108 P. 914 | Mont. | 1910
delivered the opinion of the court.
The plaintiff began this action in the district court of Fergus county to recover judgment against the defendant on a certain promissory note for. $1,550, dated June 20, 1907, due four months after date, with interest after maturity at the rate of ten per cent per annum. The defendant answered, admitting the corporate capacity of the plaintiff, and that the latter was the owner and holder of the note. He also admitted the making and delivery of the note, but denied that it was given for a valuable consideration, or for any consideration whatever. By way of affirmative defense he alleged that the note was made at the express instance and request of the plaintiff, without consideration, and for plaintiff’s accommodation. He further pleaded in his answer that at the time the note was made and delivered, it was agreed between him and the plaintiff that he should not be required to pay the note, and that he should not be in any manner liable thereon. As a further affirmative defense he alleged that the note was procured by plaintiff through false and fraudulent representations on the part of plaintiff’s cashier, with intent to deceive and defraud him. This latter defense was abandoned at the trial. The plaintiff by replication denied the new matter set forth in the answer. The cause was tried to the district court of Fergus county sitting with a jury. A verdict was returned in favor of the defendant, and
The note purported to have been made for value received. After the same was introduced in evidence the plaintiff rested. Thereupon the defendant testified, in part, as follows: “This note was made in the bank at Moore, at C. W. Thurston’s bank. Thurston was at that time cashier of the bank. Q. How came you to make this note?” This question was objected to on the ground that any oral contemporaneous agreement would tend to vary and change the tenor of the note, and because it had not been shown that Thurston was acting within the scope of his authority as cashier. The objection was overruled, and the witness continued: “Well, Mr. Thurston asked me to make a note, sign, a note, for $1,500, and I told him that I did not want to sign the note, and he asked me why, and I told him I could not pay the note if I was called upon to do so. He said that the bank would not hold me responsible.- He said that his paper would not—that the bank would not want his paper in there, and that it would not look well to the bank examiner’, and I told him that was the condition under which I would sign it; that the bank would not hold me liable or responsible on the note, and he said the bank would never ask me to pay it, and that he would look after it, and that I never need bother about it. And I signed the note, and he took it and turned it in to the teller. I did not receive any of the proceeds of the note. I was not called upon to pay the note at the time of maturity. It must have been a month after the note matured before anything was said about it. Mr. Thurston was not still cashier of the bank. Mr. Hedrick, the cashier that went in afterward, called upon me to pay the note. It is supposed Thurston got the proceeds of the note. Of course, at that time I didn’t know whether he did or not. What makes me think he did is because it has been shown that he did to my mind. It is through matters subsequently learned that I base my answer that Thurs-ton got the proceeds of the note. Of my own knowledge I
John N. Phillips, a former bookkeeper and teller of the bank, testified: “Mr. Thurston was cashier of the bank until September 3, 1907. When this note went into the bank it took up three of Mr. Thurston’s cash items, aggregating $480.48, which had been running some little time; also two notes carried in the bank by Mr. Thurston, aggregating $423.07. These notes were given to the bank by Thurston, and the proceeds of the Forsyth note, or part of it, took up those two notes. Four drafts issued by the bank on June 20, 1907, through Mr. Thurs-ton, aggregating $51.40, were also paid by Thurston from the proceeds of the note. Part of the other proceeds of this note went to the credit of Mr. Thurston’s account, and he took cash for some of it. Under date of June 20, 1907, Thurston’s account shows a credit of $400. That $400 came from the proceeds of the Forsyth note. The balance was taken in cash. While I was employed in the bank, Mr. Thurston had charge of making the loans; that was principally his work. He made all kinds of loans. He made loans as large as the capital of the bank would stand. I don’t think he consulted any of the directors of the bank. I know positively that on certain loans he did not consult with other directors of the bank. As long as he had charge of the bank he pursued that line of conduct, or making loans of that character and size without consulting the other directors or officers of the bank. He had charge of the promissory notes taken by the bank. In making payments of notes no one was consulted but the cashier. I didn’t consult anyone except Thurston. If he was away I used my own judgment in the matters. The bank had a manager. Mr.
