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of exchange or promissory notes. (n) It has been held, however, that the cashier of a bank has prima facie authority to indorse all paper belonging to the bank, so as to pass the property and render the bank liable as indorser.(o) That he has authority to indorse, for the purpose of collection merely, there is no doubt.(p) It may be well to remember, that at common
(n) See Moss v. Livingston, 4 Comst. 208; McCullough v. Moss, 5 Denio, 567; Farmers' and Mechanics' Bank v. Troy City Bank, 1 Doug. Mich. 457.
(0) Thus, in Wild v. Bank of Passamaquoddy, 3 Mason, 505, Story, J. said: “The cashier of a bank is, virtute offici, generally intrusted with the notes, securities, and other funds of the bank, and is held out to the world by the bank as its general agent in the negotiation, management, and disposal of them. Prima facie, therefore, he must be deemed to have authority to transfer and indorse negotiable securities, held by the bank, for its use and in its behalf. No special authority for this purpose is necessary to be proved. If any bank chooses to depart from this general course of business, it is certainly at liberty so to do; but in such case it is incumbent on the bank to show that it has interposed a restriction, and that such restriction is known to those with whom it is in the habit of doing business. In the present case, the cashier has, as cashier, indorsed the bill in behalf of the bank, and this is prima facie evidence of authority, it being within the ordinary duties performed by such an officer. If he was restricted in his authority, it is for the defendants to show it. The proof is in their possession, and the plaintiff, who is a stranger to their regulations, cannot be presumed to be conusant of it." So in Fleckner v. U. S. Bank, 8 Wheat. 338, 360, Story, J., delivering the opinion of the court, said: "We are very much inclined to think that the indorsement of notes, like the present, for the use of the bank, falls within the ordinary duties and rights belonging to the cashier of the bank, at least if his office be like that of similar institutions, and his rights and duties are not otherwise restricted. The cashier is usually intrusted with all the funds of the bank, in cash, notes, bills, &c., to be used, from time to time, for the ordinary and extraordinary exigencies of the bank. He receives directly, or through the subordinate officers, all moneys and notes. He delivers up all discounted notes, and other property, when payments have been duly made. He draws checks, from time to time, for moneys, wherever the bank has deposits. In short, he is considered the executive officer, through whom, and by whom, the whole moneyed operations of the bank in paying or receiving debts, or discharging or transferring securities, are to be conducted. It does not seem too much, then, to infer, in the absence of all positive restrictions, that it is his duty as well to apply the negotiable funds as the moneyed capital of the bank to discharge its debts and obligations." And see, to the same effect, Everett v. United States, 6 Port. Ala. 166; Harper v. Calhoun, 7 How. Miss. 203; Farrar v. Gilman, 19 Maine, 440. But see U. S. Bank v. Fleckner, 8 Mart. La. 309, and cases cited in next note.
(p) Hartford Bank v. Barry, 17 Mass. 94; Elliot v. Abbot, 12 N. H. 549. This was an action of assumpsit, upon a promissory note, dated September 30, 1839, payable to the President, Directors, and Co. of the Ashuelot Bank, or order, in sixty days and grace, and alleged to be indorsed by the cashier of the bank to the plaintiff. The note in question was signed by John Townsend as principal, and by the defendant as surety, and had upon it the indorsement of the cashier of the bank. In giving the opinion of the court, Parker, C. J. said: “ Although the bank never had any interest in this note, we see no objection to regarding it as having been made to them, and indorsed to the
law no stockholders of any corporation are liable for its debts, in any form. But this rule is importantly qualified by statutes in many of our States.
plaintiff, if the indorsement can be upheld upon the evidence. The signers did promise to pay the bank; and as they made the promise negotiable, the bank might well transfer it. And it makes no difference to the defendant, whether the bank discounted the note, and then sold and indorsed it to the plaintiff; or whether the plaintiff, having funds in the bank, furnished the money in the first instance, the bank indorsing the note to him, and the defendant assenting to the transfer. We come, then, to the question, Has this note been indorsed to the plaintiff, by the bank? Is that allegation in the plaintiff's declaration sustained? The defendant may deny this. . . . . . The ground upon which the cashier may indorse the name of the bank, and transfer the legal interest, in any case, is not because the indorsement is merely nominal, transferring no actual property. If it were so, this indorsement might be supported as the indorsement of the bank. But it is, that the cashier is the agent of the bank for that purpose; that, by virtue of his appointment as cashier, the bank authorizes him to make indorsements in such cases. Tested by this principle, the indorsement in this case must fail. It is not the act of the bank, because not made by an agent having power to make an indorsement in such case. The directors are the general agents of the bank. The cashier is a special agent, and a matter of this kind is not within the scope of his authority. The plaintiff's allegation that the note was indorsed by the bank, therefore, fails; and this is a material allegation as the case now stands."
OF THE CONSIDERATION.
OF THE GENERAL PRINCIPLES IN RELATION TO THE CONSIDERATION OF NOTES AND BILLS.
By the rules of the common law, no promise which is not made for a consideration can be enforced. This consideration may be either a gain or benefit of any kind to him who makes the promise, or a loss or injury of any kind suffered by him to whom it is made; such gain being the cause of or the inducement to the promise, and the promise being the cause of or the inducement to such loss.
To this rule there is an exception, by the ancient law, in favor of a written promise which has a seal attached to it; or, as it is commonly expressed, a promise under seal; for the seal, according to the law, imports a consideration. And there is another more recent exception by the law merchant, in favor of negotiable bills and notes in the hands of third parties.
