George E. Lloyd & Co. v. Matthews
79 N.E. 172
Ill.
1906
Check Treatment
Mr. Justice Vickers

delivered the opinion of the court:

Nelson E. Matthews and Clark H. Rice, banking partners, doing business at Ottawa, Ohio, brought an action of assumpsit against George E. Lloyd & Co., a corporation, on the endorsement and guaranty on the following promissory note:

“$1500.00 Ottawa, Ohio, July 25, 1902.
“Sixty days аfter date, we, or either of us, promise to pay to the order of George E. Lloyd & Co. fifteen hundred dollars, payable ‍​‌​‌‌​​​​‌‌‌​​​​‌‌‌​‌​​‌​‌‌‌​‌​‌‌‌‌‌‌‌​​​​‌​​​​​‍at the banking house of Matthews & Rice, Ottawa, Ohio. Value received. If not paid at maturity to bear eight per cent interest from maturity.
Columbia Telephone Mane. Co. (Seal.)
By G. M. Risser, Prest. (Seal.)
W. M. Rees, Secy. (Seal.)”

On the back of the note appears the following:

“Payment guaranteed; protest, demand and notice of non-payment waived.
Geo. E. Lloyd & Co.
By E. C. Williams, President.”

To the declaration, which contained two special counts (one on the endorsemеnt and one on the guaranty) and the common counts, appellees pleaded the general issue and a special plea, verified by affidavit, denying the execution of the guaranty. From a judgment for the faсe of the note in the circuit court of Cook county an appeal was prosecuted to the Appellate Court for the First District, where the judgment below was affirmed, and appellant prosecutes a further appeal to this court.

Since the judgment of the Appellate Court settles all the controverted questions of fact adversely ‍​‌​‌‌​​​​‌‌‌​​​​‌‌‌​‌​​‌​‌‌‌​‌​‌‌‌‌‌‌‌​​​​‌​​​​​‍to the contention of the appellant, we need only to consider the questions of law raised.

1. It is contended that even though it be conceded that George E. Lloyd & Co., by E. C. Williams, its president, signed the guaranty, still, as a matter of law, the corporation cannot be held liable without proof of special authority from the corporation to its president to execute the contract of guaranty. A corporation can act only through its agents, and the president of a corporation, as the agent and corporate representative, has the power, in the ordinary course of business and in furtherance of the corporate interests, to execute contracts and to bind "the cоmpany in so doing. He is, by virtue of his office, recognized as the business head of the company, and any contract pertaining to the corporate affairs, within the general powers of such officer, exeсuted by the president on behalf of his corporation, will, in the absence of proof to the contrary, be presumed to have been done by authority of the corporation. (Atwater v. American Exchange Nаt. Bank, 152 Ill. 605; Bank of Minneapolis v. Griffin, 168 id. 314; Anderson v. South Chicago Brewing Co. 173 id. 213; Anderson Transfer Co. v. Fuller, 174 id. 221; Williams v. Harris, 198 id. 501.) If the contract in question had been executed by some agent who ordinarily does not have the power to sign such instruments, and the execution had been put in issue by properly verified plea, as is the case here, then it would be necessary to go beyond the mere fact of the execution of the instrument and prove the authority of the agent to execute the same; but when the contract is properly executed for the corporation by its president and it is such a contract as the corporation might lawfully make, the proof of the execution by the president is all that is required, in the absence of any evidence to the contrary showing that the contract was not made by the authority of the corporation.

In support of its contention that special authority in the president to sign this ‍​‌​‌‌​​​​‌‌‌​​​​‌‌‌​‌​​‌​‌‌‌​‌​‌‌‌‌‌‌‌​​​​‌​​​​​‍guaranty must be shown, the appellant cites and relies upon Dobson v. More, 164 Ill. 110, Park Hotel Co. v. Fourth Nat. Bank, 86 Fed. Rep. 746, National Park Bank v. German American Mutual Warehousing and Security Cо. 116 N. Y. 281, and some other cases of like character. Language can be found in these cases, and perhaps in others, which, when considered alone and disconnected from the facts of the case whеrein it is employed, seems to sustain the contention of appellant that in order to make a contract binding upon a corporation which has been executed by the company through its president, a rеsolution of the board; of directors or a vote of the stockholders, or other special authority, must be shown where the execution of the instrument is put in issue by a verified plea. Upon a careful examination of these cases it will be found that they are / clearly distinguishable from the case at bar, in that the president, in the execution of the contracts, was using the credit of the corporation to serve his own privatе interests or that of some third party. Thus, in Dobson v. More, supra, where the president and 'general manager had express authority “to sign notes, drafts and acceptances in the name of the company, and to make checks upon the company funds in bank for the payment of any proper indebtedness of the company,” and the president, merely to aid another company to raise money, executed in behalf of his company a written guaranty on the note of another corporation, it was held, as against the holder of such note with notice of the facts, that the company could not be held liable on such guarаnty, there being no authority whatever shown for the president to bind the company, as guarantor, for the indebtedness of another. The powers of a president to bind a corporation by contracts are limited to those matters concerning which the charters and by-laws and the statutes of the State authorize it to make contracts. In Park Hotel Co. v. Fourth Nat. Bank, 86 Fed. Rep. 746, where the president discounted a note for his own privаte benefit and endorsed by him in the name of the Park Hotel Company, of which he was president, and payable to hirp-jelf, it was held that the corporation was not liable, and that the bank had notice, by the facе of the note, that the president was exceeding his usual and ordinary powers in making a note to himself, and that in the absence of special authority from the corporation no recovery could be had. Nаtional Park Bank v. Warehousing Co. 116 N. Y. 281, is a case in all essential features like Dobson v. More, supra, and the same rule is applied.