At the close of defendant’s case the plaintiff moved for a directed verdict in its favor. The motion was overruled. Thereupon John C. Hauek, the president of the bank, was called as a witness for the plaintiff. He said: “I was supervisor of the affairs of the bank during the year 1907. Every once in a while we would go over the accounts and cheek them all up, I and Mr. Warr, the cashier of the Bank of Fergus County. We did that for about four months after the bank was started, and then we done it off and on ever since up to the time Thurston left. I went through everything that was in the bank several times in the two years, about five or six times I should judge. That was when Thurston had charge of the bank. I never, as president, authorized Thurston to make any collateral agreements that the paper of the bank should not be, or was not to be, collected. I don’t think we directors had any meetings in the spring and summer of 1907.”
The court also gave to the jury instruction No. 3, as follows:“The court instructs the jury that the burden of proof was on-the plaintiff to show that the note was given upon a valuable-consideration, and that, if that was doubtful upon the whole ■ evidence, plaintiff could not recover; that the admission by the-defendant of the execution of the note and its production in evidence made a prima facie case for the plaintiff upon which the jury might find a verdict for plaintiff, unless the defendant introduced evidence which showed that it was not given for a valuable consideration, or evidence to render it doubtful in. the minds of the jury whether it was given on a valuable consideration, and that if not so given, or if it was doubtful whether it was given for a valuable consideration, the plaintiff could not recover.” Plaintiff objected to this instruction, for-the reason that it placed the burden of proving the considera
“(9) You are instructed that the note sued upon in this case imports a consideration, and the burden of showing a want of consideration sufficient to support a written instrument lies with the party seeking to invalidate it.”
Instruction No. 7 reads as follows: “The court instructs the jury that, if you find from the evidence that the defendant signed the note sued upon in this case as an accommodation maker for the plaintiff, and delivered the note to the plaintiff, or one of its officers for the bank, the defendant cannot be held liable thereon, no matter how the bank may have dealt with the note, so long as it retained ownership and control thereof, and, even though you find that the bank, after the note was delivered to it, gave Thurston the benefit of the whole or a part of it, this fact would not render defendant liable on the note. ’? This instruction was also objected to for several reasons; among others, that it conflicts with instructions 8, 10, and 11, given by the court. These latter instructions read as follows:
“No. 8. If you find from the evidence that the note in question was made, executed, and delivered to the State Bank of Moore by John Forsyth, for the accommodation of Mr. Thurs-ton, and that Thurston received the benefits therefrom, then you must find for the plaintiff.”
“No. 10. The plaintiff in this action is a corporation, and you are instructed that a corporation is bound by the acts of its officers or agents only so far as they act within the scope of their authority. In this action, the burden is upon the defendant to prove by a preponderance of the evidence that in making the oral agreement, if you believe that such oral agreement was made, Thurston, the cashier of the plaintiff, was acting-within the scope of his authority as such cashier, or that such agreement was subsequently ratified by the plaintiff in the action. If the defendant has failed to prove these allegations by
“No. 11. In this action the defendant claims, among other things, that the note sued upon was made for the accommodation of the plaintiff. You are instructed that an accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser without receiving any value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value notwithstanding such, holder, at the time of taking an instrument, knew him to be only an accommodation party.”
We think the foregoing extracts from the instructions fairly illustrate the theory upon which the case was tried, and that the motions and exceptions of counsel for appellant are sufficient to raise the vital questions argued in this court. We shall not analyze the instructions, but will content ourselves with the statement that, assuming that they correctly state the law, the jury failed to follow them. The testimony, however, is practically uncontradieted. There is no conflict in essentials, and, in our judgment, but one inference may be drawn from it. Therefore the cause should not have been submitted to the jury. The court should have directed a verdict for the plaintiff.
