Grove v. Foster

7 N.M. 650

• Court: New Mexico Supreme Court
• Decided: August 24, 1895
• Docket: No. 567
• Status: Published

Opinion

Collieb, J.

This was an action in assumpsit by the defendant in error, as receiver of the First National Bank of Doming, against plaintiff in error, upon the following promissory note:

“$6,000. Deming, New Mexico, Dec. 1,1892.

“On March 1, after date, we jointly and severally promise to pay to the order of the First National Bank six thousand, nO/Do dollars, at the First National Bank of Deming, with interest at the rate of one per cent per month from Jan. 1, 1892, until paid. Value received. And in event of a suit to force collection of this note, or any portion thereof, we further agree to pay the additional sum of ten per cent upon the amount found due, as attorney’s fees in said suit.

“The Oak Drove and Sierra Verde Cattle Co.

“Per C. H. Dane, Treasurer.

“No. 1,598. $6,000. Due March 1, 1892.”

The declaration claimed that amount, with interest and ten per cent as attorney’s fees, and was made returnable to the November, 1893, term of said district court. At this term defendant filed a plea “that the note upon which plaintiff’s action is founded was not executed by it, the defendant, or by anyoue authorized to bind it in the premises,” and to this plea is an affidavit that “T. F. Conway, agent for said defendant in this behalf, makes oath that the above plea is true.” At said term the record shows the following: “Now, by order of the court, the defendant herein is granted leave to plead over in this cause. And now the court overruled plaintiff’s motion to strike out the pleas heretofore filed herein.” At the April, 1894, term of said court there was filed plea of general issue and special pleas, both concluding to the country. The first special plea alleged that defendant “did not execute,” and that it “did not authorize any person to execute, the said promissory note” for it or in its behalf. To these pleas was annexed the affidavit of Henry W. Bishop, as president of defendant corporation, “that said defendant never authorized any person to execute said promissory note for it or in its behalf; that said defendant never ratified the execution of said promissory note; and that I have read the foregoing pleas "by the said defendant aftove pleaded, and know the contents thereof, and that the same is true in substance and in fact. So help me G-od.” Issue was joined on these pleas as follows: “And the said plaintiff, to the pleas respectively of the said defendant company, whereof said defendant puts itself upon the country, doth the like.” . At a later day of the term two additional pleas were filed, both concluding with a verification, and neither sworn to. The first, in substance, alleged that the note was obtained by fraud and circumvention, in that C. JEL Dane, being treasurer of defendant corporation, made and gave said note without consideration, and the bank, well knowing Dane had no authority to execute said note, accepted the same as the note of Dane, and not of defendant. The other additional plea alleged that Dane signed the note without authority, and delivered same to the bank without consideration, either to Dane or defendant, as to which the bank had notice, and such delivery was for the purpose of entering upon the books of the bank said note as a-fictitious credit and , asset of said bank. Plaintiff moved to strike out the second, third, and fourth pleas, because the second plea is applicable only to actions upon instruments under seal; because the matter in the third may be shown under plea of general issue; and the same as to the fourth, if they make any defense. The court below sustained the motion as to all three of said pleas, and the c§use proceeded to trial, as may be inferred, though not definitely shown, upon the “sworn plea of the general issue,” found on pages 10 to 11 of the record. Over the objection of the defendant that the note, “under the sworn plea of the general issue, can not be introduced except its execution be first proven,” the court admitted the note in evidence, and it being admitted that plaintiff is receiver, etc., and the suit properly brought, plaintiff rested its case.' The defense introduced as a witness F. H. Siebold, who was cashier of the bank at the time that the note was given, who testified, in effect: That the note came into the bank January 7, 1892. That at the time Dane was president and director of the bank. That he never saw the note made. That, on the books of the bank, bills receivable was charged with $6,000, and the number, 1,032, standing for acceptance of $20,000, given by Masterson on Huller, was credited with $10,500, being $6,000, amount of this note, and another item of $4,500. The acceptance was entered on the books October 5, 1891, and, being $10,000 over the limit that the bank (being capitalized for $100,000) could loan to any one individually, Dane had to reduce this overlimit paper because the bank examiner was expected along very soon. This $6,000 was given as part payment to reduce this overlimit paper. “Q. Was it credited on the $20,000 acceptance in any way? A. Yes, sir. On one account.” This acceptance was drawn by Masterson, accepted by Huller, and used by Masterson as collateral security. Dane took the collateral security, put it in bills receivable on or about October 5, 1891, as his individual paper, and got from the bank the value of $20,000 for the acceptance. The following question and answer were asked and given: “ Q. The $6,000 note, then, was used by Mr. Dane to reduce his personal liability on the $20,000 acceptance to the bank? A. Yes, sir.” Plaintiff moved to strike out the testimony as to the fact of Dane using this money personally, which was sustained, and exception taken, but the testimony was allowed to stand “as to the consideration for the note” and “as to the proceeds of the note.” It .is difficult to gather from the testimony whether the witness meant to say the acceptance which was given as collateral security, which was reduced by the $6,000 note, or whether the indebtedness of Dane, which purported to be reduced by the acceptance, was so reduced; but it is taken that the indebtedness was so reduced, as the collateral did not belong to the bank, and would not have been reduced if it had. These questions were asked: “Q. In the regular course of business in the Deming bank at the time you were cashier, who attended to the discounting paper! A. Mr. Dane. Q. That bank had a discount committee, didn’t it! A. Yes, sir. Q. How many members! A. Three. Q. Directors! A. Three directors. Q. Under the by-laws of the bank, whose duty was it to pass on the discounted notes, loans, etc.! A. The discount committee. Q. Who actually acted! A. Mr. Dane. Q. Did you have anything to do with the discount of any notes! A. No, sir. Mr. Dane had an account with the bank as treasurer of defendant company, and checked against it from time to time. Q. Did Mr. Dane, as- treasurer, execute or discount in your bank, the First National Bank of Deming, a note of the Oak Grove & Sierra Verde Cattle Company, previous to this!” This question being objected to as incompetent, immaterial, and irrelevant, objection was sustained, and exception noted. The witness stated that no consideration passed out of the bank for the note. Other testimony was offered by the defendant as to by-laws; but was ruled out, and the court instructed the jury to find a verdict for amount of note, interest, and attorney’s fees. Motion for new trial being made and overruled, the case is here by writ of error.

