Merchants' Bank v. Central Bank

By the Court

Nisbet, Judge.

There are two counts in the plaintiff’s writ: one founded on the bill of exchange, the other for money had and received. The testimony proves that the bill was discounted by the Central Bank, at the instance of Scott Cray, for the Bank of Hawkinsville ; that the money was paid to him, and deposited in the agency of the Hawkinsville Bank at Macon, to the credit of Jerry Cowles, the drawer ; and that two-thirds of it was applied in extinguishment of a debt due by him to the Hawkinsville Bank; the balance, Mr. Cowles was permitted to cheek out. Under this state of facts, if it is conceded that the Merchants’ Bank of Macon is not liable to pay this bill, upon the endorsement of Scott Cray, yet it is, in our opinion, liable upon the common count, upon principles ex aquo et bono.

If a person, assuming to act as the agent of a corporation, but without legal authority, makes a contract, and the corporation receive the benefit of it, and use the property^ acquired under it, such acts will ratify the contract, and render the corporation liable thereon. — Angell and Ames, 2d edit. 178; 8 Cowen, 25; Story on Agency, sect. 162; 1 Pick’g, 372; 7 Cranch, 299; 19 Johns. R. 60; 4 Wend. 624; 5 Wheat. 334. It is contended by the plaintiff in error, that an act of an agent, to be binding upon bis principal, must be done in the name of the principal; and, inasmuch as the name of the principal does nowhere appear on this bill, it cannot be evidence to charge the principal, tho Merchants’ Bank of Macon, formerly the Bank of Hawkinsville. The bill is payable to the order of Scott Cray, agent; drawn by J. Cowles, upon the cashier of the Fulton Bank, New York ; acceptance waived, and endorsed “ Scott Cray, agent.”

paper as agent for some person, or corporation, but who, or what, does not appear. The name of his principal docs not appear. The general rule is this : in order to bind a principal, on a contract made by an agent, it must purport, on its face, to be the contract of the principal; and his name must be inserted in it, and signed to it. It is not enough, that the agent bo described as such in the instrument.— Story on Agency, sect. 147; Paley on Agency by Lloyd, 180, 181, 182; 2 Kent, 629, 3d edition.

This rule applies, more particularly, to solemn instruments under seal; and as to them, to use the language of judge Story, it is “ regularly true,” but not universally true in all its extent. For, so far as regards instruments under seal, there are some exceptions to some of the requirements of the rule. Although the rule is thus strict as to sealed instruments, yet a more liberal rule obtains as to unsolemn instruments, especially commercial and maritime contracts. In such cases, in furtherance of the public policy of encouraging trade, if it can, upon the whole instrument, be collected, that the true object and intent of it arc, to bind the principal, and not merely the agent, courts of justice will adopt that construction of it, however informally it may be expressed. — Story on Agency, sect. 154. This is a commercial contract, not under seal, and comes under the rule last laid down. If an agent, in % parol contract, intends to bind his principal, and appears to act us agent, the principal is bound. — Wheaton’s Selwyn, 823, note 5, Am. ed.; 2 Fairfield, 267; 8 Pick. 56; Angell and Ames, 235-6—7.

It may bo stated generally, that where it appears from the lace of the paper, that the credit is not given to the agont, and the name of principal is disclosed at the time of the transaction, and the act is within the powers of the agent, the principal is bound. The question whether the agent is bound, does not affect this question, for there are many cases whore both principal and agent are bound. Now, it is apparent on this bill of exchange, that it was the intent of the parties to bind Scott Cray’s principal: else why make it payable to him as agent, and why take Ids endorsement as agent ? It is still more manifest that he does appear to act as agent. The testimony upon the trial, too, is, that the name of his principal was disclosed to the Central Bank at the time the bill was discounted. We hold, too, that upon parol contracts, where the intent is not sufficiently clear that the principal is to be bound, the defect can be supplied by parol testimony. ' A party cannot be discharged, who is apparently liable on the contract, but a now party may be introduced by parol. — Ang. and Ames, 236-7; 5 Wheat. 326; 1 Cowen, 536; 12 Mass. R. 240; 1 Cranch, 345; 6 Adolphus and Ellis, 486; 8 Meeson and Welsby, (Excheq.) 440. See, also, Story on Agency, 190, 191, 334-5—6.

