Hammond v. President of the Michigan State Bank

1 Walk. Ch. 214

• Court: Michigan Court of Chancery
• Decided: July 15, 1843
• Status: Published

Opinion

The Chancellor.

By the act of 17th February, 1842, the legislature ratified the settlement made between the bank and the commissioners appointed by the state, except so much of it as purports to bind the state to pay certain debts of the bank, or debts for which the bank is liable, which the act repudiates.

In disposing of the demurrer, it will be necessary, therefore, to decide whether the commissioners were authorized by the act of February 1st, 1840, under which they acted, to bind the state to pay these debts ? If not, then, whether the legislature could confirm in part, and refuse to confirm in part, what the agents of the state had done, by ratifying what they were authorized to do, and rejecting what they were not authorized to do ; or was the state bound to ratify or reject the whole settlement?

I think it clear that the commissioners exceeded their powers in attempting to bind the state to pay these debts. They were authorized to commute, and receive an assignment of any of the assets of the bank, but not to contract for the payment of the debts of the bank, by the state. There is a manifest difference between taking an assignment of a piece of property subject to a lien, and an agreement on the part of the assignee to pay the debt; in the one case he would be personally liable for the payment of the debt, although the thing assigned might not be worth the half of it, while, in the other, he would at most but lose the property on which the debt was a lien. There is nothing in the act, express or implied, conferring this power on the commissioners. They might, with as great show of authority, have taken an assignment of all the assets of the bank, and have agreed the state should pay all its debts. In what do the cases differ ? Not in the power, but in the extent of its execution only.

The word “ equitable,” in the first section of the act, it has been insisted, would warrant a more liberal construction of the powers of the commissioners. I cannot think so. There is no connection, as I can discover, between it and the power given by the fourth section of the act. It is to be found only in the first section of the act, where it is used in connection with the powders mentioned in that section; which are, 1st, to settle with the bank; 2d, to give such time for the payment of the balances found to be due to the state, as the ability of the bank might seem to require, and to take security for their payment. It is in connection with the first of these powers the word “ equitable” is used. The words of the act are, “ commissioners on the part of the state to settle with the Michigan State Bank, upon such terms as they may deem equitable." It has reference to the adjustment or settlement of the “balances” due from the bank to the state, and was intended to authorize the commissioners, in making up such balances, to allow all equitable claims or set-offs the bank might have against the state. This is what is meant by the word “ equitable,” in the first section of the act. If we look for its meaning into the previous legislation that had been had with a view to a settlement with the bank, we shall come to the same conclusion. The first act on the subject was the act of April 10, 1839. This act authorized the “ committee” to settle with the bank for all deposites made with it by the state. The word equitable is not in it. The committee afterwards reported to the legislature they could not settle with the bank, because it insisted on having certain demands set off against what it was owing the state, which the committee did not feel authorized to allow, under the law appointing them. Thereupon, the joint resolution of the 19th April, 1839, extending the time for making the settlement, and increasing the powers of the commissioners, was passed. By this resolution the commissioners were authorized to settle with the bank “ upon such terms as they might deem equitable." The same language is used in the act of February 1st, 1840, the first three sections of which, with some slight verbal alterations, in no way affecting the powers of the commissioners, are a transcript of the joint resolution of the 19th of April, preceding. Whether, therefore, we look to the act itself for the power of the commissioners, or to the course of legislation on the subject of the settlement with the bank, the conclusion at which we arrive is the same.

“ All written powers,” says Mr. Lloyd, “ such as letters of attorney, or letters of instruction, receive a strict interpretation ; the authority never being extended beyond that which is given in terms, or is absolutely necessary for carrying the authority so given into effect.” Foley on Agency, by Lloyd, 192; Atwood v. Mannings, 7 B. & C. 278. Story's Agency, 66, sec. 68.

The next question is, whether the legislature had a right to reject the condition without declaring the whole settlement void. The commissioners accepted an assignment of property and debts, in full satisfaction of what was due to the state; the bank was discharged from its debt to the state; the property was delivered to the commissioners, and the injunction against the bank was dissolved. There was then a full and complete settlement of all matters between the state and bank. Had the commissioners stopped here, there can be no doubt both the bank and state would have been bound by the settlement. But they went further; they annexed a condition to the settlement, that the state should pay certain debts of the bank, which they had no authority to do under the act appointing them. In this, and in this alone, they exceeded their powers. The state refuses to recognise this part of the settlement. The bank insists it cannot reject a part and confirm a part, but that it must reject or confirm the whole.

