Bank of Martinez v. Orchard & Land Co.

The Court. This appeal was taken by the Hemme Orchard and Land Company, from an order refusing a new trial.

The plaintiff is a corporation incorporated under the laws of this state in 1873. The articles of incorporation specify that the corporators desire to incorporate under the laws of the state of California, in relation to the formation of corporations, “ embraced in title (1) one, [377]part four (IV) of division first of the Civil Code of this state,” and further, “that the purposes for which said corporation is formed are to engage in and carry on the business of banking to such extent, and in such branches, as may legally be done under the constitution and-laws of the state of California.”

The action was brought to foreclose a mortgage given by defendants August and Minerva E. Hemme-to plaintiff, to secure a loan made to them by plaintiff.

Appellant contends that the mortgage is invalid because ultra vires; and illegal because forbidden by sections 34 and 35 of article IV of the constitution of 1849, which was in force when plaintiff was incorporated.

1. So far as the first point depends upon the provisions of the Civil Code we are unable to see any force in it. The code authorizes banks of deposit and discount, and prohibits the issuance of paper to circulate as money. Banks of deposit had from time immemorial been almost universally banks of loan and discount. Discount is a mode of loaning. No reason is suggested why they might not as well loan upon land security as any other. We are unable to see any point in the suggestion that because savings banks may loan on real estate therefore commercial banks may not. It might as well be argued that such banks cannot loan on personal security because savings banks are authorized to do so. The power to loan on real estate is not what distinguishes a savings bank from a commercial bank. In some states such loans are prohibited to commercial banks, either expressly or by the language of the charters. Cases arising under such laws have no force here.

2. The second point is no longer open. In Bank of Sonoma County v. Fairbanks, 52 Cal. 196, it is said: “ Under article IV, section 34, of the constitution of the state, deposit and loan associations may be formed which do not issue paper to circulate as money; and such are hot banks within thé prohibition of the constitution, although they may be called ‘ banks.’ ”