Contracts · MBE-tested
The President, Directors, and Company of the City Bank of New Haven v. Simon Perkins
29 N.Y. 554·New York Court of Appeals·1864·NY
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Opinion
The President, Directors, and Company of the City Bank of New Haven v. Simon Perkins.
Nothing short of actual malajides, or notice thereof, will enable the indorser or acceptor of negotiable paper to defeat an action brought upon it by one who is apparently a regular indorsee or holder; especially where there, is no defense as to the indebtedness.
As to anything beyond the bonajides of the holder, the defendant, who owe* the debt, has no interest.
He cannot set tip, as a defense to an action on bills of exchange drawn 01 accepted by him, that the same were the property of a bank, and weri« transferred or pledged to the plaintiff, as security for a loan by the cashier who had no authority so to transfer or pledge them.
It is sufficient, if the plaintiffâs title is good as against the defendant. If there are any others who claim a title to the bills superior to that of th« plaintiff, it can be determined whenever they come before the court to assert it.
The cashier of a bank is the financial officer thereof, and the only person who can transfer negotiable paper belonging to the bankÂĄ His authority to make such transfer ex officio, for a legitimate purpose, is undoubted.
Appeal from, the Superior Court of the City of .New York.
The action was brought on two bills -of exchange of $10,000 each endorsed by the defendant, and two other bills of $5,000 each accepted by him. These bills bore date in August and September, 1854. The defendant denied his indebtedness, and also denied that the plaintiffs were the lawful holders and owners of said bills, and alleged that the bills belonged to the Bank of Akron, in the state of Ohio, or to its legal representative, the State Bank of Ohio. It appeared, upon the trial, that the defendant was indebted upon the bills, and the only question was whether the plaintiffs were legitimate holders. The facts ĂĄre as follows:
In July, 1851, J. W. McMillan, cashier of the Bank of Akron, ajiplied to the president of the plaintiffsâ bank for a loan by the latter bank" to the Bank of Akron of $50,000, which loan was agreed to be made, and the terms and conditions thereof were arranged and agreed upon as follows: The loan was to be made in the bills of the plaintiffsâ bank. The amount advanced was to, be secured by the notes of McMillan individually, and endorsed by him as cashier, and also by a pledge of the discounted bills of the Bank of Akron to be placed in the American Exchange Bank of the city of New York for collection. The Bank of Akron was to pay four per cent per annum interest on the amount of the loan, and to protect the plaintiffs and the bills thus issued by a credit in the American Exchange Bank to the account of the plaintiffs, on being advised each week of the amount of bills redeemed by the plaintiffs. The bills were to be sent by express from New York in parcels to the address of McMillan, cashier of the Bank of âAkron, care of Y. C. Severance, cashier, Cleveland, Ohio, at the risk and expense of the Bank of Akron. The bills were sent accordingly in packages, commencing in August) 1851, and ending in January, 1852, when the whole amount of the loan had been sent. The packages were received and receipted by McMillan as cashier, who made his notes and endorsed them according to the agreement, which were sent to the plaintiffs as each package was received.
On or about the 26th of September, 1857, the cashier of the American Exchange Bank was notified that $50,000. of the collection paper of the Bank of Akron, held by the American Exchange Bank, at any time, was pledged to the plaintiffs, and that it had been agreed that the amount of such collection paper should at no time be less than the indebtedness'of said Bank of Akron to the plaintiffs. On the 12th of January, 1852, a similar notice was addressed to the cashier of the American Exchange Bank, stating that $60,000 of the collection paper of the Bank of Akron was pledged as security for the loan of $50,00Q, and that it had been agreed that the amount of collection paper in the American Exchange Bank to be held for that purpose should at no time be less than that amount, so long as said indebtedness should exist.
After the loan of $50,000 liad been completed, the several-notes which had been given by McMillan and endorsed as cashier, were surrendered by the plaintiffs, and a new note for the whole amount of $50,000, signed by McMillan, and payable to his order as cashier, and duly endorsed, ivas delivered and accepted in lieu of the notes surrendered. This note bore interest at four per cent, payable semiannually.
