Court Opinion

ID: 8267587
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:12:21.994109+00
Date Added: 2024-06-11T16:43:25.232637
License: Public Domain

The opinion of the court was delivered by
Scudder, J.
The single question presented to the court on appeal is, w’hether a bank formed under the act of congress authorizing associations for carrying on the business of banking, can legally loan money by taking, as security therefor, a mortgage on real estate. Other defences that were made in the court below have been abandoned here, and this question alone is presented for our determination. The exact position of the defendants, as set out in their answer to the bill to foreclose the mortgage in controversy, is, that the mortgage to the complainant was, in its inception, void under the provisions of section 5137 of the revised statutes of the United States. This section enacts, that “ a national banking association may purchase, hold and convey real estate for the following purposes, and no others.” The two purposes that might be claimed to cover this mortage are, “ second, such as shall be mortgaged to it in good faith by way of security for debts previously contracted;” “ third, such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings.”
It is obvious that these loans were made by the bank on the security of these two separate mortgages, and that the making of the notes, the payment of the money by cheeks, and the delivery of the mortgages, duly executed as security therefor, were concurrent acts. They were not, therefore, *808given as security for debts previously contracted, nor were the mortgaged lands conveyed in satisfaction of debts previously contracted in the course of the dealings of the bank.
These cases, therefore, stand without the authority of the statute to purchase and hold real estate for such purpose. Each mortgage was given as security for a concurrent loan of money by discounting commercial paper.
The case has been well argued by the counsel for the appellants, on the ground that contracts forbidden by statute are void, and that courts will refuse to enforce such contracts from regard to the law itself, and without reference to any equities between the parties. A like argument has been successfully presented in some reported cases, and some courts' of high authority have held that such mortgages given as security for debts contracted at the time, or for future advances, are invalid, and not enforceable at law or in equity, because of the alleged prohibition of the statute. Crocker v. Whitney, 71 N. Y. 161; Fowler v. Scully, 72 Pa. St. 456; Ripley v. Harris, 3 Biss. 199; Kansas Valley Bank v. Rowell, 2 Dillon 371; Woods v. Peoples Nat. Bank of Pittsburg, 83 Pa. St 57; 1 Jones on Mort. (2d ed.) § 134.
But we are spared an examination of these cases, and others with like conclusions, and the reasoning upon which they are based, for a late decision in the 'supreme court of the United States has given a construction of this statute, and has authoritatively determined the validity of mortgages like these in controversy.
In National Bank v. Matthews, 8 Otto 621, sections 5136 and 5137 were construed, in their application to a deed of trust of lands with power of sale, of like effect with a mortgage assigned to a national bank as security for a loan of money to the holder. The conclusion was, that where a corporation is incompetent, by its charter, to take a title to real estate, a conveyance to it is not void, but only voidable, and the sovereign alone can object. It is valid until assailed in a direct proceeding instituted for that purpose. The court cites, with approval, the high authority of Chancellor Kent, *809in Silver Lake Bank v. North, 4 Johns. Ch. 370, where similar terms in a statute were construed. The bank, in this ruling case, directed the trustee named in the bill of trust, to sell, and, on bill to enjoin the sale, the question of the validity of the security was raised. It is, therefore, an express authority upon the defence here raised on the bill to foreclose the mortgages to the bank.
The decrees in both cases will be affirmed, with costs.
Decrees unanimously affirmed.