Bank of Attica v. Pottier & Stymus Manufacturing Co. — 17 N.Y. St. Rep. 327

Majority

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The Bank of Attica v. The Pottier and Stymus Manufacturing Company, impleaded with Charles H. Andrews.

(Supreme Court, General Term, Fifth Department,

Filed June 23, 1888.)

Headnote

1. Corporation—Bills and notes—Indorsement by officer—Limitation to power—Bona fide holder.

Where there was inherent power in a corporation to make, indorse and use in its business commercial paper a bona fide holder of paper indorsed by its officer is not charged with notice of a limitation of the apparent power of the officer authorized to make or indorse such paper. His rights are not affected by secret instructions given to said officers limiting his apparent powers.

3. Same—Who can avail themselves of apparent authority of officer TO MAKE OR INDORSE NOTES.

The fact that the indorsement of the defendant company’s notes was within the scope of the apparent power of the treasurer (who made it) was available to the plaintiff as a bona fide holder of the note although it had not before dealt in the paper of the defendant so indorsed. And the indorsement itself was a representation by the agent that it was paper which came within such power.

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3. Agency of person acting fob cobporation—Person dealing with, BOUND TO KNOW.

Persons dealing with a corporation are chargeable with notice of the-purpose for which it was organized, and with the powers and authority of its officers and agents with whom they deal.

4. Same—New trial—Motion for on exceptions to be heard in first instance at general term

Where on a motion for a new trial based upon exceptions only and heard in the first instance in general term, the case having been treated by counsel at the close of the evidence as raising questions of law only, questions of fact cannot be considered but must be deemed to have been determined in support of the verdict.

Motion by the defendant for a new trial on exceptions taken at Erie circuit, and ordered heard at general term in the first instance.

The action was brought upon a promissory note of date May 28, lSS?, made by the defendant Andrews for $4,908.63, payable to the order of the defendant, the Pettier & Stymus Manufacturing Company, five_ months after date, at 100 East Seventeenth street, New ~x ark.

“Indorsed.—Pay Bank of Attica, Buffalo, N. Y., or order, Pettier & Stymus Manufacturing Company. M. E. Ingersoll, treasurer. Shaw & Co.”

The complaint alleges that the note was indorsed by the payee, and delivered to Shaw & Co., and by the latter indorsed and delivered to the plaintiff for value before maturity in the ordinary course of business. The plaintiff had a verdict.

Ansley Wilcox, for def’t; Spencer Clinton, for pl’ff.

The defendant is a domestic corporation, created pursuant to the general manufacturing act, and doing business in the city of New York. The contention on the part of the defendant is that the alleged indorsement of the note was not made by it. The question arises upon exceptions taken to the denial of the defendant’s motion for nonsuit, and to the refusal of the court to direct a verdict in its favor; also to the direction of a verdict for the plaintiff. The indorsement purporting t© be that of the defendant, was. made by M. E. Ingersoll, who was in fact its treasurer. But that relation did not presumptively authorize him to charge the defendant by indorsement of commercial paper. Persons dealing with a corporation are chargeable with notice of the purpose for which it was organized, and with the powers and the authority of its officers and agents with whom they deal. When, therefore, they seek to charge a corporation with liability upon a contract made apparently in its behalf, the burden is upon them to prove the authority to make it by the person assuming to act as the officer or agent of the corporation. Adriance v. Roome, 52 Barb., 399 : Alexander v. Cauldwell, 83 N. Y. 480 ; De Bost v. Albert Palmer Co., 35 Hun, 386 .

In the latter respect the rule is substantially the same as-

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that applicable to natural persons acting through agents, and apparently may be as effectual as actual authority to charge a corporation with liability in behalf of a party dealing in good faith with the agent. This situation may arise out of recognized transactions of the agent, and a course of dealing by him in the business of the corporation acquiesced in by it. It was within the legitimate power of defendant to make and indorse notes in and for the purposes of its business, and this could be done only through its officers or agents.

