Case Name: YUNGFLEISCH'S APPEAL
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1879-03-31
Citations: 1 Walk. 125
Docket Number: No. 252
Parties: YUNGFLEISCH’S APPEAL.
Judges: 
Reporter: Reports of cases decided by the supreme court of pennsylvania which have been omitted from the regular reports
Volume: 1
Pages: 125–128

Head Matter:
YUNGFLEISCH’S APPEAL.
An assignment of error should be specific.
The charter of the Mountain City Banking Company gives it discounting privilege -.
Where discounting privileges have been granted, it will be presumed that the constitutional requirements have been complied with.
Appeal from Common Pleas of Schuylkill County. No. 252, January Term, 1878.
The Mountain City Banking Compauy discounted promissory notes, which J. C. Yungdeisch had endorsed amounting to about $3,900.
Subsequently Yungdeisch made an assignment for the benefit of creditors and an auditor was appointed to distribute the proceeds of the sale of the estate of the assignor among his creditors. Yungfieiseh himself, as well as several creditors, objected to the participation by the Mountain City Banking Company in the distribution, because it was claimed that that corporation was created as an insurance company only, did not possess the discounting privilege, had not given the six months notice required by the constitution upon the incorporation of a bank and was not in fact a bank and could not recover upon negotiable paper discounted in the course of such illegal business.
The Mountain City Banking Company was incorporated by Act approved 8th April, 1870, (P. L. 1051) as the Pennsylvania Insurance Company of Pottsville, “with all the rights and privileges and to be subject to all the restrictions in the Act, entitled ‘An Act to incorporate the Allentown Fire Insurance and Trust Company, approved 4th May, 1869.’”
This latter Act (P. L. 1253) creating the Allentown Fire Insurance and Trust Company, provided that it was “to be organized and managed according to the provisions of an Act lor the incorporation of insurance companies, approved 2d April, 1856, and the supplements, except so far as the same is altered, changed or provided for by this act; and shall be limited to risks designated in the first clause of the seventh section of said act, with the right to transact fire insurance business on the mutual principle in connection with the capital stock as aforesaid.”
Section 3 of that act gave the corporation power to make insurance contracts as therein specified.
Section 4 provided “that it shall be lawful for said company to invest its capital, premiums and profits on real or personal security in‘bonds, notes, mortgages, ground rent, judgments, stocks and loans of the U. S. and Pennsylvania * * * and in other good securities.”
Other sections authorized the corporation to act as executor and trustee, but no power was expressly granted to receive deposits, discount commercial paper, issue bank bills or act as a bank.
The insurance Act of 1856 referred to in the last mentioned act in section 8, provided that “any company incorporated under the act shall not have or exercise the powers of savings or discount institutions,” and the supplement of 1st May, 1857, provided that any company so organized shall not “invest or employ their capital stock or other money in the purchase or discount of, or advance upon promissory notes, bills of exchange or other negotiable paper.”
A supplement to the act incorporating the Penna. Ins. Co. of of Pottsville, approved 4th April, 1862, (P. L. 963) changed its name to the Mountain City Banking Company, provided that “all insurance privileges of said company be and the same are hereby repealed, reserving to said company the right to receive deposits and to invest the same agreeably to the provisions of said act, and all the trust and other privileges thereunto belonging.”
The evidence taken before the auditor, while it did not clearly establish the fact, inferentially showed that the Mountain City Banking Company did a general banking business and that the notes of Yungfleisch were discounted in that business. Evidence was offered to show that the six months’ notice required by the constitution upon the incorporation of banks was not given at the incorporation of the Mountain City Banking Company. The auditor refused to receive it, holding that the agreement in writing of Yungfleisch, made subsequent to the maturity of the discounted paper, in which he agreed to pay the amount represented by the notes, and the sworn testimony of Yungfleisclr admitting the banking company’s claim to be correct, “does away with the necessity of the corporation proving any legal existence.” He also held : “As to the question of the validity of the bank’s charter and its privileges, the auditor not only thinks he has no authority to take up any collateral question, as he claims such inquiry would be, but he also thinks that the question was settled by the admission of Yungfleisch above referred to. And the auditor awarded to the Mountain City Banking Company its proportionate share of the funds in the hands of the assignee.
