National Exchange Bank v. Wiley

delivered the opinion of the court.

This is an action upon a judgment rendered in one of the courts of Ohio, and the question to be considered is whether the final judgment under review gave to' the proceedings in the Ohio court such faith and credit as are required by the Constitution and laws of the United States.

The Constitution, Art. IV, § 1, provides that “Full faith

The Wiley Construction Company, a Massachusetts corporation, and Wiley, the defendant in error, executed and delivered to the National Exchange Bank, the plaintiff in error, a written instrument — being a note with warrant of attorney annexed — dated Tiffin, Ohio, April 26, 1884, in which for value received they jointly and severally promised to pay to that bank, or order, on the 'first day of October, 1884, at its office in that city, ten thousand dollars with eight per cent interest after maturity. The instrument authorized N. L. Brewer, or a.ny attorney at law in the United States, or elsewhere, to appear before any court of record, after such obligation became due, waive the issuing and service of process, and confess judgment against the obligors or either of them " in favor of the holder ” for the amount then appearing to be due, together with the cost of suit; and thereupon to release áll errors and writs of errors, and in behalf of the obligors or either of them waive all right to appeal and stay of execution.

On the thirty-first day of July, 1899, nearly - fifteen years after the maturity of the note, the National Exchange Bank instituted suit against both obligors in the court of Common Pleas of Seneca County, Ohio — a court of general jurisdiction in that State — to recover the balance due on that obligation, which was alleged to.be $5,772.70, with interest from May 9,

It may be here stated that there was no endorsement on the note showing that it had ever been assigned or transferred by the original payee.

With the petition in that suit were filed copies of the paper constituting the note and warrant of attorney! With it was also filed an answer, in which an attorney, assuming, by virtue of the above warrant and not otherwise, to be the attorney of the construction company and of Wiley, confessed judgment against them for the full amount claimed by the bank.

On the very day of the bringing of that suit judgment was entered against the defendants therein for $11,419.68, being the amount of the obligation with interest at eight per cent from May 9, 1887, — the judgment reciting that the- attorney who acted under the warrant .of attorney, naming him in person, by virtue of that warrant, entered the appearance of the defendants, waived the issuing and service of process, confessed judgment, and released and waived all exceptions, errors and right of appeal.

The present action was by the National Exchange Bank against Wiley on the judgment rendered in the Ohio suit. The defendant disputed the plaintiff’s right to recover upon several grounds, one of which was that prior to the institution of the Ohio suit and more than twelve years before the commencement of the present action, the note had been fully discharged, so far as he was concerned, pursuant to an agreement between him and the holder. But on this writ of error we are concerned only with the part of the defense which distinctly raises a Federal question.

The defendant alleged that the warrant of attorney annexed to the note of April 26,. 1884, did not authorize a confession of judgment against the obligors except in favor .of the “holder ;” that so far from the National Exchange Bank being such holder when it brought the Ohio suit, the Tiffin National Bank, as early as March 2, 1885, purchased, received and

.The plaintiff insisted that it was the holder of the note when put in suit; further, that the court in Ohio had full power- and jurisdiction to render the judgment in question, and that neither personal’service of process on nor notice to the obligors was necessary in order to give that court jurisdiction of the parties and subject-matter.

Both at the trial and in the Supreme Court of Nebraska the bank contended that full faith and credit, as required by the Constitution and laws of the United States, would not be given to the proceeding's in the Ohio suit if the judgment in its f-avor was held not to be conclusive in respect of the authority of the Ohio court to render such judgment.

It is unnecessary to set out all the instructions. It is sufficient to say that the jury were, in substance, instructed that the warrant of attorney authorized a confession of judgment in favor of the holder of the note; that it was to be presumed upon the showing made by the record of the Ohio court that it had jurisdiction to render the judgment sued on; and that such' presumption continued throughout this case, unless the defendant, by a preponderance of evidence, proved that the plaintiff bank was not, in fact, the holder of the note when put in suit in Ohio. The jury were also instructed that if the plaintiff was found not to be such holder, the verdict should be for the defendant.

.Did the Ohio court have jurisdiction to render the judgment in question? It is a settled doctrine, Chief Justice Marshall said in Rose v. Himely, 4 Cr. 241, 269, that the effect of every judgment must depend upon the power of the court to render that judgment. In determining whether the Ohio court had authority to render the judgment against the obligors in the note, we must look first into the decisions of the highest court of that State.