On or before the 24th of October, 1854, $30,000 of the principal of this note had been paid, and all the interest thereon. The arrangement had been continued up to this time, and the weekly redemptions regularly provided for with the fupds of the Bank of Akron. Shortly after this the Bank of Akron failed to provide funds in the American Exchange Bank to meet the redemption of the bills loaned, and on the 11th of November, 1854, the plaintiffs demanded and received from the cashier of the last named bank the notes in question, which had been deposited there for collection by the Bank of Akron. These notes had been regularly discounted by the Bank of Akron and sent forward for collection to the American Exchange Bank, Avhere they were made payable. After they were received by the plaintiffs, they were left at the latter bank for demand and protest, and were finally sent to the plaintiffs, about the 4th of December, 1854, duly endorsed. On the 23d of November, 1854, the Bank of Akron committed an act of insolvency, whereupon, in pursuance of the laws of Ohio, all its property and assets vested in the State Bank of Ohio. It appears that the other officers of the Bank of Akron Avere wholly ignorant of this loan from the plaintiffs, and of the arrangements made for securing it, until a short time previous to the failure of the bank. The evidence tends to show that McMillan,, on pretence of obtaining a loan for the bank, had effected it on his own account, and used the funds for his own purposes, and that he had entered only a very small portion of the transactions between the two banks on the books of his own bank, and that the money received from the plaintiffs was credited to his individual account as it was received at the bank, and applied to his own individual use. It also appeared that McMillan had wrongfully appropriated a large amount of the funds of the bank to his own use. The packages of money sent, directed as aforesaid, were all received at the bank, opened and counted by the teller, put into the bank safe and paid out at its counter. The letters sent to McMillan, cashier, on the subject of the loan, were all received at the bank by the cashier or teller; whichever was present, and opened, read, and filed with the other correspondence of the bank. It also appeared that McMillan was the principal financial officer of the bank, and that he had the sole management and control of its affairs at and before the time of making the said loan, and up to a short time before the failure of the bank, when he resigned by reason of the discovery of his fraud. The president was in the habit of doing business at the bank, but made no investigation into its affairs, or inquiry as to the manner in which its business was conducted. The board of directors met twice in each year, January and July, but made, no examinations, trusting wholly to the cashier. The defendantâs evidence tended to show that the cashier had no authority to pledge the assets of the bank, without the consent of the board of directors. Upon the discovery of the fraud of McMillan, and his resignation, a new cashier was appointed, and the bank gave notice to the plaintiffs that it did not sanction the loan, and should hold them responsible for the money and the bills in question. It also appeared upon the trial that by a statute of the state of Ohio, in force when the loan was made and the money sent, it was made unlawful for any bank in that state â to issue, pay out or give in exchange for other money, so as to go into circulation in this (that) state, any circulating notes or bills except the notes or bills of the banks of this (that) state, issued according to law.â The statute also provided that all contracts, promises and agreements, founded in whole or in part upon the payment, exchange or putting forth of sdch bank notes contrary to the provisions of the act, should be held and adjudged utterly null and void. The plaintiffs, at the time of maldng the loan, had no knowledge of this statute. The written proposition of the cashier, McMillan,- which was accepted by the plaintiffs for the loan of their bank issues, contained no provision or stipulation' hi regard to the place where the bills were, to be paid out or circulated. The plaintiffsâ cashier, in his testimony, states that the inducement to their bank to make the loan at so low a rate of interest was the circulation of their bills; and he adds that âthe agreement was that the notes should be circulated in Ohio, and as we redeemed them, we were to be reimbursed for their redemption.â
When the plaintiffs rested, the defendant moved for a dismissal of the complaint, on the ground that the plaintiffs had shown no legal title to the bills in question, even if they were creditors of the bank. That McMillan was the principal debtor, and had no authority to endorse for the bank or to pledge its assets either for the debts of the bank or for his own debts. The motion was denied, and the defendantâs counsel excepted. Several exceptions were taken to the rulings of the judge in. the course of the trial by the defendantâs counsel, but no point was made upon them here.
