Westfield Bank v. Cornen

Westfield Bank v. Cornen. Principal and agent.—Notice. Where the act of an agent is warranted by the terms of his power, it is binding upon the principal, as to all persons dealing in good faith with the agent. Notice to a bank director, whilst not engaged officially in its business, does not affect it. Appeal from the general term of the Supreme Court, where a judgment entered upon a verdict in favor of the plaintiff had been affirmed. This was an action by .the President, Directors and Company of the Westfield Bank against Peter P. Cornen, upon a promissory note for $3000, purporting to have been made by the defendant, by.his attorney, EL A. Bartlett, dated the 18th September 1860, payable three months from date, to the order of Carson & Hard, and by them indorsed to Jessup & Laflin, who indorsed it to the plaintiffs. It appeared upon the trial, that Bartlett, who made the note in the defendant’s name, was his attorney in fact, for him and in his name, place and stead, to sign all notes and checks, and accept all drafts, in conducting his business, as then prosecuted by him in the city of New York. That the note was, at the request of Jessup & Laflin, discounted by the plaintiffs, before maturity, in the usual course of business, for the benefit of Carson & Hard. The defendant offered to show that the note was made as an accommodation, for Carson & Hard, and not in the usual scope of the defendant’s ousiness, and without his knowledge or consent. This was objected to by the plaintiffs, and excluded by the court, to which ruling the defendant excepted. It was shown, that Jessup was one of the directors of the plaintiffs’ bank, and that he knew the object for which the note was made, but that he had no power to direct the note to be discounted, and did not so direct. The counsel for the defendant then renewed his offer, on the ground, that the bank had notice that the note *was an accommodation note, through Jessup, a director. This was objected to by plaintiffs’ counsel, and excluded by the court, and another exception taken. When the plaintiffs rested their case, the defendant moved for a dismissal of the complaint, on the grounds: 1 That the evidence in the case showed that the authority of the agent, Bartlett, was a special one, and limited to the business of the defendant. 2. That there was no proof that Bartlett, in giving the note in question, acted within the scope of his agency, and had authority to give it. 3. That the authority of the agent, Bartlett, being special and limited, and the defendant having offered to show that the note was an accommodation one, the plaintiffs must show themselves to be bond fide holders. The motion, however, was denied, and the defendant excepted. The defendant called Jessup as a witness, and asked him the following question : “ At the time the note was made, was there another note, made for the same purpose, and subsequently diverted to other purposes by you ?” The plaintiffs’ counsel objected to the question, as immaterial and irrelevant, and the objection was sustained; to which ruling the defendant excepted. The following question was then put by the defendant’s counsel to the witness: “Were you and Laflin, at the time the note was made, creditors of Carson & Hard?” This question was objected to by plaintiffs’ counsel, as immaterial and irrelevant. The court sustained the objection, and an exception was taken. The evidence being closed, the defendant’s counsel asked that the question whether the plaintiffs had notice that the note was an accommodation one should be submitted to the jury, and that they should be instructed, that if they found the plaintiffs had such notice, then the defendant would be entitled to a verdict. The learned judge, however, denied the request, and directed the jury to find a verdict for the plaintiffs for the amount of the note and interest, to which the defendant’s counsel excepted. ' *The jury rendered a verdict in favor of the plaintiffs for $3063.50; and the judgment entered thereon having been affirmed at general term, the defendant appealed to this court. Cadwallader, for the respondents. Atlantic State Bank v. Savery, 82 N. Y. 291, 307. [MAJORITY — Parees, J.] Parees, J. (after stating the facts.)