In Osborn v. Hawley, 19 Ohio, 130 (1850), the plaintiff declared as endorsee of a promissory note, to which was attached a power of attorney to confess judgment. The report of that case is very meager, but in the course of the opipion the court said: “The power of attorney is not negotiable, and when the legal title to the note is transferred the power of attorney becomes invalid, and no power whatever can be éxercised under it, for the benefit of the endorsee; and he holds the note as if no such power had ever been attached to it.”

In Marsden v. Soper, 11 Ohio St. 503 (1860), the plaintiff declared on a note to which was attached a warrant of attorney authorizing a'confession of judgment “in favor of any holder.” A suit was brought on the note in one of the courts of Ohio by the endorsee thereof, and judgment-was confessed under a warrant of attorney annexed to the note. The question was whether the court had jurisdiction of the persons of the defendants so as to authorize a judgment affecting their rights. The Supreme Court of Ohio said: “It will be noticed that the plaintiff in this judgment is not the payee of the note on which judgment is taken, but an endorsee; and that the warrant of attorney under which judgment was confessed purports to authorize such confession ‘ in favor of any holder of this obligation,’ after the same becomes due. But, it was held, in broad and general terms, in the case of Osborn v. Hawley, 19 Ohio

In Cushman v. Welsh, 19 Ohio St. 536 , 539, the warrant of attorney authorized a confession of judgment “in favor of the legal holder.” The note there in question was payable to order and had not been regularly endorsed to the party who in fact, purchased and owned it and in whose name suit was brought. The question in the case was whether the confession under the.warrant of attorney authorized judgment in favor of the purchaser. The court said: “Though he might, as the owner of the note , in equity, have brought an action thereon, under the provisions of the code, in his own name, against the makers of the note,.it does,not follow that he could obtain judgment by confession on their warrant of attorney attached to the note. . That depends on the extent of the power conferred by the warrant. The attorney can do nothing more than execute the power conferred by his warrant; moreover, ‘all authorities of this sort must be strictly pursued.’ Cowie v. Allaway, 8 Durnf. & East, 257. ‘Indeed, formal instruments of this sort are ordinarily subjected to a strict interpretation, and the authority is never' extended beyond that which is given in terms, or which is hécessary and proper for carrying the authority so given into full effect.’ Story on Agency, sec. 68. Now, the power conferred by the .terms of the instrument in this case, was, to confess judgment

In Watson v. Paine, 25 Ohio St. 340 , which was an action upon a judgment based on a warrant ,of attorney attached to a promissory note, and which authorized any attorney at law to confess judgment in favor of the holder of the note, the point was made that the warrant of attorney did not authorize the waiving of process or an appearance for the defendants in an action brought by an endorsee. The members of the Supreme Court of Ohio were divided- in opinion on that point, and it was left undecided. The casement off upon another ground, but Mcllvaine, C. J., delivering the judgment of the court, expressed his individual opinion that a power to confess judgment in favor of any holder of the note may be exerted as well in favor of an endorsee as of the payee.

But in Clements v. Hull, 35 Ohio St. 141 , 143, it was held that, under the Code of Civil Procedure., a warrant of attorney authorizing judgment to be confessed in favor of the holder of a note could be executed in favor of the equitable owner and holder, being the real party in interest. The court said: “The scope of the power is not limited in this case as it was in the case .of Cushman v. Welsh, 19 Ohio St. 536 , in favor of the legal holder only. The authority here given is ‘ to confess

The latest case in the Supreme Court of Ohio is Spence v. Emerine, 46 Ohio St. 433 , 439, 440, 441. There the note was payable to a named person pr bearer, and the warrant of attorney authorized any attorney to appear for the obligor in any court of record in Ohio, and confess judgment for the aniount then due, and' to release all errors and the right of appeal. The confession was in favor of one to whom the note had been transferred by delivery merely. The question was as to the power of the court to render the judgment. The Supreme Court of Ohio, after referring to its prior adjudications, said: “Whether the warrant of attorney can be executed for the benefit of a holder of the note other than the payee, must depend upon the language of the warrant itself. But it is an established principle that an authority given by warrant of attorney to confess a judgment against the maker of the note must be .clear and explicit and strictly pursued, and we cannot supply any supposed omissions of the parties. Cushman v. Welsh, 19 Ohio St. 536 ; Cowie v. Allaway, 8 T. R. 257; Henshall v. Matthew, 1 Dowling’s Pr. Cas. 217; Foster v. Claggett, 6 Dowling’s Pr. Cas. 524; The Manufacturers’ & Mechanics’ Bank of Philadelphia v. St. John, 5 Hill. 497 . . . . The power of attorney attached to the note in controversy does not, in express language, authorize a confession of judgment in favor of any one, not even of the payee; but if such authority might be implied as to the payee, we cannot, under the rule of a strict interpretation, extend that implication in favor of the defendant in error to whom the note was transferred by delivery. ... It will thus be seen that where it has been adjudged by the court that a power of attorney to confess a judgment may be executed in favor of a party other than the payefe, it has been in cases where authority was expressly conferred to confess a judgment in favor of a legal

