Helena National Bank v. Rocky Mountain Telegraph Co.

51 P. 829, 20 Mont. 379, 1898 Mont. LEXIS 9

• Court: Montana Supreme Court
• Decided: January 17, 1898
• Status: Published

Opinion

Pigott, J.

(1; Appellant (defendant) contends that its motion for judgment on the pleadings in action No. 878 should have been sustained, upon the ground that the replication did not deny the averment in the answer of want of authority in Bidgway to execute the note in its behalf; the theory being that such averment was new matter, constituting a defense, and therefore admitted for want of denial.

We are satisfied that the averment is not new matter. Ultimate facts only should be pleaded. Plaintiff pleaded the ultimate fact according to its legal effect, by alleging that defendant made the note. This ultimate fact the defendant denied. Corporations necessarily act entirely through agents in all transactions having no relation to the corporation in its corporate capacity, and, under the statement that the corporation executed the note, plaintiff would have been entitled to prove that any authorized agent of the corporation issued the paper in its behalf. The denial in the answer raised the issue whether the note was executed by the corporation through any authorized agency. It was not necessary in law, under the issue raised by the averment and denial of the making, for plaintiff to prove that Ridgway had authority to act; and the so-called ‘ ‘separate defense’ ’ was, in legal effect, but a claim that one certain person was without legal authority to perform that which plaintiff charged the corporation with doing; non constat that some duly-empowered agent did not deliver the note. As a matter of pleading, as distinguished from evidence, it v, as unimportant whether or not Ridgway possessed the power to bind the corporation. The manner, as well as the means, of execution, is mere evidence. That portion of the answer setting up so-called “separate defense” consists of evidential matter, the proof of which might or might not become material on the trial. Viewing it in the light most favorable to defendant, the separate defense pleaded was wholly evidence and therefore redundent. Nor might defendant, by answer, limit the issue to the question of Ridgway’s authority.

We have dwelt upon this question of pleading for the reason that appellant has so strenuously and seriously defended its position

Tne issues made by the pleadings in No. 878 were, upon trial, narrowed to the question whether Ridgway was clothed with authority to make the note in defendant’s name, and whether, in the absence of such authority, the defendant ratiiffed his act in its behalf. If there was any substantial evidence tending to prove such authority or such ratification, the duty would devolve upon this court to determine the many errors claimed to have Jaeen committed by the court below in admitting evidence, unless, under the competent evidence, the jury, as a matter of law, ought to have found for plaintiff.

Upon careful consideration of all the evidence in the record, we are of opinion that plaintiff failed to make a case for the jury, and the court should have granted the motion for non-suit. An agent with general authority to manage his principal’s business has, by virtue of his employment, no implied authority to bind his principal by making a negotiable instrument. Such authority must be expressly conferred, or be necessarily implied from the exigencies and the general course of the particular employment, or the act must be ratified by the principal. (See Mechem, Agency § 398.) This rule is applicable to the managing agent or general manager of a nontrading corporation, as well as to the agent of natural persons. (Oak Grove Cattle Co. v. Foster, (N. M.) 41 Pac. 523; Edwards v. Carson Water Co. (Nev.) 34 Pac. 381; Thomp. Corp. § é850.) The power given to the business manager of such a corporation to transact its business does not authorize him to bind thé corporation as maker of a negotiable note. (Culver v. Leovy, 19 La. Ann. 202; Oak Grove Cattle Co. v. Foster, supra.) The English rule is even more strict than the American. (See In re Cunningham, 36 Ch. Div. 532.)

Argument is not needed to show the extraordinary and well-nigh unlimited power conferred upon an agent who has authority to make negotiable notes in his principal’s name. An agent with such authority has, for practical purposes,. full power to wreck the corporation by putting out its paper* to which paper, in the hands of a good-faith- endorsee before maturity, no defense can be made.

As said by Mr. Justice Cooley in New York Iron Mine v. First National Bank, 39 Mich. 644, (a case involving questions akin to those arising in the case at bar) : ‘.‘The issuing of promissory notes is. not a power necessarily incident- to the conduct of the business of mining, and it is so susceptible of abuse, to the injury, and, indeed, to the utter destruction of a corporation, that it is wisely left by the law to be conferred, or not, as the prudence of the board of directors may determine. ”

The doctrine approved by us finds clear expression in the opinion of the Supreme Court of Arkansas in Geyer v. King, 34 S. W. 89. The opinion in that case contains a review of the authorities, and a thorough exposition of the principles applicable to the case at bar.

