Wroten's Assignee v. Armat.

date on the 27th day of June, 1866, having been duly recorded on the 28th of June, 1866, while the deed of trust under which the said assignee of Wroten claims bears date on the 1st day of January, 1867, and was recorded on the 23d of January, 1867, the maxim of law, prior in tempore potior in jure, would plainly show the right of priority of the said bank, unless there be some provision of the charter of the bank which disables it from claiming under the deed of trust executed for its security by the hotel company as aforesaid.

Accordingly it is contended by the learned counsel for the appellant that there is some such provision of the said charter. Let us now inquire and determine whether there is or not.

There can be no question but that a corporation is the creature of its charter, from which it derives not only all its powers, but its very existence. It certainly has no power which its charter denies to it. But in the absence of such denial it has certain implied powers which are as complete as if they were expressly given or affirmed in the charter. One of these powers is the power to acquire estate, real or personal. Another is the power to acquire a credit by bond, bill of exchange or other chose in action, and to obtain security for the payment of such credit by mortgage, deed of trust or other security. That a bank, the main object of whose creation is to loan out money, may acquire such a credit and obtain such security, would be a plainly implied power in the absence of a plainly expressed negation of such a power on the face of the charter of the bank. And if the charter could be fairly construed so as to make it consistent with the existence of such a power, it would accordingly be so construed.

Now let us examine the charter in this case and see if there be any thing, and if any thing, what, which negatives the power of the bank to acquire such a credit or obtain such a security.

The National Bank of Fredericksburg was organized very soon after the war between the Confederate States and United States, under the act of the 3d of June, 1864 (see Revised Statutes of the United States, title 62, p. 998, § 5136), which declares that "upon duly making and filing articles of association and an organization certificate, the association shall become, as from the

Wroten's Assignee v. Armat.

date of the execution of its organization certificate, a body corporate, and as such, and in the name designated in the organization certificate, it shall have power," etc. The seventh enumeration of express powers is in these words:

"Seventh. To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt; by receiving deposits; by buying and selling exchange, coin or bullion; by loaning money on personal security; and by obtaining, issuing and circulating notes according to the provisions of this title.

Section 5137 declares that "a National banking association may purchase, hold and convey real estate for the following purposes,

and for no others:

"First. Such as shall be necessary for its immediate accommodation in the transaction of its business.

"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.

"Fourth. Such as it shall purchase at sales under judgments, decrees or mortgages held by the association, or shall purchase to secure debts due to it.

"But no such association shall hold the possession of any real estate under mortgage, or the title or possession of any real estate purchased to secure any debts due to it, for a longer period than five years."

These are the only provisions of the said act of Congress which can have any effect to imply a negation of corporate power on the part of the National banks which might be organized under it to make a loan of money on real security. Can they have any such effect? Can their effect be to annul any loan made by any such bank? To release and discharge any deed of trust or mortgage on real estate taken by the bank to secure the payment of any such loan?

We are of opinion that they cannot have any such effect.

Wroten's Assignee v. Armat.

It will be observed that none of these provisions prohibit the banks organized under the said act of Congress to loan money on real estate, nor impose any penalty on the act of any such bank in so doing. The most they do is to declare that such banks shall have power to loan money "on personal security." Does this exclude, by necessary implication, the common-law power of such a corporation to loan money on real security, or any other security which would be satisfactory to the bank or might be desired by any persons bound as indorsers for said loan, for their indemnity? And that in the enumeration of the purposes for which, and no others, such an association may purchase, hold and convey real estate are embraced the following, viz.: "Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted." See, also, the third and fourth specifications. How long previously contracted? A year, a month, a week, a day? There is no specification of time which must elapse between the loan and mortgage or deed of trust to make the latter valid. Was it not the object of the specification to indicate that the banks organized under the said act were not to engage in the business of speculating in lands, but in the business of making loans on b..ls of exchange and other negotiable securities, as incidental, however, to which latter business they were to have the power to take mortgages and deeds of trust on real estate for the better security of said loans, and any persons bound as indorsers for said loans were to have the power to take such mortgages and deeds of trust for their indemnity. Indeed, the third and fourth. specifications expressly legalize conveyances of real estate made to any such bank in satisfaction of debts previously contracted in the course of its dealings, or such as it shall purchase at sales under judgments, decrees or mortgages held by the association, or shall purchase to secure debts due to it.

