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which does not disentitle the plaintiff to recover, since it alleges that the notes were delivered by the association to the Old Town Bank "as collateral security for advances to be made by it to the association"; and in Maitland v. The Citizens' Bank, 40 Md. 562, 17 Am. Rep. 620, it is said that "every person is within the rule, and entitled to the protection of a bona fide holder for value, who has received the note in payment of a precedent debt, or has taken it as collateral security for a precedent debt, or for future as well as past advances." The Old Town Bank, therefore, as well as the plaintiff, is presumed to be a holder for value; and in Cover v. Myers, 75 Md. 419, 23 Atl. 850, 32 Am. St. Rep. 394, the court said: "Where a negotiable instrument is originally infected with fraud, invalidity, or i gality, the title of the original holder be destroyed, the title of every subsequent holder which reposes on that foundation, and no other, falls with it. But if any subsequent holder takes the instrument, in good faith and for value, before maturity, he is entitled to recover on it, and so any person taking title under him may recover, notwithstanding such latter holder may have knowledge of the infirmities of the instrument; and all that is required of the holder in such case is that it be proved that he, or some preceding holder or indorsee, under whom he claims, acquired title to the paper before maturity, bona fide, and for value." And this view of the law has since been formulated in section 77 of article 13. We find no error, therefore, in the ruling as to this plea. The only difference between the tenth and eleventh pleas is that the latter alleges these notes were given to the association for its accommodation, and that this fact was known to the plaintiff. But this does not alter the case, nor destroy the negotiability, in fact, of paper which was made negotiable in form for the accommodation of the party receiving it, for, as was said in Maitland v. Citizens' Bank, supra: "The result of all the well-considered cases upon the subject is that it is no defense that the note sued on was known to be an accommodation note between the maker and the payee, provided the plaintiff took the note for value, bona fide, before it was due. The reason is, as stated by Mr. Justice Story, that the very object of any accommodation note is to enable the party accommodated, by sale or negotiation, to obtain a free credit and circulation of the note; and this object would be wholly frustrated unless the purchaser, or other holder for value, could hold such a note by as firm and valid a title as if it were founded in a real business transaction." And section 48 of article 13 of the Code declares that: "An accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a party is liable on the instrument to a holder for

value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party." It is obvious from the above language of the Code, and from that of Maitland's Case, that an accommodation note, taken for value and before maturity, is taken bona fide; and what we have said respecting the tenth plea is equally applicable to the eleventh plea. The twelfth plea is based upon the alleged executory agreement between the defendant and the association, which is sufficiently stated in the earlier part of this opinion. The plea avers knowledge by the plaintiff of the terms of this agreement when the notes were taken, but contains no averment of breach and notice of breach before the plaintiff took the notes, and parted with its money on their faith and credit. Upon principle, it would seem that this must constitute a fatal defect in the plea, and the authorities sustain this view. The rule is stated thus in U. S. Nat. Bank v. Floss (Or.) 62 Pac. 751, 84 Am. St. Rep. 752: "The breach of an executory agreement which forms the consideration of a negotiable note is not a defense, in whole or in part, against an indorsee who took the note for value, before maturity, even if he had notice of the contract, unless he was also informed of the breach before its purchase." In Davis v. McCready, 17 N. Y. 233, 72 Am. Dec. 461, the reasons upon which this rule rests are well stated in an opinion by Judge Denio. In that case the consideration for the acceptance of a bill of exchange was the sale of a brig, accompanied by an executory agreement of the vendor to make such repairs as would render her seaworthy. The defense was that this agreement had not been performed, but the court said: "The plaintiffs were not bound to follow up the transactions between the original parties to the bill. To hold otherwise would attach an inconvenient and repugnant condition to such an acceptance. By accepting, simply and unconditionally, a negotiable bill, the defendants are to be held as intending to give it all the qualities of commercial paper, one of which is that it shall circulate freely for the purposes of business, and be available in the hands of any holder for value. To decide that one who proposed to purchase it, and who had a knowledge of the transaction upon which it was given, must await the consummation of that transaction, would essentially impair its character and legal effect." So in Arthurs v. Hart, 17 How. 6, 15 L. Ed. 30, the supreme court of the United States said: "It is true, the plaintiffs knew at the time they took the paper that it was given as part of the price of a sugar mill, and that the mill had been defectively constructed; but they also knew that the defendant, upon the promise of the builders to make the necessary repairs, had agreed to accept the bill unconditionally, and had accepted it accordingly. They knew, therefore, that he looked to this undertaking

