National Bank of the Republic v. Navassa Phosphate Co.

Cullen, J. This action is brought against' the defendant as indorser of a promissory note made by one John Reed. The answer puts in issue the indorsement by the defendant. The plaintiff had the verdict at circuit, and from the judgment entered upon that verdict this appeal is taken. The note in suit was made to the order of the defendant. The evidence for the plaintiff tended to show that it was transferred by the defendant to the Delta Azotin Company, on account of a debt from the defendant to the latter company. Upon such transfer it was indorsed, “Yavassa Phosphate Co., W. E. Lawton, President. ” The note was subsequently discounted by the plaintiff [930] for the Delta Azotin Company. Evidence was also given of the indorsement by Lawton of similar notes, but no direct authority from the trustees for such purpose was shown. The defendant denied all authority in Lawton to indorse notes, and also the existence of any debt to the Delta Azotin Company or from Beed. Lawton appears to have absconded after having issued a large amount of fraudulent paper. The case was submitted to the jury under instructions that, if either of the defendants received the proceeds of the note when it was indorsed and delivered by the president, or that if, as to the plaintiff or third parties, the president was apparently authorized to indorse and deliver the note, the plaintiff was entitled to recover the verdict. Proof that Lawton was the president of the defendant, without proof of his authority to indorse notes, did not show that the indorsement was that of the corporation. Bank v. St. Anthony's Church, 109 N. Y. 512, 17 N. E. Rep. 408; McCullough v. Moss, 5 Denio, 567; Bridge Co. v. Bachman, 66 N. Y. 262. The only power conferred upon the president by the by-laws was that of presiding at meetings of the board of trustees. PTo resolution of the board granting further power was produced. It was therefore incumbent upon the plaintiff to establish Lawton’s power to bind the company by further proof. This, we think, could have been shown in two ways: First, by the acquiescence or ratification by the trustees of the assumption of such power by Law-ton; second, by proof of such a course of dealing by Lawton and such negligence on the.part of the trustees as would estop the defendant from denying Lawton’s authority. Railroad Co. v. Schuyler, 34 N. Y. 30. Evidence was given by'Jones, president of the Delta Azotin Company, to the effect that he had received many such notes from Lawton; and by one Kirkland, a clerk of Lawton’s, and practically also the book-keeper of the defendant, so far as the Píew York office was concerned, that Lawton had indorsed 300 or 400 notes like the one in suit, and had them discounted, and that the witness Kirkland had made entries in the books of the company of the proceeds of such notes. Knox, the president of the plaintiff, testified that similar notes had been discounted by the plaintiff, and subsequently paid. We think that these facts, if proved by competent evidence, were sufficient to justify the submission to the jury of the question of estoppel on the part of the defendant as to Lawton’s authority. It may be assumed that the other trustees did not know that Lawton was indorsing commercial paper, but if such were the fact, and entries of the transactions disclosing their nature were made in the books of the defendant company extending over a long period, the mere ignorance of the trustees would not suffice to relieve the defendant. The corporation is justly chargeable with notice of all that should have been known by the trustees, as well as what actually was known. If, for several years, Lawton, though without authority, was using the credit of the company and the corporate machinery to avail himself of that credit, entering the transactions on the books of the corporation, and paying obligations out of apparently corporate funds, we think the trustees could not, by their negligence in omitting to discover the fact of practically turning over to Lawton the whole management of the PTew York office, relieve the company from liability to those who had acted on the faith of the apparent power. But the indorsement of numerous notes was not of itself sufficient to charge the company. Such was a mere repetition of the fraud. The essential point was to charge the defendant with either actual or implied notice. The entries of the transactions in the company’s books may have been of such a character as to have accomplished this object. Such entries, as well as the notes, were, against the defendant’s objection that the evidence was secondary and under its exception, proved, not by the books or notes, but by the testimony of the clerk, Kirkland. As to the notes, we are inclined to think the ruling of the trial court correct.' Chrysler v. Renois, 48 N. Y. 209. But as to the books we can find no justification for it. The objection was directed to the exact [931] defect, and an exception was taken to the ruling of the court. It was the vital point of the case, and contradictory evidence of a similar character offered by the defendant was excluded. Without this objectionable testimony, the evidence would have been insufficient to justify the submission to the jury on this branch of the case. For this error, therefore, the judgment must be reversed, unless, as is now claimed, the evidence on the other branch of the case, i. e., that the company had received the proceeds of the note, was so conclusive that the court should have directed a verdict for the plaintiff on that ground. We think this claim cannot be sustained. The evidence of the various transactions with the Delta Azotin Company by which the note in suit was indorsed to that company is solely that of Jones, its president. He testified that it was delivered by Lawton in part payment of a running account in favor of the Azotiu Company against the defendant for goods sold. The books of neither company were produced to show the account. Jones does not state what goods were ever sold to the defendant, and the existence of any dealings between the two compánies is denied by the defendant. Law-ton, who is the defaulting president, was interested in the Delta Azotin Company. To say the most of this evidence, it was neither so satisfactory or so conclusive that the question of the existence of the debt, and the payment of it by the note in suit, should have been submitted to the jury for determination. The judgment appealed from should be reversed, and a new trial ordered, costs to appellant to abide the event.