Commercial Investment Trust, Inc. v. Carrano

The controversy upon the trial turned upon the question whether the defendant, Carrano, had proved that Lawton was the agent of the plaintiff in receiving payments upon the car from Carrano. Carrano was the maker of the note in suit and Lawton the payee, who indorsed the note to the plaintiff on the day it was executed. The court charged that "the maker of a promissory note is charged with knowledge that the note is negotiable and may be transferred and indorsed by the person or firm to whom it is payable to some third person or indorsee, . . . and . . . if he made payments to the original payee . . . he did so upon his peril." To this no exception was taken.

Under the law thus stated, the maker of a note cannot indulge in the assumption that the payee of a note is an agent of an indorsee of the note to accept payment. If the maker pays the note to the payee and it develops that before such payment the payee had indorsed the note to a third party, the maker, in order to have such payments credited to him upon the note, must prove that the payee was the agent of the indorsee to receive payment. No presumption of a payee's authority to accept payment will assist the maker in establishing such agency. The maker may arrange with the payee to tender the maker's money to the holder as a payment on the note. Such an arrangement, by the maker with the payee, would not make the payee an agent of the holder to collect payments, but merely agent of the maker to make tender.

In support of his claim that Lawton was the agent of the plaintiff in his receipt of the payments on the car, Carrano testified that Lawton was present when he bought the car and executed the papers, and that Lawton stated to Carrano that he was the agent and authorized representative of the plaintiff, and also stated to him that if he would pay $40 or $45 per month on account of the note, this would be satisfactory to the plaintiff corporation, which he was then representing, and any additional payment required to make up said sum of $75.21 per month would be paid by Lawton.

The defendant further offered the evidence of Rubin, Lawton's sales agent, which he claimed tended to prove that Lawton collected and received money from other purchasers of automobiles in regard to which there were similar transactions, and that Lawton as a matter of custom collected moneys as the agent of the plaintiff from parties to whom he had sold automobiles under notes and conditional sale contracts of the same kind and character as those signed by the defendant; and Carrano testified that he was never notified by the plaintiff that payment should be made on the note to the plaintiff and not to Lawton, the payee.

The plaintiff offered evidence tending to prove that Lawton was not authorized by it to collect instalments from the defendant on this note, and that in the usual course of the plaintiff's transactions with automobile dealers like the one involved in this case, the dealers were not authorized by the plaintiff to collect payments on notes sold by the dealers to the plaintiff, and that the defendant had notice that the note involved in this action was to be paid at the office of the plaintiff by reason of the fact that this was stated on the face of the note; and that the plaintiff had sent to the defendant its customary notice that the note had been sold to it and that payments were to be made to the plaintiff; and that the plaintiff sent two telegrams to the defendant on May 22d and June 19th, 1924, which telegrams were to the effect that the defendant would lose the car unless he paid such instalment or instalments as were due. Carrano testified that he had received at least one telegram from the plaintiff, but that he did not understand it and did not seek an explanation of what it meant.

The appeal in this case involves (1) a claim of error in not granting the plaintiff's motion for a new trial because the verdict was against the evidence; (2) various claims of error in the admission of evidence, and in the refusal to charge as requested, and in the charge as made.

The alleged error in denying the motion for a new trial because the verdict was against the evidence, must be considered in view of the evidence admitted, and not in view of such evidence as was in fact admissible. Viewing the evidence from that standpoint, there was no error in denying the motion.

Upon the trial the plaintiff produced in chief as a witness, Henry Rubin, who testified that as sales manager for E. C. Lawton he sold the car in question to Carrano, and that the signature on the note in suit was that of Carrano, and that the signature on the back of the note was that of E. C. Lawton.

The defendant, on cross-examination, then asked Rubin: "Q. At that time what arrangement did you make with Carrano about payments for the automobile?" The plaintiff objected to the question because not cross-examination and not material. The court overruled the objection. At the time of this objection the note and conditional sale contract were in evidence. The conditional sale contract contained a provision as to the amount due and its payment. The note and contract in the hands of the plaintiff were not subject to change by any unauthorized arrangements by Rubin and Carrano; hence the matter was immaterial, also the question was clearly not cross-examination. There was error in this ruling. The witness Rubin, against the objection of the plaintiff, was allowed to testify to other matters, on the assumption that he was the agent of the plaintiff. This was also error. Such an assumption, without any evidence or promise to produce evidence of the fact, was improper. No question of discretion arises here as to the order of the reception of evidence.

On cross-examination by the defendant, Rubin was further asked, in substance, whether Lawton had other sale agreements on automobiles and was collecting money and forwarding it to the finance corporation at that time? Over an objection of the plaintiff, the question was admitted, as showing the usual custom, in order to prove agency on the part of Lawton for the plaintiff in this transaction. Disregarding the obvious fact that this was not cross-examination or properly admissible upon the assumption above mentioned, was such evidence proper evidence under the situation to prove that Lawton was an agent of the plaintiff?

Evidence of agency in a given case may sometimes be supplied by proof of agency on other occasions. Mechem on Agency, Vol. 1 (2d Ed.) § 262. See also Wigmore on Evidence, Vol. 1 (2d Ed.) § 377. Evidence of such a nature should not be admitted unless a foundation is laid by definite proof of other transactions sufficient to show a regular course of business from which an inference of agency in a like transaction might reasonably be inferred. The testimony of Rubin in this case as to the conduct of Lawton in like transactions lacks the definiteness required. There was error in the ruling.

The defendant testified on the trial and was asked, in substance, if Lawton told him that he (Lawton) was the agent of the plaintiff. An objection to this method of proving Lawton's agency was overruled. This was error. Agency cannot be proved by statements of a claimed agent, that he is such an agent. Mechem on Agency, Vol. 1 (2d Ed.) § 285.

There are six claims of error as to the charge as given, numbered seven to twelve, inclusive.

In claimed error numbered seven, the court charged, in substance, that when Carrano made a payment to Lawton, on July 29th, which paid the note in full, without securing the note, he was in fact relieved of further liability, if, under the facts found, he was justified in believing in good faith that he was dealing with an authorized agent. The vital question was whether he made the payment to an agent of the plaintiff, not whether he was justified in believing he was dealing with an authorized agent; there was no claim that the plaintiff was estopped from claiming that Lawton was not its agent in regard to payments.

In the eighth claimed error, the court charged, in substance, that in judging whether Lawton was the agent of the plaintiff and why Lawton made such an assertion (that he was agent), the jury should consider: "is it reasonable to suppose that he did so without having authority to do so?" The question to be decided was whether Lawton in fact had authority as agent of the plaintiff, not what it was reasonable for Carrano to suppose as to Lawton's authority from Lawton's statement. This was a question to be determined by the evidence of the conduct of the plaintiff, not by the conduct of Lawton. There was error in the eighth assignment.

As to the assignments of error relating to the portions of the charge quoted in the ninth, tenth, eleventh, and twelfth assignments of error: in view of the changes that will take place in the evidence admitted on a new trial, no useful purpose would result from a discussion of such claimed errors. The same considerations lead us to forbear to discuss the claimed errors in refusing to charge as requested.

There is error and a new trial is ordered.

In this opinion the other judges concurred.