Second National Bank v. Pottier & Stymus Manufacturing Co.

Majority

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The Second National Bank of Allentown v. The Pottier and Stymus Manufacturing Co.

(New York Superior Court, General Term,

Filed October 25, 1888.)

Headnote

1. Principal and agent—Authority oí1 agent may be inferred.

Authority to one to act for another need not be conferred in words. Such authority may be inferred from the course of business and employment, and from the fact that similar actions of the assumed agents have been acquiesced in by the principal as done by his authority.

2. Same—From what acts authority may be inferred.

It is not necessary, in order to authorize the inference of general agency, that the person who has assumed to act as agent should have done an act the same in specie as the one on which the alleged principal is sought to be held. If he has usually done things of the same general character and effect, with the assent of the principal, it is enough.

3. Same—Authority to endorse notes.

The plaintiff attempted to show that at the time it discounted a certain note, which is the subject of this suit, its president was told that the endorsement on the note was defendant’s regular endorsement, that is that I. was authorized by the company to endorse notes for it. Held, that this evidence was competent; that it was not necessary that the appearances on which plaintiff acted should arise from transactions had between the plaintiff and defendant, that it was sufficient that there were transactions from which the authority of I to act as defendant’s agent in endorsing the note in suit could he inferred, and that plaintiff had knowlege of these transactions.

4. Same—Corporations—Authority of officer of corporation—From WHAT INFERRED.

When in the usual course of business an officer ot a corporation has

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been allowed to manage its affairs, bis authority may be implied from the manner in which he has been permitted to transact such business. In such cases the officer’s authority does not depend upon his title but on the duties he is in the habit of performing.

5. Same—When corporation bound by act of officer.

Where an officer of a corporation has made, in the name of the corporporation, what purports to be the contract of the corporation, and this contract is, upon its face, one that the corporation has authority to make, and its only defect consists in some extrinsic fact (such as the purpose or object for which it was made) such contract is binding upon the corporation, and the person with whom the contract is made is not bound to enquire as to such extrinsic fact.

This action was tried before a judge and a jury. The trial judge directed the jury to render a verdict in favor of the defendant, and further directed that the exceptions be heard in the first instance at the general term.

Martin & Smith and Geo. A. Strong, for plaintiff; Frederick M. Littlefield, for defendant.

The action is against the defendant, a corporation, as indorser of a promissory note. It was, in fact, indorsed by one Ingersoll, the treasurer of the defendant. On the trial the defendant denied that Ingersoll had authority from it to indorse its name. The plaintiff proved that for many years Ingersoll had signed the name of the defendant as maker of notes, and had indorsed its name upon notes to the knowledge of defendant—the defendant recognizing its liability in these instances. This was proof that, at the time of these instances, Ingersoll acted as agent of defendant, with authority to bind it. This agency, upon the facts in the case, was presumed to continue to the time of the indorsement of the note in suit. The form of the indorsement is the same as that previously used by Ingersoll. Ingersoll, being the authorized agent to sign and indorse and transfer, bound the defendant, by any express or implied representation by him, that the conditions which limited his power as between the defendant and himself had been complied with.

Authority to one to act for another need not be conferred in words. Such authority may be inferred from the course of business and employment and from the fact that similar actions of the assumed agent have been acquiesced in by the principal as done by his authority. But the defendant contends, and the evidence tends to show, that the note in question is an accommodation note, and that an authority to indorse an accommodation note cannot be inferred from the fact that the alleged agent had the right to indorse business paper. This contention cannot be sustained. It is not necessary, in order to authorize the inference of general agency, that the person who has assumed to act as agent should have done an act the same in specie as the one on

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which the alleged principal is sought to be held. If he has usually done things of the same general character and effect with the assent of his principal, it is enough. Commercial Bank v. Norton, 1 Hill, 501 .

This authority to act for another, which is inferred from appearances, operates only by way of estoppel, and takes the place of real authority only when some person has acted upon the appearances (People v. Bank of North America, 75 N. Y., 548 ), and has, in good faith, parted with value.

