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which does not disentitle the plaintiff to re value, notwithstanding such holder, at the cover, since it alleges that the notes were time of taking the instrument, knew him to delivered by the association to the Old Town be only an accommodation party.” It is obBank "as collateral security for advances to vious from the above language of the Code, be made by it to the association"; and in and from that of Maitland's Case, that an Maitland v. The Citizens' Bank, 40 Md. 562, accommodation note, taken for value and be17 Am. Rep. 620, it is said that “every per fore maturity, is taken bona fide; and what son is within the rule, and entitled to the we have said respecting the tenth plea is protection of a bona fide holder for value, equally applicable to the eleventh plea. The who has received the note in payment of a twelfth plea is based upon the alleged exprecedent debt, or has taken it as collateral ecutory agreement between the defendant security for a precedent debt, or for future and the association, which is sufficiently statas well as past advances.” The Old Town ed in the earlier part of this opinion. The Bank, therefore, as well as the plaintiff, is plea avers knowledge by the plaintiff of the presumed to be a holder for value; and in terms of this agreement when the notes Cover v. Myers, 75 Md. 419, 23 Atl. 850, 32 were taken, but contains no averment of Am. St. Rep. 394, the court said: "Where breach and notice of breach before the plaina negotiable instrument is originally infected tiff took the notes, and parted with its monwith fraud, invalidity, or itality, the title ey on their faith and credit. Upon princiof the original holder blino destroyed, the ple, it would seem that this must constitute title of every subsequent holder which re a fatal defect in the plea, and the authoriposes on that foundation, and no other, falls ties sustain this view. The rule is stated with it. But if any subsequent holder takes thus in U. S. Nat. Bank v. Floss (Or.) 62 Pac. the instrument, in good faith and for value, 751, 84 Am. St. Rep. 752: “The breach of an before maturity, he is entitled to recover on executory agreement which forms the considit, and so any person taking title under him eration of a negotiable note is not a defense, may recover, notwithstanding such latter in whole or in part, against an indorsee who holder may have knowledge of the infirmities took the note for value, before maturity, of the instrument; and all that is required even if he had notice of the contract, unless of the holder in such case is that it be proved he was also informed of the breach before that he, or some preceding holder or indorsee, its purchase.” In Davis v. McCready, 17 under whom he claims, acquired title to the N. Y. 233, 72 Am. Dec. 461, the reasons upon paper before maturity, bona fide, and for which this rule rests are well stated in an value." And this view of the law has since opinion by Judge Denio. In that case the been formulated in section 77 of article 13. consideration for the acceptance of a bill of We find no error, therefore, in the ruling as exchange was the sale of a brig, accompanied to this plea. The only difference between by an executory agreement of the vendor to the tenth and eleventh pleas is that the latter make such repairs as would render her seaalleges these notes were given to the as worthy. The defense was that this agreesociation for its accommodation, and that this ment had not been performed, but the court fact was known to the plaintiff. But this said: “The plaintiffs were not bound to foldoes not alter the case, nor destroy the ne low up the transactions between the original gotiability, in fact, of paper which was made parties to the bill. To hold otherwise would negotiable in form for the accommodation of attach an inconvenient and repugnant condithe party receiving it, for, as was said in tion to such an acceptance. By accepting, Maitland v. Citizens' Bank, supra: “The simply and unconditionally, a negotiable bill, result of all the well-considered cases upon the defendants are to be held as intending the subject is that it is no defense that the to give it all the qualities of commercial note sued on was known to be an accommo paper, one of which is that it shall circulate dation note between the maker and the payee, freely for the purposes of business, and be provided the plaintiff took the note for value, available in the hands of any holder for bona fide, before it was due. The reason is, value. To decide that one who proposed to as stated by Mr. Justice Story, that the very purchase it, and who had a knowledge of object of any accommodation note is to en the transaction upon which it was given, able the party accommodated, by sale or ne must await the consummation of that transgotiation, to obtain a free credit and circula action, would essentially impair its chartion of the note; and this object would be acter and legal effect.” So in Arthurs v. wholly frustrated unless the purchaser, or Hart, 17 How. 6, 15 L. Ed. 30, the supreme other holder for value, could hold such a court of the United States said: “It is true, note by as firm and valid a title as if it were the plaintiffs knew at the time they took the founded in a real business transaction." And paper that it was given as part of the price section 48 of article 13 of the Code declares of a sugar mill, and that the mill had been that: “An accommodation party is one who defectively constructed; but they also knew has signed the instrument as maker, drawer, that the defendant, upon the promise of the acceptor or indorser, without receiving value builders to make the necessary repairs, had therefor, and for the purpose of lending his agreed to accept the bill unconditionally, and name to some other person. Such a party is had accepted it accordingly. They knew, liable on the instrument to a holder for therefore, that he looked to this undertaking
for indemnity, and not to any conditional performed.