1. The first question arising is whether the defense of want of consideration in the note, pleaded and attempted to be interposed by the defendant, was a valid one.
In the ease of Higgins v. Ridgway, 153 N. Y. 130, 47 N. E. 32, the court of appeals, after a review of the New York cases on the subject, held that it was a valid defense to the enforcement of a promissory note against the maker, by the party to whom it was delivered, that the note was without consideration, and was delivered upon the condition that the maker should not be held liable thereon. To the same effect are the rulings of the courts in Breneman v. Furniss, 90 Pa. 186, 35 Am. Rep. 651; Burke v. Dulaney, 153 U. S. 228, 14 Sup. Ct. 816, 38 L. Ed. 698; Benton v. Martin, 52 N. Y. 570; Garfield National Bank v. Colwell, 57 Hun, 169, 10 N. Y. Supp. 864; Simmons v.
In the casé of Tacoma Mill Co. v. Sherwood, 11 Wash. 492, 39 Pac. 977, cited by appellant in opposition to the principle laid down in the foregoing cases, it appeared that there was a consideration for the note in question, and the court said: “The law will not permit the maker of a note, where there is a consideration, to show an oral agreement that he was not to be liable at all on the note.” Appellant also cites the case of Dolson v. De Ganahl, 70 Tex. 620, 8 S. W. 321, but in that ease the court said: “The note fixes the obligation of the appellant to pay, and his pleadings leave open to him only the defense that it was executed without consideration. Evidence tending to support that defense is admissible.” The court then proceeded to show that there was a valid consideration for the note.
The case of Davy v. Kelley, 66 Wis. 452, 29 N. W. 232, is also called to our attention. In that case it was held that evidence of a contemporaneous oral agreement between the parties to a note that it was not to be enforced as between them, is inadmissible. But the opinion of the court, by Mr. Justice Taylor, discloses the fact that it was finally determined that the note in suit was given upon sufficient consideration.
We are of opinion that, in view of the authorities, and in principle, the rule laid down by the New York court of appeals, in Higgins v. Ridgway, supra, is founded in sound reason, and that the court below properly followed the same.
2. Was the bank bound by the representations of its cashier that defendant should not be called upon to pay the note?
The supreme court of the United States, in Martin v. Webb, 110 U. S. 7, 3 Sup. Ct. 482, 28 L. Ed. 49, held that, although a cashier of a bank ordinarily has no power to bind the bank except in the discharge of his customary duties, and although the ordinary business of a bank does not comprehend a contract made by a cashier, without delegation of power from the board of directors, involving the payment of money not loaned
Again, the supreme court of the United States in West St. Louis Savings Bank v. Shawnee County Bank, 95 U. S. 557, 25 L. Ed. 490, said: “Ordinarily the cashier, being the ostensible executive officer of a bank, is presumed to have, in the absence of positive restrictions, all the power necessary for such an officer in the transaction of the legitimate business of banking; * * * but certainly he is not presumed to have power, by
reason of his official position, to bind his bank as an accommodation indorser of his own promissory note. Such a transaction would not be within the scope of his general powers; and one who accepts an indorsement of that character, if a contest arises, must prove actual authority before he can recover. There are no presumptions in favor of such a delegation of power.”
Mr. Thompson in his work on Corporations (volume 2, second edition, section 1532) says: “The principal limitation upon the powers of a cashier is that his acts must be within his ordinary duties. It cannot be assumed that he is authorized to do every act within the powers of the bank. His implied authority is limited to acts done in the usual and ordinary course of business, and cannot be extended to cover unusual and extraordinary transactions. For the transaction of such business, special authority must be conferred upon him by the directors.”