When the evidence on both sides was closed, the judge directed the jury to find a verdict for the plaintiffs for the face ,of the bills, and interest; to which direction and ruling the defendantâs counsel excepted. The jury thereupon found a verdict in favor of the plaintiffs for $36,-541.95. The defendant made a case, with exceptions, and moved at the general term for a new trial, when the motion was denied, and judgment ordered for the plaintÂź; from which judgment the defendant appealed to this court.
C. C. Langdell, for the appellant.
I. McMillan had no power to borrow money of the plaintiffs on behalf of the Bank of Akron.
1. The cashier of a bank, as such, has no power to borrow money for the bank. That is a power intrusted exclusively to the board of directors. A cashier, or any other agent, undertaking to exercise such a power, must show that he has authority for that purpose from the board of directors. (Hallowell & Augusta Bank v. Hamlin, 14 Mass. 180; Hartford Bank v. Barry, 17 Mass. 97.)
2. There is nothing in the case to distinguish McMillan from ordinary cashiers, in respect to the power to borrow âąmoney. The charter of the Bank of Akron ' expressly declares that its affairs â shall be managed by not less than five nor more than nine directors,â and it does not recognize a cashier at all. Therefore, McMillan could derive no mthority from the charter. Nor does it appear that any authority was ever conferred upon him by resolution of the board of directors. Neither is the Question at all affected by the evidence respecting the mode of conducting the. business of the Bank of Akron. It is admitted that McMillan was the chief executive officer of the bank; but that did not enlarge his powers. Every cashier is presumed to be the principal executive officer of his bank, and to be clothed with all executive powers, but these do not include borrowing money. The fact that the directors did little or nothing is not material; the cashier derives no power to act from the inaction of the board of directors. The evidence should show what was done by the cashier; not what was left undone by the board of directors. It is true, McMillan testifies that he borrowed money for the bank, but he gives no particulars; it doe's not appear whether it was once or twice; whether it was with or without the' knowledge of the board of directors; whether it was by their authority or without it; whether they, approved or disapproved of it. No inference whatever can be drawn from a statement so entirely loose and vague. Nor did the plaintiffs make the loan in the belief that McMillan had any other powers than such as ordinarily belong to cashiers of banks; for they had no knowledge or information upon the subject. They dealt with McMil lan entirely upon the strength of a letter of introduction from the cashier of the American Exchange Bank.
3. Since the making of the loan, it has not been in any manner adopted or ratified by the Bank of Akron. As to any express ratification, it appears, without contradiction, that the directors of the bank were wholly ignorant of the loan until the 16th of November, 1854, and that, on the following day, their president, by their direction, wrote to the plaintiffs, repudiating the entire transaction in the most positive terms. Notwithstanding such ignorance, if the money borrowed had been applied to the use-of the bank, it could not, perhaps, have repudiated the debt, while retaining the benefits accruing from it. But here again the proof is uncontradicted that McMillan borrowed the money for his own use, and that not a dollar of it ever enured to the benefit of the «bank. In the case of Beers v. The PhĆnix Glass Company (14 Barb. 358), cited and relied upon in the court below, it not only appeared, from the previous course of business, that the secretary was fully authorized to borrow the money for which the suit was brought, but the facts proved warranted the presumption that the money was in fact borrowed for the company in good faith, and applied to its use. The defendants made no attempt to rebut this presumption; and, for any thing that appeared in the case, the loan may have been made with the full knowledge and sanction of the board of trus. tees. It is undoubtedly true, as a general proposition, that notice to an agent, as such, of a matter within the scope of his authority, is in law notice to the principal, as between the latter and the person giving the notice, for all the purposes for which the notice is given. But notice to an agent of matter not- within his authority, is no notice to his principal; and notice to an agent is never notice to his principal as between the latter and third persons, or as to any matters in reference to which the notice was not given. The present case furnishes an illustration of these distinctions. Thus, notice from the plaintiffs to McMillan, of any matters relating to the loan in question, would not affect the Bank .of Akron, for if McMillan had no authority to make the loan, he had no authority to receive any notice respecting it.. On the other hand, notice from the American Exchange Bank to McMillan, of any matter relating to the ordinary business between the two banks, would be notice to the Bank of Akron as to such business; but it would be no notice as to other distinct matters, nor any notice for any purpose as between the Bank of Akron and third persons.