Many other cases are to be found illustrating the doctrine announced in the decisions above referred to, but since this court in Dobson v. More, supra, has reviewed many of these cases and approved them, no necessity exists to discuss them further. The case at bar does not fall within the exceрtion to the general rule recognized in these cases, but since the guaranty sued on was placed on the note of appellant and the note was ‍​‌​‌‌​​​​‌‌‌​​​​‌‌‌​‌​​‌​‌‌‌​‌​‌‌‌‌‌‌‌​​​​‌​​​​​‍discounted for its benefit and the proceeds thereof were remitted to appellant, the plainest principles of justice require that the company should be held bound by the act of its president without any proof of authority beyond that which must be presumed from the fаct that the president in good faith and in the regular course of corporate business, and for the benefit of the corporation, executed the instrument sued on.

2. It is next contended by appellant that the cоurt erred in giving instructions for the appellee. Instruction No. 2 is as follows:

“The court instructs the jury, as a matter of law, that it is immaterial whether the words of special guaranty are stamped or written on the back of a notе above the signature of a guarantor at the time its signature is placed thereon, or afterwards, provided you believe, from the evidence, that the signature was in fact placed there for the purposе of guaranteeing the payment of the note, and the words as stamped or written are in accordance with such purpose.”

The objection pointed out to this instruction is,'that it ignores the question whether the cоntract of guaranty is ultra vires, and that it impliedly tells the jury that parol evidence can be heard to vary or alter an endorsement by the payee of a promissory note. There is no question in this case to which thе doctrine of ultra vires can have any application. This objection needs no further consideration. The second objection is equally frivolous. The instruction says nothing about the admissibility of parol evidencе to alter or vary the terms of a blank endorsement by the payee of a promissory note. If this instruction is to be understood as laying down the law that the holder of a promissory note endorsed in blank by the payee can write out a contract of special guaranty over the signature of the endorser and rely on parol proof to establish that such was the agreement and understanding at the time of the endorsement, then the instruction is erroneous. There is a well defined distinction between the contract of an ehdorser and that of a guarantor of commercial paper. The liability of an unconditional guarantor becomes independent and fixed upon the failure of the principal party to pay the money or perform the act guaranteed, (Holm v. Jamieson, 173 Ill. 295,) while that of an endorser is conditional until the statutory ‍​‌​‌‌​​​​‌‌‌​​​​‌‌‌​‌​​‌​‌‌‌​‌​‌‌‌‌‌‌‌​​​​‌​​​​​‍diligence has been shown. (Bledsoe v. Graves, 4 Scam. 382; Schuttler v. Piatt, 12 Ill. 417; Clayes v. White, 83 id. 540.) In cases of a blank endorsement the owner of the note may fill out the formal assignment at any time before or at the trial; but this rule has never been so extended as to authorizе the holder to write words of a special guaranty above a blank endorsement, thereby changing the contract from one of endorsement to one of guaranty. The instruction under consideration is inartificially drawn, but as applied to the facts in this case we do not think it was misleading. There was some conflict in the testimony as to whether the words above appellant’s signature were placed there before it was signed or afterwards, but the evidence shows that after the signature was placed on the back of the note appellees wrote a letter to appellant, and also sent a telegram, asking if the endorsement on the note was satisfactory. In this correspondence appellees quoted the language of the guaranty, and received a reply from appellant that it was “perfectly satisfactory.” This is an express ratificátion of the guaranty contract, and therefore it was, under the facts of this case, immaterial whether the words constituting the guaranty were on the note at the time of the signing or were placed there afterwards, since the appellant fully ratified the guaranty contract after it had a copy of it. Under these circumstances instruction No. 2 was harmless.

Errors complained of in giving other instructions and in refusing instructions asked by appellant have been carefully considered, and we see no error in any of the rulings of the court for which judgment should be reversed.

The judgment of the Appellate Court is therefore affirmed.

Judgment affirmed.