■ The assignments of error which will be noticed in this opinion, are that the court below erred in striking out the second, third, and fourth pleas; in admitting in evidence the promissory note upon which the action was founded; in excluding legal and competent evidence; and in instructing the jury to find for the plaintiff.

In considering the question of striking out the pleas, we will take it that the first plea was regarded by the court and counsel at the trial as not being in the ease, and that of the four other pleas the three last were stricken out by the court, thus leaving what the counsel for the defendant in the court below, plaintiff in error here, denominated “sworn plea of the general issue.” The question of striking out .the third and fourth pleas is perhaps easily disposed of by saying that, as these pleas merely set up want of consideration, evidence as to that may be given under the general issue.

* Promissory note of cuted by treasur” pí¿afd?nTaIiof: tehoSy°toeLa-u’ cute:verification, The second plea, which denies that the defendant either executed the note sued on or authorized any person to execute it in its behalf, and is verified by the affidavit of the president of the defendant company, was stricken out upon the ground that such a A a Plea was on^y applicable to instruments under seal. This question requires a more extended consideration. The particular groun(j grated in the motion for striking out the second plea is that such plea is applicable only to actions upon instruments under seal; and this, we think, was so decided in Luna v. Mohr, 3 N. M. It •can not be gathered from the opinion in that ease whether section 1922, enacted in 1882, was in force at the time of the filing of the plea of non est factum, but there is not in the opinion any reference whatever to said section. Section 1922 enables either party, plaintiff or defendant, to take as admitted by the other party the genuineness and due execution of any written instrument referred to in a pleading, where it or a copy is incorporated in, or attached to, such pleading, unless in another pleading or writing filed in the cause the opposite party denies the same under oath. If, under the rules of evidence, “genuineness and due execution” would have to be proven as to the particular written instrument referred to and attached to the pleading, this necessity would be obviated by there not being a denial of the same under oath. If, however, under the rules of evidence, “genuineness and due execution” is not necessary to be proven before the instrument can be admitted in evidence, a denial under oath could not impose a condition of admissibility that "did not before exist. For example, if an action is brought upon a promissory note purporting to be signed by the defendant, a denial under oath of the genuineness and due execution would not take the place of section 1914, Compiled Laws, which provides: “When any party to a suit, either as principal or security, or indorser, founded on any written instrument, covenant, or agreement whatever, shall deny his signature, he shall do the same under oath.” The denial referred to in section 1922 would be merely inapplicable in that kind of a case, so far as genuineness and due execution are concerned. Was it applicable, however, in the case at bar, for this purpose? The note sued on purported to be the obligation of an artificial person, a corporation, executed by its officer, having requisite authority. As such, plaintiff brought suit upon it. He must be held to have averred the genuineness and due execution of that note, and, inasmuch as there is annexed to the declaration what purports to be a copy of the note itself, such genuineness and due execution could be taken as admitted, unless denied under oath. This would be as much the case as if Richard Roe were sued upon a pfomissory note signed “Richard Roe, per John Jones, agent;” and neither case might be met by a denial of making signature. We hold, therefore, that the second plea, being sworn to, constituted a denial under oath, contemplated by section 1922, and the court erred in sustaining the motion to strike the same out. We do not hold that a plea was strictly necessary, 'but think that the statute would be satisfied by an affidavit denying genuineness and due execution, its office being merely to prevent an admission of genuineness and due execution arising. The denial maybe “in a pleading or writing filed in the cause.” Any mode is sufficient, so that the denial is under oath. Is this reversible error?