In the case of Bank of the United States v. Dunn, 6 Pet. 51, 8 L. Ed. 316, the defendant offered to prove that the cashier ■and president of the bank gave him to understand that if he indorsed the note in suit, he would incur no risk or responsibility. The court said: “The most decisive objection to the evidence is that the agreement was not made with those persons who have power to bind the bank in such cases. It is not the duty of - the cashier and president to make such contracts, nor have they the power to bind the bank, except in the discharge of their ordinary duties.”
In Bank of the Metropolis v. Jones, 8 Pet. 12, the court said: “It is unnecessary to add in this case,' as was stated by the court in the case of Dunn, that the officers of the bank had no authority, as agents of the bank, to bind it by the assurances which they gave.” In the Jones Case it appeared that the president of the plaintiff bank had assured the indorser, through the maker, that he would incur no responsibility on the note on account of the fact that certain property, which could be subjected to its payment, was very valuable.
In the case of Thompson, as Receiver, v. McKee, 5 Dak. 172, 37 N. W. 367, the facts were these: McKee went to the First National Bank of Sioux Falls to identify one Wolf, and at the request of the cashier wrote his name on the back of a draft, the cashier assuring him that he should not be liable on it, his name being wanted merely to show who identified Wolf. Me
In the case of Claflin v. Farmers’ & Citizens’ Bank, 25 N. Y. 293, it was held that the general authority of the president of a bank to certify cheeks drawn upon it does not extend to cheeks drawn by Mmself.
The supreme judicial court of Massachusetts, in Dedham Institution for Savings v. Slack, 6 Cush. (Mass.) 408, held that the treasurer of an incorporated institution for savings has no authority, as such, and without being specially authorized thereto, to execute a release in the name of the corporation.
In Gallery v. Bank, 41 Mich. 169, 32 Am. Rep. 149, 2 N. W. 193, it was shown that one Irwin was president of the bank and also of a railway company. With other directors of the railway company he made a note to the bank. Evidence was introduced tending to prove that the note was not to be paid by the makers thereof, but only from the assets or funds of the railroad company. It was claimed that Irwin, as president of-the bank, consented to an arrangement by which the debt was assumed by a third person and the makers .released. The court said: “Even had he [Irwin] assumed to act for and represent the bank, being liable as maker and indorser, he could not consent to his own release and that of his comakers and bind the
The testimony shows that the transaction in controversy was an isolated one. The defendant testified that he had previously had no dealings of the kind with Thurston. No question of estoppel is involved. Hauck testified that he, as president, had never authorized the cashier to make the arrangement testified to by the defendant, and there is no evidence that the board of directors did so. We conclude, therefore, that the promise of Thurston was, on its face, beyond the scope of his authority, and that the defendant was chargeable with notice thereof. We hold that the cashier of a bank, by virtue of his office, has no authority to make such an arrangement as that testified to by the defendant, and that whoever accepts such an agreement and acts upon it does so at his peril.
3. But it is contended that the note was in fact given without consideration. If so, this was an available defense against the payee, regardless of whether the cashier had authority to promise that defendant should not be called upon to pay.
