(— N. C. —, 133 S. E. 415.) Colonel Blair, vice president of plaintiff, who accepted the same in payment of the notes of Mackie, Hanes, Alexander, and others held by plaintiff. A payment has been made on the Hanes note from the proceeds of the sale of the certificates deposited as collateral thereto. There was also evidence offered by defendants tending to show that in February, 1924, and for some time prior thereto, J. H. Mackie was insolvent; that many judgments aggregating a large sum had been docketed against him in Yadkin county; that executions on some of these judgments had been issued and returned unsatisfied; that he was a man of good character and reputation; that he was in possession of considerable real estate of large value, the title to which was in his wife and children. He was at one time treasurer of Yadkin coun ty. Both Messrs. Holton and Hall, as witnesses for defendant, testified that in February, 1924, Colonel Blair saw them on the streets of Winston-Salem, and asked each of them as to the general character of J. H. Mackie; that each told Colonel Blair that Mackie was regarded as a man of good character; that neither of them told Colonel Blair that Mackie was solvent. There was also evidence that the certificates of stock issued to J. H. Mackie by the Southern States Finance Company were delivered to Mackie at his home in Yadkin county by S. F. Penry, together with a letter dated March 6, 1924, signed by the president of defendant company, and containing the following paragraph: "We are pleased to extend to you a hearty welcome as a stockholder in this corporation, having just received your subscription for $16,500 worth of our common stock, which we are sending to you with this letter." There was much additional evidence relied upon by defendant to sustain its contentions. Plaintiff offered evidence tending to contradict witnesses for defendant in many respects, and to rebut infer which defendant contends that the jury might draw from all the evidence. We do not deem it necessary for a decision in this case to set out this evidence. Plaintiff assigns as error the refusal of the court to allow its motions, made first at the conclusion of defendant's evidence, and, upon being then overruled, renewed at the conclusion of all the evidence for judgment as of nonsuit upon defendant's defense to its action on the note, set out in the complaint, and for judgment, upon the admissions in the pleadings, that plaintiff recover of defendant in accordance with its prayer. The gist of the defense, relied upon by defendant, and submitted to the jury upon the first and second issues, is the allegation that plaintiff, in violation of the confidence which it knew defendant had in plaintiff, by reason of their relations, and with intent to cheat and defraud defendant, made false and fraudulent representations to defendant as to the solvency and financial condition of J. H. Mackie, and thereby caused defendant to issue certificates for its common stock worth $16,500, and to accept in payment therefor the note of J. H. Mackie for that sum. Plaintiff is a corporation, organized and doing business under the National Bank Act; it has only such power as is conferred by that act. It has, pursuant to said act, power "to exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this title." Section 8 (U. S. Comp. Stat. § 9661, Banks-extent of powers. 6 Fed. Stat. Anno. 2d ed. p. 654). National banks have no powers beyond those expressly granted or those fairly incidental thereto. Westervelt v. Mohrenstecher, 34 L.R.A. 477, 22 C. C. A. 93, 40 U. S. App. 221, 76 Fed. 118; Myers v. Exchange Nat. Bank, 96 Wash. 244, L.R.A.1918A, 67, 164 Pac. 951; Commercial Bkg. & T. Co. v. Citizens Trust & G. Co. 153 Ky. 566, 45 L.R.A. (N.S.) 950, 156 S. W. 160, Ann. Cas. 1915C, 166; Commercial Nat. Bank v. Pirie, 27 C. C. A. 171, 49 U. S. App. 596, 82 Fed. 802. A national bank has no power to engage in the business of furnishing to depositors or to others gratuitously or for compensation, direct or indirect, information as to the solvency, or condition or reputation, financial or otherwise, of persons, firms, or corporations. An agreement to furnish such information is ultra vires. One with whom a national bank may -power to furnish official information. form authority to that effect, that a banking corpora come surety. tion cannot lend its power to becredit to another by becoming surety, indorser, or guarantor for him. Indiana Quarries Co. v. Angier Bank & T. Co. 190 N. C. 277, 129 S. E. 619. A national bank cannot lend its credit to another by becoming surety, indorser, or guarantor for him. Merchants' Bank v. Baird, 17 L.R.A. (N.S.) 526, 90 C. C. A. 338, 160 Fed. 642. It may, however, guarantee the payment of commer dorsement. cial paper as inci- -liability on indental to its power to buy and sell the same. Thomas v. City Nat. Bank, 40 Neb. 501, 24 L.R.A. 263, 58 N. W. 943. It will be held liable on an indorsement or guaranty, to the extent, at least, of the consideration, if any, which it has received. Appleton v. Citizens' Cent. Nat. Bank, 190 N. Y. 417, 32 L.R.A. (N.S.) 543, 83 N. E. 470; Page Trust Co. v. Wachovia Bank & T. Co. 188 N. C. 766, 37 A.L.R. 1368, 125 S. E. 536. There is evidence in this record that the People's National Bank of WinstonSalem was a member of the advisory board of defendant Southern States Finance Company. There is no evidence, however, tending to show what obligations plaintiff undertook to assume by the contract establishing that relation. The contract is in writing. It was not offered in evidence. There is evidence that defendant was a depositor of plaintiff. No obligation, however, arose from this relation on the part of plaintiff to furnish -duty to furinformanish information to defendant tion as to solas to the solvency or financial condition of Mackie. There was no relation between plaintiff bank and defendant which imposed upon the plaintiff any duty to answer inquiries about J. H. Mackie. vency. There is evidence that Colonel Blair, who was vice president of plaintiff bank, had been accustomed (N. C. -, 133 S. E. 415.) to answer inquiries made by defendant relative to persons residing in Winston-Salem, or its vicinity, in whose notes or other obligations defendant was interested as a prospective purchaser. Some arrangement had been made by defendant with Colonel Blair for this service. There is no evidence, however, that Colonel Blair, in rendering this service to defendant, was acting, or undertaking to act, for plaintiff. Plaintiff had no interest in these persons or in the notes which defendant proposed to purchase. Colonel Blair was not serving or undertaking to serve the bank in answering defendant's inquiries. There is no evidence that, at the time of the inquiry by defendant relative to Mackie, plaintiff had any interest in the note which Mackie had executed, payable to the order of defendant. In answering the inquiry relative to Mackie, Colonel Blair was serving defendant, and not the plaintiff. It was held in Taylor v. Commercial Bank, 174 N. Y. 181, 62 L.R.A. 783, 95 Am. St. Rep. 564, 66 N. E. 726, that a bank cashier is not acting within the scope of his authority in giving information as to the value of notes executed by customers of the bank so as to render it liable in case the statements prove to be untrue. See Farmers' & M. Nat. Bank v. Smith, 23 C. C. A. 80, 40 U. S. App. 690, 77 Fed. 129. The distinction between the acts of Colonel Blair when acting for defendant and when acting for plaintiff is made clear by the testimony of Mr. Cherry, secretary and treasurer of defendant. When asked to secure information as to Mackie, Colonel Blair proceeded to act at once. When asked if the bank would purchase the note he replied: "Well, I will have to look further into that phase of the matter." There is evidence that, before giving a reply to the latter inquiry, he submitted the matter to the finance committee of the plaintiff, and re plied only after the committee had authorized the purchase of the note. We must, therefore, hold that upon all the evidence appearing in this record plaintiff cannot be held liable for any loss or damage which defendant may have sustained by reason of the falsi -liability for ty of any represen- fraud of vice tation which Colo president. nel Blair may have made with respect to J. H. Mackie or by reason of his failure to disclose to defendant any facts within his knowledge with respect to Mackie. Defendant, having failed to sustain its allegation in this respect, must fail in its defense involved in the first and second issues. There is no evidence to sustain an affirmative answer to the third issue, which involves the allegation that plaintiff agreed to hold the certificates of stock issued to Mackie as collateral security for his note, transferred by the indorsement of defendant to plaintiff. These certificates were delivered to J. H. Mackie, and not to the plaintiff, by S. F. Penry, agent of defendant. The note was not in the form of a collateral note. The certificates were not delivered to plaintiff by defendant, and defendant's letter to J. H. Mackie, signed by its president, is evidence contradicting the contention of defendant with respect to the third issue. right to en force note There was error in the refusal of the court to allow plaintiff's demurrer to defendant's evidence offered to sustain its defense and submitted to the jury on the first, second, and third issues. Upon all the evidence, the court should have directed a verdict in favor of plaintiff on all the issues. Lester v. Harward, 173 N. C. 83, 91 S. E. 698. There must, therefore, be a new trial. against indorser -defense of Clarkson, J., dissenting. Petition for rehearing denied. ANNOTATION. Liability of bank for erroneous credit information furnished by it or its officer or employee. [Banks, §§ 28, 42, 60, 68; Fraud and Deceit, §§ 23, 28.] I. Introduction, 528. II. Authority to represent bank, in general, 529. III. Representations in course of bank's business; receipt by bank of benefits; estoppel or ratification, 537. IV. Ultra vires, 544. V. Question as affected by nature of statement or knowledge of falsity: a. Statement as one of fact or of opinion or prophecy, 546. b. Knowledge or ignorance of falsity, 549. c. Construction and effect of statement generally, 550. VI. Miscellaneous; duty of bank to give information or to make inquiry, 551. I. Introduction. Generally, as to powers of bank president or vice president, see annotations in 1 A.L.R. 693, and 9 A.L.R. 1146 [Banks, § 32], particularly subd. VI. As to the authority of an officer of a bank to bind the bank by false representations as to the credit of a third person, as affected by the Statute of Frauds, see subd. VI. of the annotation in 9 A.L.R. on p. 548 [Contracts, § 116]; also Banbury v. Bank of Montreal [1917] 1 K. B. (Eng.) 409, which is set out on p. 544 of the same annotation. The latter decision is reversed on this point in [1918] A. C. 626. Among possibly other recent cases bearing on this question, attention is called to Sedgwick v. National Bank (1922) 295 Mo. 230, 243 S. W. 893, in which it was held that the Statute of Frauds applied, and precluded recovery from a national bank for fraud and deceit on the part of its president in making misrepresentations as to the solvency of a third party, unless the same were in writing. As to liability of corporation for fraud of officer for his own benefit, but