In Story on Agency, (page 156, sec. 166,) it is said the question may often arise, whether an act is wholly void or not, when the agent does more than he is authorized to do, or less than he is authorized to do. Lord Coke says, “Regularly, it is true, that where a man doth less than the commandment or authority committed to him, there, the commandment or authority being not pursued, the act is void. And, where a man doth that which he is authorized to do, and more, there it is good for that which is warranted, and void for the rest. Yet both these rules have divers exceptions and limitations.” Co. Litt. 158, a. “If a warrant of attorney is given to make livery to one person, and the attorney make livery to two, or if the attorney is to make livery of Blackacre, and the attorney makes livery of Blackacre and Whiteacre, the execution is good, so far as it is authorized by the power, and void as to the residue; for the excess is clearly ascertainable. So, if a letter of attorney be to make livery absolutely, and the attorney make upon condition, this is a good execution of the power, and amounts to a sufficient livery, and the condition is void.” Story on Agency, 159, sec. 168. Livermore on Agency, 102. Again, “if an agent were authorized to procure insurance upon a ship for two thousand dollars, and he should procure a policy for two thousand dollars on the ship, and two thousand dollars on the cargo, the policy would be good as to the ship, and void as to the cargo, at least unless under special circumstances.” Story on Agency, 160, sec. 169. Livermore on Agency, 101-102.

In Nixon v. Hyseratt and Hyseratt, 5 J. R. 58, an action was brought against the defendants on a covenant of seisin, in a deed executed by their attorney, who was authorized to sell the land and to “execute, seal, and deliver, in their names, such conveyances and assurances in the law, of the premises, unto the purchaser, his, her, or their heirs or assigns, for ever, as should or might be needful or necessary, according to the judgment of said attorney.” The plaintiff was nonsuited. The Court says, “the attorney was authorized to sell and to execute conveyances, and assurances in the law, of the land sold, but no authority was given to bind his principal, by covenants. A conveyánce or assurance is good and perfect without either warranty or personal covenants, and therefore they are not necessarily implied in an authority to convey; an authority is to be strictly pursued, and an act varying in substance from it, is void.” Here the agent had done what he was authorized to do, and something more. He had not only sold the land and given á deed for it, but he had inserted a covenant of seisin in the deed, which he had no authority to do. The defendants had received the benefits of the sale, but it was not so much as pretended in that case, that they were, on that account, bound by the covenant of seisin; that they could not hold on to the purchase money, and, at the same time, disclaim the covenant.

So, in Gibson v. Colt and others, 7 J. R. 390. The defendants were the owners of a ship, and had authorized the master to sell her. The master sold her to the plaintiff, and, at the time of sale, represented her to be a registered vessel, according to the act of Congress. She was not a registered vessel, but a licensed coasting vessel only; and the action was brought for the deceit of the agent, in representing her to be a registered vessel. Judgment was given for the defendants, the Court holding that the agent had exceeded his authority in making the false representation, and that the defendants were not bound by it, although they had received ten thousand dollars for the ship.

In Fenn v. Harrison and others, 3 T. R. 757, defendants being the owners of a bill of exchange, which came to them by endorsement, employed an agent to get it discounted, telling him to carry it to market and get cash for it, hut they would not endorse it. The agent procured a third person to endorse it, telling him he would indemnify him for it, and the bill was then discounted. The acceptor of the bill failed, and the plaintiff', who discounted it, applied to defendants for payment, who at first refused, but afterwards promised to take it up. The Court held the defendants were not bound by the promise made by their agent to the person who endorsed the bill, and that, therefore, there was no consideration for the promise made by them'to the plaintiff, to take up the bill. The bill in this case had been discounted, and the defendants had received the money.

In Snow v. Perry, 9 Pick. R. 539, bank bills were handed to an agent, with directions to deliver them to Snow, and see their amount endorsed on a note which Snow held against Perry, or to take a receipt for the amount. Snow received the bills and gave a receipt, by which he promised to endorse the amount on the note, or return the bills when called for. The bank soon after failed. The Court held the taking of the bills was payment pro tanto, the agent having exceeded his authority in taking a conditional receipt. The Court say: “But the plaintiff relies upon the terms of the receipt, stated in the report, and the condition or alternative therein expressed. If this receipt had been given by Perry himself, or by an agent competent to bind him, in this respect, he would be bound by the condition. Then the question recurs, could the messenger, consistently with his authority, accept such receipt? He was instructed to see the money endorsed, or to take a receipt as for so much money received in payment, or to bring the bills back. This was the extent of his authority.”