for indemnity, and not to any conditional liability upon the acceptance; and the transaction which is brought home to the plaintiff lays no foundation, in law or equity, to impeach the paper in their hands." We are of opinion, therefore, that the demurrer was correctly overruled, as to all the pleas to which it was addressed.

The demurrer having been overruled, the plaintiff put in evidence the certificate of the incorporation of the association, and of the amendment thereto, showing that it was a trading corporation, with large and varied powers, incorporated December 5, 1899, with a capital stock of only $1,000, but that by amendment certified February 27, 1900, the capital stock was increased to $250,000. The plaintiff also proved payment of the proper bonus tax upon the original and amended certificates of incorporation, and then proved by Miles W. Ross that he was a clerk in the employment of the association, at its principal office, in Baltimore city, from February 7, 1900, to September 4, 1900, when it went into the hands of receivers; that during the period of his employment the association received notes, checks, and drafts, all of which were indorsed by J. B. Councilman, treasurer; that he knew Mr. Councilman's signature; and that the name of the association was always indorsed with a rubber stamp. The two notes sued on were then shown him, indorsed, "The United Milk Producers' Association of Baltimore City, Jas. B. Councilman, Secy. and Treas.," by a rubber stamp, and "J. B. Councilman, Treas. ;" and he testified that he recognized this signature as Mr. Councilman's, and that the name of the association was indorsed in the usual way, with a rubber stamp. These two notes were then offered in evidence by plaintiff, and were admitted over defendant's objection, and to this ruling the first exception was taken. The defendant contends that a corporation can only make such contracts as are authorized by its board of directors, and that such contract is then made through an agent, whose authority can only be shown by a vote of the board. But this is too general and broad a statement of the law on the subject. It is true that, in the absence of express authority conferred by charter or bylaw, there is no power inherent in the office of secretary or treasurer that would enable him to make or indorse promissory notes in the name of the corporation; but, on the other hand, to hold that, for every transaction of this character, it is necessary to show a vote of the board, no matter what may be the custom of the corporation in this regard, would be to take an untenable position. Thus, in vol. 1 (2d Ed.) Amer. & Eng. Enc. of Law, p. 1032, it is said: "The power of an agent to draw and indorse negotiable instruments must, as a general rule, be expressly conferred, yet in some cases it is necessarily implied from the duties to be

performed.

