While a national bank cannot act as trustee and hold land for
third persons, under 5136, Rev.Stat., it may do those acts that are
usual and necessary in making collections of commercial paper and
evidence of debt.
A national bank, under 5136, Rev.Stat., may be assignee of a
judgment to collect and distribute the amount thereof where the
assignment is not made merely to enable it to sue in its own
name.
Under the law of Oregon, a national bank holding a chose in
action as trustee to collect and distribute may use in it own
name.
Quaere whether any but the government can raise the
question that a national bank, in acting as trustee, violates §
5136, Rev.Stat.
Kerfoot v. Bank, 218 U.
S. 281.
53 Ore. 53 affirmed.
The facts, which involve the construction of § 5136, Rev.Stat.,
in regard to the extent of power of a national bank to act as
trustee, are stated in the opinion.
Page 223 U. S. 509
MR. JUSTICE LAMAR delivered the opinion of the Court.
Miller, the plaintiff in error, was the attorney of Helmick in
an action against Porter. The judgment obtained in that suit was
assigned by Helmick to the First National Bank of Fayette, Idaho,
which executed an instrument reciting that it would hold any money
collected subject to the order of Helmick. At the time of making
the assignment, Helmick gave verbal instructions to pay part of the
money when collected to Lauer. The bank placed the judgment in the
hands of Miller, who collected the money and, claiming to act as
attorney for Helmick, paid over the proceeds to the Moss Mercantile
Company, which asserted that the cause of action had been
transferred to it prior to the rendition of the judgment. The bank
thereupon brought suit against Miller for the recovery of the money
thus collected by him and paid over to a third party. The defendant
answered, denying that the bank had title; alleging that it had
paid no consideration for the transfer, that it was intended to
defraud creditors, setting up that Helmick had revoked the
assignment and had given Miller a release. There was, however, no
claim that the charter of the bank prevented it from taking the
transfer or prosecuting the suit.
There were several trials of the case, and ultimately, with the
consent of Helmick and Lauer, the bank assigned the judgment to
King. He was substituted as plaintiff, and recovered a judgment
against Miller. The case was
Page 223 U. S. 510
taken to the supreme court, where it was contended that a
national bank could not act as trustee on an express trust, so as
to be able to institute and maintain a suit under the statute of
Oregon, which provides that the trustee of an express trust may sue
without joining the person for whose interest the action is
prosecuted. The judgment was affirmed, and no federal question is
presented in the writ of error here except on the theory that,
under Revised Statutes, § 5136, a national bank could not act as
trustee of an express trust, and that therefore the suit was
absolutely void, and could not proceed to judgment in the name of
the substituted plaintiff.
A national bank cannot act as a technical trustee and hold land
for the benefit of third persons. It cannot, for example, act as
trustee under a railroad mortgage, nor take title to property to be
held for the life of the grantor, with remainder to his children.
Every such transaction would be voidable at the instance of the
government.
Kerfoot v. Farmers' Bank, 218 U.
S. 281. But under Revised Statutes § 5136, "it may
exercise all such incidental powers as shall be necessary to carry
on banking," and it may therefore act as a fiduciary and occupy a
trust relation in matters connected with that business. It may do
those acts and occupy those relations which are usual or necessary
in making collections of commercial paper and other evidences of
debt. It is both usual and proper for the legal title to negotiable
instruments to be vested in a bank by mere indorsement for purposes
of collection, holding the proceeds as the indorser directs. There
is no difference in law if the title is conveyed by a lengthier and
more formal instrument. In both cases, the bank takes the legal
title for the purpose of demand and collection. In a proper case,
there is no reason why it might not go further and institute suit
thereon in its own name for the recovery of what may be due. If the
transfer was made, or the suit was being maintained, for purposes
not
Page 223 U. S. 511
authorized by the charter of the bank, and if the defendant was
in a position where his rights were prejudiced thereby, it would be
incumbent on him to raise that defense at the outset of the
litigation or as soon as he learned that fact.
In this case, the assignment was made in order that the bank
might collect the money, pay part to Lauer, and in effect hold the
balance on deposit to the credit of Helmick. The judgment was not
transferred to the bank for the mere purpose of enabling it to
bring suit in its own name. At the time of the transfer, no suit
was contemplated, and indeed none was necessary, because the money
was immediately paid by Porter. Suit only became necessary when the
amount collected by Miller was later improperly paid over by him to
the Moss Mercantile Company. There was nothing in this transaction
which was so disconnected with the banking business as to make it
in violation of Rev.Stat. § 5136, even if the defendant could raise
such question.
Kerfoot v. Bank, supra. The laws of Oregon
permitted an action to be maintained by the bank in its own name.
There is no federal question before us which authorizes a reversal,
and the judgment is
Affirmed.