President of the Peninsular Bank v. Hanmer

14 Mich. 208 | Mich. | 1866

Cooley J.

The action was brought by Hanmer in the Court below upon a contract executed in the name of the bank by Brown, its cashier, to indemnify Hanmer against a certain mortgage made by Nathaniel P. Jacobs and wife to Charles Seymour. The contract is under the corporate seal, but it is claimed by the bank that it was entered into without authority, inasmuch as there was no action of the directors authorizing it, and the ■by-laws required all contracts to be signed by the president. On the other hand Hanmer produced evidence that for a considerable period before and after the giving of this paper, the whole management of the bank was virtually in the hands of Brown; the directors seldom or never meeting unless to declare dividends, and very little attention being paid to the rules prescribed by the by-laws for the transaction of business. The case comes before us on exceptions, and the assignments of error relate mainly to the admission of evidence tending to show such a course of business on the part of the bank as should make this contract binding upon it, and to the rulings of the Circuit Judge thereon.

In order to judge of the importance of this testimony and the rulings, it is necessary to look at the transaction out of which this contract of indemnity grew. The date of the instrument was September 15, 1857. Brown’s testimony was taken in the ease, and he testified as follows: “ There was great financial trouble here then. The bank owed Hanmer over $5,000; he told me he did not want the money, but wanted to be sure it was secure. I told him I thought I could negotiate a loan, by which the bank would be benefitted, and place his money where it would be secure. Jacobs owed the bank; on my insisting that he should reduce his debt to the bank, he agreed to mortgage his house on Fort street; I then made the negotiation; Jacobs assuring me that the property was unincumbered except a conditional mortgage to secure the payment of the purchase money of property at the comer of Jefferson Avenue and Wayne street, bought of Seymour and Martin: subsequently he brought me a discharge of the mortgage. After the mortgage to Hanmer had been made out, an abstract of title to Jacobs was procured, showing one or two mortgages on it. I then told Hanmer the facts as Jacobs had stated them to me, -and told him there could be no difficulty as Jacobs had performed his contract with Seymour. Hanmer was not satisfied. I referred Mm to Mr. Duffield, and told him that the Bank would indemnify Mm against the Seymour mortgage. Mr. Duffield prepared the indemnity bond, and I signed and executed it. Hanmer paid the money to the bank, and the bank gave Jacobs credit to that amount on its books, and so reduced his indebtedness.”

It will be seen from this evidence that the transaction resulting in this contract, was one originated and managed by Brown, not primarily for the benefit of either Jacobs or Hanmer, but of the bank itself. The bank held $5,000 of Hanmer’s money, which was liable to be drawn out at any time, but which the bank officers were anxious to retain. At the same time they were desirous of obtaining either payment or security from Jacobs. Through Brown’s management the two operations of obtaining ready money on the debt of Jacobs, and paying their own debt to Hanmer in long paper, were combined in one, by taking the security from Jacobs to Hanmer, instead of having it made to the bank and then assigned to Hanmer. Jacobs and Hanmer did not deal with each other at all in the transaction, but both with the bank ; and the mortgage which Jacobs gave was really given to secure his debt to the bank, and was only made to Hanmer because, under the arrangement made by Brown, the bank was to pay a debt of equal amount with it. We are unable to perceive that this case stands on any different footing than if Brown had first obtained securities from Jacobs to the bank, and then transferred them to Hanmer in satisfaction of his deposits.

We have then to see whether a guaranty, given by the cashier in the name of the bank, on turning out its assets in satisfaction of a demand against the bank, is binding upon the corporation under the circumstances appearing here. The extent of the general powers of the cashier of a bank'is a question of law. — Farmers' and Mechanics' Bank v. Troy City Bank, 1 Doug. Mich. 451. In the absence of proof to the contrary, he will be presumed to have authority to turn out the notes and assets of the bank in payment of its indebtedness. — Kimball v. Cleveland, 4 Mich. 606. There is nothing-in the by-laws put in evidence in this case which can fairly be held restrictive of this power. But no such payment can be held to be an absolute discharge of the original indebtedness unless agreed to be accepted as such; and the question here is not so much whether Brown had authority to give the contract of indemnity, as whether Hanmer assented to receive the mortgage in payment, without an indemnity. If he did not, — as is clear in this case, — then this indemnity contract is either valid and available to Hanmer, or Ms original demand against the bank is still due Mm, subject only to a deduction of what he has made from the Jacobs mortgage. Admitting the- contract by Brown to be in excess of Ms authority, the bank could only affirm or rescind it in toto ; it was not in its power to rescind it so far as it imposed an obligation upon the bank, and affirm the transaction so far as it operated to its advantage.

The bank has never repudiated the authority of Brown to enter into this contract; all that has been done has been in affirmance of it. The bank defended Hanmer in the suit brought to foreclose the Seymour mortgage, and after decree against him, removed the case to the Supreme Court. A disaffirmance now, after Hanmer’s money, obtained by means of it, has been retained for a period sufficiently long for the statute of limitations to run against his demand, could not be justified on any legal principle.

It does not become necessary to consider in this case whether the general power of the cashier to apply the assets of the bank in payment of its indebtedness, would include also a power to guarantee their collection or availability. The contract actually given in this case must be held to be affirmed by the subsequent acquiescence of the corporation, and to be now binding upon it.—Episcopal Charitable Society v. Episcopal Church, 1 Pick. 372; Hayward v. Pilgrim Society, 21 Id. 270; Randall v. Van Vechten, 19 Johns. 60.

In our view there is no error in the record of which .the bank can complain, and the judgment must be affirmed, with costs.

The other Justices concurred.