Even as between immediate parties, this exception has some application. For as between them, unlike the case of other parol contracts, a consideration is presumed in the first instance, and therefore need not be proved. But this presumption may be rebutted by evidence; and proof that there was no consideration in fact will constitute a perfect defence. As to subsequent bona fide holders, on the other hand, this presumption is conclusive. As to them, it is immaterial whether there was any consideration between prior parties or not. Therefore a maker cannot defend himself, on the ground that he promised without consideration, against the suit of an indorsee; nor can an indorser against the suit of the indorsee of
his indorsee. But a maker sued by the payee, or an indorser by his indorsee, or, in general, any promisor sued by the party to whom he directly promises, may make this defence.
We shall find both the reason of this rule and the limitation of it in the nature and purpose of negotiable paper. It is intended to represent money; and the rules of law are intended to make this representation accurate and adequate. A, then, holding a note against B, indorses it to C in some business transaction, as money. C can judge for himself of B's ability to pay, and of A's, and accepts the note. Whether A paid anything to B for it, or whether B had any consideration whatever, or whether if there were a consideration it has or has not failed, C knows not. Perhaps he could ascertain this by sufficient inquiry; but the inquiry would require much time and labor, and could not be made in every case in which negotiable paper is used in business, without inconvenience so great as very seriously to diminish the employment and the usefulness of such paper. The law, therefore, takes care of this for him. If C receives the note in good faith, B cannot interpose the objection of want or failure of consideration. The presumption is absolute as to him; and so it is in favor of any party against any other party, excepting him from whom he, in reference to whom the question is raised, immediately received it.
In the case before supposed, C stands in a different relation to A from what he does to B. Whether any consideration passed between A and B, he cannot be supposed to know, and the law infers or rather supplies it for him. But whether any passed between himself and A, he must be supposed to know, and therefore, while the law presumes this prima facie, as a proper protection to negotiable paper, it permits the defendant to rebut the presumption by evidence.
In a few of the earlier cases, attempts were made to place negotiable paper on the same footing with instruments under seal, even as between the original parties; (g) especially if it appeared that the paper was intended as a gift to the payee. (r) But it is
(9) See dicta in Pillans v. Van Mierop, 3 Burr. 1663.
(r) Thus, in Livingston v. Hastie, 2 Caines, 246, Livingston, J. said: "Whether the mere want of consideration, even between the original parties, can be alleged against a promissory note, or a bill of exchange, may well be doubted. It is not necessary, as in other simple contracts, to state a consideration in the declaration; the instrument itself
now well settled, that, in an action against a party to a bill or note by his immediate promisee, a want or failure of consideration furnishes the same defence as in the case of any other parol
imports one, and in this respect partakes of the quality of a specialty. Nor is the plaintiff bound to prove his giving any value for such paper, unless when he sues as bearer of a bill transferable by delivery, and that under suspicious circumstances. Grant v. Vaughan, 3 Burr. 1516. No case can be found where the want of consideration alone has been admitted as a good defence. As against the payee, the maker, it is true, has been permitted to show, not a want, but a failure, of consideration, and in all cases he may insist on the illegality of it. Chitty says, that the want of consideration may be relied on, but not one of the decisions which he cites will bear him out. In Jefferies v. Austin, 1 Stra. 674, the defendant was only permitted to show the note was delivered in the nature of an escrow, and it appearing that the condi tion on which it was to take effect had not been performed, a verdict was found for him. Here, the consideration which had induced the defendant to make the note failed, but if he had given it to the plaintiff voluntarily, as a gift, and without receiving any value, this would hardly have been a good defence." In Bowers v. Hurd, 10 Mass. 427, a woman possessed of a sum of money and desirous of leaving a legacy to a friend to whom she thought herself under obligation, and desirous also to avoid the expense attending a will, made a promissory note payable to that friend, which she placed in the hands of a third person to be by him delivered over to the promisee after her deccase. She recognized the transaction in her last sickness, and put into the hands of a person about her, personal securities for the payment of her debts and funeral charges, and especially this promissory note. It was held, that the promisee was legally entitled to the contents of the note, in an action against the administrator of the promisor, her estate being solvent. Parker, J. said: "We do not admit that, when one voluntarily makes a written promise to another to pay a sum of money, the promise can be avoided merely by proving there was no legal and valuable consideration subsisting at the time; any more than, if he actually paid over the amount of such note, he can recover it back again, because he repents of his generosity. He has, indeed, precluded himself and his representatives from denying a consideration, when he has under his hand acknowledged one. That consideration may not have been of a nature to support an indebitatus assumpsit upon an implied promise; but may, nevertheless, have been a just and adequate foundation of his promise; and as the circumstances of the transaction may be wholly unknown to any but the immediate parties, there is no reason for permitting an executor or administrator to dispute what the deceased never questioned in his lifetime, and never intended should be questioned after his death. We are satisfied that none of the decisions respecting the avoidance of notes or other written promises, for want of consideration, are impeached by our decision in this case. A careful examination will discover, that in all those cases the ground taken in defence is, not that there was originally no consideration, contrary to the express admission of the promisor, but that the consideration had failed, or that it rested in mistake or misapprehension; what the parties supposed to be a consideration turning out in fact to be none. It was on this principle that the case of Boutell v. Cowdin, 9 Mass. 254, was decided. In those cases the promisor is always permitted, against the party with whom he contracted, to show the mistake or the failure of what was supposed to be substantial. This does not contradict his own acknowledgment of value received, but sets up an equitable claim of discharge, upon the ground that both parties were deceived in the contract. Fraud, illegality, and imposition are also proper defences against actions to enforce such promises, depending upon other principles." And see VOL. I.-M