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ARBOGAST v. CORPORATION COMMISSION
Factual and Procedural Background
On and prior to April 21, 1930, the Central Bank and Trust Company of Asheville owned notes and bonds on which plaintiff John C. Arbogast was liable as maker or endorser; all were past due and aggregated $127,573.59. Some were secured by deeds of trust on lands executed by the plaintiffs, others by collateral, and others unsecured. Wallace B. Davis, president of the bank, agreed with John C. Arbogast that the deeds of trust would be foreclosed, the bank would acquire title to the lands, and the bank would deliver all the notes and collateral to Arbogast; the lands' fair market value at that time was $150,000. The deeds were foreclosed and the lands conveyed to a corporation holding title in trust for the bank, but the notes and bonds were not delivered. The bank became insolvent and closed November 19, 1930; its affairs came into the possession of the Corporation Commission of North Carolina (and its successor, the Commissioner of Banks), which refused to deliver the notes and collateral. The trial court ordered defendants to deliver the described notes, bonds and collateral to the plaintiffs and awarded costs; defendants appealed. The Supreme Court affirmed.
Legal Issues Presented
- Whether a bank that knowingly received and retained consideration under a contract made by its president is estopped to deny the president's authority to bind the bank to that contract.
- Whether the Corporation Commission (and its successor, the Commissioner of Banks), as liquidating agents holding the bank's assets, are likewise estopped and therefore bound to perform the contract terms (specifically, to deliver the notes and collateral to the plaintiff).
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Union Indemnity Company v. Perry, 198 N.C. 286, 151 S.E. 629 | Supports the principle that a corporation which ratifies a contract executed on its behalf is estopped from denying the agent's authority. | The court relied on this authority to conclude the bank had ratified the president's contract and therefore could not deny his authority; the defendants (liquidating agents) were likewise bound. |
Court's Reasoning and Analysis
The court identified that the president's contract resulted in the bank's acquisition of property valued at $150,000 and that the bank retained that property with full knowledge of the agreement that the bank would deliver the specified notes and collateral to the plaintiff. Because the bank had ratified the contract prior to insolvency, the bank was estopped from denying the president's authority to make the contract. Applying the same estoppel to the Corporation Commission and its successor, who held the bank's assets for liquidation, the court concluded those defendants were bound by the contract and could not refuse delivery of the notes and collateral. The court cited Union Indemnity Company v. Perry as supporting authority for the estoppel/ratification principle and applied that principle directly to affirm the trial court's order.
Holding and Implications
Affirmed.
Direct effect: The judgment ordering the defendants to deliver the described notes, bonds and collateral to the plaintiffs and awarding costs was affirmed; the defendants (the Corporation Commission and its successor) are estopped and bound to the contract terms. The opinion does not discuss broader legal implications beyond this application of estoppel and ratification.
Estoppel C b — Bank retaining benefits held estopped to deny authority of president to make contract, and liquidating agent was bound thereby.
A bank having knowingly received and retained before its insolvency the adequate consideration of a contract made by its president in its behalf, is estopped to deny the authority of the president to bind it thereto, and where the contract obligates the bank to return certain notes upon which the plaintiff is either maker or endorser, and the consideration remains a part of the assets of the bank in the hands of the Corporation Commission or its successor, the Corporation Commission or its successor is also estopped to deny the terms of the contract and are bound thereby, and must return the notes in accordance therewith.
On and prior to 21 April, 1930, the Central Bank and Trust Company of Asheville, N.C. owned certain notes and bonds, on which the plaintiff, John C. Arbogast, was liable as maker or endorser. All these notes were past due. Some of the said notes were secured by the deeds of trust on lands executed by the plaintiffs; others were secured by collaterals, and others were unsecured. The aggregate amount of said notes was $127,573.59.
It was agreed by and between Wallace B. Davis, president of the Central Bank and Trust Company, acting for and in behalf of said company and the plaintiff, John C. Arbogast, that the deeds of trust on the lands should be foreclosed, and that the Central Bank and Trust Company should acquire title to all the lands described therein, and that all of said notes, together with collateral held by the said company, should be delivered to the plaintiff, John C. Arbogast. The fair market value of said lands, at the date of this agreement, was $150,000.
Pursuant to said agreement, the said deeds of trust were foreclosed by sale under the powers of sale contained therein. The lands described in said deeds of trust have been conveyed to a corporation organized for the purpose of taking title thereto. This corporation holds the title to said lands in trust for the Central Bank and Trust Company. The notes and bonds held by the said Central Bank and Trust Company on which the plaintiff, John C. Arbogast was liable, have not been delivered to him, in accordance with the agreement.
On 19 November, 1930, the Central Bank and Trust Company, because of its insolvency, closed its doors and ceased to do business. Its affairs are now in the possession of the Corporation Commission of North Carolina, or its successor, the Commissioner of Banks, for the purpose of liquidation as provided by statute. The said Corporation Commission and its successor, the Commissioner of Banks, have refused to deliver the said notes and bonds, with collateral securing the same, all of which came into their possession as assets of the Central Bank and Trust Company, to the plaintiffs.
On the foregoing facts, it was ordered and adjudged that the defendants deliver to the plaintiffs all the notes and bonds, with collateral securing the same, described in the exhibit attached to the complaint, and that plaintiffs recover of the defendants the costs of the action.
From this judgment defendants appealed to the Supreme Court.
PER CURIAM.
By the contract made in its behalf by its president, Wallace B. Davis, with the plaintiff, John C. Arbogast, the Central Bank and Trust Company of Asheville, N.C. acquired property of the value of $150,000. The said company acquired said property, and retained the same with full knowledge of the agreement of its president that the notes and bonds held by it, aggregating in amount the sum of $127,573.59, with collateral securing the same, should be delivered by it to the plaintiffs.
The Central Bank and Trust Company, having ratified the contract, prior to its insolvency, was estopped from contending that its president was without authority to make the contract with the plaintiff on its behalf. The said company was bound by all the terms of the contract. See Union Indemnity Company v. Perry, 198 N.C. 286, 151 S.E. 629. The defendants are likewise bound by all of said terms, and are estopped from contending to the contrary. The judgment is
Affirmed.
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