The legal principle to be deduced from these cases, is this: That where an agent, acting within the scope of his authority, does a thing which, standing alone and by itself, would be binding on his principal, and, at the same time, does something more, which he was not authorized to do, and the two are not so interwoven with each other that they cannot be separated, but constitute different parts of the same contract, that which the agent was authorized to do is binding on his principal, and that only which he was not authorized to do, is void. As the covenant of seisin in Nixon v. Hyseratt; the false representation with regard to the registry of the vessel in Gibson v. Colt; the promise to indemnify the person who endorsed the bill in Fenn v. Harrison, and the condition in the receipt in Snow v. Perry. In each of these cases the agent had done what he was authorized to do, and something more; but that something more stood by itself, and was “clearly ascertainable,” and was therefore void as it regarded the principal, and not merely voidable in connection with the whole contract. The excess in each of these cases, was an excrescence upon the due execution of the power, deriving no nutriment from the power itself, and consequently not entering into and forming a part of its execution, which was complete without it. By this I do not intend to be understood as saying, that the land or the ship would have sold for as much as it did, without the covenant of seisin, or false representation; or that the note would have béen discounted had it not been endorsed, or that the bank bills would have been received, had an unconditional receipt been required. This is not the principle on which these cases were decided; but the total want of authority in the agent to do what he did.

In what respect does the present case differ from Nixon v. Hyseratt? They are, it seems to me, the same in principle. They differ in form only. In that case there was a covenant; in this, there is a condition subsequent, not a condition precedent; and in both cases the agent exceeded his authority. On what principle of law can it be holden, that the covenant in that case was void and not binding on the principal, and the condition in the present case is good and binding on the state?

A person who deals with an agent is bound to inquire into his authority, and ignorance of the extent of the agent’s authority is no excuse. But it cannot be said the bank was ignorant of the authority of the commissioners, who acted under a public law or statute of the state, of which the bank had full knowledge. The commissioners, and those acting on the part of the bank, I have no doubt, supposed they had authority. But this, while it acquits the commissioners and the representatives of the bank of bad faith, can have no effect on the legal rights of the parties to the settlement. Every man is supposed to know what the law is, and his rights are to be determined accordingly. It is no excuse that he was ignorant of the law, or had given an erroneous construction to it. If the bank suffer in consequence of such ignorance, it is not the fault of the state.

In Nixon v. Hyserait, it does not appear Nixon knew the agent was exceeding his authority, in warranting that his principals were seized of the land. The bank is chargeable with such knowledge, or, in other words, with a knowledge that the commissioners were exceeding their powers, in consenting to the condition; and can it take advantage of its own wrong, to compel the state either to ratify the condition, or reject the settlement in toio*? Would not the adoption of such a rule open a door to fraud ? — to collusion between the agent and persons dealing with him?

The agreement was not executory but executed at the time; and the bank has, from that time to the present, had all the advantages and benefits of the settlement. The injunction was dissolved and the debt due to the state cancelled. If it was now in the power of the state to reject the. settlement, which it cannot do, (except the condition which, was never binding on the state,) the bank could not place back the claim of the state where it was before the settlement, and the dissolution of the injunction. And must the state either lose all benefit of the proceedings it had instituted against the bank, and of the injunction it had obtained, or pay a sum of money for the bank it never had agreed to pay ? The doctrine contended for, if law, would present this alternative.

It is insisted the bill is multifarious, and the prayer of the bill is referred to in proof of the fact. To determine whether a bill is multifarious, we must look to the stating part of the bill, and not to the prayer alone; for if, in his prayer for relief, complainant ask several things, to some of which he may be entitled and to others not, the bill is not, on that account, multifarious, but he will, on the hearing, be entitled to that specific relief, only, which is consistent with the case made in the stating part of the bill. The whole drift and object of the bill is to obtain a discovery and account, from Joy & Porter, of the assets assigned, and in their possession as attorneys for the bank when the assignment was made, and which they after-wards continued to hold as attorneys for the state. The bank is made a party in consequence of the claim it sets up to these assets. The bill is somewhat in the nature of a bill of interpleader; but, instead of being filed by Joy & Porter, it is filed by the commissioners against them and the bank, they setting up the claim of the bank as an excuse for not accounting to the commissioners.

Demurrer overruled, with costs.