The testimony on the trial shows that it was the intent of the parties to bind the Bank of Hawkinsville by this endorsement.

The second assignment of error is, that this bill of exchange is not evidence against the defendant, because it is not signed by the president and countersigned by the cashier, as is required by the 8th section of the charter of the Bank of Hawkinsville. That section declares, that the funds of the company shall, in no ease, be liable for any contract or engagement whatever, unless the same shall be signed by the president and counter signed by the cashier of the corporation. —Prin. 108. This provision is found in most of the bank charters of this State, and if construed to apply to bills of exchange, checks, and drafts, as well as to all the contracts or engagements of the banks implied in law, then there will be introduced an entire change in the manner of doing bank business in Georgia. Indeed, then it would be hardly possible to bank at all. There is nothing in the form of a contract, expressed or implied, that is not comprehended in the sweeping phraseology of this section. Neither the banks themselves, nor the courts, nor tbe mercantile community, have held it to aj}ply to the ordinary business contracts of the corporation. Upon the interpretation contended for by the plaintiff in error, no bank would be liable for its deposits; nor upon any of that large class of engagements which, in mercantile affairs, result by implication or operation of law. This is not all; credit, which is based upon character, upon good faith, upon honor, and which constitutes the soul of commerce, would be no longer an element in banking.

For fhis would be substituted, in all cases, when practicable, the president’s signature and the cashier’s certificate. Who would deal with a bank which, in bar of its cashier’s checks, drafts, or endorsements, could successfully plead the absence of its president’s signature ? What company, with honest purposes, would accept a charter, if the franchises conferred were to be enjoyed solely upion the condition that no' engagement, of ‘any kind, could be entered into but in writing thus formally authenticated. If it be a privilege to a bank, to be bound only by contracts in writing, signed by its president and countersigned by its cashier, then common honesty, as well as her interests, would compel her to make no other. The privilege contended for by the plaintiff in error, would work an estoppel to banking in Georgia. Thus we arrive at the conclusion, that the Legislature did not intend, in these comprehensive words, to defeat the very objects contemplated in this charter. The whole .act must bo construed together ; all parts of the charter must stand, if possible, and the different parts must be made to harmonize. We cannot suppose that tho Legislature intended to confer banking privileges, and in the very act which confers them, insert a clause which, in the form of guardianship, or protection, practically annuls the charter.

