82 N.Y. 291 | NY | 1880
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The plaintiff is a banking association created under the act of the legislature of this State entitled "An act to authorize the business of banking," passed April 18, 1838, and as such brings this action upon a promissory note of $3,000, made by the firm of Charles F. Parker Co., of Boston, Massachusetts, payable to their own order, indorsed by them and by Alexander Law, individually, and also purporting to be indorsed by "John Savery's Sons." The defendants composed that firm and carried on business as manufacturers and traders in the city of New York. They are sued as indorsers. The complaint contains the allegations usual in such cases. Law does not defend, but the other members of the *299
firm answer, and among other things deny that they indorsed the note in their firm name, or otherwise, or that they ever delivered it to any person, and aver that the defendant Law was a member of both firms; that the firm of Charles Parker Co. made and indorsed the note, and placed it in the hands of Law for the purpose of raising money thereon for the sole benefit of the makers or of Law, or both of them; that Law fraudulently indorsed the same in the name of said firm of "John Savery's Sons" as an additional security for the name of the makers, and for his own name as indorser thereon, "and thereupon negotiated the same for the benefit of himself individually, and of said makers of said note;" that this was without the knowledge or consent of the answering defendants or either of them, or in any manner for the benefit of the firm of "John Savery's Sons." They also allege that the plaintiff took the note "with full notice and knowledge of all these matters, and without value paid therefor;" and further, that Leonard, Sheldon Co., to whom Law delivered the note, are still the actual owners thereof, and that this action is prosecuted for their benefit. Upon the trial the allegations in regard to the manner of making, indorsing and negotiating the note by Law, and the ignorance of defendants were fully established. It also satisfactorily appeared that Law transferred the note to Leonard, Sheldon Co., a firm of brokers, with whom he had private dealings as an individual and to whom he was indebted in a sum exceeding the amount of the note, with directions to sell it and apply the proceeds upon that indebtedness. This was done. It is thus apparent that neither Law, nor Leonard, Sheldon Co., could have maintained an action against the defendants on the indorsement of "John Savery's Sons," for as to them the case would be within the well-established doctrine that one partner cannot bind the firm by negotiable paper made by him in its name, and applied to discharge his pre-existing indebtedness, without the assent of the other partners, and this would be so, even if the creditor had no knowledge that the paper was so made, but in this case Leonard, Sheldon Co., although they did not know that Law had himself written the name of the *300
firm, had actual notice that he was using the firm name, and therefore its credit, in a matter having no relation to the partnership, and so they could not claim to have taken it even in good faith. (Comstock v. Hier,
It was shown that Mr. Puffer, the president, was in the habit of going every day to various offices in New York, and among others to that of Leonard, Sheldon Co., "looking for paper;" at that place "they said to him they had a good piece of paper, and if he wanted it he could have it." After examining it, *301 and the "mercantile book to see if it was all right," "he made a bargain for it, bought it, and paid for it," receiving at the time a paper from the brokers in these words:
"NEW YORK, April 4, 1877.
Sold to Atlantic State Bank, by Leonard, Sheldon Co., note C.F. Parker Co., due June 30 ........................................... $3,000 00 Indorsed A. Law and Jno. Savery's Sons. 87 days at 9 per cent. ....................... 65 25 _________ $2,934 75" =========
He directed Leonard, Sheldon Co. to draw upon the bank for this balance, and on the 6th day of April they did so. The draft was paid on the 7th of April, and an entry made by the cashier of the bank, "charge notes cashed."
The defendants claim in the first place that this transaction was a purchase, and not a discount, and that "the buying of promissory notes is not within the powers conferred upon a banking association." The plaintiff was; by the act above referred to, empowered "to carry on the business of banking by discounting bills, notes and other evidence of debt, * * * by buying and selling gold and other bullion, foreign coins and bills of exchange, in the manner specified in their articles of association for the purposes authorized by this act, by loaning money on real and personal security, and by exercising such incidental powers as shall be necessary to carry on such business." (Laws of 1838, chap. 260, § 18.)