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or indorsement of negotiable paper is necessary or customary in the transaction of the business, authority in the agent may be implied." "Parol evidence is admissible to show the authority of an indorser's agent to indorse." Miller v. Moore, 1 Cranch, C. C. 471, Fed. Cas. No. 9,584. "A corporation may confer authority by parol upon an officer to issue or indorse negotiable paper." Odd Fellows v. Sturgis Bank, 42 Mich. 461, 4 N. W. 158. "The implication of power arises where the act falls under the customs and usages of business within the officer's sphere of duty." 1 Daniel on Neg. Inst. sec. 396; Farmers' & Mechanics' Bank of Kent Co. v. Butchers' Bank, 16 N. Y. 125, 69 Am. Dec. 678. Special reliance is placed by defendant on the case of The City Electric Street R. W. Co. v. First Nat. Exchange Bank (Ark.) 34 S. W. 89, 31 L. R. A. 536, 54 Am. St. Rep. 282, where it is said: "Unless the authority is expressly conferred by the charter, or given by the board of directors, it may be stated as a general proposition, that the president and secretary of a corporation are not empowered to bind it by their signatures to commercial paper. Where the authority of the president and secretary is challenged, as it has been by the answer in this case, that authority should be shown by the proof, and not be presumed as matter of law." And in The Floyd Acceptances, 7 Wall. 666, 19 L. Ed. 169, Justice Miller said: "The person dealing with the agent, knowing that he acts only by a delegated power, must, at his peril, see that the paper on which he relies comes within the power under which the agent acts, for it is to be kept in mind that the protection which commercial usage throws around negotiable paper cannot be used to establish the authority by which it was issued or indorsed." Accepting fully both those authorities, we think they in no way affect the present case. In Credit Co. Limited, v. The Howe Machine Co., 54 Conn. 357, 8 Atl. 472, 1 Am. St. Rep. 123, the strong court of that state held that drafts accepted by the treasurer of a corporation are presumed to be properly accepted by the corporation, there being no circumstances to indicate fraud or illegality; and, in an action by the holder against the corporation as acceptor, the burden of proof is upon the defendant corporation to show that the plaintiff had knowledge that the acceptances were for accommodation, and that he was not a bona fide holder for value. In the course of the opinion in that case, Judge Carpenter said: "A preliminary question of some importance is, on whom was the burden of proof? In the pleadings the defendant assumes that burden, and properly so, upon principle. The drafts apparently may be for a legitimate purpose. As there is some presumption that all parties act properly and within the scope of their powers, the plaintiff

establishes a prima facie case when it presents the drafts, duly drawn and accepted; there being no circumstances indicating fraud or illegality. And so are the authorities. Edwards on Bills, 686, 689; Daniel on Neg. Inst. 626, 662; 1 Parsons on Notes & Bills, 255. The course of dealing by the defendant shows clearly the treasurer had power to accept drafts, but it is claimed that, under the circumstances, he had no power to accept these particular drafts. Obviously the authority or want of authority in the treasurer to accept these drafts depended, not upon the nature of the act, but upon the attending facts and circumstances. That he had power to accept drafts under some circumstances is not denied. Hence, if they were drawn on account of the defendant's business, or to draw out of the treasury money which belonged to the drawer of the draft, the power of the treasurer to accept them must be conceded." And to the same effect is Nat. Bank of Battle Creek v. Mallan, 37 Minn. 404, 34 N. W. 901, and Beach on Corp. sec. 189. There is much in the reasoning of the Connecticut case above cited which strongly commends itself to us, but it is not necessary for us to determine here upon whom the burden of proof lies in such respect, since here the plaintiff assumed that burden, and offered evidence showing the course of dealing by the defendant, and that it was accustomed to receive notes, checks, and drafts which were habitually indorsed by the secretary and treasurer under the same circumstances and in the same manner that these notes were indorsed. Both upon principle and authority, we think these notes were properly admitted in evidence.

The plaintiff then, by Miles W. Ross, proved that the signatures to a note for $5,000 then shown him were the signatures of W. B. Crother, president, and J. B. Councilman, treasurer, known to him, and that the note was indorsed by J. B. Councilman, treasurer. He was also shown certain passbooks, which he identified as the passbooks of the association with the Old Town Bank, and the plaintiff then closed its case. The defendant then offered to prove by himself the alleged agreement set forth in the twelfth plea, and to follow it up with proof that Granville Haines, who was the president of the plaintiff at the time these notes were taken, had notice of the terms and conditions of said agreement. The plaintiff objected, and the second exception was taken to the rejection of this offer. If the demurrer to the twelfth plea was correctly sustained, it would follow that the exclusion of the facts therein alleged, when offered in evidence, could work no injury to the defendant. Moreover, this offer of proof was made as a whole, and it could be of no avail to prove the alleged agreement, without proof, also, of such knowledge by Mr. Haines as would bind the plaintiff; and it is seen that