within his apparent authority, see annotation in 43 A.L.R. 615 [Corporations, § 107]. As indicated in the title, the annotation does not cover cases involving merely the question of personal liability of the bank officers for erroneous credit information given by them regarding a third person; nor does it include cases like Fisher v. United States Nat. Bank (1894) 12 C. C. A. 413, 26 U. S. App. 448, 64 Fed. 710, where the alleged misrepresentation was of the solvency or financial responsibility of the bank whose officer made the representations. In this connection, attention is called to Farmers' State Guaranty Bank v. Cromwell (1918) 70 Okla. 199, 1 A.L.R. 684, 173 Pac. 826, where the purchaser of stock in a state bank sought to avoid liability for the purchase price on the ground of misrepresentations of the bank's cashier and president in regard to the value of the stock, it being held that, in the absence of a showing of specific authority to make the representations, the bank could not be held liable for the reason that the officers were acting without the scope of their authority in giving the information. Cases involving fidelity bonds of bank officers and employees are of a somewhat distinct class which is not covered in the annotation. (The question of concealment and misrepresentation by officer or employee of corporation as to previous embezzlement, as affecting liability on fidelity bond, is discussed in annotation in 40 A.L.R. 1036 [Bonds, § 50]). Attention is called to several of these cases merely by way of illustration. Thus, the question sometimes presented has been as to the authority of a bank officer to make representations as to the integrity, etc., of an employee or other officer of the bank, to enable the latter to obtain a bond. See, for example, American Surety Co. v. Pauly (1898) 170 U. S. 133, 42 L. ed. 977, 18 Sup. Ct. Rep. 552, affirming (1896) 18 C. C. A. 644, 38 U. S. App. 254, 72 Fed. 470; United States Fidelity & G. Co. v. Muir (1902) 53 C. C. A. 56, 115 Fed. 264, petition for writ of certiorari denied in (1902) 187 U. S. 648, 47 L. ed. 348, 23 Sup. Ct. Rep. 847; Guarantee Co. of N. A. v. Mechanics' Sav. Bank & T. Co. (1902) 183 U. S. 402, 46 L. ed. 253, 22 Sup. Ct. Rep. 124, which are cited in the annotation in 1 A.L.R., on p. 700. As to authority of a bank cashier to bind the bank by statements made to a surety company as to the integrity and faithful performance of duties by the president of the bank, the statements being made in connection with contemplated renewal of the latter's guaranty bond, see also Fidelity & D. Co. v. Courtney (1900) 43 C. C. A. 331, 103 Fed. 599, affirmed in (1902) 186 U. S. 342, 46 L. ed. 1193, 22 Sup. Ct. Rep. 833. The lower court took the position that the certificate executed by the cashier containing the alleged misrepresentations was inadmissible, as there was no showing that the bank authorized the cashier to fill out and return the certificate, and this was not within his inherent duties, in the absence of special authority. The Federal Supreme Court, however, held that the making of the certificate was an act done in the course of business of the bankin other words, an official act performed on behalf of the bank, and not a mere personal representation of the officer making it; that exclusion of the certificate was erroneous, but that the error under the particular circumstances was not prejudicial. Attention is called also to Lieberman v. First Nat. Bank (1898) 8 Del. Ch. 229, 40 Atl. 382, where the surety on the bond of the teller of a national bank sought to restrain it from proceeding at law to collect from the surety for defalcations of the teller; and the court held that the surety's responsibility was not affected by assurances at the time the contract was made, given by the bank cashier, that the teller's accounts were all straight and that the surety could go on the 48 A.L.R.-34. N. W. 862, an action on the bond of a bank cashier, it was held not a defense that the surety had been induced to sign the bond by alleged false and fraudulent representations, made by the president of the bank before the bond was signed, relative to the personal character and ability of the cashier, the court saying that nothing appeared to indicate that the president had reason to believe otherwise, but that, if the contrary were true, this fact would not be controlling, since the president was but a fellow officer of the bank, and was not authorized to speak for it, or to bind it by any statements made by him, except as the statute and by-laws of the bank invested him with the necessary authority, and that under the statute and by-laws the president had nothing to do with the cashier's bond, but the duty and authority in respect thereto rested wholly with the board of directors. Fraud has been the usual ground on which it has been sought to hold a bank liable for erroneous credit information furnished by its officer or employee, but no distinctions on the present subject have apparently been made between fraud and negligence as a possible ground for recovery. See III. infra, as to bank's liability for fraud. II. Authority to represent bank, in general. It may be stated as a general rule that when, as a matter of custom or of courtesy, a bank officer or employee replies to an inquiry for credit information regarding a customer or other third party, he is not acting within the scope of his ordinary or implied duties, and, in the absence of express authority, does not represent the bank, so as to render it liable for erroneous information furnished to one who acts thereon to his injury. United States.-First Nat. Bank v. Marshall & I. Bank (1897) 28 C. C. A. 42, 54 U. S. App. 570, 83 Fed. 725; Citi |