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First National Bank of Charlotte v. Nat'l Exch. Bank, 92 U.S. 122 (1875)

First National Bank of Charlotte v. National Exchange Bank of Baltimore

92 U.S. 122


1. In adjusting and compromising contested claims against it growing out of a legitimate banking transaction, a national bank may pay a larger sum than would have been exacted in satisfaction of them, so as to thereby obtain a transfer of stocks of railroad and other corporations, in the honest belief that by turning them into money under more favorable circumstances than then existed, a loss which it would otherwise suffer from the transaction might be averted or diminished. So also, it may accept stocks in satisfaction of a doubtful debt with a view to their subsequent sale or conversion into money in order to make good or reduce an anticipated loss.

2. Such transactions would not amount to dealing in stocks, and they come within the general scope of the powers committed to the board of directors and the officers and agents of a national bank. Subject to such restraints as its charter and bylaws impose, they may do in this behalf whatever natural persons can lawfully do.

3. Dealing in stocks by a national bank is not expressly prohibited, but such a prohibition is implied from the failure to grant the power.

The plaintiff, a national bank organized under the laws of the United States and doing business at Charlotte, N.C., desiring to increase its capital stock, and for that purpose to deposit with the Treasurer of the United States at Washington $50,000 in bonds of the United States, employed Bayne & Co., of Baltimore, as its agent to procure and deliver them at the Treasury. Not having money to pay for them at the time, the plaintiff sent its president, Wilkes, to Baltimore with a certificate previously prepared in Charlotte, as follows:


"CHARLOTTE, Dec. 15, 1865"

"Received on deposit from Bayne & Co., fifty-five thousand United States 5-20 bonds, third issue, payable to the order of themselves on return of this certificate."


"Pres. First Nat. Bk., Charlotte, N.C."

This certificate was delivered by Wilkes to Bayne & Co. in Baltimore, and on the 18th of December, 1865, they, having endorsed the same, deposited it, together with other securities,

Page 92 U. S. 123

with the National Exchange Bank of Baltimore as collateral security for a call loan of $80,000 then made by that bank to said firm of Bayne & Co.

A few days after the delivery of said certificate, the plaintiff deposited in New York, to the credit of Bayne & Co., a sum sufficient to pay the same, and received, in January, 1866, oral notice from them that the certificate was discharged and subject to its order. In March, 1866, the plaintiff received a written notice to the same effect, but did not apply for the surrender of said certificate. In April following, Bayne & Co. failed, and the plaintiff was then notified by the defendant that it held the certificate of deposit for value, and demanded the delivery of the bonds therein mentioned.

Wilkes, the president, was sent by the plaintiff to Baltimore to negotiate for the return of said certificate. He informed the defendant that it had been satisfied by the payment to Bayne & Co., and disavowed any legal liability on account of same to the defendant. To avoid suit, however, Wilkes offered to pay $5,000 upon the delivery of the certificate, which defendant refused, but offered to take $20,000, and threatened suit unless so settled. Wilkes declined to pay this sum, but asked for delay until he could return to Charlotte and consult the directors of his bank. He again returned to Baltimore, and new negotiations for compromise of the controversy between the two banks in regard to their respective rights to the certificate were opened. Wilkes ascertained that the defendant held, among its collaterals from Bayne & Co., a large number of shares of Washington, Alexandria & Georgetown Railroad stocks, the market value of which had been seriously depressed by the failure of Bayne & Co. Having informed himself in regard to the condition of the stock and its supposed value, and after one or two interviews with the president and directors of the defendant, it was finally agreed that the plaintiff should take four hundred shares of the Washington, Alexandria & Georgetown Railroad stock and one thousand shares of the Maryland Anthracite stock, the same being valued at $40,000, and one hundred and twenty-five shares of the stock of the plaintiff, valued at $15,000 -- the latter, inasmuch as he was advised that a national bank could not buy its own stock, to be taken by

Page 92 U. S. 124

Wilkes himself, thus making $55,000. Upon the basis of this settlement, the defendant was to deliver to Wilkes the certificate held by it for the $55,000 United States bonds. The plaintiff paid to the defendant the sum of $40,000 according to the terms of the above settlement, and received the certificates for one thousand shares coal stock. The four hundred shares of railroad stock were not then delivered, there being a suit about it at the time of the agreement which prevented all transfers, but it was regarded and treated by both parties as belonging to the plaintiff.

In September, 1869, nearly three years after the date of the settlement, suit was brought by the plaintiff in the Superior Court of Baltimore City to recover the $40,000 paid by it to the defendant in pursuance of the arrangement above stated. At the request of the plaintiff, the court granted the following propositions of law:

First, that if the plaintiff agreed to purchase for $40,000 the railroad and coal stock, and paid that sum, then the court must find for the plaintiff for that amount, provided the court shall find that the defendant knew the plaintiff to be a national bank and shall further find that the certificate of deposit was delivered up in consequence of said contract, if by said contract no part of the $40,000 was to be paid for the certificate.

Second, that if the plaintiff agreed to purchase the said stock for $40,000 and Wilkes also agreed to purchase for $15,000 one hundred and twenty-five shares of plaintiff's stock, and the inducement to both agreements was Wilkes's desire to obtain the certificate of deposit, and he did so obtain it, that does not inure to make the first contract valid, provided the court shall find that by the first-mentioned contract, the consideration for which the sum of $40,000 was to be paid was the railroad and coal stock, and that no part of said sum was to be paid for the certificate of deposit.

Third, that if the plaintiff, in order to compromise the certificate of deposit, agreed to purchase it and the railroad and coal stock for 40,000, and paid the money, then the plaintiff is entitled to recover so much of said sum as the court shall find was paid for said stock.

Page 92 U. S. 125

The court found for the defendant, and rendered a judgment in its favor, which the Court of Appeals affirmed: whereupon the case was brought here by writ of error.

Page 92 U. S. 126

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