II. Assuming the loan to have been valid and binding upon the Bank of Akron, the cashier had no power to pledge the property of the bank as security for its repayment. The fact that the property-consisted of negotiable paper,. is wholly immaterial, the rights of a subsequent bona fide holder not being in question. (Hoyt v. Thompson, 1 Seld. 320.)
III. Assuming that McMillan had power to borrow money for the bank, and to pledge its property as security for repayment, still, as he was committing a fraud upon the bank by borrowing money in its name for his own use, and pledging its property for the payment of a debt really his own, the plaintiff can not hold the property so pledged, they not being in the position of purchasers for a valuable consideration. To constitute one a purchaser for value, he must have parted with value on the faith of the. specific property in question, or on the faith of. other specific property for which the property in question has been substituted. The plaintiffs have clone neither. They parted with all the money nearly three years before the bills in question were in existence; nor' did they part with it on the faith of any other specific property for which these bills have been substituted. The most that can be said is that these bills were received in pursuance and execution of a previous contract; but that does not make the plaintiffs purchasers for value within the meaning of the rule. The contract was not applicable to any particular bills, and while it remained unexecuted it clearly created no lien upon anything whatever. It appears that the plaintiffsâ presiden! selected, such bills as he chose; but it is impossible that the mere election of the plaintiffs to take these bills instead of others, should make them purchasers for value. (Stalker v. McDonald, 6 Hill, 93.)
IY. The contract between the plaintiffs and the cashier of the Bank of Akron was illegal and void, as being in violation of a law of the state of Ohio, where it was to be performed. The plaintiffs, therefore, acquired no title to the bills sued on, having received them as security for a void and illegal contract. The case of Dewitt v. Brisbane (16 N. Y. 508), is directly in point to show that such would be the result upon a suit brought in the state of Ohio; and the case of Hyde v. Goodnow (3 Comst. 269), is in point to show that our courts will give the same effect to the laws of Ohio that the courts of Ohio would do, even as against our own citizens. Much more will they do so in a case like the present, where a foreign corporation is suing a citizen of Ohid in this state, upon a controversy to which this state and its citizens are total strangers, and in which they have not the slightest interest; and where the suit was commenced for the express purpose of withdrawing the controversy from the state of Ohio, where it properly belonged, and where it was already m train for adjudication. We have already shown that the plaintiffs are entitled to no particular favor from the courts of this state; but there are other reasons why they should not have been regarded even in the state of Ohio with that degree of favor which they seem to. have found in the court below. The real contest is not between the plaintiffs and the defendant (who has no real interest in the controversy), nor between the former and the Bank of Akron (which long since ceased to exist), but between the plaintiffs and the bona fide creditors of the Bank of Akron, of the validity of whose.claims there is no question, and who trusted the latter bank upon the credit of those assets which the plaintiffs seek to appropriate exclusively to their own use. The question is whether the assets of the Bank of Akron shall be appropriated, in the first instance, to the payment of a debt fraudulently contracted by McMillan for his own benefit, to the exclusion of the bona fide creditors of that bank, who had no participation in McMillanâs fraud, and are in no degree responsible for it. The plaintiffs urged .in the court below that the defendant should not be heard with favor, because he admitted that he owed the money to some one, and was volunteering a defense on behalf of other persons. But the plaintiffs having entrapped the defendant by serving process on him while passing through this state, he has taken the only course that he could take under the circumstances, with safety to himself and justice to others, viz: by defending the suit on behalf of the State Bank of Ohio, and at their expense. The consequence of any other course would have been either that the defendant would run the risk of paying the money twice, .or the State Bank of Ohio would have its rights adjudicated upon without a hearing.
B. W. Bonney, for the respondent.
I. The bills of exchange in suit were respectively accepted and endorsed by the defendant, and regularly discounted Tby the Bank of Akron. The defendant owes the amount of those bills, and admits his indebtedness, but denies that the plaintiff is the lawful holder of the bills or entitled to collect them. So far as appears in this action, he is the only person who questions the plaintiffâs title.
