69 So. 508 | Ala. | 1915
This is the second appeal in this case. See report of former appeal, 185 Ala. 249, 64 South. 561, for a statement of the issues, facts, and law of the case on that appeal. The issues and facts shown by the record of this appeal are, to some extent, the same as'on the former appeal, .and some questions of law are raised again on this appeal. As to these questions, we see no reason to change, on this appeal, the rulings announced on the original appeal, as we still deem them correct.
The action was on 33 promissory notes, payable to L. B. Williamson, aggregating, with interest, more than $10,000. The notes appear to have been executed at the same time, and to mature at different dates, the first on June 14, 1911, and the last September 30, 1911, each payable four months after date. It is averred that each of said notes was dated at Louisville, Ky., being negotiable and payable at the Commercial Bank & Trust Company, that each bore interest from date of execution at the rate of 6 per cent, and that each of said notes was past due and unpaid, and was the property of the plaintiff, having by the payee therein been indorsed in blank, and the plaintiff having become the purchaser of each of them in due course for value received and before maturity. The recitals of the record as to the issue or issues upon which the trial was had are as follows: “The plaintiff, with leave of the court, amends his complaint, and then demurs to pleas numbered 7, 8, 9, 10, 12, 13, 14, and 15, and-said demurrer being understood by the court, it is considered by the court, and it is the judgment of the court, that said demurrers be sustained as to pleas numbered 7, 8, 9, 10, 12, 13, and 14, and overruled as to No. 15, and there
The record shows that five special replications were filed to this plea, but no general one. There appears in the record a demurrer to these replications, but it does not appear to have been filed, and there appears to have been no ruling thereon; hence it cannot be considered on the appeal.
“(4) Said plea fails to set out any duty on the part of the plaintiff to apply said alleged funds to these particular notes.
“(5) Said plea does not sIioav the state of the account of Williamson with plaintiff as to' debits and credits at any particular time.
“(6) The defendant, under the pleading, was and is the party primarily liable under the Negotiable Instruments Law.
“(7) Said plea shows that said alleged deposit and withdrawal was as to defendant res inter alios acta.”
We do not think this plea was subject to any of the grounds of demurrer assigned, and our statute limits us to a consideration of those only which are assigned. We do not mean to say, however, that it is or is not subject to successful attack on any ground. The plea showed that the defendant was not the principal debt- or, but signed each of the notes for the accommodation of the payee; that the plaintiff, at the time of the execution of the notes and before it acquired the notes, had knowledge of the fact that this defendant maker was not a principal, but that he signed the notes for the accommodation of the payee; that after these notes were due, and should have been paid by the principal, the principal had on deposit in that bank money sufficient to pay the notes; and that the plaintiff bank failed to so apply the deposit to the payment of the notes past due. The reasoning applicable to the facts stated in this plea, is thus stated by Mr. Morse in his book on
This was approved by the Kentucky court in the case of Pursiful v. Pineville Banking Co., 97 Ky. 154, 30 S. W. 203, 53 Am. St. Rep. 409, and by the Indiana court in the case of Bank v. Hill. 76 Ind. 223, 40 Am. Rep. 239. A note to the report of the Kentucky Case, 53 Am. St. Rep. 414, thus sums up the holdings of other cases: “When a bank is a bona fide holder of a note at its maturity, and also holds funds of the maker, it is bound to consider the interests of the indorsers or sureties, and to apply such funds to the payment of the note. If it allows the maker to withdraw his funds after protest, causing the indorsers to lose thereby it is liable to them. — Mechanics’, etc., Bank v. Seitz, 150 Pa. 632 [24 Atl. 356], 30 Am. St. Rep. 853, and note. A bank, holding a depositor’s note past due, is entitled to set it off against the amount due him upon his deposit' account, and is therefore under no obligation to pay his check drawn against such account, if it is exhausted before the check is presented by charging against it the amount of such note. — Bank v. Windishchmulhauser Brewing Co., 50 Ohio St. 151 [33 N. E. 1054], 40 Am. St. Rep. 660, and note. See, also-, the extended note to National Bank v. Smith (N. J.) 23 Am. Rep. 50.
“In an action by a bank against sureties on a promissory note discounted by it, it is no defense that before maturity the principal directed the bank to pay
That a bank may so apply deposits has been decided by this court. In the case of Wynn, Adm’r, v. Tallapoosa County Bank, 168 Ala. 489, 53 South. 228, it is said: “As to a general deposit the bank has a right to set-off as for the balance of the general account of the depositor, and of course so long as that balance is in favor of the depositor the lien or right has neither existence nor validity; but the moment any advance or loan by the bank is made to the depositor — in the form of an overdraft, a discount, acceptance, etc. — then the lien Or right is born, and may be applied by the bank (and the bank only) to the payment of such indebtedness till it is fully discharged. — Morse on Banks and Banking, §§ 324, 334; Lehman’s Case, 64 Ala. 567; Dean v. Allen, 8 John. (N. Y.) 390.”
This court has also decided that the failure of the bank to so apply the deposit discharges the surety. In the case of White v. Life Association, etc., 63 Ala. 430, 35 Am. Rep. 45, it is said: “In McDowell v. Bank, 1 Har. (Del.) 369, the creditor, a bank, had on general deposit moneys of the principal, sufficient to pay the debt, but permitted the principal, from time to time, after maturity of the debt, to withdraw them by checks, and the surety was held discharged. The same principle is recognized in Dawson v. Real Estate Bank, 5 Ark. 296-299. The cases of Martin v. Merchants’ Bank,
This alleged conspiracy between Jones, the president, and Williamson, the payee of the notes, was attempted to be shown by proof of conversations between the two, and by declarations of each, and by the circumstance that checks from Williamson to Jones for large amounts passed through the bank each month for a long while. The defendant, appellant here, objected to the introduction of each and all of these circumstances and facts, and excepted to the action of the court in admitting such proof of each of such circumstances or facts to go to the jury.
