This proceeding involves the review of a judgment entered in the Court of Common Pleas. The parties here stand in the same relative position as in the lower court. The case was tried without the intervention of a jury and resulted in a finding and decree for the defendants. The action was based upon a note and mortgage and sought the foreclosure of the latter. This note and mortgage, with other collateral, had been delivered to the Board of Stewards of the Ohio Conference of the Methodist Episcopal Church to secure a deposit of $45,612.19 in cash. By the terms of this loan the Commercial Bank Savings Company agreed to pay interest on the amount of the deposit in the sum of 5 per cent. per annum from the date of the deposit. The deposit was made, and the collateral turned over by the bank to the Board of Stewards about September 11, 1929, and under the agreement *Page 559 one-half of the trust fund so deposited was to remain with the bank until about September 15, 1929, and the remaining one-half until about December 15, 1929. Within a short period $22,171.44 was repaid by the bank, leaving the sum of $23,440.75 owing on the principal. On November 29, 1929, the Superintendent of Banks of the state of Ohio took charge of the bank for the purposes of liquidation, and since that time a 5 per cent. dividend has been paid. It is conceded that the value of the collateral exceeds the amount on deposit.
The question presented to us is whether the act of the bank in giving collateral as security for the deposit was ultra vires, and whether, if the act was ultra vires, the bank is entitled to have the securities returned without making payment of the amount owing.
In our judgment the correct rule is laid down by the Court of Appeals of New York in the case of State Bank of Commerce v.Stone, 261 N.Y. 175, 184 N.E. 750, 87 A.L.R., 1449. The opinion in that case is well considered and logical, and relieves us of the necessity of writing a reasoned opinion.
We hold that the act of securing private deposits by giving collateral was ultra vires, and we are of the further opinion that in view of the fact that the transaction was not forbidden by positive statutory enactment in Ohio it should be treated like all ultra vires acts of a corporation, and that the Superintendent of Banks should not be permitted to take possession of the collateral without paying to the depositors the amount owing.
In State Bank of Commerce v. Stone, supra, the court, after holding such act ultra vires, uses this language: "This does not necessarily mean, however, that the judgment of the courts below must be reversed, as we have to consider the effect of ultravires. In pledging these bonds, the officers were acting for and on behalf of the bank, and for its business, apparently *Page 560 seeking to obtain deposits which, under the Banking Law, it was authorized to receive. They applied the deposits to the bank's business, and the bank has had and received the benefit of the money due to the agreement which the bank made, and the bonds which it delivered as security. Under these circumstances it would not be just for the bank or its creditors to accept all the benefits and repudiate the burdens, unless the acts of the bank be in violation of some direct and positive statute. Whatever the difference of view there may be as to the effect of ultra vires on corporate contracts, in no jurisdiction can a party retain what it has received under such a contract and refuse to perform the contract. (Appleton v. Citizens' Central Nat. Bank, 190 N.Y. 417, [83 N.E. 470, 32 L.R.A. (N.S.), 543]; American Surety Co. v. Philippine Nat. Bank, 245 N.Y. 116 [156 N.E. 634]; where the authorities in this State are reviewed.)"
The money had been on deposit but a very short time, and there is no claim made that the equities of third parties have intervened.
Judgment affirmed.
RICHARDS and LLOYD, JJ., concur.
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