Where the execution liability upon the acceptance; and the trans or indorsement of negotiable paper is' necesaction wbich is brought home to the plaintiff sary or customary in the transaction of the lays no foundation, in law or equity, to im business, authority in the agent may be impeach the paper in their hands." We are plied.” “Parol evidence is admissible to show of opinion, therefore, that the demurrer was the authority of an indorser's agent to incorrectly overruled, as to all the pleas to dorse.” Miller v. Moore, 1 Cranch, C. C. which it was addressed.
471, Fed. Cas. No. 9,584. “A corporation The demurrer having been overruled, the may confer authority by parol upon an ofplaintiff put in evidence the certificate of the ficer to issue or indorse negotiable paper." incorporation of the association, and of the Odd Fellows v. Sturgis Bank, 42 Mich. 461, amendment thereto, showing that it was a 4 N. W. 158. “The implication of power trading corporation, with large and varied arises where the act falls under the customs powers, incorporated December 5, 1899, with and usages of business within the officer's a capital stock of only $1,000, but that by sphere of duty." 1 Daniel on Neg. Inst. sec. amendment certified February 27, 1900, the 396; Farmers' & Mechanics' Bank of Kent capital stock was increased to $250,000. The Co. v. Butchers' Bank, 16 N. Y. 125, 69 Am. plaintiff also proved payment of the proper Dec. 678. Special reliance is placed by debonus tax upon the original and amended cer fendant on the case of The City Electric tificates of incorporation, and then proved by Street R. W. Co. v. First Nat. Exchange Miles W. Ross that he was a clerk in the Bank (Ark.) 34 S. W. 89, 31 L. R. A. 536, 54 employment of the association, at its prin Am. St. Rep. 282, where it is said: “Unless cipal office, in Baltimore city, from February the authority is expressly conferred by the 7, 1900, to September 4, 1900, when it went charter, or given by the board of directors, into the hands of receivers; that during the it may be stated as a general proposition, that period of his employment the association re the president and secretary of a corporation ceived notes, checks, and drafts, all of which are not empowered to bind it by their sig. were indorsed by J. B. Councilman, treasurer; natures to commercial paper. that he knew Mr. Councilman's signature; Where the authority of the president and and that the name of the association was al secretary is challenged, as it has been by the ways indorsed with a rubber stamp. The answer in this case, that authority should be two notes sued on were then shown him, shown by the proof, and not be presumed as indorsed, "The United Milk Producers' As matter of law.” And in The Floyd Acceptsociation of Baltimore City, Jas. B. Council ances, 7 Wall. 666, 19 L. Ed. 169, Justice man, Secy. and Treas.," by a rubber stamp, Miller said: “The person dealing with the and “J. B. Councilman, Treas.;" and he testi agent, knowing that he acts only by a dele. fied that he recognized this signature as Mr. gated power, must, at his peril, see that the Councilman's, and that the name of the as paper on which he relies comes within the sociation was indorsed in the usual way, power under which the agent acts, for it with a rubber stamp. These two notes were is to be kept in mind that the protection then offered in evidence by plaintiff, and were which commercial usage throws around negoadmitted over defendant's objection, and to tiable paper cannot be used to establish the this ruling the first exception was taken. authority by which it was issued or indorsThe defendant contends that a corporation ed.” Accepting fully both those authorities, can only make such contracts as are au we think they in no way affect the present thorized by its board of directors, and that case. In Credit Co. Limited, v. The Howe such contract is then made through an agent, Machine Co., 54 Conn. 357, 8 Atl. 472, 1 Am. whose authority can only be shown by a St. Rep. 123, the strong court of that state vote of the board. But this is too general held that drafts accepted by the treasurer of and broad a statement of the law on the sub- a corporation are presumed to be properly acject. It is true that, in the absence of ex cepted by the corporation, there being no cirpress authority conferred by charter or by cumstances to indicate fraud or illegality; law, there is no power inherent in the office and, in an action by the holder against the of secretary or treasurer that would enable