The testimony shows conclusively that the plaintiff in fact parted with full consideration for the note, and, to our minds, the evidence of the defendant himself proves that a valid consideration passed, and that he was aware of the fact that certain assets of the bank were to be withdrawn and his note substituted in place thereof at the time he executed and delivered the same. How otherwise can his statement that “the
And there are other reasons why the judgment cannot stand. 'The whole transaction shows on its face that Thurston was in fact acting for himself, and not for the bank, and that the defendant either knew the fact, or should have known it. Thurs-ton was engaged in a palpable attempt to defraud the bank of which he was cashier, and the defendant by his acts made it possible for him to consummate the fraud. In the case of Pauly v. O’Brien (C. C.), 69 Fed. 460, Judge Boss said: “It is said for the defendant that the note sued on was without consideration. Not so, according to the agreed statement of facts, for :it is there stated that it was executed in place of and to take •up the note of Naylor, then represented by the bank officers to be past due and to be secured by collaterals which were believed to be ample to pay it, and which they represented the bank ■wanted to get ‘out of the past-due notes,’ and which together with the collaterals were to stand as collateral to the note éx■ecuted by the defendant upon the execution of which the Naylor note was entered as paid on the books of the bank, and the de.fendant’s note was entered thereon ‘as a discount for its face.’ It thus appeared that the defendant executed his first note, .subsequently renewing it from time to time, and ultimately by the note in suit, for the purpose of having it take the place of the Naylor note, which, together with the collaterals, ‘were to be collateral to the note’ given by him. If, however, this was not really the case, but that, in truth, the transaction was a mere trick to make it appear to the government and to the •creditors and stockholders of the bank that it had a valuable note when in fact it did not have one, the result must be the .same; for, when parties employ legal instruments of an oblig
.In the case of Allen v. First Nat. Bank, 127 Pa. 51, 14 Am. St. Rep. 829, 17 Atl. 886, the facts were these: The bank brought an action to recover the sum of $5,000 alleged to be due on a promissory note. The defendant offered to prove that Beecher, the cashier of the bank, came to him at the postoffice and said that the bank was carrying for his firm of Beecher & Copeland a quantity of oil certificates, in excess of what they were permitted to carry for one firm under the laws of the United States, and that the bank desired to have the oil carried in the name of other parties, so as to make an appearance of compliance with the law, and for that purpose he asked the defendant to become the maker of a note for $5,000, to be secured by 5,000 barrels of oil that the bank was carrying for Beecher & Copeland; and, in compliance with .this request, Allen executed the note without other consideration, and with the express agreement that he should not be held liable thereon. The trial court directed a verdict for the plaintiff bank. On appeal the su
The case of Simmons v. Thompson, 29 App. Div. 559, 51 N. Y. Supp. 1018, is called to our attention by the learned counsel for the respondent. In that case, however, the court held that the vice-president of the Loan and Trust Company who induced the defendant to make the note in suit, by representations that he should not be held liable upon it, was apparently clothed with authority in the premises; the facts show that he was actually engaged in carrying forward a transaction which was beneficial to his principal, and also that the corporation, had ratified his acts. The question of consideration as arising from the detriment to -the trust company which advanced money on the note is not mentioned in the majority opinion, but is quite clearly shown by the dissenting opinion of Mr. Justice Ingra
But it is contended that the knowledge possessed by Thurs-ton is to be imputed to the bank, and therefore the latter had notice that Forsyth received nothing for the note. The correct rule on this subject is, we think, laid down in Innerarity v. Merchants’ Nat. Bank, 139 Mass. 332, 52 Am. Rep. 710, 1 N. E. 282, as follows: “While the knowledge of an agent is ordinarily to be imputed to the principal, it would appear now to be well established that there is an exception to the construction or imputation of notice from the agent to the principal in case of such conduct by the agent as raises a clear presumption that he would not communicate the fact- in controversy, as where the communication of such a fact would necessarily prevent the consummation of a fraudulent scheme which the agent was engaged in perpetrating. * * * A bank * * * can only act through agents, and it is generally true that, if a director who has knowledge of the fraud or illegality of the transaction acts for the bank, as in discounting a note, his act is that of the bank, and it is affected by his knowledge. * * * But this principle can have no application where the director of the bank is the party himself contracting with it. In such case the position he assumes conflicts entirely with the.idea that he represents the interests of the bank. To hold otherwise might sanction gross frauds, by imputing to the bank a knowledge those properly representing it could not have possessed.” (See, also, State Savings Bank of Ionia v. Montgomery, 126 Mich. 327, 85 N. W. 879.)
In the case at bar we have only to consider the effect of the testimony to determine that the defendant is not in a position to dispute his liability on this note. It would be a most dangerous holding if we should decide, upon the facts disclosed by
The order and judgment appealed from are reversed, and the-cause is remanded to the district court of Fergus county, with directions to enter judgment in favor of the plaintiff as prayed, for.
Reversed and remanded.