. Looking, at the face of the note, the National Exchange Bank insists that, being payee, it was also the holder within thé meaning of the warrant of attorney, however strictly' construed; that nothing else appearing than the note and warrant a confession of judgment in its favor was in conformity with law and usage in Ohio, as declared by the highest court of that State. We incline to think that thai position is justified -by the above cases, when carefully 'considered; and assuming such to be the law as administered in Ohio — which is the view most favorable to the plaintiff in error — the question still remains whether the judgment, when sued on in another State, may be collaterally attacked upon the ground that the party in whose behalf it was rendered was not in fact the holder, because not the real, owner, of the note? This question must, we think, be answered’in the affirmative. It can be so answered without doing violence to the Constitution, or the laws of the United States. "While the words of the warrant of attorney might be held to embrace any holder, even the equitable owner, who might rightfully prosecute an action on the note in his own name and for his own use, Clements v. Hull, 35 Ohio St. 141 , above cited, yet if it was true, as alleged, that in 1885 the Tiffin National Bank purchased', received and became the owner of the note,- then the National Exchange Bank could not thereafter rightfully sue on it in

By les on Bills says that "holder is a general wrord, applied to any one in actual or constructive possession of the bill, and entitled at law to recover or receive its contents from the parties to it.” Sharswood’s Ed. 66. So in 1 Parsons’ Bills and Notes it is said that "by the holder of negotiable paper is meant, in law, the owner of it; for if it be iiFhis,possession without title or interest he is, in general, considered only as the agent of. the owner.” p. 253. So that proof that the payee bank was not the owner of the note when it brought suit in Ohio tended to show that it was not in law the "holder” of the instrument within what must be regarded as the true meaning of the warrant of attorney, and, therefore, that the court was without authority to enter judgment by confession in its favor against the obligor. In other words, the defendant Wiley could show collaterally that he was not legally before the court — as he was not in any just sense — if his,; appearance was entered and judgment confessed- by one who had, in fact, at title time, no authority to do either; and, consequently, v that the court was without jurisdiction to proceed except on legal notice to him or without his appearance in

This whole subject was carefully considered in Thompson v. Whitman, 18 Wall. 457 , 463, 469. That was an action of trespass, brought in the Circuit Court of the United States for the Southern District of New York, for taking, and,carrying away a certain sloop. The defendant, a New Jersey sheriff, had seized the vessel, pursuant, as he claimed, to a statute of New Jersey relating to the raking of clams, and.proceeded against it before two justices of Monmouth County, New Jersey, by whom it was condemned and ordered to be sold. Those justices had no jurisdiction, under the statute, to act in the premises, unless the seizure and the offense both occurred in that county. The record of the case recited that the offense was committed and the seizure made in Monmouth County, and the contention was that the record was conclusive, both as to the jurisdiction of the court and the merits of the case. In that case it was held to be competent for-the complaining party to prove collaterally that the vessel was not seized in Monmouth County, and, therefore, that the facts necessary to the exercise of jurisdiction by the New Jersey justices did not exist, although their existence was recited or affirmed in the official record made by them. Speaking by Mr. Justice Bradley, this court adjudged, in the language of Story, that the Constitution “ ‘ did not make the judgments of other States domestic judgments to all intents and purposes, but only gave a general validity, faith and credit to them, as evidence;’ ” and, upon an elaborate review of previous cases, that “the jurisdiction of the court by which a judgment is rendered in any State may be questioned in a collateral

Perceiving no error of law in the record/the judgment must be affirmed.

It is so ordered.