The transaction above narrated, and through which the plaintiff acquired the note in question, was, I think, directly within the power thus conferred to carry on its business, "by discounting * * * notes and other evidences of debt," and this is so according to the general practice and understanding among men, and the decisions of our courts. "Discount" is "reduction." (Roget's Thesaurus.) *302
In MacLeod on Banking, a book of authority, speaking of "price, discount and interest," the author says, page 43, "Now as money naturally produces a profit, it is clear that the price given for a debt payable a year hence must be less than the amount of the debt. The difference between the price of the debt and the amount of the debt is called discount. Therefore clearly the price, together with the discount, equals the amount of the debt; and as the price decreases the discount increases. In the language of the money market it is usual to estimate the value of money by the discount or the profit it yields; and to buy or purchase adebt is always in commerce termed to discount it." And see further page 291, where the subject is amplified.
I find nothing in the statute to indicate that the word "discount" is there used in any other than the general sense, above referred to, nor can I perceive that any evil can result from the construction given to it in this respect by the trial court, and the learned judge who delivered the opinion at General Term. It accords also with the decisions of the courts. InTracy v. Talmage (18 Barb. 456), referring to the provisions contained in section 18 of the law above cited, and a banking association organized under it, the court say: "It was authorized, among other things, therefore, `to discount' not only bills and notes, but other evidences of debt, without restriction, and to loan money on any kind of security `real' or `personal.' `Now to discount' includes to buy, for discounting at most is but another term for buying at a discount" (page 462). And although the judgment rendered was subsequently modified by this court (
"Received of Leonard, Sheldon Co., and discounted for them — Note, C.F. Parker Co., due June 30 ......................................... $3,000 00 Ind. A. Law and Jno. Savery's Sons, eighty-seven days at nine per cent. ............................ 65 25 __________ $2,934 75" ==========
Would not the title of the bank have been precisely the same as now? In the one case the vendor and in the other case the vendee states the contract; nor would it have changed the *306 meaning of the paper if the words "bought of" were substituted for "discounted for." This supposed paper and the one actually drawn complement each other, and taken together describe the transaction. Nor does the fact that Leonard, Sheldon Co. did not indorse the note make any difference. A note payable to the order of the maker becomes, when indorsed, payable to bearer. That was this case. If it had been payable to the order of Leonard, Sheldon Co., they might have indorsed it without recourse. The money in either form would have been lent or advanced, without personal liability on the part of the person receiving it, for the loan or advance would have been made as it was in this case, on the credit of the note, and when that was paid the loan would be discharged.
I think the transaction was within the statute, and whether it is called a discount or a purchase, valid. I am unable to see any merit in the objection that the title to the note is rendered invalid by reason of the "reduction of nine per cent," instead of seven. If any penalty was incurred, which I do not concede, it was only the penalty prescribed by the act itself (Laws of 1870, chap. 193), and such defense or claim is not interposed by the answer in this case. Nor do I think it would have availed these defendants if it had been.
The violation of the statute is not a fact affecting the good faith of the holder of the paper as between itself, and one liable in any event for its payment. If the statute contained words of prohibition, a different question would arise and the cases cited by the appellant (Bank of U.S. v. Davis, 2 Hill, 451; N.Y. State L. Trust Co. v. Helmer,
The transaction out of which the cause of action became the property of the plaintiff was not forbidden. It was not improper in itself, and if it was not within the exact letter of the law from which the plaintiff derived its existence, the fault is one which should give no advantage to the defendants. (Whitney ArmsCo. v. Barlow,
Is the plaintiff affected by the knowledge of Leonard? As we have seen, in the hands of his firm the note was so affected by the fraud of Law, that it could not be enforced by them. He was one of the directors of the plaintiff. From this circumstance alone nothing can be inferred. If the knowledge of the director was acquired in his official capacity, the bank also is presumed to have it; but if it was acquired as any private person might have acquired it, the bank is not chargeable. Leonard comes within the latter condition. The information which he had was not communicated to him as a director, nor did he acquire it while engaged in its business. It did not belong to the plaintiff and there can be no presumption that it was communicated to it. In behalf of the bank he did no act concerning the note or its purchase. The title to the note was perfect in the bank when its president perfected the bargain. Relying on that the money of the bank was paid. His *308
knowledge, therefore, cannot operate to its prejudice. (Pres't,etc. v. Cornen,
The judgment should, I think, be affirmed.
All concur.
Judgment affirmed.