But suppose the act of Congress plainly prohibited a bank organized under it to take a deed of trust or mortgage to secure a loan in any case, or made it penal to do so. Would it follow that the deed or mortgage in such case would be void, and that the borrower would be entitled to have the money loaned, and at the same time to hold on to the property which he stipulated to give

Wroten's Assignee v. Arinat.

or to pledge for its security? For whose benefit could any such prohibition have been made, or such penalty imposed? Certainly not for the benefit of the borrower or his sureties, contrary to his or their express contract, the benefit of which he or they had received. But such a provision could only have been intended for the benefit of the government, which might or might not, at its pleasure, enforce the forfeiture.

Let us now examine some of the authorities referred to on the subject, and see how far they tend to sustain these views.

In a case decided by this court (Banks v. Poitiaux, 3 Rand. 136), it was held that, under an act of assembly authorizing a bank to hold so much real property as may be requisite for its immediate accommodation, in relation to the convenient transaction of its business, and no more, the bank may purchase more ground than is necessary for the erection of a banking-house, build fire-proof houses on the vacant land, for the greater security of the bankinghouse, and sell them out to third persons. And that even if the bank violated its charter in so doing, the only proceeding against it would be by quo warranto; and the purchasers of the houses cannot resist a specific performance of their contracts by alleging that the bank had exceeded its powers in erecting and selling the houses.

In another case decided by this court (Rivanna Nav. Co. v. Dawsons, 3 Gratt. 19), only three judges were present- BALDWIN, STANARD and BROOKE. BALDWIN, J., delivered an opinion, and the only one that was delivered in the case, in which he said: "But a general prohibition (to purchase real estate) would not be inferred from a mere partial enactment of the incidental commonlaw power; as for example, from a clause authorizing a bank, or insurance or manufacturing company, to purchase land for its necessary buildings. Such a clause, whether with or without limitation as to quantity or value, would not exclude the incidental power to take mortgages or other securities on real or personal estate for debts due the corporation, or assignments or conveyances of chattels or lands in commutation therefor." "To avoid altogether the contract of a corporation made in reference to the objects of its institution is a measure of extreme rigor, and may be productive

Wroten's Assignee v. Armat.

of great injustice to the corporation on the one hand, or to the other contracting party on the other. An incapacity to take will not even be inferred from an inhibition to hold, though the policy of the latter be to prevent the accumulation by the corporation of a specified description of property, if the purpose of the conveyance be a sale of the property by the corporation and the application of its proceeds to the objects contemplated by the charter. This proposition, reasonable in itself, may be fairly deduced from the cases of Banks v. Poitiaux, 3 Rand. 136; Leazure v. Hillegas, 7 S. & G. 313, and Baird v. Bank of Washington, 11 id. 411." "At most, the act is only voidable on the ground of misuser or abuse of the franchise, and cannot be drawn in question collaterally, especially by those having no longer any interest in the subject. Banks v. Poitiaux, supra; Silver Lake Bank v. North, 4 Johns. Ch. 370." STANARD, J., concurred in the results of BALDWIN's opinion. BROOKE, J., dissented.

The cases of Silver Lake Bank v. North, 4 Johns. Ch. 370; Leazure v. Hillegas, 7 S. & R. 313, and Baird v. Bank of Washington, 11 id. 411, above referred to, were cited and much relied upon by the learned counsel for the appellees in this case, and have an important bearing upon it.

In Silver Lake Bank v. North, which was decided by that great judge, Chancellor KENT, he said: "Another objection is, that the plaintiff had no right to take a mortgage concurrently with the loan, in order to secure it; and that their charter only authorized them to take mortgages for debts previously contracted. If this objection was strictly true in point of fact, I should not readily be disposed to listen to it. Perhaps it would be sufficient for this case that the plaintiffs are a duly incorporated body, with authority to contract and take mortgages and judgments; and if they should pass the exact line of their power, it would rather belong to the government of Pennsylvania to exact a forfeiture of their charter than for this court, in this collateral way, to decide a question of misuser by setting aside a just and bona fide contract. But if we were driven to that necessity, we might, on colorable grounds, consider this to be a mortgage to secure a debt previously contracted, for it is in proof that previous to