McCormick v. Market National Bank of Chicago
This was an action brought July 17, 1895, by McCormick against the Market National Bank of Chicago, Ill., in the superior court of Cook county, in the state of Illinois, and was submitted by the parties, waiving a trial by jury, to that court, upon an agreed statement of facts, in substance as follows:

On January 31, 1893, articles of association were signed, and an organization certificate was signed and acknowledged, by nine citizens of Illinois, before a notary public, and both were transmitted to the comptroller of the currency, as required by title 62 of the Revised Statutes of the United States (the material parts of which are copied in the margin ), for the purpose of making them a national banking association at Chicago by the aforesaid name; and were on February 3, 1893, recorded, and afterwards carefully preserved, in the comptroller's office.

On January 31, 1893, at a meeting of the directors of the bank, chasen by the stockholders, and named in the articles of association, a president and a cashier were duly elected, and the directors caused a seal to be made for the bank. On February 9, 1893, the president, pursuant to a resolution of the directors, signed and sealed with the corporate seal a lease in writing from the plaintiff to the bank of certain offices in Chicago, 'to be used and occupied by said Market National Bank as a banking office, and for no other purpose,' for the term of five years from May 1, 1893, at a yearly rent of $13,000, payable in equal monthly installments. By an agreement made part of the lease, the plaintiff was to make certain alterations and repairs at his own expense; either party might cancel the lease on May 1st of any year by giving 90 days' notice in writing; and no rent was to be charged until the bank took possession. On April 12, 1893, the parties made a supplemental agreement, by which the plaintiff was to make further alterations, the bank paying half the cost thereof. All the alterations and repairs were made by the plaintiff as agreed; the cost, paid by him, of the alterations made under the agreement of April 12, 1893, being $2,475.

Upon the completion of the alterations, on June 22, 1893, the president and cashier, in the name of the bank, took possession of the demised premises, and put in the fixtures and furniture, blank books and stationery, necessary to carry on a banking business, and they were not removed until April 30, 1895.

Of the whole capital stock of $1,000,000, provided for in the articles of association, no more than the sum of $331,594 was ever paid in; and the bank was never authorized by the comptraller of the currency to commence, and never did commence, the business of banking.

The officers of the bank, from time to time, corresponded with the plaintiff, using letter heads with the name, location, and place of business of the bank and the names of its officers printed thereon, and signing in their official capacity.

The plaintiff, at the times of the negotiations for the lease, and of its execution, and of the taking possession of the demised premises by the officers of the bank, understood and believed that it was legally organized as a national bank, and as such was ready to do banking business, and had the power to enter into the lease and agreements aforesaid; and had no knowledge or information to the contrary until August 15, 1893, when the officers of the bank informed him that the bank had never been authorized by the comptroller of the currency to commence the business of banking, and had no power to enter into the lease, and had abandoned all further proceedings for carrying on the banking business, and offered to surrender the lease, but he refused to accept the surrender. On September 20, 1893, the president of the bank caused the key of the office to be left on the desk of the plaintiff's agent, he refusing to accept it.

On July 15, 1893, the nine persons who had signed the aforesaid articles of association and organization certificate signed and transmitted to the comptroller of the currency a certificate revoking them, and he placed it on file in his office. On the same day, five of those persons and seven others signed and acknowledged, and forwarded to the comptroller, other articles of association and organization certificate, for the purpose of making them a national bank by the same name, with a capital of $500,000, and they were forthwith recorded in the comptroller's office. On July 25, 1893, the persons signing the latter articles of association and organization eertificate abandoned all further proceedings with regard to the organization of the bank as therein provided, and with regard to its commencing the business of banking.

On October 4, 1893, the parties agreed in writing that, without prejudice to the rights of either, the plaintiff should take possession of the premises, and endeavor to lease them and to collect the rent thereof. The plaintiff made every effort to obtain a tenant accordingly, but was unable to do so.

On January 3, 1895, the plaintiff gave written notice to the president of the bank of his intention to terminate the lease on May 1, 1895, in accordance with its terms.

The cashier paid the rent, according to the lease, until July 22, 1893. But the bank refused to pay any rent subsequently accruing, and never paid its half of the cost of the alterations made under the agreement of April 12, 1893.

If, upon the facts stated, without regard to the form of the pleadings, the court should be of opinion that the plaintiff was entitled to recover, judgment was to be rendered for him for such sum as he was entitled to, with costs; otherwise judgment for the defendant, with costs.

The plaintiff asked the court to find, as matter of law, the following propositions:

'(1) That the execution of the lease in question by the defendant was incidental and necessarily preliminary to its organization, and to its entering upon a banking business.

'(2) That the execution of the lease in question was a proper exercise of the powers possessed by such defendant to make contracts under paragraph 3 of section 5136 of the Revised Statutes of the United States.

'(3) That the limitation or last clause of paragraph 7 of said section does not apply to the powers conferred by paragraphs 1 to 6 in said section; that the Market National Bank of Chicago had the power to enter into said lease, and to legally bind itself thereby.