In the judgment of this court, tho clause of the charter does not apply to such contracts or engagements as occur in, or are neeessary to, the ordinary business of a cashier or agent (Ang. and Ames, 231-2; 5 Wheaton, 326) ; such as drawing or endorsing bills of exchange, checks, and drafts. These acts appertain, according to commercial law and usage, to the office of a cashier. The record discloses that Mr. Cray was the general agent of the Bank of Hawkinsville, at Macon. Ho possessed, as such, more than the power which ordinarily belongs to a cashier. He had charge of the agency of the bank at Macon, virtute officii ; therefore, ho was clothed with all the powers of a branch of the Bank of Hawkinsville. Among those powers, certainly, is the power to discount bills of exchange (Angell and Ames, 243-4-5) ; to deal in bills, was no doubt the prime object of creating an agency at Macon. He was held out to the public as the general agent of the Bank of Haw-, kinsville, at Macon ; and being so held out, the bank was bound by all his acts, done within the scope of that agency, even although restricted, as to certain acts, by secret instructions. There is no doctrine bettor settled than this. It is the doctrine of the Roman, as well as the commercial law. — See 12 Wheaton, 70; 1 Harris and Gill, 392; 3 Mason, 505; 21 Wend. 296 ; Ang. and Ames, 222, 234, 238 ; Story on Agency, sec. 126-7-8. Also, wc hold that, in the absence of any express power to draw and discount and endorse bills of exchange, that the Bank of Hawkinsville was liable upon this endorsement, according to the principles just stated; but if this were not so, it is liable, because the order of tiie board of directors expressly clothes Mr. Cray with power to draw and discount bills of exchange. The power to discount confers the power to endorse'. Wherever an agent is empowered to do a particular thing, he is also empowered to nse the means necessary to accomplish it. The means are included in the power. — Story on Agency, sec. 77, A power to discount hills includes a power to endorse. — Story on Agency. sec. 59; Bayley on Bills, 5th ed. chap. 2, 7. In the Mechanics’ Bank of Alexandria vs. the Bank of Columbia, reported in 5 Wheaton, 326, there is a construction put upon the Sth section of the charter of the Bank of Hawkinsville, by the, Supreme Court of the United States— we say a construction put upon this section, because that case arose under the provision of a bank charter almost identical with it. The provisions of the two charters are in all material particulars the same. The words of the charter of the Mechanics’ Bank of Alexandria are ; “ All bills, bonds, notes, and every other contract or engagement on behalf of the corporation, shall be signed by the president and countersigned by the cashier, and the funds of the corporation shall in no case bo liable for any contract or engagement, unless the same shall be so signed and countersigned as aforesaid.” By comparing this section with the provisions of the charter of the Hawkinsville Bank, herein-before recited, their substantial identity will be seen. The Supreme Court, in this ease, determined that tlie clause of the charter of the Mechanics’ Bank of Alexandria did not apply to a cheek drawn by its cashier, or to contracts implied in law.

The third ground of error is, that Scott Cray exceeded all the powers conferred upon him specially, and also all the powers of a general agent, in endorsing this bill, because it does not appear from the evidence, that the bill had ever been the properly of the plaintiff in error.

The bill being made payable to the agent of the plaintiff in error, and in the hands of his immediate endorsee, the only fair inference is, that it was discounted at the instance of the plaintiff in error; and if presented by the plaintiff in error for discount, it is equally clear that he was the owner. Ownership may bo inferred, too, from the fact of endorsement. The bill itself affords evidence enough of ownership, to cast upon the defendant, in the court below, the burden of disproving it. The testimony, however, as to the ownership, is not confined to the bill itself. It is in evidence, by parol, that Mr. Cray went to Milledgeville by direction of the president of the bank, for the purpose of procuring a discount from the Central Bank, and that while there, under' an arrangement with Mr. Cowles, the drawer, this bill was put into his hands to be discounted at the Central Bank — that it was presented by him, discounted, and the money paid to Mr. Cray. The ownership of the bill was a fact for the jury to determine upon the evidence submitted to them; they have passed upon it, and it is not the business of this court to disturb their finding.

.The fourth ground of error was abandoned by the counsel for the 'plaintiff in error.

The fifth ground of error is, that the plaintiff did not prove demand of the drawee and notice to the endorser, and therefore they were not entitled to recover.