II. It is conclusively proved that the plaintiff, in February, 1851, at New Haven, in Connecticut, agreed to lend to the Bank of Akron $50,000, on the security of a pledge of bills of exchange, discounted by the Bank of Akron and sent to the "American Exchange Bank, in New York, for collection; that the sum of $50,000 was, pursuant to such agreement, advanced and lent by the plaintiff to the Bank' of Akron, and by order or letter addressed to the American Exchange Bank, that bank was advised that bills of exchange, discounted by and belonging to the Bank of Akron, sent to the American Exchange Bank for collection to the amount of $60,000, were duly pledged to the plaintiff to secure the payment of said loan; that in October, 1854, $20,000 of said amount loaned remained due to the plaintiff, and the bills of exchange now in question, which belonged to the Bank of Akron, and had been sent to the American Exchange Bank for collection, were received by the plaintiff from the American Exchange Bank under said pledge, and are now sought to be collected by the plaintiff as such pledgee.
HI. The bills in question are all regularly endorsed, and the plaintiffâs prirna facie title thereto is perfect.
TV", The pledge made to the plaintiff by the Bank of Akron authorized the plaintiff, at any time before said loan was paid off, to take and receive from the American Exchange Bank bills of exchange belonging to the Bank of Akron, sent to the American Exchange Bank for collection to an amount not exceeding $60,000, and, as such pledgee, to demand and collect such bills of exchange as the lawful holder thereof. ⹠» â
V. John W. McMillan, cashier of the Bank of Akron, had, as such cashier, authority to borrow money for the use of said bank, and to secure the repayment of the loan by pledge of the bills of exchange or other property of such bank. (Farmers and Mechanics' Bank v. Butchers and Drovers' Bank, 16 N. Y. R. 125, 133; Curtis v. Leavitt, 15 N. Y. R. 51, 62 to 66, 169, 219 to 223, 262, 267 to 270; Lafayette Bank v. State Bank of Illinois, 4 McLean's R. 208; Angell & A. on Corp. 5th edition, sec. 299, 300; Bank of Vergennes v. Warren, 7 Hill, 91; Commercial Bank of Buffalo v. Kortright, 22 Wend. 348; Hartford Bank v. Barry, 17 Mass. R. 94; Folger v. Chase, 18 Pick. 63.) Besides his implied authority as cashier, it is proved that said cashier, at the time of the transaction in question, was entrusted with and exercised the control of the Bank of Akron, and had the management of all its business.
VI. The contract for the loan in question was made at New Haven, in the state of Connecticut, and with reference to the laws of that State, and there the money was to be repaid. The contract must be construed, and its legality determined- by the law of the place where the contract was made, and where it was to be performed. (Curtis v. Leavitt, 15 N. Y. R. 91, 230, 296, and case's there cited; Babcock v. May, 4 Ohio R. 334, 348; Van Cleef v. Therasson, 3 Pick. 12.)
VII. There is no allegation or pretense that the contract between the plaintiif and the Bank of Akron violated any law of the state of Connecticut, or would be in that state invalid, -or that any right or interest of the state of New York, or of its citizens, can be thereby injured or impaired. The courts of the state of New York will, therefore, enforce the contract. (Merchants' Bank v. Spalding, 12 Barb. 302; Same case (in Appeals), 5 Selden, 53; McIntyre v. Parks, 3 Metcalf, 207; Pellecat v. Angell, 2 Cromp. Mees. & Rose. 311; Reznor v. Hatch & Langdon, 7 Ohio State R. 248, 255.)
VHI. There is no proof or ground for pretense that the plaintiffs, in the transaction with the Bank of Akron, intended to violate any law of the state of Ohio, or did any act intentionally to promote or aid any such violation; or even had knowledge that by any law of the state of Ohio, the circulation o'f the bills of foreign banks by the banks of Ohio was prohibited, and this action would be sustained in Ohio. (Merchants' Bank v. Spalding, 5 Selden, 53-63.)
IX. The court will not be astute to so construe the law or apply the evidence as to sustain the defense in this action. It is proved, and not denied, that the defendant owes the amount of the bills in suit, and that the plaintiff holds them for full consideration paid in good faith. The defense is, therefore-, unjust and inequitable, and, to be successful, must be fully and strictly made out. Every intendment will be against it.
