99 N.Y.S. 98 | N.Y. App. Div. | 1906
Lead Opinion
The action is upon two promissory notes purporting to have been " made by the defendant. Each note is for $2,500, bears date the : 31st day of March, 1903, was written, with the exception of the day ' of the month in the date and the words “ with" interest,” -by Thomas Cochran, Jr., who was the treasurer of the company :and was signed by him, “ Ardsley Hall Co. by Thomas Cochran, Jr., Treas.,” was made payable to his order as treasurer four months after date and ; was indorsed by him as treasurer. The defendant denied the making of the notes and alleged as defenses that they were hot signed •: or executed according to the by-laws or- authorized, and that if never received any of the proceeds thereof;
The defendant corporation owned and conducted ah apartment--' house in the city of Mew Yoi’lt, and in the month of March, 1903,’-
On the 20th day of April, 1903, which was before maturity, the . plaintiff received the notes inclosed with a letter written by Kohler from Baltimore on the stationery of the trust company, which letter related to other business between the plaintiff and the trust company and requested that it discount the notes, stating in the body of the letter that he, Kohler, was going to charge the notes to plain-' tiff’s account, and that if it was not all right he would take them up when he returned from Hew York; but in a sentence at the end of the letter he said he would not charge them to plaintiff’s account, and requested it to §end a draft to him for them if it was all right. The plaintiff immediately discounted' the notes and' forwarded a draft-on the trust company, addressed to Kohler at the office of the . trust- company, but payable to him individually. The draft was paid the next day. Kohler received the money, but it does" not appear what he did with it. The plaintiff’s cashier says -that. ordinarily drafts were drawn payable to Kohler in his official capacity with the trust company, but that this one was drawn payable to him individually because he inferred from the letter that Kohler desired it so drawn. The plaintiff knew that Kohler was -president of the defendant; but counsel for defendant showed by the cross-examination of the cashier of the plaintiff, who dis
The trust company suspended business about the 6th of June, 1903; Kohler’s accounts with it were involved. ' He • disappeared about the time of the failure of the trust company and his testimony was not obtained on the trial of the action. ' The treasurer' of the defendant testified, without objection, that he' was informed by Kohler on or about April 12, 1903, that the notes had not been negotiated, and a few days prior to the time that Kohler disappeared he received back from- him a $10,000 note which had been delivered to Kohler at the same time and for the same purpose as the two notes in question, but which had not been negotiated-, and that Kohler then informed him in reply to a demand for the return of the tWo notes in question that he had “ given it to the Miners & Merchants’ Bank.” The foregoing seems to be the only e’xpress evidence on the question as to whether the notes had been first discounted by the trust company. Counsel for-the appellant states in his points that they were first negotiated with the trust company and by it transferred to the plaintiff, and •counsel, for respondent seems to deem it immaterial. It is, therefore, not necessary to consider the sufficiency or the éfféct ofithe evidence on that point.
The defendant showed that it never received any of the proceeds of the discount of the notes,' and that the issuance thereof was not authorized by the board of directors. The appellant, in its first point, contends, that it was error to receive the; notes, in evidence
Section 2. The President shall preside at all meetings . of the Board of Directors, and shall act as temporary chairman at and call to order all meetings of the stockholders; he shall-sign certificates of stock, sign and execute all contracts in the name of the company, when authorized so to do by the Board of Directors; countersign all checks drawn by the treasurer; appoint and discharge agents and employees, subject to the approval of tlie Board of Directors, and he shall have the general management of the affairs of the corporation and perform all the duties incidental to his office. * * *.
“ Section 4. The treasurer shall have the earn and custody of' all the funds and securities of the corporation and deposit same in the name of the corporation in such bank or banks as the directors may elect; he shall sign all checks, drafts, notes and. ordérs for the payment of money which shall be countersigned by the president.”
While it does not appear that Cochran, as treasurer, had ever made notes for the purpose of negotiating a loan without the countersignature of the president or vice-president and authority from the board of directors, it does appear that-he'had made notes, not authorized by resolution of the board of directors, seven or eight in number, for the payment of the company’s bills. Sometimes the payment of interest on coupons was authorized by resolution of the board of directors, and sometimes payment was made without such authorization. A sale of second mortgage bonds to Kohler was made without authority of the board of directors, and it also appeared that Cochran, as treasurer, was in the habit of indorsing defendant’s-■checks and drafts for' deposit in the - trust company without any - formal authority. The notes were entered on the books of the defendant and its vice-president had notice thereof, but it does not appear how soon after their execution.
.At the close of the evidence both sides moved for a direction of a verdict. This submitted the question of fact tó the court for determination. The verdict having been directed in favor of the plain
The evidence was clearly insufficient to justify or .sustain a finding- that the defendant held its treasurer out as authorized to make promissory notes, or its president to negotiate notes so made or that it ratified the acts of the treasurer in issuing or of the president in negotiating this note. There was no course of dealing or " holding out these officers as authorized by which the defendant could be "held liable on the theory of implied authority or on the theory of estoppel. It is doubtful whether the by-laws conferred authority on the treasurer, to issue promissory notes of the company, even when countersigned by the president, with action of-the board of directors; but that point need not be decided for it is quite clear that, in any event, it only authorized the issuance of its promissory notes when signed by the treasurer and countersigned by the president. There seems to be a distinction between actions on promissory notes of business and religious. corporations with respect to what evidence is sufficient to establish a prima facie case that the paper was issued by authority of the defendant. (People's Bank v. St. Anthony's R. C. Church, 109 N. Y. 512; Karsch v. Pottier & Stymus Mfg., etc., Co., 82 App. Div. 230.) The weight of authority, however, in this jurisdiction is to the effect that a recovery cannot be had against either a religious or a business corporation on com? mercial paper unless the evidence taken as a whole shows' or warrants a finding not only that the paper was issued by officers of the corporation, but that its issuance was authorized by the by-laws, or by a resolution of the board of directors, or- by a course of dealing by which the corporation held them, out as authorized to issue it and would be deemed estopped from questioning their authority or of ratification by the acceptance and retention of some benefit or advantage from the unauthorized act or otherwise. (Dabney v. Stevens, 2 Sweeny, 415, 425; affd. on this point, 46 N. Y. 681 ; People's Bank v. St. Anthony's R. C. Church, supra ; Bangs v. National Macaroni Co., 15 App. Div. 522; National Bank of Newport v. Snyder Mfg. Co., 107 id. 95 ; National Bank v. Navassa Phos
O’Brien, P. J., dissented.