The presumption of law is more strongly opposed to an implied authority to execute negotiable instruments than to do anything else, and even where there is a general authority £ ‘to transact all business” or “to do all lawful acts concerning all the principal’s business of whatever nature or kind soever,” it is very generally held that the power to execute bills or' notes is not included. (Tiedeman on Com. Paper, §77.)

The case at bar is to be distinguished in its facts, or upon principle, from all the cases cited by plaintiff, with the possible exception of Grommes v. Sullivan, 26 C. C. A. 320, 81 Fed. 45. We believe the doctrine announced in that case to be contrary to the great weight of authority, and that it should not be followed.

In Glidden & Joy Varnish Co. v. Interstate National Bank, 16 C. C. A. 534, 69 Fed. 912, upon which plaintiff so much relies, the facts were that the defendant was a trading and manufacturing corporation of Ohio, having a branch in Missouri, at which a large business was carried on, in the purchase and working up of raw material, and the sale of the finished product over a large territory. This branch was conducted by a general agent and manager, who was in full control of all departments of the business conducted in Missouri, and managed all its affairs, financial and otherwise, with the knowledge and consent of the corporation, and usually without direction and oversight by its officers. From time to time he reported-to his principal, and some of his reports showed entries of bills payable. This general manager made notes in the name of the corporation, by himself, as treasurer ; and, upon the trial of an action upon them, it was proved that the president knew that the manager had been signing all the bills payable made by the Missouri branch, for goods purchased. The president of the corporation testified that it was the natural order of things for the manager to procure their discount by indorsing them as treasurer, and that, if the money was required in an emergency, he supposed the agent ■ would be expected to make notes for the corporation, and cause them to be discounted. Under these circumstances the court held the jury warranted in finding the agent clothed with implied authority to execute the notes. In the course of the opinion, the court made some observations not necessary to a decision, to the effect that the general manager of a manufacturing and trading corporation, who is authorized to buy and sell goods, to carry on the business, and to take and discount promissory notes for his principal, is thereby vested with implied power to execute notes for his principal, and that such general agent is presumed to have the same authority to execute notes in behalf of the corporation that a reasonably prudent merchant or manufacturer has to make notes for himself. These observations were obiter dicta.

In all the other cases cited by plaintiff there was express or implied authority in the agent, a ratification of his acts, usage rising to the dignity of a custom, or estoppel. For example, in Bates v. Keith Iron Co., 7 Metc. (Mass.) 221, the managing agent of a manufacturing corporation executed a note in its name for the amount of wages admittedly due from his principal. The court was inclined to the opinion that the directors had held the agent out as authorized to make notes, and might well have put the -decision reached upon that fact. Whatever may be the principle applicable in this respect to trading or manufacturing corporations, there is nothing in the nature of the business of a corporation organized for the purpose of operating a telegraph line, or of the duties of its general manager, which implies authority in such agent to make negotiable paper. (Craft v. Railroad Co., 150 Mass. 207, 22 N. E. 920.)

There was no express authority conferred upon Ridgway to make the notes in behalf of the defendant. If the admissibility of the document alleged to have been issued by Clark and the Standard Company be conceded, we find that it merely conferred upon Ridgway “full power to manage the business of the Rocky Mountain Telegraph Company, and make all necessary contracts and arrangements in carrying on and operating said business. ’ ’ This, under the authority of the adjudicated cases, and upon principle, was insufficient, hior was such power necessarily implied from the exigencies or general course of the business. (New York Iron Mine v. First National Bank, supra.) Neither was there a ratification by defendant of the acts of Eidgway, nor a recognition of the note as its paper. Neither was there proof of custom, habit or course of business pursued by defendant or by Eidgway, from which his authority to make negotiable notes could be implied or inferred. On three occasions, it is true, he did execute notes in the defendant’s name, but there is no proof that these instances were ever brought to its knowledge until after Eidgway ceased to be its manager. (Elwell v. Puget Sound Railroad Co. (Wash.) 35 Pac. 376.) Nor was there sufficient publicity in the doing of the acts mentioned to warrant the inference that defendant had knowledge of them. The drawing of checks by Eidgway against the funds of the defendant did not tend to establish a usage as to the giving of negotiable promissory notes. (Oak Grove Cattle Co. v. Foster, supra.)

The defendant was not negligent in failing to obtain information in respect of the notes. In order to charge the defendant upon the principle of negligence, there must have been a duty devolving upon defendant, and a neglect to perform that duty. The duty of suspecting its agent of exceeding its authority was not incumbent upon it. It was justified in trusting to the presumption that he would act within the sphere or obit of the power delegated to him. Moreover, the payee of the note was bound to know that the law would not charge the defendant upon a note executed by an agent not clothed with the power to act in that behalf.