—There is no doubt that the plaintiffs are band fide holders of the note, for value, unless they are chargeable with notice of its being an accommodation note, by reason of notice of that fact to Jessup, a director: If they are bond fide holders of the note, for value, under the rule which is now well settled,' they are entitled to recover against the defendant, notwithstanding the fact that his agent exceeded his authority in making it. The principle is as stated in North River Bank v. Aymar (3 Hill 262). “ Whenever the very act of the agent is authorized by the terms of the power, that is, whenever, by comparing the act done by the agent, with the words of the power, the act is, in itself, warranted by the terms used, such act is binding on the constituent, as to all persons dealing in good faith with the agent; such persons are not bound to inquire into facts aliwide. .The apparent authority is the real authority.” This principle, although the case was reversed by the court for the correction of errors, has been since recognised and established by numerous cases in this court. (Farmers’ Bank v. Butchers’ and Drovers’ Bank, 14 N. Y. 627; s. c. 16 Id. 135; Griswold v. Haven, 25 Id. 595; Exchange Bank v. Monteath, 26 Id. 505; Bank of New York v. Bank of Ohio, 29 Id. 619.) The note being negotiable, the maker is deemed in law to enter into a contract with every one to whom it is afterwards negotiated, so that the plaintiffs thus stand in privity with the defendant, and are, within the rule, dealing in good faith with the agent, notwithstanding th”e payees and their immediate indorsers had notice that the agent was transcending his authority in the making of the note. (Farmers’ and Mechanics’ Bank v. Butchers’ and Drovers’ Bank, 16 N. Y. 141; Griswold v. Haven, 25 Id. 602.) This principle disposes of the exception to the refusal to dismiss the complaint, and brings us to an examination of the question, whether notice to Jessup, that the note was an accommodation note, was notice to the plaintiffs. It is to be ^remembered, that Jessup, although a director of the plaintiffs’ bank, was not acting as such, in the discounting of the note, and, so far as was shown or offered to be shown, notice of the object for which the note was made, was not given to him as such director. He was no agent of the bank in this transaction, and the rule that notice to an agent is notice to the principal, does not apply. It was said by Chief Justice Nelson, in Bank of United States v. Davis (2 Hill 463), “ I agree, that notice to a director, or knowledge derived by him, while not engaged officially in the business of the bank, cannot and should not operate to the prejudice of the latter. This is clear, from the ground and reason upon which the doctrine of notice to the principal, through the agent, rests. The principal is chargeable with this knowledge, for the reason, that the agent is substituted in his place, and represents him in the particular transaction; and, as this relation, strictly speaking, exists only while the agent is acting in the business-thus delegated to him, it is proper to limit it to such occasions.” This agrees with the decision of the court in National Bank v. Norton (1 Hill 572). In that case, one member of a firm, after dissolution, renewed a partnership note, held by the plaintiff, without authority from, or knowledge of, Norton, his late copartner. Before the making of the note in question, one of the directors of the plaintiffs’ bank knew of the dissolution of the firm; and the question was, whether such knowledge was notice to the plaintiff. At the circuit, it was héld that it was, and the plaintiff was nonsuited. A motion was made to the court in banc, on a case, to set aside the nonsuit, and for a new trial, which was granted. The. court says : “ In the case at bar, the learned judge had proof of publishing the notice; and actual knowledge in the director, whose duty as one of the board, it was, to pass on the discount and renewal of notes, and who was, therefore, to be regarded as the agent of the plaintiffs, was sufficient proof of their knowledge.” In this, we think he erred. The board were the agents, for the purposes mentioned, and -they should acquire this sort of knowledge, as such, or, at least, the firm *should show notice brought home to some other agent specially authorized by the bank, or by the course of their business to receive it. (See also Angelí and Ames on Corporations,' §§ 307, 308, and cases cited.) In the case before us, I think, the knowledge of Jessup, that the note was an accommodation note, was not notice of that fact to the plaintiffs. The question put to the witness Jessup, whether, at the time the note in question was made, another note was made, for the same purpose, and subsequently diverted to other purposes by him, was manifestly immaterial and irrelevant, and therefore properly excluded. • The same is true of the question, whether Jessup & Laflin were creditors of Carson & Hard, at the time when the note in question was made. There was no question to be submitted to the jury, and they were oroperly directed to find a verdict for the plaintiffs. The judgment should be affirmed. Judgment affirmed.