140 Ky. 133 | Ky. Ct. App. | 1910
Opinion of the Court by
Reversing.
On September 29,1903, H. K. Cole, desiring to borrow $2.250 from the National Deposit Bank of Owensboro, Kentucky, executed a note for that sum payable in four months to the order of James H. Parrish, which was endorsed by Parrish and discounted by the hank. The note
There is no contradiction in' the evidence as to the facts, and so the first question arising in the case is: Was the Realty-Company responsible to the bank on a note- made by Cole himself, payable to Ms own order, which he negotiated to the bank in payment of his own debt, when in fact the Realty Company owed him nothing?
In Claflin v. Farmers Bank, 25 N. Y. 293, Houghton, the president of the bank who had authority to certify checks, certified a check drawn by himself which passed into the hands of a bank who claimed to be a bona fide holder without notice. Denying this contention, the court said: ‘ ‘ The difficulty in the way of this conclusion, however, is that the want of authority in Mr. Houghton to bind the' ’bank,'appeared upon the face of the «heck. There could be no bona fide holder of such an instrument. * * The double relation in which Mr. Houghton stood alóne, rendered it void, and of this the plaintiffs were apprised by the check. ’ ’
A recovery was refused. In Stainback v. Bank of Virginia, 11 Grat. 269, the agent who had authority to
In New York Iron Mine v. First National Bank of Negaunee, 39 Mich. 644, an agent having authority to make bills for bis principal, made a note in tbe name of bis principal, payable to himself, and negotiated it to tbe bank to pay bis own debt. The court held that the fact that on the face of tbe paper he appeared to be acting in two capacities, one of which might be antagonistic to tbe other, imposed upon the party taking tbe paper the obligation of special care in inquiring into his authority. In Park Hotel Co. v. Fourth National Bank of St. Louis, 30 C. C. A., 409, tbe president of a corporation made a note in the name of tbe corporation to himself and discounted it to tbe bank on bis own account. Judge San-born, speaking for tbe court and refusing a recovery, said:
“General authority to conduct the business and to issue the promissory notes of a corporation is authority to do those acts for corporate purposes, and in the interest of the corporation only. It does not include the power to do them for the exclusive benefit of others, to the detriment of the corporation. And while a promissory note, made by an agent or officer having such authority, in the usual form, and taken by a stranger -in the ordinary course of business, carries with it the presumption that it was issued for corporate purposes, and under lawful authority, a note issued by such an agent, payable to himself, is accompanied by no such presumption, but is itself notice that it is without the scope of his general power, and that lit does not bind his principal, unless its execution was specially authorized by the corporation, through its directors or officers, other than the agent to whom it is payable. Such a note is a danger signal, which the discounter or purchaser disregards at his peril. It is notice to him that, if it is contested, he cannct recover upon it, under any general an • thority in the agent or at all, unless he proves that the agent was specially authorized to make that particular
: Onr own opinions are to the same effect. In Chemical National-Bank v. Wagner, 93 Ivy. 528, the president.of the corporation issued the.notes of a corporation for his own personal benefit, the notes showing upon their face that they were issued by. the payee as agent of the corporation. It was held that the notes were prima facie void at the option of .the corporation. The court said: “Now the notes bear upon their, face the conclusive evidence of the ■fact.that they, were issued by Mr.,-Matthews, as agent, to hinisélf.as principal,.which was notice of itself to -the appellants that the notes were void at the instance of the company, which destroyed their immunity as innocent purchasers, and consequently they, could not ■ recover thereon unless -they could show that the company, by its superior officer, authorized so to do, or its board of directors, with like authority, authorized Mr. Matthews to thus issue the notes.”
■:.-Tke rule thus announced was followed in Trapp v. Fidelity National Bank, 101 Ky. 485, and in Mathis v. Bank of Taylorsville, 32 R. 200. In the latter case a farmer had given his son a power of attorney authorizing him to transact his business and to make notes and draw cheeks. The son fell in debt to the bank and thereupon executed to the bank a note in the name of his father to cover the indebtedness. It was held that in so far as the .-note represented the indebtedness of the son there could be no recovery by the bank. So here, while Cole as president-of the Realty Company may have had authority to "make notes in the transaction of the company’s business, he had no authority to execute the company’s note to himself- to be used in paying his own debt to the bank, and when the bank accepted the note so executed the facts appearing on the face of the paper were sufficient .to put it on 'inquiry, and it is not therefore a bona fide purchaser without notice.
But it is insisted for the bank that the Kenyon Realty Company had only three directors, James II. Parrish, Cole and Mrs. Jesse M. Parrish, and that a majority of the directors, Cole and James II. Parrish, were cognizant of the transaction and consented to it. But Cole and James H. Parrish were both bound for the debt. They had no authority as directors to use the funds of the company to pay their own debt, and if all of the directors had
The rule is that a ratification of a voidable contract by the party having the power to disaffirm does not bind him unless made with full knowledge of the circumstances. (10 Cyc. 1079.) Estoppels are not favored, and they are not sustained unless the party sought to be es-topped knew the facts, and with this knowledge misled the other party to his prejudice. It is very evident from the testimony of Mrs. Parrish that she knew nothing about this transaction except the fact that the bank held a note.' : There is nothing to show that she knew that the note had been given by Cole to himself in the name of the company to pay his own personal debt to the bank. She did nothing to mislead the bank and the bank knew that
Judgment reversed and cause remanded for further proceedings consistent herewith.