the offer of proof does not propose to show that the facts were communicated to Mr. Haines officially, to be brought by him to the knowledge of the board; and it is settled in this state, however the law may be elsewhere, that the sound and safe rule on this subject is that notice given to a director of an incorporated institution privately, or which he acquires from rumor, or through channels open alike to all, and which he does not communicate to his associates at the board, will not bind the institution. U. S. Ins. Co. v. Shriver, 3 Md. Ch. 388; Genl. Ins. Co. v. U. S. Ins. Co., 10 Md. 523, 69 Am. Dec. 174; Gemmell v. Davis, 75 Md. 553, 23 Atl. 1032, 32 Am. St. Rep. 412. It follows that there was no error in excluding this offer of evidence.

The defendant then proved by Geo. R. Gehr that he had been the plaintiff's cashier since 1895, and that his bank took the two notes sued on, on June 7, 1900, and that he had agreed on June 6th, over the telephone, to take them; that he received them from Mr. Wilcox, cashier of the Old Town Bank, and that they had sent two drafts to the Old Town Bank, payable to it; and that he had paid the Old Town Bank the proceeds of the note. On cross-examination he was then shown a note for $5,000 made June 6, 1900, by the association, payable to the order of James B. Councilman, treasurer, at the Old Town Bank, 90 days after date, and indorsed, "J. B. Councilman, Treas.;" and this note was offered in evidence, and was admitted over the objection of the defendant, and to this ruling the third exception was taken. The ground of this objection is that defendant did not introduce this note, or interrogate the witness respecting it, and therefore it was not a proper subject of crossexamination. Under ordinary circumstances, it is true that in this country the cross-ex amination can only relate to facts and circumstances connected with the matters stated in the direct examination of the witness, and that, if a party wishes to examine a witness as to other matters, he must do so by making the witness his own, though the rule in England is that, where a witness is called to a particular fact, he may be cross-examined upon all matters material to the issue. But the rule indicated has its qualifications, and much must be left to the discretion of the presiding judge in the determination of this question. 3 Jones on Evidence, sec. 821. "One of the objects of the cross-examination is to elicit the whole truth of transactions only partly explained, and the rule limiting the inquiry to the general facts stated in the direct examination must not be construed as to defeat the real object of the crossexamination." Idem. Here the defendant inquired into the circumstances under which the plaintiff took the two notes sued on, and any circumstances connected with and explaining the taking of those notes would seem

to come within the qualification of the rule above stated. The author just quoted, citing numerous cases, says: "Unless a trial court should so far overstep the bounds as to admit that in cross-examination which clearly has no connection with the direct testimony, an appellate court would not be justified in reversing a judgment for such cause, especially where the cross-examination is upon facts competent to be proved under the issues in the case." Here the matter thus inquired into was the foundation of the whole transaction, and the notes inquired of by defendant were collateral thereto. Under these circumstances, the discretion of the trial judge must be upheld.

The fourth and sixth exceptions were taken to a continuation of the cross-examination begun and referred to in the third exception, and which related to the circumstances under which the $5,000 note of the association was taken, and how the proceeds of said note were paid to the Old Town Bank, and it follows from what we have said that there was no error in these rulings.

The fifth exception was taken to the admission in evidence of a letter of June 6th from Wilcox, cashier of the Old Town Bank, to Gehr, cashier of the plaintiff, referring to the $5,000 note of the association above mentioned. We think it was error to admit this letter, because its effect was to admit the unsworn statement of a third party to prove that the note was to be discounted, and that Wilcox had charged plaintiff with proceeds of that note, less 91 days' discount; one of the questions at issue being whether the . note was discounted or sold. But we do not think its admission constitutes reversible error, because, after that exception, in continuing the cross-examination of Gehr, which we have said was properly allowed, the plaintiff proved, without objection by the defendant, through a letter of June 7th from Gehr to Wilcox, that his letter of the 6th inst. was received, and that he had credited "$4,924.17, pro. of note disctd."; that being the exact amount which Wilcox, in his letter, said should be the proceeds of the note which he sent "to be discounted."