Concurrence Opinion
I concur in a reversal of this judgment, but on the ground only that error was committed in permitting the plaintiff to read the deposition taken before trial of the witness Cochran. This witness was produced and sworn On the trial and his whole deposition pre
.. . I dissent, however, from the conclusions. reached by Mr. Justice Laughlin in liis opinion. '
It seems to me that plaintiff showed 'good title to the- notes in controversy and that defendant is bound by the acts of its treasured arid president in issuing them.
The plaintiff paid f ulb value- before maturity and had. no notice - of. actual or intended diversion of proceeds or of any infirmity in their execution unless the form itself of the notes gave such notice. . I do not think it did.
The defendant was engaged in business in the prosecution of which it gave,notes for indebtedness.incurred and for the- purpose" of obtaining cash, and .it is not disputed that conjointly the president and treasurer could-have-given binding notes. Kohler was its president. with, the power of “ general management of the;affairs of the corporation.” Cochran was the treasurer, and the by-laws of the defendant, in addition to enumerating as liis duties that, he should have the care and custody of the funds and .books- of the corporation, provided.that he should “sign all checks,, drafts,- notes and orders for the payment of money which shall be countersigned by Ihe president and he shall pay out. and dispose of the same under the .direction of the president.” The treasurer signed the .notes in question and delivered them to the president to be negotiated for the benefit of the defendant. The president did not countersign them but he procured them to be discounted by plaintiff in due course of business. Under the president’s general authority to manage the affairs of the defendant it can hardly be said ho had no authority to give notes-of - the defendant in its business or to negotiate one .given therein by its treasurer. ' .
The by-laws of defendant do not prescribe the form of any note to be given. In enumerating the duties of the treasurer he is required to sign all. notes, drafts, and checks which have been
In the regular performance of the duties which are enumerated by the by-laws the first step would be the making of the note and the signing by the treasurer, and then it naturally would be countersigned by the president. A treasurer of a corporation is its fiscal officer, and, prima facie, checks, drafts and notes issued in the. business of the corporation, signed by him as such, officer, are the obligations of the corporation, for they are acts which such an officer would ordinarily perform. The by-laws do not prohibit the giving of a note signed by the treasurer alone or by the president alone. They only prescribe that the treasurer shall sign if the president countersigns. Indeed, the defendant in course of business had issued and presumably ratified and paid several notes signed by the treasurer alone. This was sufficient evidence, of course, of dealing to authorize the direction of a verdict for plaintiff. If the president had power to give a note in his management of the defendant corporation he had power to negotiate one given by the treasurer. This he did. The fact that the draft of $5,000 was made payable to him individually instead of as president of defendant (or as treasurer of the trust company if the notes were purchased from it) did not destroy the hona fides of the plaintiff. If currency had been given on the discounting of the notes it necessarily would have been delivered to him as an. individual, and as an individual he had authority to receive it. Hor does the fact- that the president diverted the proceeds of the discount affect, the plaintiff’s position, for it was without notice or any means of knowing that the president would not act honestly towards his corporation.
Except for the error in reading the deposition I should, therefore, vote for an affirmance of the judgment.
Dissenting Opinion
Upon the question of the defendant’s liability upon the notes I concur with Mr. Justice Houghton.
Upon the additional question as to whether it was error to admit the deposition of the officer of the corporation, I dissent from the views of the majority of the court. It will .be noticed by reference
I think, under the construction to be given to these sections of the Code, that where, as here, what was sought and obtained was an examination of the-defendant —which could only be obtained by examining its officers.— when an examination is so taken it becomes the examination of the corporation, and is the equivalent of the examination of a party not a corporation for the purpose of reading the same upon the trial, of the action. I, therefore, dissent.
Judgment and order reversed, new trial ordered, costs to appellant to abide event. Order filed.
Concurrence Opinion
I voteifór a reversal of this judgment upon the ground .that the court erred in permitting the deposition- of Thomas Cochran, Jr., to be read. Section 870 of the.Code of Civil Procedure provides for taking the deposition of a party to an action, and section 871 of a person not a party. Subdivision 7 of section 872 provides that if the party sought to be examined is a corporation, the affidavit shall state the name of the officer or director thereof, and the order to be made in respect thereto shall direct the examination of such .person, etc. Section 882 provides that “ such a deposition, except that of a party taken-at the instance of an adverse party or a deposition taken in pursuance of a stipulation as prescribed in this article,
, Cochran was present and examined as a witness at the trial, and when the plaintiff proposed to read his deposition, objection was taken upon that ground. The objection was overruled and the deposition received upon the ground that he was a party to the action. The ruling was erroneous. The deposition should have been excluded. Except for this error I should vote to affirm the judgment.
Patterson, J., concurred.
Code Civ. Proc. chap. 9, tit. 3, art. ,1.— [Rep.