treasurer to exepaper in name of corporation. This inquiry involves at least two considerations. If the treasurer, who signed the note, is not such officer of a corporation as makes his signing a promissory note presumptively or prima facie the act of the corporation, then the „ ' burden of showing that he acted with authority is upon the plaintiff. If a treasurer of a corporation is such an officer as is vested with implied power to make nogotiable paper in its name, then the burden is on the defendant to show the want of such authority in a particular case; and the denial under oath required by section 1922 merely leaves the parties-to makei out their case under the ordinary rules of evidence.. In Fifth Ward Savings Bank v. First National Bank, 7 Atl. Rep. 318, it is held that a treasurer of a savings bank had no authority or power virtute officiito -borrow money.for the savings bank and give its notes or pledge its security in payment. It is also stated in Daniel on Negotiable Instruments, section 394, citing Torrey v. Dustin Monument Association, 5 Allen, 327, that the treasurer of a corporation- is not such an officer as is vested with implied power to make negotiable paper in its name. In Be Great Western Telegraph Company, 5 Biss. 363, it is stated that usage may authorize the treasurer of a corporation to bind it by a promissory note, plainly implying that otherwise he could not. This, also, we understand to be the rule laid down by Morawetz, Private Corporations, section 251, and that such principle is well established. In Craft v. S. B. Bailroad Company, 150 Mass. 207, it is stated that, whatever may be true of trading corporations, there is nothing in the nature of the business of a horse railroad corporation, or of the duties of a treasurer of such a corporation, which implies that the treasurer, by virtue of his office, has authority to borrow money for the company, or give its notes therefor. By reference to Monument Bank v. Globe Works, 101 Mass. 67, we find that by statute in Massachusetts the treasurer or manager of a trading corporation may bind the company to the payment of promissory notes made in pursuance of the business of the company. We hold, therefore, that, with the second plea in the case, it would have devolved upon the plaintiff in the court below to show authority in C. H. Dane, treasurer, to execute the note sued-on, as a condition precedent to recovery. At the time the note was offered, objection was made to its admissibility upon the ground that under the sworn plea of the general issue its execution must be first proven. We do not think that “a sworn plea of general issue” is such denial as is required by section 1922, and that, as the ease then stood, the objection was properly overruled. The objection would have stood good, however, if predicated upon the second plea, which we hold to have been improperly stricken out.