The seventh exception was taken to the allowance of a question asking what had been paid on the collateral notes, and this question was addressed in rebuttal to the cashier of the plaintiff. If sufficient had been paid on these notes to discharge the $5,000 note, it is obvious there could be no recovery on the two notes here sued on. There was therefore no error in allowing the question Indeed, under our previous ruling, this question might have been asked as part of the cross-examination. The plaintiff then proved by James R. Schultz that he had been in the employment of the Old Town Bank for three years, and continued so during the year 1900; and plaintiff then offered in evidence the passbooks of the association with the Old Town Bank, which had been

identified by Mr. Ross, and which showed, among other debits and credits, the following: June 7th, 1900.

66

66

Dr. $5,000 00

Dis., $75 83........

Cr. $4,924 17 To this offer the defendant objected, but the objection was overruled, and the passbooks were admitted; and this constitutes the eighth exception. The books being admitted, Schultz identified them, and testified that the entries of that date, including the one above set forth, were in the handwriting of Mr. Price, one of the tellers of the Old Town Bank. He was then asked to "state what were the discounts under June 7th," to which the defendant objected, but the objection was overruled; and this constitutes the ninth exception. These passbooks had been previously identified by Mr. Ross, and only the entries of June 7, 1900, the date when it had been already shown this $5,000 note was received by the plaintiff from the Old Town Bank, were offered in evidence; and we can perceive no reason why they should not have been admitted, in order that the jury might determine therefrom, so far as these entries threw any light upon the transaction, what the parties understood and intended it to be. Not having made these entries himself, however, and not professing to have any actual personal knowledge of what these items represented, we think it was error to allow him to state what he understood them to represent. He could only draw deductions from the entries themselves, or, as he says in his answer, "argue that the particular $5,000 item, with discount of $75.83, referred to the note of June 6th for that amount, because that was the correct discount for 91 days." But it was the province of the jury to draw this inference from all the facts in evidence, including these entries. Again, however, we think the error was a harmless one, because these entries, unexplained by Schultz, or in any manner, necessarily tended to show the identity of the $5,000 note in evidence with that therein referred to as subject to discount of $75.83; and it is not reasonable to ask an appellate court to find that any inference of the jury was drawn from the inference of Schultz, rather than from their own unaided common sense, as applied to the meaning apparent from the face of the entries.

At last, then, we come to the ruling on the prayers brought up by the tenth exception. The plaintiff offered two prayers, which were granted, and the defendant offered five, which were rejected. The substance of both the plaintiff's prayers is that if the two notes sued on were executed.by the defendant and delivered to the association, and before their maturity said notes were indorsed in blank by said association, and delivered, with other notes similarily indorsed, to the Old Town Bank, and if the $5,000 note of said association of June 6, 1900, was indorsed in blank

by the secretary and treasurer, and was delivered to the Old Town Bank, and was discounted by the plaintiff, for the Old Town Bank, upon the faith and credit of the two notes sued on, together with the other notes similarly indorsed, and delivered with said two notes, as collateral security for said $5,000 note, and the proceeds of said $5,000 note were paid by plaintiff to said Old Town Bank, and there was still due and unpaid on said $5,000 note a sum greater than the amount due upon said two notes, then the plaintiff is entitled to recover. The second prayer of the plaintiff also instructs the jury that there was no evidence legally sufficient to show bad faith on the part of the plaintiff in receiving said notes. We think the theory and form of these prayers correct, and that they were properly granted, and that the defendant's special exception thereto on the ground that there was no evidence to show that the $5,000 note, or the notes sued on, were discounted, was properly overruled. The abstract principle embodied in the defendant's first prayer is correct, if it were so framed as to require merely the same preponderance of evidence required of every plaintiff in all essential matters of proof on his part. But we think. it was correctly rejected, for the reason assigned in the plaintiff's special exception thereto, viz., that it was calculated to lead the jury to suppose that full power and authority to indorse the notes sued on could only be expressly conferred, and that the evidence of implied authority arising from the custom proved, and from ratification by acceptance of the proceeds of the $5,000 note, which the prayer ignored, was insufficient to prove such authority. The defendant's second, third, fourth, and fifth prayers are all based upon the theory that there was evidence proper to be submitted to the jury to show that the $5,000 note and the two notes sued on were sold to, and were not discounted by, the plaintiff; that such purchase was not within the corporate powers of the plaintiff; and that such defense was open to defendant, and precluded recovery by the plaintiff. But we do not find that there is any legally sufficient evidence that the transaction was a sale, and the plaintiff specially excepted to all these prayers on that ground. In Lazear v. Union Bank, 52 Md. 78, 36 Am. Rep. 355, there was such evidence. The court says on page 124, 52 Md., "The evidence shows that Winchester & Son, note and bill brokers, were employed by Lazear Bros. to sell the note of June 22, 1872, to any purchasers willing to buy, and that it was sold to the appellee, over the counter of its banking house, at nine per cent. discount, for Lazear Bros., the drawers, who received the proceeds of sale."