X. There was no error in any ruling or decision of the judge presiding at the trial, nor in his direction to the jury' to render a verdict for the plaintiff. The judgment of the superior court was correct, and should be affirmed with costs and ten per cent damages.
[MAJORITY â Johnson, J.]
Johnson, J.
In the view I take of this case, it is wholly unnecessary to inquire whether the contract between the plaintiffs and McMillan, the cashier of the Bank of Akron, in pursuance of which the bills in question were endorsed to the plaintiffs, was in all respects valid and binding upon said bank, as between it and the plaintiffs. The bank of Akron is not a party to the action, nor is its legal representative, the State Bank of Ohio. The defendant claims no title -to the paper, and does not pretend to have any interest in it, except as a promisor-, liable to pay to any proper holder. There is no party before the court who has any legitimate 'interest in 'questioning the plaintiffsâ title, or who- has, as it seems to me, under the circumstances of this case, any right to be -heard on that question. There is no connection shown between the defendant and the State Bank of Ohio which represents the Bank of Akron. It is not shown or pretended that the defendant has been forbidden to pay the bills to the plaintiffs, or even requested not to do so; and, for aught that appears, the State Bank of Ohio acquiesces in the plaintiffsâ claim of title to these obligations. It is of no consequence whatever that the Bank of Akron undertook'to repudiate the transaction by giving .notice to the plaintiffs before its insolvency. All its rights, as the case shows, are now vested in the State Bank of Ohio, and the latter bank may, upon better advisement, conclude never to contest the plaintiffsâ claim. The legal presumption is that it does not .ntend to do so, as the contrary is not shown. The defendant stands here, therefore, as a mere volunteer, in behalf of others not before the court, and who make no claim on theirâown account. Confessedly he owes the debt. He has no defense, whatever, on his own account, and should he succeed in defending, on the grounds on which the litigation seems thus far to have proceeded, he may escape the payment of a just debt altogether. This the court should not allow in a case like this, except upon clear and well-established grounds. It will be time enough to determine whether any other person has a better title, when such person shall Ă©ome before the court to claim the bills in question, or their proceeds, from the plaintiffs. Upon what grounds, then, can the defendant, as a mere debtor, be permitted to defeat the action? It has been held that' if a defendant can show that the plaintiff obtained the note by his own fraudulent act, he has a right to defeat the. action on that ground, although he may be liable to pay the note to the true owner. (Talman v. Gibson, 1 Hall, 308.) Oakley, j., in delivering the opinion in that case, says: â This proceeds on the general doctrine that no man can acquire a right, by his own fraud, to sustain an action in any court; and it is a principle of general application.â In that case, however, it appears that the defense was set up for the defendant by one Hyslop, who claimed to be the true owner of the note and had demanded it of the plaintiff. The same principle was adopted by this court in Houghton v. McAuliffe, decided at the last December term (reported 26 Howardâs Practice Eeports, 270). The action was against the makers, who refused to pay on the ground of the illegality of the transfer to the plaintiff. It was held that the transfer of the note was contrary to the statute, and that the party who transferred it to the plaintiff was guilty of a criminal offense in obtaining the note, and could transfer no title to any one having notice that it belonged to another; and that the plaintiff, under the circumstances, must be deemed to have notice that the note belonged to the company to which it was given, and not to the person of whom he purchased it.
And so the finder of negotiable paper, or the thief who steals it, acquires no title, although either may transfer a good title to a bona fide purchaser. (2 Parsons on Notes and Bills, 265 to 270 inclusive, and cases there cited.) The same rule would, I suppose, apply to the case of one obtain ing such paper through any positive breach of law. But as I understand the rule, nothing short of actual malafides, or notice thereof, will enable a maker or endorser of such paper to defeat an action brought upon it by one who is apparently a regular endorser or holder; especially where there is no defense as to the indebtedness.
