National Bank of Commerce v. B. W. Marr & Co.

242 N.W. 523, 258 Mich. 214, 1931 Mich. LEXIS 1103

• Court: Michigan Supreme Court
• Decided: June 1, 1931
• Docket: Docket No. 84, Calendar No. 35,260.
• Status: Published

Opinions

ON REHEARING. The trial court found, and I agree with his finding, that there was "fraud in the making of the note, the fraud being on the part of B. W. Marr Company and to the injury of A.L. Hill, the defendant." The burden was then cast on the plaintiff to prove that it was a holder in due course. To do so, it must have shown "That he took it in good faith and for value * * * that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it." 2 Comp. Laws 1929, § 9301.

The facts, as I gather them from the record, are as follows: B. W. Marr Company was organized as a corporation in April, 1926, for the purpose of engaging —

"in the general business of real estate, buying and selling, leasing and sub-leasing property, syndicating and subdividing, engaging in property management, rentals, contracts, mortgages, interest and equities, and acting in the capacity of a holding company."

The note sued upon was given on December 11th of that year, and purchased by the plaintiff four days later. The articles of association disclose that 495 shares of its capital stock were allotted to B.W. Marr, 2 shares to Vincent Dacey, and the remaining 3 shares to James S. Novy. P.E. Vandermade was an insurance agent. He testified that Marr told him he was forming a hotel company, and wanted life insurance to divert it to that company. "He told me that the insurance would be turned over to the hotel company." He agreed to take the insurance in the company represented by Vandermade if he (Vandermade) could get the money on Hill's note. Vandermade took the defendant's $2,500 note, indorsed "B. W. Marr Co. (Sgd.) by B. W. Marr, Pres.," indorsed it himself, and secured its discount at the plaintiff bank, used $404 in payment of the insurance, and gave Marr his check for $2,096, payable to B. W. Marr Company, which Marr indorsed as he had the note and deposited it to the credit of B. W. Marr Company in the People's Wayne County Bank, in which it kept its account.

Harry S. Covington, an officer in the plaintiff bank, testified that when Vandermade produced the note for discount he asked him, "What are you doing with B. W. Marr Company's note?" and that Vandermade answered, "I am selling him insurance," and that he knew when he discounted it that Vandermade "was writing insurance for B. W. Marr Co."

The defendant Hill testified that the note in question and other notes, totaling $17,500, were given by him to Marr Company to secure to him a onehalf half interest in certain real estate to be purchased by the company and developed and subdivided. It appears that the other notes were turned over to the man from whom the land was to be purchased. They were afterwards returned to the defendant. It is apparent that defendant knew that his notes were likely to be negotiated by Marr Company.

Under these facts, which in my opinion are established by the weight of the evidence, the trial court was warranted in concluding as a matter of law that the plaintiff was a bonafide holder in due course for value. B. W. Marr Company is not here insisting that the note was indorsed by its president without authority. It could not well do so without returning to Vandermade the $2,096 which was deposited to its credit out of the proceeds thereof. It was what is frequently referred to as a "one-man corporation." The general rule that a president of a corporation has no authority to bind it by such an indorsement should not, in my opinion, be here applied. In Gould v. W. J.Gould Co., 134 Mich. 515 (104 Am. St. Rep. 624, 2 Ann. Cas. 519), cited in our former opinion in its support, it was said:

"It is true that the authority to transact business of this character may be implied where it is shown either that the president has been held out as having charge of the business, and as authorized to perform such an act on behalf of the corporation as that in question, or where the corporation is shown to have received and retained the benefits of the transaction."

In Ceeder v. H. M. Loud Sons Lumber Co., 86 Mich. 541 (24 Am. St. Rep. 134), it was held (syllabus):

"The president of a manufacturing company, who is in the active conduct and management of its business, must be presumed to have all the powers of any agent exercising like control or management, and to have authority to do what is usually and ordinarily done by such agents or managers."

See, also, Sarmiento v. Davis Boat Oar Co., 105 Mich. 300 (55 Am. St. Rep. 446).

Had the plaintiff taken this note, indorsed as it was, in payment of his individual debt to it, or permitted him to deposit the proceeds thereof to his own credit in the bank, a different question would be presented. In speaking of the degree of care which a purchaser of negotiable paper must exercise, Mr. Justice STONE, speaking for the court inHakes v. Thayer, 165 Mich. 476, 488, said:

"It was at one time held that circumstances which ought to excite the suspicions of a prudent and careful man constituted notice and put the purchaser upon inquiry. This rule has been abandoned, and it is the almost universal rule now that neither suspicions, nor even gross negligence on the part of a taker will affect his right, unless the suspicions or circumstances amount to bad faith. Suspicions or even knowledge of facts which will fall short of bad faith do not amount to notice."

Having in mind the nature of the business in which the corporation was engaged, the personal interest of Marr therein, the purpose he had as president in indorsing the note, the information relative thereto communicated to plaintiff's official at the time of its purchase, and the use to which the proceeds of the note were put, in my opinion it should be here held that the plaintiff was a holder thereof in good faith for value and entitled to recover from the defendant.

The judgment is affirmed.

CLARK, C.J., and NORTH and BUTZEL, JJ., concurred with SHARPE, J.