It must be assumed here that the plaintiff took this note in regular course of its business" for value before maturity, and became a bona fide holder of it. It follows that if the indorsement of the note by the treasurer of the defendant was within the scope of his authority, actual or apparent, as that term is understood, the defendant was charged with liability upon it without reference to the question of authority in fact. And in that view such would be the effect if it were an accommodation indorsement, although no officer or agent of a corporation has any power in fact to indorse such paper. North River Bank v. Aymar, 3 Hill, 263 ; Farmers’ and Mechanics’ Bank v. B. and D. Bank, 14 N. Y., 623 ; S. C., 16 id., 125; Meads v. Merchants’ Bank, 25 id., 143; Banking Asso. v. White Lead Co., 35 id., 505; Cooke v. State Nat. Bank, 52 id., 96; Monument Nat. Bank v. Globe Works, 101 Mass., 57 .

The question, therefore, is whether, upon the evidence, the conclusion was warranted that the indorsement by this officer was within the scope of his power, actual or apparent. There is evidence tending to prove that in the course of business of the defendant, its notes were made by this officer, and notes held by it were in its name indorsed by him in the manner in which the note in question was indorsed, and that notes so indorsed were discounted for the defendant; but so far as appears, those discounted for it also had the indorsement of Auguste Pettier, an officer of the defendant. His was an individual indorsement. He testified, and so did another officer of the defendant, that the rule and uniform custom was that all notes belonging to the defendant, indorsed for discount or use, should have the indorsement of Pettier before so discounted or used; that this was the requirement of the defendant.

Upon this evidence, it is contended by the defendant’s counsel that it was not within the scope of the power of the treasurer to make for the corporation any indorsement of a note to have effect, until the name of such other officer was also indorsed upon it. Assuming that this was so in fact, as between the treasurer and the defendant, it still would seem that the indorsement of notes for the defendant was within the scope of his authority, because so far as ap-

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pears, the defendant’s indorsement was made by him only, and apparently that of Mr. Pottier added merely to the financial strength of the paper. The restriction was not upon the indorsement for the company, but related to the negotiation and use of the paper when so indorsed. The personal indorsement of Pottier, following that of the treasurer for the company, would not furnish any information of tlie restriction referred to. The paper would still indicate that the indorsement of the defendant was made by the treasurer. While a party dealing with the officers of a corporation may be charged with notice of the authority conferred upon them, he acting in good faith, is not or are his lights affected by secret instructions limiting their apparent powers. Edwards v. Schaffer, 49 Barb., 291 ; Lefler v. Field, 50 Barb., 407 . This power of the treasurer to indorse for the company, carried with it the authority to charge it by indorsements, qualified by a want of power to negotiate the paper upon its indorsement alone. This may have been a precautionary means of protection against the misuse by the treasurer of its paper, but in view of the inherent power of the corporation to make, indorse and use in its business commercial paper, it is difficult to see that a bonct fide holder is charged with notice of it as a limitation of the apparent power of the officer authorized to make or indorse such paper. It is his indorsement alone, when so made for it, that charges the corporation with liability, although the other indorsement is added. It is, however, said that by reason of this restriction upon the power of the treasurer to negotiate the paper so indorsed by him, or to render it effectual for that purpose, by the indorsement of the company alone, through him, the right to treat such indorsement affectual to charge the company must rest upon estoppel, which is not available to the plaintiff, because it had not before taken any of the paper indorsed in this or any manner by the defendant, or had any dealings with it. It is true that when an agent acting within the scope of his apparent power, or that with which he is clothed, proceeds in violation of it, the ground upon which the principal is chargeable to third persons acting in good faith, is that of estoppel. It is not usually, like the ordinary estoppel, in pais, founded upon the representation of the principal; but while the creation or existence of the power of an assumed agent cannot be established by his declarations or acts Marvin v. Wilber ( 52 N. Y., 270 ), the act of the agent within the scope of his apparent authority, constitutes the representation of the existence of the facts which enable him to perform it. 2 Mor. Priv. Corp., §§ 586, 587, 597; Bank v. Comen, 37 N. Y. 330 ; Bank v. Railroad Co., 106 N. Y., 196 , and N. Y. State Rep., 209, affirming 33 Hun, 589 .