corporation as acceptor, the burden of proof him to make or indorse promissory notes in is upon the defendant corporation to show the name of the corporation; but, on the that the plaintiff had knowledge that the acother hand, to hold that, for every transac ceptances were for accommodation, and that tion of this character, it is necessary to he was not a bona fide holder for value. In show a vote of the board, no matter what the course of the opinion in that case, Judge may be the custom of the corporation in this Carpenter said: "A preliminary question of regard, would be to take an untenable posi some importance is, on whom was the burden tion. Thus, in vol. 1 (2d Ed.) Amer. & Eng. of proof? In the pleadings the defendant asEnc. of Law, p. 1032, it is said: "The power sumes that burden, and properly so, upon of an agent to draw and indorse negotiable principle. The drafts apparently may be for instruments must, as a general rule, be ex a legitimate purpose.
As there is some prepressly conferred, yet in some cases it is sumption that all parties act properly and necessarily implied from the duties to be within the scope of their powers, the plaintiff
establishes a prima facie case when it pre the offer of proof does not propose to show sents the drafts, duly drawn and accepted; that the facts were communicated to Mr. there being no circumstances indicating fraud Haines officially, to be brought by him to the or illegality. And so are the authorities. knowledge of the board; and it is settled Edwards on Bills, 686, 689; Daniel on Neg. in this state, however the law may be elseInst. 626, 662; 1 Parsons on Notes & Bills, where, that the sound and safe rule on this 255.
The course of dealing by the subject is that notice given to a director of defendant shows clearly the treasurer had an incorporated institution privately, or power to accept drafts, but it is claimed that, which he acquires from rumor, or through under the circumstances, he had no power to channels open alike to all, and which he does accept these particular drafts. Obviously the not communicate to his associates at the authority or want of authority in the treas board, will not bind the institution, U. S. urer to accept these drafts depended, not Ins. .Co. v. Shriver, 3 Md. Ch. 388; Genl. upon the nature of the act, but upon the Ins. Co. v. U. S. Ins. Co., 10 Md. 523, 69 Am. attending facts and circumstances. That he Dec. 174; Gemmell v. Davis, 75 Md. 553, 23 had power to accept drafts under some cir Atl. 1032, 32 Am. St. Rep. 412. It follows cumstances is not denied. Hence, if they that there was no error in excluding this were drawn on account of the defendant's offer of evidence. business, or to draw out of the treasury The defendant then proved by Geo. R. money which belonged to the drawer of the Gehr that he had been the plaintiff's cashier draft, the power of the treasurer to accept since 1895, and that his bank took the two them must be conceded." And to the same notes sued on, on June 7, 1900, and that he effect is Nat. Bank of Battle Creek v. Mal had agreed on June 6th, over the telephone, lan, 37 Minn. 404, 34 N. W. 901, and Beach to take them; that he received them from on Corp. sec. 189. There is much in the rea Mr. Wilcox, cashier of the Old Town Bank, soning of the Connecticut case above cited and that they had sent two drafts to the which strongly commends itself to us, but it Old Town Bank, payable to it; and that he is not necessary for us to determine here up had paid the Old Town Bank the proceeds on whom the burden of proof lies in such re of the note. On cross-examination he was spect, since here the plaintiff assumed that then shown a note for $5,000 made June burden, and offered evidence showing the 6, 1900, by the association, payable to the course of dealing by the defendant, and that order of James B. Councilman, treasurer, at it was accustomed to receive notes, checks, the Old Town Bank, 90 days after date, and and drafts which were habitually indorsed by indorsed, "J. B. Councilman, Treas.;" and this the secretary and treasurer under the same note was offered in evidence, and was adcircumstances and in the same manner that mitted over the objection of the defendant, these notes were indorsed. Both upon prin and to this ruling the third exception was ciple and authority, we think these notes taken. The ground of this objection is that were properly admitted in evidence.
