Claflin v. Farmers' & Citizens' Bank of Long Island

The only question in this case, which seems to me to require serious consideration, is, whether Mr. Houghton could bind the bank by accepting checks or drafts drawn by himself. It is a well settled rule of the law of agency, to which I apprehend there is no exception, that no person can act as the agent of both parties to a contract, although he himself may have no *Page 295 interest on either side; nor can he act as agent in regard to a contract in which he has any interest, or to which he is a party on the side opposite to his principal. In the present case, Mr. Houghton, as the drawer of the checks, was the party with whom the contract of acceptance was primarily made, and stood, therefore, precisely in those opposite relations which the rule referred to forbids. It is not necessary for the principal in such cases to show that the agent has acted unfairly, or that he himself has sustained any injury. The act of the agent is deemed to be unauthorized, and the contract is void. It is conceded, in the opinion of the Supreme Court in this case, that, as between the bank and Mr. Houghton, the certificate of acceptance of the latter would not be obligatory. But that court supposed that a subsequent bona fide holder could, nevertheless, avail himself of such certificate. The difficulty in the way of this conclusion, however, is, that the want of authority in Mr. Houghton to bind the bank appeared upon the face of the check. There could be no bona fide holder of such an instrument. An indorsee of commercial paper may, it is true, very frequently acquire rights superior to those of the original party; but never, so far as I am aware, when he has notice of the defect. If he knows the facts which would render the paper void in the hands of the party from whom he derives title, he cannot recover. The Supreme Court seems to have supposed that, to prevent the plaintiffs from being considered as bona fide holders, they must have known that the drawer had no funds in the bank to meet the check. This was clearly an error. The acceptance was void in the hands of the drawer, irrespective of the question whether he had or had not such funds. The double relation in which Mr. Houghton stood alone rendered it void, and of this the plaintiffs were apprised by the check. It could not be necessary that they should have had notice of any other fact, in order to defeat their recovery; as the same facts which render commercial paper void in the hands of the original party, will equally avoid it in the hands of any subsequent holder having notice of such facts. *Page 296 It is of no importance that the referee has found, as a fact, that the plaintiffs were bona fide holders. This finding is opposed to the plain law of the case, and is therefore nugatory. This reasoning applies to two only of the checks upon which the action is brought. I see no obstacle to a recovery upon the check drawn by Green. The judgment of the Supreme Court should be reversed, and there should be a new trial.