Overview
Case summary
Plaintiff Seeber sued Commercial National Bank of Ogden on a contract of indemnity. The bank's cashier, Oscar E. Hill, was attempting to collect a promissory note from J.M. Taylor in Missouri. To obtain an attachment bond for the collection suit, the bank (under the name 'O.E. Hill, Cas.') wrote letters to Seeber requesting he furnish the bond and agreeing to hold him harmless. Seeber executed the bond as surety, indemnified co-sureties, and ultimately paid losses when the bond was called. The bank demurred to the complaint, arguing the cashier lacked authority and the contract was void as beyond corporate powers. The court overruled the demurrer, holding that (1) the allegation that the letters were the 'act of the defendant' allowed proof of any appropriate authorization to the cashier, not just proof of usage, and (2) the contract was not void on public policy grounds because the plaintiff had fully performed and the contract only affected the bank, its stockholders, and creditors, with no statutory prohibition.
Abstract
Plaintiff sued a bank on a contract of indemnity after acting as surety on an attachment bond for the bank's collection suit on a promissory note, incurring losses that the bank agreed to hold harmless. The bank demurred, claiming the cashier lacked authority and the contract exceeded corporate powers. The court overruled the demurrer, finding the complaint's allegation of the letters as the bank's act permitted proof of authorization and holding the contract enforceable as the plaintiff fully performed and no public policy or statutory prohibition applied.
Opinion of the court
opinionMARSHALL, District Judge
- Allegation that letters were act of defendant admits proof of any authorization to cashier
- Usage allegations may be treated as surplusage
- Contract not void on public policy when plaintiff fully performed
- Public policy favors enforcing contracts when repudiation would be dishonest
- Corporation acting outside chartered powers does not automatically void contract if no statutory prohibition
Jurisdiction
not challenged- Case involves a national bank as defendant
- Suit based on contract of indemnity
Procedural posture
- Validity of contract of indemnity
- Authority of cashier to bind bank
Legal categories
Case record
Issues & holdings
de novo
Allegation of ultimate fact that letters were act of defendant admits proof of any appropriate authorization, not limited to usage
Issue preserved for review
de novo
Contract not void as plaintiff fully performed and public policy does not require avoidance when no statutory prohibition and contract only affects bank, stockholders, and creditors
Issue preserved for review
Holdings of the court
Error analysis
- Defendant argued complaint insufficient because usage not alleged to be known to bank's board of directors — procedural · no error foundUsage allegation not necessary when complaint alleges letters were act of defendant · not applicable
- Defendant argued contract void as beyond corporate powers — procedural · no error foundContract enforceable despite being outside chartered powers when plaintiff fully performed · not applicable
Statutory interpretation
1Standards of review
- Interpretation of pleading allegations and legal sufficiency of complaint — de novo Court reviews demurrer based on legal sufficiency of allegations
Timeline
Court overruled defendant's demurrer
Outcome: Demurrer overruled
Court found complaint stated valid claim
J.M. Taylor executed promissory note to Commercial National Bank of Ogden for $2,409.10
Created the debt that led to subsequent collection efforts
Defendant bank transferred promissory note to cashier Oscar E. Hill for collection in Missouri
Bank's attempt to collect debt through its cashier
Hill instituted suit against Taylor and needed attachment bond with $6,085 penal sum
Required surety bond that led to bank's indemnity promise
Defendant bank, under name 'O.E. Hill, Cas.', wrote two letters to plaintiff Seeber requesting bond and agreeing to hold him harmless
Formed basis of contract of indemnity sued upon
Plaintiff executed attachment bond as surety and indemnified co-sureties
Plaintiff performed his part of the contract
Plaintiff and co-sureties became liable and paid the $6,085 penal sum on bond
Loss occurred that indemnity contract was meant to cover
Plaintiff repaid co-sureties for amounts they paid
Plaintiff suffered actual loss for which he seeks indemnity
Plaintiff filed complaint against defendant bank for indemnity
Initiated the lawsuit
Defendant filed general demurrer to complaint
Challenged legal sufficiency of complaint
Facts & evidence
Key facts
8 facts- J.M. Taylor made promissory note for $2,409.10 to defendant bank
- Oscar E. Hill was cashier of defendant bank
- Defendant transferred note to Hill for collection in Missouri
- Hill sued Taylor and needed attachment bond with $6,085 penal sum
- Defendant bank, under name 'O.E. Hill, Cas.', wrote two letters to plaintiff requesting bond and agreeing to hold him harmless
- Plaintiff executed bond as surety and indemnified co-sureties
- Plaintiff and co-sureties became liable and paid penal sum
- Plaintiff repaid co-sureties and sued defendant on indemnity promise
Procedural history
3 steps- Plaintiff filed complaint
- Defendant demurred generally to complaint
- Court heard argument on demurrer
Evidence in the record
- Plaintiff's allegation that transfer to Hill was for collection purposes (though characterized as 'informed and believes')
- Promissory note for $2,409.10 from J.M. Taylor to defendant bank
- Two letters from defendant bank (under name 'O.E. Hill, Cas.') to plaintiff requesting bond and agreeing to hold harmless
- Attachment bond with $6,085 penal sum
Objects of relevance
Authorities
Cited authorities (11)
Statutes
- National Bank Act (implied reference to corporate powers)
Standards & doctrines
- Ultra vires doctrine for corporate contracts
- Public policy exception for executed contracts
- Agency by custom or usage
- Pleading ultimate facts versus evidence
Legal principles applied
- He who employs another at particular place must be taken as intending business done according to usage of that place
- Public policy favors enforcing contracts when other party has performed, even if corporation acted outside chartered powers
- Usage must be reasonable to be enforceable