This rule is founded in the most obvious dictates of reason and sound policy, and should be inflexibly maintained. As to anything beyond the bona fides of the holder, the defendant, who owes the debt, has no interest. This was held in Gage v. Kendall (15 Wend. 640.) The defense in that case was, that the plaintiff did not own the note, although he appeared to be the endorser; and that the action had been commenced without his knowledge or consent, or any notice of, or assent to the pretended transfer to him. But it was held that the owner had the right to fill up the blank endorsement with any name he pleased, and the person whose name was thus used would be deemed on record as the legal owner; and that whether he was so in fact or not, he could sue as trustee for the real owner, and the defendant had no' concern with the question. The court sĂĄy it was not a case of mala fide possession, and remark: âWhy should, the defendant give himself the trouble to investigate the plaintiffâs title? He owes the money to some" one.â The principle of that case applies here, with full force. There is no ground for pretending that the plaintiffâs possession is mala fide. Upon the face of the .bills, their title is complete and perfect. They belonged to the Bank of Akron,' and were regularly transferred to the American Exchange Bank by the endorsement of McMillan as cashier of the Bank of Akron. He was the financial officer of the latter bank, and the only person who could thus transfer them. His authority to make such transfer ex officio for a legitimate purpose is undoubted. (Ang. and.Ames on Corp. 296; 2 Parsons on Notes and Bills, 7; Fleckner v. The Bank of the United States, 8 Wheat. 338.)
I do not understand that any question is made in behalf of the defendant in respect to the validity of the transfer to the American Exchange Bank; or .but that the defendant might have been compelled, by action brought by that bank, to pay the amount of the bills. The point is, that the cashier had no authority to pledge the bills while there to the plaintiffs as a security for the loan, and therefore the transfer by that bank under the authority, or by the direction of McMillan to the plaintiffs is void, and confers no title upon the latter. But it is very clear that the plaintiffs were acting in good faithâall the time supposing and believing that they were, in fact, dealing with the Bank of Akron, and with no one else, and took the bills in question without any-notice or suspicion of any fraudulent conduct, or excess of authority, on the part of McMillan, the cashier. That must be sufficient as against the defendant, who is without defense upon, the obligations themselves. And even if it should be held as between the Bank of Akron, or its legal representatives, and the plaintiffs, that the lat-. ter were bound to inquire into the authority of the cashier and take notice of its extent (as to which I shall express ' no opinion), it is a question which in no way concerns the defendant, and upon which he cannot be allowed to defend, and escape the payment of his obligations. . It is enough that the plaintiffs make out a title free from mala fides on their part, and which is every way sufficient for his protection. The issue, beyond that between the parties before the court, is wholly,immaterial; and if established against the plaintiffs, would constitute no defense to this action. The title is good as against the defendant, and that is sufficient. If there are any others who claim a title to the instruments superior to that of the plaintiffs, it can be determined whenever they come before the court to assert it.
The point that the whole transaction is void, as a positive breach of the laws of the state of Ohio, is untenable. The contract was not made in that state, and was not to be performed there; it was made in the state of Connecticut, and was to be performed there; and there is no pretense that it infringed any law of that state.
It was not an essential part of the contract that the bills of the plaintiffsâ bank should be circulated in the state of Ohio. The borrower might have circulated them elsewhere, or withheld them from circulation altogether, without any violation of the contract. It is quite possible that the plaintiffs might not be able to enforce their contract in the courts of the state of Ohio. As a general rule, no people are bound to enforce, or hold valid in their courts of justice, any contract which is injurious to their public rights, or offends their morals, or contravenes their policy, or via< lotes a public law. (2 Kentâs Com. 458.) Though I am inclined to the opinion that even then a contract of this kind would be enforced, notwithstanding their statute. It is quite certain that our courts would enforce it under similar circumstances against one of our own citizens. In this respect it would be analogous, in principle, to the cases of The Merchants' Bank of New York v. Spalding (5 Selden, 53); and Tracy v. Talmage (14 N. Y. R. 162.) Certainly it does not violate any law of Connecticut or of this state, and we could scarcely be expected to give any stich extraordinary effect in our courts to a statute of Ohio as to hold that the contract cannot be enforced here. My conclusion is that the judgment is right, and should be affirmed. .
All the judges concurring, judgment affirmed.