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The fact that the indorsements of the notes of the company was within the scope of the apparent power of the treasurer, was available to the plaintiff as a bona fide holder of the note, although it had not before dealt in the paper of the defendant so indorsed. And the indorsement itself was a representation by the agent that it was paper which came within such power. Marine Bank v. Clements, 6 Bosw., 166 ; affirmed, 31 N. Y., 33 .

The limitation upon his authority goes to the circumstances under which effect is to be given to his endorsements, rather than to his power to make them for the defendant. This may be construed to have the character of instructions to the officer, and not the effect of qualification of his apparent power to the prejudice of a bona fide holder of paper endorsed by him, and in its effect may be likened to the want of power to endorse accommodation paper, in respect to which it has before been observed the principal may be charged by a holder in good faith when done within the scope of the apparent authority of the agent. This doctrine rests on the ground that when one of two innocent parties must suffer, the responsibility should fall on him who has enabled another to do the injury. These views lead to the conclusion that the inferences of fact legitimately permitted by the evidence were such that the defendant was not as matter of law entitled to the direction of a nonsuit or verdict. The propositions of fact hereinbefore stated bearing upon and in support of the authority of the treasurer to make endorsements for the defendant are expressed upon the view merely, that the evidence so warranted the finding of the facts, and not that they were conclusively or as matter of law established.

Then there was a question of fact arising out of the inconclusive character of the evidence upon the subject whether the endorsement by Mr. Pottier in addition to that of the defendant through the treasurer of notes for discount was a rule of the corporation. The evidence to support the claim that it was such and adopted by the defendant for its purpose was solely in the testimony of two officers, the president and vice-president of the defendant. They had an interest which presented for consideration the question of their credibility. Their evidence uncontradicted would for that reason not be conclusive Dean v. Van Nostrand, 23 N. Y. Wkly. Dig., 97; McElwain v. Erie R. Co., 21 id., 21; Kearney v. Mayor, 92 N. Y., 618 ; Honegger v. Wettstein, 94 id., 253; Sipple v. State of New York, 99 id., 285.

This evidence however was contradicted so far that a witness testified to the effect that the endorsement of such

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person in addition to that of the defendant was a requirement of the bank where its paper was discounted. There seems therefore to have been a question of fact properly for the determination of the jury whether such additional endorsement was required by a rule of the company by way of limitation of the power of the treasurer, or made simply to improve the character of the paper. And this question in the view taken of it by the defense has some importance.

The same remarks are applicable to the evidence of the two officers upon the question whether the endorsement referred to was an accommodation one or not, in respect to which there is no other evidence supporting or contradicting theirs.

So far therefore as this question may have importance, if it can be said to have any, the evidence also presented a question of fact growing out of that of the credibility of those witnesses. But no question of fact is available to the defendant upon this review, because first the case is here upon exception only, and no question upon the weight of the evidence can have consideration; and second, at the close of the evidence it was treated by counsel as presenting questions of law only. And desire to have any question submitted to the jury was negatived by the defendant’s counsel. Whatever questions of fact there were, will therefore be deemed determined in support of the verdict directted. Colligan v. Scott, 58 N. Y., 670 ; Dillion v. Cockroft, 90 id., 649; Provost v. McEncroe, 102 id., 650.

We have examined the several exceptions taken to the exclusion of evidence and think there was no error in the rulings to the prejudice of the defendant.

The motion for a new trial should be denied and judgment directed for the plaintiff upon the verdict.

Haight and Dwight, JJ., concur.

Cases cited

Alexander v. Cauldwell 83 N. Y. 480 N.Y. 1881-01-18 p. 328