Wayne Title & Trust Co. v. Schuylkill Electric Railway Co.

191 Pa. 90 | Pa. | 1899

Opinion by

Mb. Justice Dean,

The plaintiff brought suit against defendant on a check of which this is a copy:

“Pottsville, Pa., Sept. 11,1895.

“ The Government National Bank of Pottsville, Pa.,

“ Pay to W. W. Hess or order Fifty-three hundred dollars. $5,300. Schuylkill Eleotbic Railway Co.,

“ W. A. Babbett, Jb.,

“ Treasurer.”

This check was by Hess indorsed over to James Goodwin, who indorsed it to “ The Wayne Title and Trust Company,” the plaintiff. On the same day Goodwin checked out the full amount. When presented for payment, the Pottsville bank refused to honor it, and it was duly protested. Thereupon, plaintiff, the holder, brought suit against defendant, the drawer. On the day of the protest, Goodwin, being informed of that fact, deposited in the Corn Exchange National Bank of Philadelphia, the sum of $5,300, instructing it to forward the amount to the Pottsville bank to be applied in payment of the check. On the same day the Corn Exchange bank telegraphed the Pottsville bank that $5,300 had been deposited to the credit of the drawer, “ The Schuylkill Electric Railway Company.” Also on the same day, C. H. Barrett, a director, and one of the active managers of the railway company, telegraphed Iioelman, the bookkeeper of the company, that the money had been deposited for payment of the protested check, and a credit for that amount was thereupon entered by the bookkeeper upon the cash book of the railway company. The next day, on receiving notice by letter from the Corn Exchange bank of the deposit, the Pottsville bank credited the railway company on its books with the $5,300, and at request of C. H. Barrett, director, the credit was duly entered on the bank book of the railway company. But the latter refused to have the check paid. At the trial, its defense was based on the absence of authority in the treasurer to draw the check without a formal order of the board of directors. A by-law of the company declared that the treasurer should not pay out money except by the authority of the board, and that all orders should be signed by the secretary and president, or in the absence of the president, by the vice president; the check had been delivered to C. H. Barrett, director, in payment, as was averred by plaintiff, of a debt due him from the railway company, and Hess was made payee merely for convenience. Defendant alleged that no consideration passed from Barrett to the company, and that the check was not only irregularly but fraudulently issued.

At the trial in the court below, there was considerable evidence on both sides, bearing on the question as to whether the railway company was indebted to Barrett in the amount of the check when the treasurer issued it to him, and consequently, whether there was a consideration to support it. The fact was scarcely denied by defendant, that the indorser, Goodwin, out of his individual funds, deposited in the Corn Exchange bank $5,300 to the credit of the railway company to meet the check, and that the company took this money and applied it to other purposes.

The court below submitted the evidence to the jury, instructing them, that if the company received no consideration for the check from Barrett, to whom it was delivered, at or before the delivery, nor afterwards, they should find for defendant; but if, on the other hand, they should find the check was given by defendant for a debt owing by it to Barrett, or if defendant received the 15,300 in cash as the consideration therefor, then they should find for plaintiff. The verdict was for plaintiff in the amount of the note with interest, and we now have this appeal by defendant, who assigns seven errors ; the first four in substance allege, that the court erred in submitting the evidence to the jury as already noticed. It is argued, the suit was founded on the check as showing defendant’s liability; if it was not liable on the check, it was not liable at all; as the cheek was issued in the face of the prohibition of the by-law, there was no corporate liability, whatever may have been the individual liability of the agent who issued it without authority from his principal. The rule of law relied upon to sustain this argument is a very familiar one, and is thus restated by this Court in Millward-Cliff Cracker Co.’s Est., 161 Pa. 167:

“ The by-laws of a corporation, upon their adoption, become written into the charter and put parties who deal with the corporation upon notice in treating with the officers of the corporation as to the extent of the power and agency of such officer; and this whether the specific by-law has been brought home to them or not.”

Undoubtedly, this is the law, and if Barrett, the first holder of the, cheek, excluding all the subsequent transactions relating to it, had demanded payment from the company, and had been refused because of want of authority in the treasurer to issue it in violation of the by-law, the argument would be to the point, and perhaps would convict the court below of error. But the very case cited, holds, that where the corporation receives the benefit of the unauthorized act of its officer, it is bound. Here, the case turned, not on the authority of the treasurer to issue the check, but on whether the company, as between the parties to this suit, is in equity estopped from denying such authority.

The jury has found as a fact, on ample evidence, that the check was not fraudulently issued; that the company was really indebted to Barrett in the amount of it when it was delivered to Mm; but assume, for the sake of the argument, the fact to be otherwise, then how stands the ease ? A check of defendant company, on its face regular, is presented for deposit by the president of the company, who indorses it; the bank receiving it has no connection with the railway company, nor so far as appears, any knowledge of its by-laws; the treasurer has formally signed it; the president formally indorses it; here are two of the highest officers of the company, each representing to the bank, in effect, that the check is an authorized corporate obligation; the bank immediately, on the faith of it, parts with its money. If there was fraud in its issue, it is not pretended the bank had knowledge of such fraud; nor is it pretended that Goodwin, the indorser, had such knowledge; so that the most that can be attributed to plaintiff, is a neglect to examine the minutes of the company to ascertain whether two of its prominent officers were lying; this is not sufficient to warrant an imputation of guilt, and the bank can with clean hands invoke the doctrine of equitable estoppel against defendant, if the latter has received the full benefit of the unauthorized act after the deposit of the check.

The fact is established, beyond controversy, that Goodwin, the Mdorser of the check, who was also bound to the bank, took from his pocket the money to meet it, and placed it to the credit of the railway company; that company immediately proceeded to appropriate it to other purposes; paid over $2,200 out in wages to its employees, and with the balance, paid an overdraft in bank. This was a wholly unauthorized perversion of Goodwin’s money; it had been deposited for a specially designated purpose, that is, to meet the check held by the bank. Clearly, by such action, the railway company received the full benefit of the unauthorized act of its treasurer; whatever fraud may have been committed by Barrett, the railway company lost nothing by it. If ever an unauthorized act of an agent could be ratified and adopted by a principal, it was so ratified and adopted here. It no longer remained a question of authority in the officer under the by-laws, but in what position bad the principal, by its subsequent conduct, placed itself? Tt is not alleged, that the by-laws required board action, before it could accept money, or before it could pay the wages due its employees. We are clearly of the opinion, that the corporation, by accepting and using Goodwin’s money deposited to meet the check, is estopped from denying the treasurer’s authority to issue it.

The remaining assignments are to the rulings of the court on the admission of evidence. In view of what we have said on the main question, all these rulings were correct, for the evidence related directly to the facts which plaintiff had the right to prove.

The judgment is affirmed.