Bearing in mind the circumstance's under which this bill was discounted at the Central Bank, it will also be remembered that the action upon it was brought by the Central Bank against the Merchants’ Bank of Macon ; who had by endorsement negotiated it to the plaintiff. It is contended by counsel for the defendant in error that, by the charter of the Central Bank, demand and notice was not necessary 5 and in this opinion of the learned counsel, this court coincides. The 20th section of the charter of the Central Bank declares: “ The directors of said bank shall not require town endorsers upon any note or obligation made payable at said bank, when the country endorsers are deemed amply responsible to secure the payment of the same, and no notice or protest tehall be necessary to charge any endorser, nor shall any charge be made by any notary public, for noting for nonpayment, or protesting anynote due at said bank.” — Prin. Dig. 74. This section, by its terms, is claimed, and we think rightly, to apply only to notes and obligations made payable at the Central Bank. Section 26th of the charter provides, that in “ all suits commenced by said corporation upon any note, bill, bond or obligation, upon which there shall be any endorser or endorsers, the maker or makers, together with the endorser or endorsers, or their representatives, may be embraced and sued in the same action, and no proof of notice, demand, or protest, shall be required on any trial, to authorize a recovery.” These sections repeal the law-merchant, requiring demand and notice to charge endorsers, in all the cases contemplated by them. This is so, or language has no meaning. The Central Bank is founded on the public funds ; it is the financial agent of the State; and with a view to the greater security of those funds, and to the greater facility of collecting the debts due it, and the consequent increased efficiency of the institution as a fiscal agent, these preliminary steps to charge endorsers were’ dispensed with. One of the objects of the organization of the Central Bank, was relief to the people by accommodation loans ; in consideration of which, it was no doubt thought but reasonable to withhold the right to notice which the law gave to endorsers. Be these thiiigs as they may, it was clearly the right of the State, in organizing a banking institution upon her own funds, to proscribe file conditions upon which the public should deal with that institution. These conditions are embodied in the charter, and arc made known to the world. Without feeling under obligation to give a good reason, for all the laws of the State, wo do feel it to bo the paramount duty of this court to enforce them, if they arc constitutional. Now, whosoever takes the privileges of this institution, takes them cum, onere ; and one of the burdens which ho assumes is, to give an endorser or endorsers, who shall be liable without notice. Nor is it incumbent upon us to demonstrate the convenience of the law, when there is no doubt in our minds as to what the law is ; it is sufficient for us to say, “ lta lex scripta est.” We do not deny that arguments “ abinconvenient! ” are legitimate aids to construction, in eases where the moaning and intent of the law is doubtful, and where other approved rules of construction have failed sufficiently to elucidate it. In the present case, we cannot say that we have a reasonable doubt about the meaning of the two sections under review. The limitation in the 20th section, which confines its operation to notes or obligations made payable at the Central Bank, is not found in the 26th. That enacts, that in all suits, commenced by the corporation upon any note, bill, bond, or obligation, the maker may bo joined in the action with the endorser or endorsers, or their representatives ; and it farther declares, that no proof of demand, notice or protest shall be required in any trial to authorize a recovery. Now this was a trial of an action on a bill; upon which, the charter declares, no proof of notice, demand or protest shall be necessary to authorize a recovery. In the teeth of this very plain provision, the plaintiff in error contends that proof of demand and notice was necessary to authorize a recovery. The counsel for the plaintiff in error, in his able argument, insisted that the 26th section applied only to cases where the maker and endorsers are sued in the same action; that is, inasmuch as the section permits a joinder of those parties in the first division, therefore, the distinct enactment in the second division is limited in its application to trials where there is such joinder. We think this is a non sequitur, and that the latter division is as general as it would be if it stood alone in the charter.

There is in fact no necessary connection between the two divisions. The language used is, no proof of demand, notice or protest should be necessary in any trial, neither on a trial of a joint action or any other. All trials, and therefore this, are embraced in the general language of the act.