defendant did not introduce this note, or The plaintiff then, by Miles W. Ross, prov. interrogate the witness respecting it, and ed that the signatures to a note for $5,000 therefore it was not a proper subject of crossthen shown him were the signatures of W. examination. Under ordinary circumstances, B. Crother, president, and J. B. Council it is true that in this country the cross-ex: man, treasurer, known to him, and that the
amination can only relate to facts and cir. note was indorsed by J. B. Councilman,
cumstances connected with the matters stat. treasurer. He was also shown certain pass ed in the direct examination of the witness, books, which he identified as the passbooks
and that, if a party wishes to examine a of the association with the Old Town Bank, witness as to other matters, he must do so by and the plaintiff then closed its case. The
making the witness his own, though the rule defendant then offered to prove by himself in England is that, where a witness is called the alleged agreement set forth in the twelfth to a particular fact, he may be cross-ex. plea, and to follow it up with proof that amined upon all matters material to the issue. Granville Haines, who was the president of But the rule indicated has its qualifications, the plaintiff at the time these notes were and much must be left to the discretion of taken, had notice of the terms and condi
the presiding judge in the determination of tions of said agreement. The plaintiff ob this question. 3 Jones on Evidence, sec. 821. jected, and the second exception was taken to “One of the objects of the cross-examination the rejection of this offer. If the demurrer is to elicit the whole truth of transactions to the twelfth plea was correctly sustained, only partly explained, and the rule limiting it would follow that the exclusion of the
the inquiry to the general facts stated in the facts therein alleged, when offered in evi direct examination must not be construed dence, could work no injury to the defend as to defeat the real object of the crossant. Moreover, this offer of proof was made examination.” Idem. Here the defendant as a whole, and it could be of no avail to inquired into the circumstances under which prove the alleged agreement, without proof, the plaintiff took the two notes sued on, and also, of such knowledge by Mr. Haines as any circumstances connected with and exwould bind the plaintiff'; and it is seen that plaining the taking of those notes would seem
to come within the qualification of the rule identified by Mr. Ross, and which showed, above stated. The author just quoted, cit among other debits and credits, the follow. ing numerous cases, says: “Unless a trial court should so far overstep the bounds as to
Dr. admit that in cross-examination which clear June 7th, 1900.
$5,000 00 ly has no connection with the direct testi
Dis., $75 83.
$4,924 17 mony, an appellate court would not be justi To this offer the defendant objected, but fied in reversing a judgment for such cause, the objection was overruled, and the passespecially where the cross-examination is up books were admitted; and this constitutes on facts competent to be proved under the the eighth exception. The books being adIssues in the case." Here the matter thus in mitted, Schultz identified them, and testified quired into was the foundation of the whole that the entries of that date, including the transaction, and the notes inquired of by one above set forth, were in the handwrit. defendant were collateral thereto. Under ing of Mr. Price, one of the tellers of the these circumstances, the discretion of the Old Town Bank. He was then asked to trial judge must be upheld.