evidence, admissibiiity of. It is contended, however, that, inasmuch as the testimony put in by the defense showed authority in the treasurer to execute the note sued upon, the striking out of the second plea was without prejudice to defendant, and the judgment-should be affirmed. We have examined the record carefully as to this, and the only thing we find upon the subject which may be supposed to touch the question occurs on pages 43 and 44 of the record, as follows: “Q. At the time the note was received in the bank, had you or not any knowledge in your official capacity as cashier, derived in the course of your official duties, with regard to Mr. Dane’s authority to sign the name of the defendant to that note? A. Mr. Dane told me he was treasurer of the company, and he had an Oak Grove & Sierra Yerde Cattle Company account, and he was drawing cheeks from time to time against that account as treasurer. That is all I know about it. Q. You know nothing about this note or the authority? A. No, sir, I do not. I suppose he was treasurer of the company. Q. Did. Mr. Dane, as treasurer, ever execute or discount in your bank, the First National Bank of Deming, a note of this kind, a note of the Oak Grove &. Sierra Yerde Cattle Company, previous to this?” This last question was ruled out as incompetent, irrelevant, and immaterial. It can scarcely be contended that the drawing' of checks by the treasurer against money of a corporation establishes, or even tends to establish, a usage as to the giving of promissory notes of the corporation. It is no different to draw a check upon a bank where corporation funds are deposited, in payment of its bills, than for him to keep the money in the corporation’s safe and pay it out on proper demand. Under the theory upon which the ease was tried in the court below, this question was competent, material, and relevant. Such testimony would not have been competent against an innocent holder for value, who received the note of a corporation executed by an officer with prima facie authority, such as a cashier in indorsing the commercial paper of his bank. See West St. Louis Savings Bank v. Shawnee Bank, 95 U. S. 559. In the case at bar we think, however, that, even if the treasurer stood as an officer prima facie authorized to execute the note sued upon, the question ruled out would have been competent evidence as a circumstance taken with the others that were shown. Thus it was shown that Dane was president of the bank at the time that he executed the note of the cattle company; that without a dollar’s cash passing from the bank to him as treasurer, or to the cattle company, he credited his individual account, and charged the cattle company account on the books of the bank; and that, as president of the bank, he attended to the discounting of paper, and, notwithstanding ■ there was a discount committee, Dane actually acted. Under these circumstances the jury should have had the benefit of proof that this note was the first attempted exercise of authority by the treasurer of the cattle company to discount its note.

Bona fide holder. As this case is to go back for a new trial because of the error in striking this second plea out, and in effect holding that Dane, as treasurer, had prima facie authority to execute the note sued upon, .nn • ■ we will express our views upon other questions for the court’s guidance upon a retrial. We think that the evidence in the case establishes that the bank was not a holder for value without notice, if, indeed, it was a holder for value at all. In First National Bank v. Blake, 60 Fed. Rep. 78, the plaintiff bank sued upon a promissory note, negotiable inform, due one year after date, and transferred for value before maturity. The defendant pleaded that the note was part of a contract relating to real estate, and the consideration of its giving was the promise of N. A. Cornish to protect certain real estate from incumbrance thereon, that lie failed so to do, and defendant became entitled to a surrender of the note. It was further alleged that at the time of the transfer of the note Cornish was the president and general manager of plaintiff bank. A demurrer to the plea was overruled, the court saying: “Upon these facts, is the plaintiff a bona fide holder of the note sued on? It is claimed for the demurrer that the knowledge which Cornish had can not be imputed to the bank, because he acted for himself in the transaction; that his interest was opposed to that of the bank, and that, therefore, there is no presumption of a communication by him against his own interests, but that the presumption is the other way, — that he concealed the knowledge he had of the infirmity of his own title. A large number of cases are cited in support of this view, and it is well settled that an officer or agent, dealing with a corporation or his principal on his own account, is'not presumed to communicate knowledge which it would be his interest to conceal, and the corporation or principal is not chargeable with such knowledge. But there is no room for the application of this principle where the agent is the sole representative of both parties in the transaction.” On that case the inference was merely drawn that Cornish was the sole representative of both parties, because it was stipulated that he was president and general manager, and as such was duly authorized to discount notes, and generally to act for plaintiff in such matters. In this case the proof shows that Dane alone attended to the discounting of notes, performing all the duties of the discount committee. In that case actual value was paid by the bank to the payee of the note. In this ease it merely appears that there was a book entry. Numerous cases are cited in the opinion in First National Bank v. Blake, supra, some of which are found in the brief of plaintiff in error. We think the view enunciated in' that case should apply to this. If it should be shown upon another trial that Dane was not the sole representative of both parties in this transaction, we think it will also be necessary to show that this treasurer acted with authority, either expressly granted or implied from usage or a long course of dealings; that the officers of the bank, other than Dane, had no knowledge of its being, if it was, a personal transaction of Dane’s, and that the bank gave value for the note. Inasmuch as the receiver, under the rulings of the court, was not called on to make any such proof, and should be given such opportunity, • we reverse the judgment of the court below, ánd remand the case for a new trial, with directions to reinstate the defeudant’s second plea; and.this is accordingly done. .

Smith, C. J., approves the conclusion. Laughlin, J., concurs.