S. v. The City Bank of Columbus, 21 How. 556. And as persons dealing with the agents or officers of a corporation are held to know the powers of the corporation (The Miner's Ditch Company v. Zellerback et al., 1 Withrow's Am. Corp. Cases, 275 [37 Cal.] 543), there can be no implication of authority. Pierce v. Madison & Ind. Railroad Co., 21 How. 443. Nor will a corporation be held liable for the fraud of its agent committed colore officii. Mayor and Common Council v. Eshbach, 18 Md. 276; Same v. Reynolds, 20 id. 1; Co. Commissioners A. A. Co. v. Duckett, id. 468; Horn v. Mayor and Common Council, 30 id. 218; Foster v. Essex Bank, 17 Mass. 599; Mechanics' Bank v. N. Y. and N. H. Railroad Co., 13 N. Y. (3 Kern.) 600.

Is the appellee estopped from making such a defense?

The doctrine of estoppel, as applicable to such a defense by a corporation, is very clearly put in Hood v. N. Y. & N. H. Railroad Co., 22 Conn, 1, 502, thus: "Where a corporation has the power to do an act, they may be estopped from objecting that the form they adopted was not the exact mode prescribed by the charter; but where the question is one of power, they cannot be deemed estopped to deny that they have done what they never could by legal possibility have done." And this principle is held and enforced in The Penn., Del. & Md. Steam Navigation Co. v. Dandridge, 8 G. & J. 248, and cases cited at p. 320; in the cases last above cited, and in Albert and Wife v. The Savings Bank, 2 Md. 159.

MILLER, J. A question of importance and of first impression in this State arises on this appeal. The suit was instituted by the

Weckler v. The First National Bank of Hagerstown.

appellant against appellee, a National bank organized under the act of Congress, approved June 3, 1864, known as the "National Currency Act." The first and second counts of the declaration aver in substance, that the defendant, as part of its business as such banking association, was engaged in the sale of the bonds of the Northern Pacific Railroad Company, and in soliciting orders for the purchase of the same and receiving commissions for such sales and orders, and by means of certain specified false, fraudulent and deceitful representations made by its teller, the plaintiff was induced to and did purchase from the bank two of said bonds of $500 each, and paid the bank therefor the sum of $1,000, and was thereby damnified. The case was tried upon issue joined on the plea of not guilty. There was conflicting proof as to the making of the alleged false representations by the teller. The court rejected all the prayers offered on both sides and instructed the jury in effect that the National Banking Act, under which the defendant was organized, limits the action of the bank to the pursuit of the object specified in the act of Congress, and that the purchase and sale of such bonds is not within the chartered powers of the defendant, and that the plaintiff cannot recover against the defendant in this action, although the jury may find from the evidence that the teller of the bank fraudulently induced the plaintiff to purchase the bonds in question by making the alleged false representations, and that she suffered loss thereby. This presents broadly and clearly the question whether the bank has authority for selling bonds of railroad companies on commission.

A bank, like other private corporations, is confined to the sphere of action limited by the terms and intention of its charter. The Supreme Court, in the case of the Bank of the United States v. Dandridge, 12 Wheat. 68, states the rule by which the powers of the bank are to be determined thus: "Whatever may be the implied powers of aggregate corporations by the common law, and the modes by which those powers are to be carried into operation, corporations created by statute must depend, both for their powers and the mode of exercising them, upon the true construction of the statute itself." And in that case the court adopt, as entirely correct and applicable to the bank, the doctrine laid down by MARSHALL, Ch. J., in 2 Cranch, 167, in reference to an insurance company, viz.: "Without ascribing to this body, which in its corporate capacity is the mere creature of the act to which it owes its

Weckler v. The First National Bank of Hagerstown.

existence, all the qualities and disabilities annexed by the common law to ancient institutions of this sort, it may be correctly said to be precisely what the incorporating act has made it, to derive all its powers from that act, and to be capable of exerting its faculties only in the manner in which that act authorizes." And in this State the law is well settled that a corporation created for a specific purpose not only can make no contract forbidden by its charter, but in general can make no contract which is not necessary, either directly or incidentally, to enable it to answer that purpose. In deciding, therefore, whether a corporation can make a particular contract, it must be considered in the first place, whether its charter or some statute binding upon it forbids or permits it to make such a contract; and if the charter and valid statutory law are silent upon the subject, in the second place, whether the power to make such a contract may not be implied on the part of the corporation as directly or incidentally necessary to enable it to fulfill the purpose of its existence; or whether the contract is entirely foreign to that purpose; a corporation has no other powers than such as are specifically granted, or such as are necessary for the purpose of carrying into effect the powers expressly granted. Steam Nav. Co. v. Dandridge, 8 G. & J. 318, 319. We must, therefore, determine the true construction of the act of Congress authorizing the formation of these banking associations, and whether the power to make contracts like the one in question is expressly conferred upon them, or is directly or incidentally necessary to enable them to fulfill the purpose of their creation, or is entirely foreign to that purpose.

So far as the purpose of the law is indicated by its title, it is, "to provide a National currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof." After prescribing in previous sections the mode by, and the conditions under which banking associations may be formed, the 8th section declares that every association so formed shall become a body corporate, from the date of its certificate of organization, but shall transact no business "except such as may be incidental to its organization, until authorized by the Comptroller of the Currency to commence the business of banking." Power is then given it to adopt a corporate seal, to have succession by the name designated in its organization certificate, and in that name to make contracts and sue and be sued, to elect directors and other officers, "and

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