It, therefore, became necessary for the plaintiff to show that it had parted -with value, and that it had knowledge of the apparent authority of Ingersoll to indorse the note in question in the name of the defendant. Evidence was offered which tended to show that plaintiff had parted with value. The plaintiff then attempted to show that at the time it discounted the note in suit, its president was told that the indorsement on the note was defendant’s regular indorsement, that is, that Ingersoll was authorized by the defendant to indorse notes for it.

This evidence was excluded by the court, and the plaintiff duly excepted. This ruling was erroneous. It is not necessary that the appearances on which plaintiff acted should arise from transactions had between the plaintiff and defendant. It is sufficient that there were transactions from which the authority of Ingersoll, to act as defendant’s agent in indorsing the note in suit could be inferred, and that plaintiff had knowledge of these transactions.

This court has lately held that where a corporation has ' in many instances recognized that one of its officers was its agent, competent to sign its name in certain manner, it is estopped from taking, against a holder for value, the position that such an officer had not the power to sign its name in that manner. National Park Bank v. The GermanAmerican Mutual Warehousing and Security Company, 53 Supr. Ct. Rep., 367 .

The case now before us is to be distinguished from the case of The People’s Bank v. St. Anthony’s etc , Church, ( 109 N. Y., 512 ; 16 N. Y. State Rep., 856), in which case the plaintiff failed to establish or to give evidence which raised a presumption that the notes in question were the authorized obligations of the defendant. It is true that the, plaintiff in that case did prove that the notes were signed by the president, secretary and treasurer of the defendant, and that said officers constituted three of the five members of defendant’s board of trustees. But the defendant proved that the notes were signed by the officers of the defendant, acting separately, and at the same time or place, or while assembled as a board of trustees. It was held in that case

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that “the trustees had no separate or individual authority to bind the corporation, and this, although the majority, or the whole number of trustees acting singly and not collectively as a board, should assent to the particular transaction.” This principle * * * is * * * expressly applied to the action of religious corporations by the act of 1813, which declares that * * * a “majority of the trustees being lawfully convened, shall be competent to da and perform all matters and things which such trustees are authorized or required to do or perform.” But this very case is an authority, by implication, for the principle that the authority of the agent to bind his principal may be inferred from other similar transactions; for it is said, “A presumption has never been indulged to sustain an allegation that an unsealed contract, executed by officers of a corporation in its name, was a corporate obligation, unless authority was implied from the nature of the office, or from previous similar dealings recognized by the corporation, or a ratification was shown. When an agency is once lawfully constituted, the agent may, in some cases, bind the principal by a false representation that a particular transaction of the same general nature with that authorized, is within the power conferred, when in fact it has never been authorized, and was a fraud upon the power.” An officer of a corporation may, by the conduct of its directors or managers, be invested with capacity to bind the corporation by acts beyond the powers inherent in his office. Thus, when in the usual course of business, an officer of a corporation has been allowed to manage its affairs, his authority may be implied from the manner in which he has been permitted to transact such business. National Park Bank v German Mutual Warehousing and Security Company, 53 Supr. Ct. Rep., 367 .

In such case the officer’s authority does not depend so much upon his title, or on the theoretical nature of his office, as on the duties he is in the habit of performing. Fifth Ward Savings Bank v. The First Nat'l l Bank, 7 Atlantic Rep., 318.

It is true that one who deals with an officer of a corporation is presumed to know the extent of his power to bind the corporation. But when an officer of a corporation has made, in the name of the corporation, what purports to be the contract of the corporation, and this contract is upon its face one that the corporation has authority tó make, and its only defect consists in some extrinsic fact, such as the purpose or object for which it was made, such contract is binding upon the corporation, and the person with whom the contract is made is not bound to inquire as to such extrinsic fact. See Farmers & Mechanics’ Bank, etc. v. Butchers & Drovers Bank, 16 N Y., 129 , 130; 4 American and, English. Encyclopedia of Law, 227, and cases there cited.

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Since this case was argued before us, the supreme court in the fifth department, in an action brought against the above named defendant on a state of facts similar to the facts in this case, has held the defendants as indorsers. Bank of Attica v. Pottier & Stymus Manufacturing Company, 17 N. Y. State Rep., 327.

The plaintiff’s exceptions are sustained, and a new trial is ordered, with costs to abide the event.