Plaintiff acquired the note by assignment, not by indorsement, and therefore acquired no better title than had the payee. Indeed, as between the parties, the effect of the note, if binding on defendant, was an account stated "in writing, containing an express promise to pay the amount found to be owing, and the further promise to pay interest thereon at the rate of 1 per cent, per month and reasonable attorney’s fees. But the question is not as to the effect of the note under the circumstances of the particular case, but of the power in the agent to execute an instrument negotiable in form, — “a courier without luggage, ’ ’ — which in the hands of an indorsee in due course would not be open to defenses. We do not wish to be understood as denying the right of plaintiff to maintain an action for recovery of the debt (if any there was) for which Ridgway attempted to make the note. No such question arises, since the only subject of the action is the supposed note, and the only cause of action is the failure of the defend-, ant to perform the alleged contract contained in the note.

For the foregoing reasons, the order appealed from in action No. 878 is reversed, and the cause remanded for a new trial.

Reversed and Remanded.

2. Action No. 877, presents the question whether Ridgway, the general manager, was, under the facts disclosed by the evidence, authozdzed to pledge the credit of his principal for the overdz’aft" of. $350. We are cleaidy of the opinion, under the facts admitted and thus proved without objection on the part of the defendant, that the apparent power was, by implication, delegated to him. He was the general manager of the defendant, in full charge of its ordinary business and transactions. The defendant is charged with notice that the receipts of the business were much less than the outlay each month, the deficit duz'ing one month being in excess of $1,000. It knew, or ought to have known, that its general manager would, in the ordinary and prudent conduct of the business intrusted to him, borrow from time to time such moneys as were requisite to meet these expenses. It knew that it did not advance funds in anticipation of a deficit. It must have known, and was negligent if it did not know, that a bank account in its name was proper and necessary to be kept at Helena by the manager. It ought to have known that the agent would probably provide for paying that portion of the current expenses the liquidation of which could not be delayed, by obtaining a temporary loan from the defendant’s banker.

. The corporation had power to borrow money so far as necessary to effectuate its legitimate purposes. The trustees were its business agents, and in them resided its entire power touching the transactions of its business, and they possessed this power, the delegation of which by them to the general manager the law sanctioned. That power, so far as it was to be exercised by reason of temporary necessity from day to day or month to month, was, by plain and unmistakable implication, delegated by the trustees to Ridgway. No fraud or collusion is charged to have existed between the bank making the loan and Ridgway; nor was the amount of the loan so disproportionate to the business transactions carried on by Ridgway as to suggest to the 'lénder that Ridgway might be obtaining the money for his own use; nor was it necessary for the plaintiff to show an actual appropriation to defendant’s use. (Thomp. Corp. § § 5706, 5707.) Neither is it to be presumed that the agent acted in bad faith. On the contrary, as .between defendant and plaintiff, the presumption of right acting upon the part of the agent is indulged. While persons dealing with agents of corporations are required to take notice of the extent of the powers conferred, to require them to have knowledge of the propriety of its exercise in the particular case would often result in gross injustice. “Especially is this so where the agent or officer of the corporation which exercises the power at the time represents the corporation, and speaks for it in giving information as to the circumstances under which it is executed.” (Id. § 4889.)

We have examined all the cases cited by defendant, as well as many others, and find none of them conflicting with the principles declared in this opinion to be applicable to the facts here shown to exist.

The allegations of the complaint were established by admissions of the defendant, and by credible evidence, and were undisputed by countervailing proof. Where, in a civil action, the facts are admitted or undisputed, or where the evidence is ‘ ‘all in one direction, ’ ’ the only questions for decisions are those of law. There being no conflict in the evidence, and the proofs being such that reasonable men could come to but one •conclusion upon them, the .case presents, in effect, an agreed statement of facts. (Emerson v. Eldorado Ditch Co., 18 Montana, 247, 44 Pac. 969; 2 Thomp. Trials, §§ 2245, 2262; Wabash Railway Co. v. Williamson (Ind. Sup.) 3 N. E. 814; Town of Orleans v. Platt, 99 U. S. 676; Town of Grand Chute v. Winegar, 15 Wall. 355; Cahill v. Railway Co., 20 C. C. A. 184, 74 Fed. 288; Martin v. Ward, 69 Cal. 132, 10 Pac. 276; Bank v. Galland (Wash.) 45 Pac. 35.

The order denying a new trial of action No. 877 is affirmed.

Affirmed.

Pemberton, C. J., and Hunt, J., concur.