President of the Salem Bank v. President of the Gloucester Bank

Parker, C. J.,

delivered the opinion of the Court ⁽⁴⁵⁾.

The first objection made to the verdict in this case is, that as the notes declared upon were made upon paper belonging to the Gloucester bank, were filled up and subscribed by the cashier, and were in all respects perfect, except in the signature of the president, and as they had got into circulation by means of the carelessness of the officers of the bank, they ought to be considered as the notes of the corporation, even if the name of the president was feloniously put to the notes by some person into whose hands they fell; and that the jury ought to have been so instructed.

The judge considered the signature by the president essential to the validity of the notes, and so instructed * the [ * 26 ] jury; but that, under the circumstances, it was incumbent on the defendants to disprove the signature.

We think this opinion correct. The notes were incomplete unless signed by the president; the act of incorporation itself making that signature an essential circumstance to make the note evidence of a promise on the part of the corporation.

It is then objected that the observation of the judge, relative to the comparison of the supposed with the genuine signatures of Mr. Somes, the president, was incorrect, and had an unfavorable bearing against the plaintiffs.

But as it appears that witnesses were examined to the point, and divers specimens of the genuine hand-writing of Somes were proved by the plaintiffs, who had possession of those specimens, it was quite proper to remark to the jury that the presumption was, that a comparison would be unfavorable to the plaintiffs’ cause on this point.

But a point more insisted on is, that the conduct, declarations, and doings of the officers of the bank were such as to render the corporation liable upon these notes, whether originally theirs or not. The directors, when the notes were presented, hesitated, but did not absolutely refuse payment; and they did not declare that they were counterfeit, but, on the contrary, seemed to believe they were genuine.

The case of Price vs. Neale was cited in support of the position, but does not maintain it. The money in that case had been paid by Price on a bill, in which the drawer’s name was forged ; and it was held that he should not recover the money back, because he was supposed to have knowledge of the drawer’s hand-writing; and should have satisfied himself before he paid the money. By paying the money he lulled the holder of the bill into security, and probably deprived him of the opportunity of resorting to the person of whom he took it. It was held not to be against conscience in the defendant Neale, to retain the money, which had been voluntarily paid him. Had Price * accepted the [ * 27 ] bill, and been sued on his acceptance, he would probably have been held liable. But the case here is different. The notes are presented to the officers of the bank as the notes of tneir corporation. They do not pay, but hesitate, and finally decl-ne If they had known them to be forged, and had not declared the forgery as the cause of their refusal to pay, they might have been answerable on the ground of fraud, or perhaps of adoption. But they were as ignorant as the plaintiffs were, and hesitated with a view to obtain knowledge. This cannot be considered an adoption of the notes, and ought not to make them liable.

The cases in 3 Esp. 60.—4 Esp. 226.—2 Campb. 450.—6 Taunt. 76, may be considered as recognizing the principles of Price vs. Neale.

When, however, a man is taken by surprise, and acknowledges a signature to be his, which turns out to be forged, he may avoid any liability by proving the forgery; as in 3 Esp. 60, and 10 Mass. Rep. 39. In which latter case, although the reason is not stated in the opinion of the Court, it may be inferred from the facts proved, that the acknowledgment of the signature was hasty and inadvertent; and without doubt the age of the party attempted to be charged had some influence on the decision. But in either of these cases, had the money been paid, that would have been such a deliberate act, that, according to the general course of authorities, it may be doubtful whether it could have been recovered back, both parties being equally innocent.

There is another class of cases, having a close analogy to these, but yet admitting of a sensible discrimination; where the party having taken a false note or bill, seems to be entitled to indemnity from the party paying it, although wholly ignorant of the want of value of the paper, in which he made his payment. Thus, where a man who has purchased articles of merchandise, pays for them in counterfeit bank notes, he shall be held to make the f * 28 ] vendor * good; because, in fact, he had not paid that which the parties believed to be money, or current as such, being of no value; as in the case of Young vs. Adams. So of a bill of exchange or promissory note discounted, which turns jut to be a forgery, as in the case of Jones vs. Ryde & Al.

In cases like the first, the party contracts by implication to pay the value of the articles which he purchases, and fails to do it; and in the other case he undertakes to sell a thing of value, which turns out to be different from what it purported to be, and worthless. In these cases there is an implied warranty that the thing delivered is what it purports to be. Negligence, however, and delay, by which the innocent payee or vendee is prevented from seeking redress from antecedent parties, would be likely to affect the right of action ; for after a reasonable time has elapsed, without any call or complaint, the receiver would be held to have waived his strict rights against a party wholly innocent.

According to the cases cited, it would seem, if upon presentation of the counterfeit bills to the Gloucester bank, they had paid, the money could not have been recovered back; because they were bound to know the proper bills of their own bank, and having received them as such, they must abide the loss, rather than throw it upon a party who had not the same means of knowing, and who took the bills as good. But payment was refused; and the question now is, whether the bills were so acknowledged, recognised, and adopted, as to make the corporation liable.

It has been seen that individuals may be held in such cases, if they countenance or adopt a spurious signature. There is a difficulty in applying the same rules to corporations. The directors are the agents of the company ; the officers are its servants. The duties of both are pointed out by statute, or prescribed in the by-laws, which are the promulgated will of the company. Acting within the limits of the authority thus given, the company is liable for their acts; but beyond those limits, they cannot bind their * principals. Surely the promise of a cashier, made [ * 29 ] without authority, to pay a sum of money, for which the company had received no compensation, could not bind them ; nor could the directors create such a liability. In such cases, the person dealing with the officers of a bank must be presumed to know the extent of their authority. If they promise more than they are authorized, they may be personally answerable, but cannot pledge their principals.