'(4) That there was no want of power on the part of said defendant to execute said lease, but merely a defective organization, and said bank cannot plead such defective organization to defeat a recovery.

'(5) That said contract of lease has been fully executed.

'(6) That the said plaintiff was not bound to ascertain whether or not the said defendant was properly and legally organized; and that, if the plaintiff relied upon the representations and statements of the proper officers of said defendant that the bank was properly and legally organized and empowered to make and enter into said lease, he is entitled to recover the stipulated rental named therein, and the defendant is estopped to deny its liability.

'(7) That the said defendant, by its acts, conduct, and declarations, as shown by the agreed statement of facts in this case, is estopped from alleging that it was not fully organized as a banking corporation under the laws of the United States, and from alleging that it did not have the power to execute the lease in question.

'(8) That the plaintiff, under the facts in this case as agreed upon, is entitled to recover judgment, at the rate agreed upon in said lease, from July 22, 1893, up to May 1, 1895, and also to recover one-half of the expenses of repairing and changing the said premises, according to the stipulation, with interest upon each installment as it became due, at the rate of five per cent. per annum.'

The court refused to find the foregoing propositions of law, or any of them, and the plaintiff duly excepted to the refusal.

The court found for the plaintiff, and gave judgment in his favor for the rent from July 22 to August 15, 1893, and for half the cost of the alterations made by the plaintiff under the agreement of April 12, 1893, with interest, amounting in all to the sum of $2,548.85.

The judgment was affirmed, on successive appeals of the plaintiff, by the appellate court and by the supreme court of Illinois. 61 Ill. App. 33, 162 Ill. 100, and 44 N. E. 381. The plaintiff thereupon sued out this writ of error. The assignments of error upon each appeal, as well as upon the writ of error, were based upon the propositions of law above stated.

A. M. Pence, for plaintiff in error.

Hiram T. Gilbert, for defendant in error.

Mr. Justice GRAY, after stating the case, delivered the opinion of the court. 

Notes

Sec. 5134. The persons uniting to form such an association shall, under their hands, make an organization certificate, which shall specifically state:

First. The name assumed by such association.

Second. The place where its operations of discount and deposits are to be carried on.

Third. The amount of capital stock and the number of shares into which the same is to be divided.

Fourth. The names and places of residence of the shareholders, and the number of shares held by each of them.

Fifth. The fact that the certificate is made to enable such persons to avail themselves of the advantages of this title.

Sec. 5135. The organization certificate shall be acknowledged before a judge of some court of record, or notary public, and shall be, together with the acknowledgment thereof, authenticated by the seal of such court or notary, transmitted to the comptroller of the currency, who shall record and carefully preserve the same in his office.

Sec. 5136. Upon duly making and filing articles of association and an organization certificate, the association shall become, as from the 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:

First. To adopt and use a corporate seal.

Second. To have succession for the period of twenty years from its organization, unless sooner dissolved or its franchise becomes forfeited.

Third. To make contracts.

Fourth. To sue and be sued, complain and defend, in any court of law and equity, as fully as natural persons.

Fifth. To elect or appoint directors, and by its board of directors to appoint a president, vice-president, cashier and other officers, define their duties, require bonds of them, and fix the penalty thereof; dismiss such officers or any of them at pleasure, and appoint others to fill their places.

Sixth. To prescribe, by its board of directors, by-laws not inconsistent with law.

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 their business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debts; by receiving deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtaining, issuing and circulating notes, according to the provisions of this title.

But no such association shall transact any business, except such as is incidental and necessarily preliminary to its organization, until it has been authorized by the comptroller of the currency to commence the business of banking.

Sec. 5168. Whenever a certificate is transmitted to the comptroller of the currency as provided in this title, and the association transmitting the same notifies the comptroller that at least fifty per centum of its capital stock has been duly paid in, and that such association has complied with

all the provisions of this title required to be complied with before an association shall be authorized to commence the business of banking, the comptroller shall examine into the condition of such association, ascertain especially the amount of money paid in on account of its capital, the name and place of residence of each of its directors, and the amount of capital stock of which each is the owner in good faith, and generally whether such association has complied with all the provisions of this title required to entitle it to engage in the business of banking; and shall cause to be made and attested by the oaths of a majority of the directors, and by the president or cashier of the association, a statement of all the facts necessary to enable the comptroller to determine whether the association is lawfully entitled to commence the business of banking.

Sec. 5169. If, upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the comptroller, whether by means of a special commission appointed by him for the purpose of inquiring into the condition of such association, or otherwise, it appears that such association is lawfully entitled to commence the business of banking, the comptroller shall give to such association a certificate, under his and official seal, that such association has complied with all the provisions required to be complied with before commencing the business of banking, and that such association is authorized to commence such business.

Sec. 5170. The association shall cause the certificate issued under the preceding section to be published, in some newspaper printed in the city or county where the association is located, for at least sixty days next after the issuing thereof.

Sec. 5190. The usual business of each national banking association shall be transacted at an office or banking house located in the place specified in its organization certificate.
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