"state what were the discounts under June The fourth and sixth exceptions were tak 7th," to which the defendant objected, but en to a continuation of the cross-examina the objection was overruled; and this contion begun and referred to in the third ex stitutes the ninth exception. These passception, and which related to the circum books had been previously identified by Mr. stances under which the $5,000 note of the Ross, and only the entries of June 7, 1900, association was taken, and how the proceeds the date when it had been already shown this of said note were paid to the Old Town Bank, $5,000 note was received by the plaintiff from and it follows from what we have said that the Old Town Bank, were offered in evidence; there was no error in these rulings.
and we can perceive no reason why they The fifth exception was taken to the ad should not have been admitted, in order that mission in evidence of a letter of June 6th the jury might determine therefrom, so far from Wilcox, cashier of the Old Town Bank, as these entries threw any light upon the to Gehr, cashier of the plaintiff, referring to transaction, what the parties understood and the $5,000 note of the association above men intended it to be. Not having made these tioned. We think it was error to admit this entries himself, however, and not professing letter, because its effect was to admit the to have any actual personal knowledge of unsworn statement of a third party to prove what these items represented, we think it that the note was to be discounted, and that was error to allow him to state what he unWilcox had charged plaintiff with proceeds derstood them to represent. He could only of that note, less 91 days' discount; one of draw deductions from the entries themselves, the questions at issue being whether the or, as he says in his answer, “argue that the note was discounted or sold. But we do not particular $5,000 item, with discount of think its admission constitutes reversible er $75.83, referred to the note of June 6th for ror, because, after that exception, in con that amount, because that was the correct tinuing the cross-examination of Gehr, which discount for 91 days.” But it was the provwe have said was properly allowed, the plain ince of the jury to draw this inference from tiff proved, without objection by the defend all the facts in evidence, including these enant, through a letter of June 7th from Gehr tries. Again, however, we think the error to Wilcox, that his letter of the 6th inst. was a harmless one, because these entrics, was received, and that he had credited “$4, unexplained by Schultz, or in any manner, 924.17, pro. of note disctd."; that being the necessarily tended to show the identity of exact amount which Wilcox, in his letter, the $5,000 note in evidence with that therein said should be the proceeds of the note which referred to as subject to discount of $75.83; he sent "to be discounted."
and it is not reasonable to ask an appellate The seventh exception was taken to the court to find that any inference of the jury allowance of a question asking what had was drawn from the inference of Schultz, been paid on the collateral notes, and this rather than from their own unaided common question was addressed in rebuttal to the sense, as applied to the meaning apparent cashier of the plaintiff. If sufficient had from the face of the entries. been paid on these notes to discharge the At last, then, we come to the ruling on $5,000 note, it is obvious there could be no the prayers brought up by the tenth exceprecovery on the two notes here sued on.
tion. The plaintiff offered two prayers, which There was therefore no error in allowing the were granted, and the defendant offered five, question Indeed, under our previous rul which were rejected. The substance of both ing, this question might have been asked as the plaintiff's prayers is that if the two notes part of the cross-examination. The plaintiff sued on were executed by the defendant and then proved by James R. Schultz that he had delivered to the association, and before their been in the employment of the Old Town | maturity said notes were indorsed in blank Bank for three years, and continued so dur by said association, and delivered, with other ing the year 1900; and plaintiff then offered notes similarily indorsed, to the Old Town in evidence the passbooks of the association Bank, and if the $5,000 note of said associawith the Old Town Rank, which had been tion of June 6, 1900, was indorsed in blank
