Court Opinion

ID: 3498727
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:06:06.691401+00
Date Added: 2024-06-11T13:54:43.015961
License: Public Domain

The record shows that the trust company engaged actively in a mortgage business, loaning on mortgages and then selling a participating interest in these securities to the public. It did not sell these mortgages or beneficial interests therein for the purpose of raising necessary funds to conduct a trust business, but sold them outright as a part of a profit-making venture *Page 137 
by trading in these securities. Its guaranty, made as an inducement to effect such sales, was an exercise of a power extended neither by statute, charter, nor necessary implication. Were this an isolated case, where, in order to raise funds with which to carry on a trust business, a mortgage or participations in it had been sold accompanied by a guaranty, and the latter had been set up as a contingent liability in the company statement, there might be some merit in the assertion that this was merely a method by which the trust company exercised its express power to borrow money and issue notes accompanied by adequate security. The record, however, plainly shows that the trust company went much further and engaged in the sale of a continuous series of guaranteed mortgage participations as a regular business. It was beyond the power of the trust company, and against public policy, for an organization of this nature to engage in such a venture, and for this reason I concur in the result.
CLARK, SHARPE, NORTH, FEAD, and WIEST, JJ., concurred with BUTZEL, J.