The various acts and declarations, which go to constitute adoption or ratification, are inferior evidence of a promise; and if a direct and express promise will not bind, any thing short of that cannot have a greater effect. The case of Wyman vs. The Hallowell and Augusta Bank, 14 Mass. Rep. 58, recognizes a distinction between acts of an agent for his principal in common cases, and similar acts done by the servants or officers of a corporation. And there is reason for this distinction; for in the first case, the extent of the authority is known only between the principal and the agent; whereas, in the latter, the authority is created by statute, or is matter of record in the books of the corporation, to which all may have access who have occasion to deal with the officers.

But even ordinary agents are limited by the authority expressly given, or growing necessarily out of the business transacted. Any thing oeyond that is void as against the principal, unless ratified by him. Now, to show an analogy between officers of corporations and the agents of merchants or others, it should be shown, when any thing has been done beyond the plain authority delegated, that the corporation itself has done some act significative of approbation or adoption. But nothing of the kind took place in the case under consideration.

In certain things the directors of a bank have all the authority of the corporation vested in them by a vote; and in respect to such things, the engagement, express or implied, of the body [ * 30 ] of the directors will bind the corporation. * But in matters not entrusted to them, their undertaking or assent cannot be binding upon any but themselves. Directors are not authorized to pay money for a bank which it does not owe; and, therefore, no act of theirs, tending to create an obligation to that effect, can be operative.

But even on the supposition that a direct engagement, or that acts or declarations on the part of the body of the directors, would amount to an adoption, by which the company was to be bound, the evidence reported falls much short of this condition of things; nothing having been done or said by any of the directors, tending to show a disposition to pay the notes, if forged; nor were the circumstances known which made them questionable. If the plaintiffs have suffered by the equivocal conduct of the defendants, it is not entirely without fault on their side. For the refusal, or even the hesitancy to pay, furnished reason enough to look to those from whom the bills had been received.

We think, then, that on this point the direction to the jury was right. For although it was a question of fact whether there was an adoption or not, yet, as a verdict for the plaintiffs must have been set aside for want of legal evidence to support it, a new trial ought not to be granted. _

Another ground of liability, viz., the negligence of the officers of the bank in so keeping the paper prepared for the signature of the president, as that it was stolen and put into circulation with his name forged, was the subject of an action on the case, which for convenience has been argued as a distinct point of this case.

Whatever might be the opinion of the Court, in the case of a direct damage, happening to any one in consequence of the negligence or mismanagement of the officers of a bank; we are clear that, for the indirect and remote consequence of the [ * 31 ] negligence in this case, the corporation is *not answerable. The notes, as they lay in the bank, were harmless, and could impose upon no one. They are in fact waste paper, until they receive the signature of the president. In this situation they are stolen, and they are made to resemble a bank note, by the felonious act of the thief, or of some person associated with him. Why should the corporation be answerable for notes thus fabricated ' The negligence of their officers was the cause of loss to none but themselves; and it is only by superadding forgery to negligence, that harm is done. The negligence may be theirs, but the forgery is not; and it is not easy to see any equity in obliging them to pay for the crimes of another. As well may it be said that if a bank note be filled up by the cashier, intended to be issued as a one dollar note, and a space be left large enough to insert the word hundred, and the word be fraudulently inserted, it became the note of the bank for one hundred dollars.

There has been no case cited which maintains such a principle , and we perceive no ground for it in reason or justice. In all cases of negligence which are the foundation of actions, it is believed the injury complained of is the direct and immediate consequence of the fault. Causa propinqua, non remota, spectatur. If, because these notes, left carelessly in an unfinished state, were stolen, and the president’s name forged to them, the corporation are bound to pay them; then, also, if the paper not filled up at all had been stolen and so used by the felon, the corporation would have been liable. But this would be strange doctrine. If a merchant should prepare promissory notes or bills of exchange for his signature, upon an expected contract, and should leave them in his desk, and some one should steal them and forge his name, can it be supposed he would be obliged to pay them ? If not, why should a bank under similar circumstances be liable ? The law is the same in this respect, for an individual and for an incorporated company.

Principals are generally liable for the misconduct of * their agents, masters for that of their servants, but only [ * 32 ] for the direct effect of that misconduct. If, by the negligence of a merchant’s clerk, property committed to his care be damaged or stolen, the merchant would doubtless be answerable; because the negligence is the cause of the damage, and he is bound, upon the principles of the contract of bailment, to take the best possible care of the goods so committed to him. But if his own property should be stolen and adulterated, so that a purchaser is cheated, can it be supposed that he would be answerable, because the mischief might be traced back to the negligence of his servants? Or, should he even be prevented from reclaiming the property stolen from him, if the purchaser could prove that the servants carelessly left open the door, by which the thief entered ?

There is no instance in the books of any liability like that which is contended for in this case. The only case, which has any resemblance to it, is that of Herbert vs. Paget, 1 Lev. 64, where the keeper of the records was held answerable for an alteration in them, although made without his knowledge, and which he could not prevent. But this was decided by two judges only against Twisden; and the two rested their decision upon the strict principle that the defendant, having undertaken as a public officer to keep the records at his peril, was answerable for them. But neither the cashier of the bank, nor the corporation, are public officers. The latter are merely copartners, authorized by law to act as a body, by a corporate name, and are no otherwise amenable to the public than as may be provided in their act of incorporation.

According to the principles of the cases cited, as well as the general principles of law applicable to the case before us, we are satisfied that the verdict is right in the action which was submitted to the jury; and that in the action between the same parties, which is case for negligence, the nonsuit was rightly ordered.

(45) Putnam, J., did not sit in the hearing or determination of this action, being interested in the event.