By the 25th seetion, the amount of loans to any one person, or body corporate, or society, or collection of persons, is restricted to $2,500. In 1838, the Legislature authorized the bank, for the purpose of remitting money to pay the interest on the State debt, to purchase exchange beyond the amount of $2,500, to which their loans were limited by the charter. This bill was' discounted under the act of J838. It is contended, then, farther by the counsel for the plaintiff in error, that this debt was not contracted under the charter ; but being contracted under a law of the Legislature, the general law as to notice, and not the charter, governs the contract, and, if so, the notice was necessary. The law of 1838 is a repeal of the charter, so far as it limits the amount authorized to be loaned to any one person, and permits the bank to purchase exchange in sums greater than $2,500. To this extent it repeals the charter, and no farther. It does not repeal that provision of the charter which dispenses with proof of demand, and notice and protest. Nor is the act of 183S in conflict with that provision ; if it were, it would be repealed by implic ation. It is said that this bill is not made payable at the Central Bark, and therefore is not subject to the provision of the charter dispensing with demand and notice. The answer to this idea is, that the 26th section applies to all bills, bonds and notes and obligations, whether payable at the bank or not. Again : it is contended that, inasmuch as this bill is not pr y-able at the Central Bank, the endorser could have no means of knowing that it would be discounted there ; but must needs infer that it would be subject to the general law of the land, and therefore it ought not to be brought wftfpn the provisions of the charter, as to demand and notice. This reason! ¡g amounts to this, that the charter itself is a fraud upon an endorser so situated. But how can this be so ? This bill is payable at ninety days, and is drawn upon a bank in New York : the endorsement was a voluntary act. It was liable to be negotiated at any bank in the State, and as well at the Central Bank as anywhere else — the charter of that bank, as well as the act of 1828, authorizing it to deal in exchange. All the provisions of that charter are presumed to be known to the endorser. The Bank of Hawkinsville was presumed to know that the Central Bank could discount this bill; and, if it did, it was exempted from the usual necessity of demand and notice ; for the charter, being a public law, is notice to the world of all its provisions. The endorsement was made therefore at the risk of the paper falling into the hands of the Central Bank: it was made, subject to that form of liability which the law creates in that event. It is quite immaterial what may have been the expectations or understanding between the drawer and endorser, as to i he destination of this bill, unless the Central Bank was a party to them ; for in that event only would it be bound by them. • But the facts of this case preclude the application to it of the reasoning which we have endeavored to silence. This bill was presented by the endorser at the board of the Central Bank for discount; it was discounted for the benefit of the Bank of Hawkinsville ; the money raised upon it was in fact paid to the endorser. It (the Bank of Hawkinsville) became voluntarily a dealer with the Central Bank, with notice of the fact that demand and notice was not by her charter necessary to charge the endorser. It endorsed the bill to the Central Bank. It therefore made with the Cenfral Bank a contract, into which that provision of the charter which dispenses with notice entered. The Bank of Hawkinsville is estopped. It cannot, in the face of its own contract to the contrary, claim the benefit of want of notice.

A party dealing with a bank, with knowledge of its usage in contravention of the general commercial law, will be .bound by the usage. — 9 Wheat. 584. With stronger reason will a party be bound by the chai ter of a bank, whose provisions are in conflict with the usual rules of commercial law. An argument, ab inconvenienti, against the construction of the charter for which we contend, is drawn from the power which sucha construction would give to the Central Bank to charge an endorser, in cases where be is discharged by want of notice. Thus, the holder of an endorsed paper fails to give notice, and the endorser is discharged ; he paper is then transferred, to the Central Bank, which, under its charter, notwithstanding, collects the money out of the endorser. Such a case would not come within the 26th section; not because it would not be embraced in its terms, but because the rights of the endorser being fixed by the law regulating his contract, the subsequent ownership of the paper by the Central Bank could not divest those rights. The Central Bank would buy the paper, subject to the law, which, up to the time of her becoming the holder, governed it. She would become the transferree of a paper upon which the endorser is discharged, and would acquire no more rights against him than if his name had never been on it. Would she, then, in such a case, be required to show notice or be nonsuit ? Certainly not. She is relieved by the charter from the obligation to prove notice, upon all trials. But, she being the holder of a paper transferred after due, the defendant is let into his defence. That defence is, that before the bank became the owner of the note or bill sued on, he was discharged for want of notice. We have no doubt but that the defence would ba triumphant; and thus the general law, regulating the rights of endorsers and the special provisions of the charter, would harmonize. Whether this be considered an inland or foreign bill, we do not find it necessary to decide, as we believe the bank charter dispenses with notice in either case.

Nor dowedeem.it necessary to express any opinion as to what would be the rule, according to the law-merchant, upon the sixth and last ground of error, to wit: that the protest itself, being the highest and best evidence, the court erred in admitting the evidence of the notary.

The charter is very explicit; no proof of demand, notice, or protest, is necessary in any trial to a recovery.

Let the judgment of the court below be affirmed.