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Fox v. Rural Home Co.

35 N.Y.S. 896 Court N.Y. Gen. Term Decision date 1895-11-15 English

Delivered by FOLLETT, J.

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FOX v. RURAL HOME CO., Limited.
(Supreme Court, General Term, First Department.
November 15, 1895.)

Headnote

Corporations—Accommodation Indorsement.
There being no evidence that defendant corporation had authority to make an accommodation indorsement, or that its cashier had power to make such indorsement, and plaintiff having been informed, when he discounted a note indorsed by such cashier, that it was an accommodation indorsement, no presumption of defendant’s liability thereon arises from the fact that the proceeds were deposited to defendant’s account, and checked out by it to the one for whom plaintiff was informed the money was being obtained.
Action by Richard K. Fox against the Rural Home Company, Limited. A verdict was rendered in favor of plaintiff, and defendant moves for a new trial on exceptions ordered to be heard at general term in the first instance. Granted.
This action was begun April 21, 1893, to recover the amount due on a promissory note made December 9, 1892, by Arthur G. Gates, whereby he promised to pay H. H. Warner, or order, $5,000, at the Gallatin National Bank of New York, four months after date, which, December 23, 1893, was indorsed by the payee and by the defendant in the form following: “The Rural Home Co., Limited. E. 0. Stebbins, Cashier.” The note was discounted on the same day by the plaintiff, who- drew his check for the avails,— $4,908.33,—payable to the order of the Rural Home Company, Limited, which was deposited to the credit of its bank account, and on the same day it, by its cashier, drew two checks payable to “the order of William M. Earl, treasurer,” amounting to $4,908.33. William M. Earl was then the treasurer of the Industrial & Mining Company, to which corporation the checks were paid. When the note fell due it was dishonored, and duly protested for nonpayment, of which the indorsers had due notice. This action was brought against the maker and both indorsers. The maker and first indorser did not answer, and the action was continued against the present defendant. It is alleged in the complaint, and not denied in the answer, that the defendant is a domestic corporation; but it is not alleged, nor was it proved on the trial, under what statute or for what purpose it was incorporated. As a defense it is alleged that the defendant is an accommodation indorser, which was well known to the plaintiff when he discounted the note, and that Edward C. Stebbins was without authority to make the indorsement. When the note was discounted, Edward C. Stebbins told the plaintiff that the money
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was not for the Rural Home Company, Limited, but was for the Industrial & Mining Company. The Rural Home Company, Limited, did not retain the proceeds of the note, and at the time it was not indebted to the Industrial & Mining Company. Edward G. Stebbins had authority to draw checks and indorse notes taken by defendant in the course of its business, but there is no evidence that he was authorized to make accommodation indorsements. These facts are undisputed. At the close of the plaintiffs case the defendant moved to dismiss the complaint on the ground that the corporation was not bound by the indorsement, which was denied, and an exception taken, and thereupon a verdict was directed for the plaintiff, and the exceptions were ordered to be heard at the general term in the first instance.
Argued before VAN BRUNT, P. J., and FOLLETT, J.
Joseph N. Tuttle, for plaintiff.
Charles Steele, for defendant.

It is unfortunate that the record does not disclose under what statute and for what purpose this defendant, a domestic corporation, was incorporated, for it would have enabled the court to deal with known facts, instead of resting its decision on presumptions. So far as we know, no corporations organized under the statutes of this state are authorized to bind the property of their shareholders by accommodation indorsements, except corporations organized under the statutes providing for the incorporation of guaranty and indemnity companies; and we know of no statute authorizing such corporations to make accommodation indorsements without receiving a-valuable consideration. It has been held that banks organized under the statutes of this state have no such power. Bank of Genesee v. Patchin Bank, 13 N. Y. 309 ; Farmers’ & Mechanics’ Bank v. Butchers’ & Drovers’ Bank, 16 N. Y. 125 , 128; Morford v. Bank, 26 Barb. 568 . Manufacturing corporations have no such power. Central Bank v. Empire Stone-Dressing Co., 26 Barb. 23 ; Bridgeport City Bank v. Empire Stone-Dressing Co., 30 Barb. 421 ; Farmers’ & Mechanics’ Bank v. Empire Stone-Dressing Co., 5 Bosw. 275 ; Wahlig v. Manufacturing Co. (City Ct. N. Y.) 5 N. Y. Supp. 420 ; Filon v. Brewing Co. (Sup.) 15 N. Y. Supp. 57 . The same rule is held in Massachusetts. Monument Nat. Bank v. Globe Works, 101 Mass. 57 ; Davis v. Railroad Co., 131 Mass. 258 . In the latter case it was also held that a railroad had no such power. Warehousing and security companies have no such power. National Park Bank v. German-American Mut. Warehouse & Security Co., 116 N. Y. 281 , 22 N. E. 567 . In Connecticut it is held that life insurance companies are without this power. Aetna Nat. Bank v. Charter Oak Life Ins. Co., 50 Conn. 167 . In California it has been held that turnpike companies have no such power. Hall v. Turnpike Co., 27 Cal. 256 . In Pennsylvania it is. held that corporations organized to hold real estate, mine for and deal in oil, have no such power. Culver v. Real-Estate Co., 91 Pa. St. 367 ; 1 Mor. Corp. (2d Ed.) §§ 389, 423, et seq.; 4 Thomp. Corp. § 5739 et seq. The learned counsel for the respondent does not gainsay this rule, but urges that the indorsement was not an accommodation one, because the check given by the plaintiff for the avails of the note was payable to the defendant’s order, was indorsed by it, and

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credited to it by the bank where it kept its account. Edward O. Stebbins, defendant’s cashier, was called as a witness by the plaintiff, and testified that he told the plaintiff, when the note was discounted, that the money was not for the defendant, but was for the Industrial & Mining Company, which was not disputed. On the same day two checks were drawn by defendant’s cashier on the bank where it kept its account for the full amount of the avails of the note, payable to “the order of William M. Earl, treasurer,” who was the treasurer of the Industrial & Mining Company. There is no evidence showing that defendant’s cashier was authorized to bind it by an accommodation indorsement, and, it having been shown to be such, which the plaintiff knew before taking the note, the burden was on him to show that the defendant had power to make such an indorsement, and that its cashier was authorized to make this or such indorsements. This burden the plaintiff did not assume, and the evidence is not of a character to authorize the court to presume that the defendant was authorized to make an accommodation indorsement, or that its cashier had power to make such indorsement. The fact that the defendant’s cashier, acting without authority, deposited the avails of the note to defendant’s credit, and on the same day checked it out for the benefit of the Industrial & Mining Company, is of no more significance than though he had taken the money and given it to the latter corporation, or had indorsed the plaintiff’s check to that corporation; and neither a consideration nor an estoppel can be predicated upon these facts. Bank v. Atkinson, 55 Fed. 465 , affirmed 27 U. S. App. 88, 10 C. C. A. 87 , and 61 Fed. 809 . There being no evidence that the defendant was authorized to bind itself by this indorsement, and no evidence that its cashier was authorized to make it, and no evidence upon which an estoppel can be based, the plaintiff failed to establish a cause of action, and the defendant’s exceptions should be sustained, the verdict set aside, and a new trial granted, with costs to the defendant to abide the event.

VAN BRUNT, P. J., concurs in result.

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