Yungfleisch and six of his creditors then excepted to the report of the auditor, but the Court overruled the exceptions and confirmed the report on January 28, 1878. Yungfleisch- and the six creditors then appealed and assigned the following errors:
1. The Court erred in confirming the report and distribution of the auditor.
2. In not sustaining the exceptions made to the report of the auditor.
3. In allowing the claim of the Mountain City Banking Company.
4. In sustaining the decision of the auditor refusing to admit evidence offered by appellant to show that the Mountain City Banking Company was not a corporation possessed of any banking privileges.
C. N. Brumm and Seth W. Geer, Esqs., for appellants argued
that a corporation has only such powers as are expressly granted or necessarily implied. Commonwealth vs. Erie R. R. Co., 3 Casey 351; Bank vs. Commonwealth, 7 Harris 144; Angell and Ames on Corporations, Section 256; Fowler vs. Scully, 22 P. F. S. 456. The corporation was an insurance company. Act April 8, 1870, P. Laws 1051; Act May 4, 1869, P. Laws 1253, and was subject to Act of April 2, 1856, and its supplement of May 1, 1857, which forbids the corporation doing a banking business. And the Act of April 4, 1872, P. Laws 963, does not give it banking privileges. A provision allowing an insurance company to invest in notes, bonds and stocks, does not give discounting privileges and therefore the appellee was not entitled to recover. Phila. Loan Co. vs. Towner, 13 Conn 260; Insurance Co. vs. Ely, 5 Conn 568-574; Utica Ins. Co. vs. Scott, 19 Johnson 1; Strauss vs. Insurance Co., 5 Ohio State. 61. The Court will not support a contract made in breach of law. Thorne vs. Insurance Co., 30 P. F. S. 15, Woods vs. Bank, 2 Norris 57; Loan Co. vs. Conover, 5 Phila. 18; Article 1, Sect. 25 of the Constitution, requires six months notice of the application for incorporation of a company with discounting privileges, and appellant offered to prove that such had not been given.
C. Little and James Lyon, Esqs., contra:
argued that one who has borrowed money from a bank cannot set up a defence that the bank exceeded its corporate powers in making the loan. Morse on Banks, 15. By the Act of 1870 the company had the right to invest in notes, and by the Act of April 4, 1872, P. Laws 963, all insurance privileges are taken away but the rights to receive deposits and invest the same according to original act were retained and the company was made liable to bank taxation, thus showing the intent of the Legislature to grant banking privileges. There is no infringement of the Constitution. Lycoming Fire Ins. Co. vs. Newcomb, 4 Leg. Gaz, 409; Schober vs. Accommodation S. F. & L. Ass., 11 Casey 223. A corporation’s charter cannot be attacked collaterally, but only by scire facias or quo warranto. Angell & Ames on Corporations, 636 and note; Centre Turnpike Co. vs. McConaby, 16 S. & R. 140; Irvine vs. Lumberman’s Bank, 2 W. & S. 190; Dyer vs. Walker & Howard, 4 Wright 157; F. & M. Bank vs. Bashore, 3 W. N. C. 360.

Opinion:
The Supreme Court affirmed the decree on March 31, 1879, in the following opinion:
Per Curiam:
The assignments of error are entirely too general, pointing to no specific error except the allowance of the claim of the Mountain City Banking Company. We think the charter of that company authorized them to purchase notes as an investment, and, conceding this was a discounting privilege, the presumption must be, that the forms prescribed by the constitution to be pursued before the creation of such a corporation by the legislature have been pursued. Whether in a collateral proceeding like this such a presumption is not conclusive it is unnecessary in this case to determine.
Decree affirmed and appeal dismissed at the costs of the appellant.