Here the evidence of the plaintiff's cashier, Gehr, who was put upon the stand by the defendant, is that the $5,000 note was discounted (the note sued on being shown to be among the collateral given therefor), and

that the amount of the discount was the legal rate for 91 days,-the time that the note ran. "To 'discount paper,' as understood in the business of banking, is only a mode of loaning money, with the right of taking the interest allowed by law in ad vance." Vol. 2 (2d Ed.) Amer. & Eng. Enc. of Law, p. 469. This term has been defined by this court, in almost the same exact language, in Weckler v. First Nat. Bank, 42 Md. 592, 20 Am. Rep. 95, where Judge Miller says: "The ordinary meaning of the term 'to discount' is to take interest in advance, and, in banking, is a mode of loaning money. It is the advance of money not due till some future period, less the interest which would be due thereon when payable." Only the legal rate of interest would be due on the principal when payable, and thus Judge Miller's definition of the term is shown to be the same as that given above. If the legal rate were exceeded, a presumption might arise that the parties intended or the law implied a sale, rather than a discount, because a sale (between ordinary parties, at least) would be legal at any rate of deduction agreed on; but, where a bank discounts paper at a rate exceeding that allowed by law, the transaction would be within the usury law. Being of opinion that there is in this case no legally sufficient evidence to show a purchase of these notes, or of the $5,000 note, we have no occasion to consider the conflict between the decision in Lazear's Case and those decisions of the United States supreme court, upon section 5136 of the National banking act [U. S. Comp. St. 1901, p. 3456], in Nat. Bank v. Matthews, 98 U. S. 626, 25 L. Ed. 188, and Nat. Bank v. Whitney, 103 U. S. 99, 26 L. Ed. 561, cited with apparent approval in Heironimus v. Sweeney, 83 Md. 160, 34 Atl. 823, 33 L. R. A. 99, 55 Am. St. Rep. 333, in an opinion concurred in by the full bench, as well as the later case of Nat. Gloversville Bank v. Johnson, 104 U. S. 271, 26 L. Ed. 742. In the still more recent case of Danforth v. The Nat. State Bank, 1 C. C. A. 62, 48 Fed. 271, 17 L. R. A. 622, it was held that cases could not be distinguished, where the title to the paper is transferred by an indorsement imposing the ordinary liability upon the indorser, from those where it is transferred by indorsement without recourse, or by mere delivery. In United German Bank v. Katz, 57 Md. 141, this court reviewed the case of Lazear v. Nat. Union Bank, supra, and distinguished it from the case before them; holding that the doctrine of ultra vires is not applicable to executed contracts, which the court said, "by the plainest rule of good faith, should be permitted to stand." In that case it was held that the United German Bank had no authority to discount promissory notes, but the court said: "It does not follow, as a consequence of this view, that, because the appellant exceeded its legitimate powers in procuring this note by discounting the

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