Union Bank v. Jones

4 La. Ann. 236

Opinion

The judgment of the court

* (King, J. absent,) was pronounced by

Suidex,!., J.

The defendant, who is sued as the endorser of a note discounted and held by the branch of the Union Bank at Covington, contends that he has been released from all liability, by reason of the voluntary discharge of the maker. Terrell, the maker of the note, had made a cessio bonorum. At the meeting of his creditors the cashier of the bank appeared, and voted a discharge of the insolvent. It does not appeal' that any authority to do so had been given by the mother board, nor does any resolution appear on the minutes of the branch boai'd; but a witness, who was at that time a director of the branch, states that, to the best of his knowledge and recollection, the boai'd of directors of the Covington branch requested the cashier to attend the meeting, accept the surrender, and grant a discharge. We do not deem it necessaiy to say whether this-evidence was admissible, and if admissible, whether it proved that a resolution of the branch board was passed authorizing the cashier to give the vote. Assuming, then, that there was such a resolution, we shall limit ourselves to the enquiry, whether it, and the act of the cashier under it, were binding on the corporation.

It is obvious that the discharge was a mere donation. Terrell had made a cessio bonorum; and the bank had acquired a right to a dividend, whether a discharge was voted or not. The vote, therefore, was without consideration, and purely gratuitous. If binding, it was an abandonment of all future claim against the insolvent, in the event of his coming to better fortune, and by consequence, a discharge of the endorser. It gave up the property of the stockholders, without any value received.

When the directors proper of a corporation gratuitously destroy, or give up its property or rights, there can be no doubt they will be personally liable to stockholders for all consequent injury; but whether such an act could be invoked by a third person as binding upon the corporation, we do not think it is indispensable now to discuss. We will confine ourselves to the examination of the question directly presented here—the authority of the board of this branch so to affect the rights of the corporation; premising that the incapacity of the cashier, virtute officii, is clear. See The Union Bank v. Bagley, 10 Rob. 43.

The management of this corporation was placed by the charter in the hands of directors; but to the usual powers was superadded the unusual grant, that the deliberations of the board of directors shall have the same force and effect as the deliberations of the stockholders. But the language of the charter is very different when it comes to speak of the branch boards. After' providing for the establishment of eight offices of discount and deposit, at various points out of New Orleans, the seat of the corporation itself, it provides that there shall be annually appointed by the board of directors of the Union Bank to administer the affairs of said offices of discount and deposit, five or seven directors, three of whom shall constitute a quorum; and said directors shall choose from among themselves a president, and shall be subject to all such regulations and rules as may be adopted by the board of the mother bank for the government of said 'officers, not inconsistent with the provisions of this charter. By sec. 35, provision was made for the appointment by the mother board of cashiers of those officers of discount and deposit, who were to furnish such security as may be required by the mother board. By the 30th section it was enacted that the directors of said offices of discount and deposit shall appropriate two-thirds’ of the capital of such offices to loans on mortgage, and one-third to loans on promissory notes or bills of exchange, and they were authorized to loan or discount upon notes secured by mortgage. By the 39th section, the rate of interest upon loans by these offices was established ; and by the 40th section power was given to the mother bank to withdraw the country offices, in the event of their operations respectively not netting over a certain rate of interest.

No grant of power to the office at Covington, in the form of rules and regulations adopted by the board of the mother bank, having been shown, we must look to the charter alone for the powers of the Covington board; and, under the charter, we cannot consider them as vested with an unqualified control—the jus ulen~ di et abutendi, but as limited agents, clothed with such authority only as was expressly granted by the charter, or was necessarily incident to the accomplishment of the objects contemplated by the charter in using a certain portion of the capital of the bank for loans and discounts, and keeping an office of deposit as therein provided. The power of making a donation of the property of the stockholders, which, if we hold the discharge valid, has been virtually exercised in the gratuitous release of Terrell and of the defendants, was not, we think, within the legitimate sphere of their authority.

The defendant has not shown that he has been in any wise inj ured by the attempted discharge of Terrell; but if he had been reduced into inactivity against Terrell by the conduct of the board, the responsibility cannot be thrown upon the principal of the agents who thus usurped authority. The power of the Covington boai’d was the creature of a statute, and as such was known to the defendant; and a party can derive no benefit from the known usurpation of power by the agent on whose acts he relies.

The note appears to have been properly protested, and the objection made to the certificate of notice, was considered and overruled in the case of the Union Bank v. Jones, ante p. 220.

It is, therefore, decreed that, the judgment of the court below be reversed, and that plaintiffs recover from the defendant the sum of $540, with interest from the 26th day of April, 1842, until paid, at the rate of seven per cent per annum, and costs in both courts.

Existís, C. J., though a stockholder of the Union Bank, sat on this case, at the request of the defendant.