We are of the opinion that the trial court was in error in these rulings. If it had been shown, or if there was any evidence from which it could be inferred, that this defendant had any knowledge or notice of this
How is a corporation to be charged with notice or knowledge of extrinsic facts, except through its agents or officers? If the agent or officer who has. the notice or knowledge of the extrinsic fact is the sole person or agency by which the corporation is represented in the matter, this notice to or knowledge of such agent or officer must of necessity be notice to or knowledge of the corporation, or it cannot have such notice or knowledge, or even be chargeable therewith. Consequently it is the settled law that corporations are chargeable with notice or knowledge acquired by their sole agent and representative in a given transaction in which such agent represents the corporation, although he may also have an individual or personal interest in the transaction, and he thereby promotes this personal interest. This forms a limitation upon, or qualification of, the exception to the rule that a corporation is not chargeable with, or bound by, notice to or knowl
The trial court evidently attempted to follow the long-list of cases which form an exception to the general rule that the corporation is not so chargeable with knowledge of its agents or officers, if the agent or officer has an individual interest in the matter adverse to
There is, however, a well-recognized exception to this general rule of the liability of the principal as fotr knowledge or notice reaching the agent, while acting within the line and scope of his authority. That exception is that the principal is not so chargeable with such notice of the agent when the latter is engaged in committing an independent fraudulent act, and the act or knowledge to be imputed relates to this fraudulent transaction. — 1 Am. & Eng; Ency. Law (2d Ed.) p. 1145, and authorities there cited. Mr. Pomeroy doubts whether this exception applies to the managing officers of a corporation. — 2 Pom. Eq. Jur. (3 Ed.) § 675, note 1. Some courts have declined to share this doubt with Mr. Pomeroy. See Brookhouse’s Case, 73 N. H. 368, 62 Atl. 219, 2 L. R. A. (N. S.) 993, 999, 111 Am.
The latest case we find on the subject is Bank v. Burns, 88 Ohio St. 434, 103 N. E. 93, 49 L. R. A. (N. S.) 764. In the opinion in this case, which was a suit by a bank against the maker of a note, and in which the defense was the fraud of the president of the bank in regard to the note (as in this case) and the fact that he was adversely interested in the matter, and the sole question was the exact question here under consideration, it is decided that: “A corporation can act only through its oficers and agents, and the knowledge of
“Where the officer is acting both for himself as an individual and as manager of a banking corporation in the purchase of a note from himself by the bank, and his action in that behalf is adopted and ratified by the bank, the manager’s knowledge as a man is equally his knowledge as manager of the bank. He cannot unknow as manager what he knows as man. To hold otherwise would be to promote fraud rather than prevent it.”
The indicated authorities were then quoted as follows : “Mechem, in his excellent work on Agency, lays down the rule in the following, apt and accurate language : ‘It is a general rule, settled by an unbroken current of authority, that notice to an agent while acting within the scope of his authority, and- in reference to a matter over .which his authoidty extends, is notice to the principal. In respect to this rule two important elements will be noticed. The first of these is that the notice or knowledge which will affect the principal is that only which is possessed by the agent while he is agent, and while he is acting within the scope of his authority. * * * The second element is that the notice or knowledge which shall be imputed to the principal is that only which relates to the subject-matter of that agent’s authority, or, in other words, is that only which relates to the business or transaction in reference to which that agent is authorized to act by and for the principal. Two general theories prevail as to the foundation upon which this rule is based, and the re-
“It is well. settled that an officer or agent dealing with a corporation or his principal on his own account, is not presumed to communicate knowledge which it would be to his interest to conceal, and the corporation or principal is not chargeable with such knowledge. But there is no room for the application of this principle where the agent is the sole representative of both parties in the transaction. If Cornish was the sole representative of the bank in the tranasction with himself, there was no one from whom information could have been concealed, or to whom it could have been communicated. If he was the sole representative of each party, each must have had equal knowledge.”— First Nat. Bank v. Blake (C. C.) 60 Fed. 79, 49 L. R. A. (N. S.) 770.
See our case of Bank v. Allen, 100 Ala. 476, 483, 14 South. 335, 27 L. R. A. 426, 46 Am. St. Rep. 805.
“To the same effect is Brobston v. Penniman, 97 Ga. 527, 25 S. E. 350. The latter case is distinguished in English-American Loan & T. Co. v. Heirs, 112 Ga. 823, 38 S. E. 103.” — 49 L. R. A. (N. S.) 770.
To hold otherwise would open wide the door to all kinds of fraud; and the more atrocious and aggravated the fraud, the less would be the likelihood of fixing the
It therefore follows that the trial court erred in parts of its oral charge to which exceptions were reserved, raising the above question, and in giving the charge requested by plaintiff, as follows: “If the jury believe from the evidence that Sam Jones, at the time of the alleged conversation at the bank between Tatum and Williamson, was interested personally in the transaction adversely to the plaintiff bank, then no notice can be imputed to plaintiff, and the jury must find for the plaintiff.”
There was also error in refusing some of the defendant’s requested charges, which asserted the converse of the one given for the plaintiff.
Most all other questions of importance to this appeal were settled on the former appeal.
Ppr these errors, the judgment is reversed, and the cause is remanded.
The judgment being reversed on the main appeal, consideration of the cross-appeal is not necessary, and cross-appellant can take nothing by reason of the cross-appeal.