by the secretary and treasurer, and was de that the amount of the discount was the livered to the Old Town Bank, and was dis legal rate for 91 days,-the time that the counted by the plaintiff, for the Old Town note ran. "To 'discount paper,' as underBank, upon the faith and credit of the two stood in the business of banking, is only a notes sued on, together with the other notes mode of loaning money, with the right of similarly indorsed, and delivered with said taking the interest allowed by law in ad.. two notes, as collateral security for said vance." Vol. 2 (2d Ed.) Amer. & Eng. Enc. $5,000 note, and the proceeds of said $5,000 of Law, p. 469. This term has been defined note were paid by plaintiff to said Old Town by this court, in almost the same exact lanBank, and there was still due and unpaid on guage, in Weckler V. First Nat. Bank, 42 said $5,000 note a sum greater than the Md. 592, 20 Am. Rep. 95, where Judge Miller amount due upon said two notes, then the says: “The ordinary meaning of the term plaintiff is entitled to recover. The second 'to discount is to take interest in advance, prayer of the plaintiff also instructs the jury and, in banking, is a mode of loaning monthat there was no evidence legally sufficient ey. It is the advance of money not due till to show bad faith on the part of the plain some future period, less the interest which tiff in receiving said notes. We think the would be due thereon when payable.” Only theory and form of these prayers correct, the legal rate of interest would be due on and that they were properly granted, and that the principal when payable, and thus Judge the defendant's special exception thereto on Miller's definition of the term is shown to the ground that there was no evidence to be the same as that given above. If the show that the $5,000 note, or the notes sued legal rate were exceeded, a presumption on, were discounted, was properly overruled. might arise that the parties intended or the The abstract principle embodied in the de law implied a sale, rather than a discount, fendant's first prayer is correct, if it were because a sale (between ordinary parties, at so framed as to require merely the same pre least) would be legal at any rate of deducponderance of evidence required of every tion agreed on; but, where a bank discounts plaintiff in all essential matters of proof on paper at a rate exceeding that allowed by his part. But we think, it was correctly re law, the transaction would be within the jected, for the reason assigned in the plain usury law. Being of opinion that there is in tiff's special exception thereto, viz., that it this case no legally sufficient evidence to was calculated to lead the jury to suppose show a purchase of these notes, or of the that full power and authority to indorse the $5,000 note, we have no occasion to consider notes sued on could only be expressly con the conflict between the decision in Lazear's ferred, and that the evidence of implied au Case and those decisions of the United States thority arising from the custom proved, and supreme court, upon section 5136 of the Nafrom ratification by acceptance of the pro tional banking act [U. S. Comp. St. 1901, ceeds of the $5,000 note, which the prayer p. 3456), in Nat. Bank v. Matthews, 98 U. ignored, was insufficient to prove such au S. 626, 25 L. Ed. 188, and Nat. Bank v. Whitthority. The defendant's second, third, ney, 103 U. S. 99, 26 L. Ed. 561, cited with fourth, and fifth prayers are all based upon apparent approval in Heironimus v. Sweeney, the theory that there was evidence proper to 83 Md. 160, 34 Atl. 823, 33 L. R. A. 99, 55 be submitted to the jury to show that the Am. St. Rep. 333, in an opinion concurred in $5,000 note and the two notes sued on were by the full bench, as well as the later case sold to, and were not discounted by, the of Nat. Gloversville Bank v. Johnson, 104 plaintiff; that such purchase was not within U. S. 271, 26 L. Ed. 742. In the still more rethe corporate powers of the plaintiff; and cent case of Danforth V. The Nat. State that such defense was open to defendant, and Bank, 1 C. C. A. 02, 48 Fed. 271, 17 L. R. A. precluded recovery by the plaintiff. But we 622, it was held that cases could not be disdo not find that there is any legally suffi tinguished, where the title to the paper is cient evidence that the transaction was a sale, transferred by an indorsement imposing the and the plaintiff specially excepted to all these ordinary liability upon the indorser, from prayers on that ground. In Lazear v. Union those where it is transferred by indorsement Bank, 52 Md. 78, 36 Am. Rep. 355, there was without recourse, or by mere delivery. In such evidence. The court says on page 124, United German Bank v. Katz, 57 Md. 141, 52 Md., "The evidence shows that Winches this court reviewed the case of Lazear v. ter & Son, note and bill brokers, were em Nat. Union Bank, supra, and distinguished ployed by Lazear Bros. to sell the note of it from the case before them; holding that June 22, 1872, to any purchasers willing to the doctrine of ultra vires is not applicable buy, and that it was sold to the appellee, to executed contracts, which the court said, over the counter of its banking house, at "by the plainest rule of good faith, should nine per cent. discount, for Lazear Bros., be permitted to stand.” In that case it the drawers, who received the proceeds of was held that the United German Bank sale.” Here the evidence of the plaintiff's had no authority to discount promissory cashier, Gehr, who was put upon the stand notes, but the court said: “It does not follow, by the defendant, is that the $5,000 note was as a consequence of this view, that, because discounted (the note sued on being shown to the appellant exceeded its legitimate powers be among the collateral given therefor), and in procuring this note by discounting the