Hills v. Peoples Express, Inc.

Crosby, J. At the time of the execution and delivery of the note which is the subject of this action the defendant company was carrying on an express business. The plaintiff’s brother, Forrest E. Hills, was the treasurer, manager and a director of the defendant corporation and owned a majority of its stock. The company being in need of funds, he applied to the plaintiff for a loan of $800, which the plaintiff agreed to make, and thereupon Forrest, as treasurer, executed the note in suit and delivered it to the plaintiff, receiving in exchange therefor a promissory note for the sum of $800 payable to the order of the First National Bank of Ipswich. This note was then indorsed in the name of the defendant by Forrest E. Hills, as treasurer, and discounted by him at the Ipswich bank; and the proceeds were deposited in the First National Bank of Newburyport in the name of the defendant, with other funds there on deposit belonging to it, and were used in the payment of its debts. There was evidence to show that before this action was brought the plaintiff took up the note given by him to the Ipswich bank, by paying in cash a part of the principal and giving a new note for the balance; and that subsequently he made partial payments from time to time and gave a new note for the unpaid balance until the entire obligation was paid. There was also evidence that, after the note in question was given, Forrest E. Hills sold his stock in the corporation to one McCarthy and resigned the various offices which he held in the company; that McCarthy agreed to pay the note to the plaintiff, which had previously been left by him with his attorney, one Bailey, for collection; that Forrest represented ‘to the plaintiff that the note was to be paid and obtained from him an order on Bailey for its delivery; that McCarthy tendered to Forrest two instruments in writing purporting to transfer to the plaintiff a [98] garage standing on leased land, and a motor truck, in payment of the note, and Forrest accepted these instruments and delivered to McCarthy the order addressed to the plaintiff’s attorney, together with an order signed by Forrest, requesting the attorney to-deliver to McCarthy the note; that when Forrest informed the plaintiff of the arrangement he refused to accept the papers, or to surrender the note unless it was paid in cash; and that the plaintiff’s attorney also refused to deliver the note to McCarthy upon the latter’s presentation of the order. Upon this evidence the motion to direct a verdict for the defendant was rightly denied. The plaintiff never received any payment on account of the note, which was in his possession outstanding and unpaid. It was given by the defendant for a valuable consideration. The plaintiff, instead of advancing cash in exchange for the note, gave his own note payable to the First National Bank of Ipswich, and delivered it to the defendant, which discounted it, deposited the proceeds to its credit, and used the money in payment of its debts. This note was paid by the plaintiff by cash and the giving of a new note, thereby discharging the defendant from liability thereon as indorser. The note given by the plaintiff to the bank could have been found to have been so given as a means of obtaining the money which he had loaned to the defendant. The situation is not different than it would be if the plaintiff had delivered ’$800 in cash to the company. The note given to the bank was-not an accommodation note or a mere loan of credit, it has been paid in full; the loan was a valid and sufficient consideration for the note in suit. Eaton v. Carey, 10 Pick. 211. Higginson v. Gray, 6 Met. 212. The tender to and acceptance by Forrest E. Hills of the two-instruments purporting to convey title to the garage and motor truck to the plaintiff could not properly have been ruled ho be a. payment of the note. As soon as he learned of the transaction he promptly repudiated it. Although the plaintiff’s brother was his agent to collect the note it was his duty to make the collectian in cash; and he never was authorized to accept anything else in payment. He was a special agent with limited authority and could bind the plaintiff only while he acted within the scope of the power delegated to him. It is well settled that a person dealing with a special agent is bound to inquire and ascertain the [99] extent of his authority. Brown v. Henry, 172 Mass. 559, 566. Lovett, Hart & Phipps Co. v. Sullivan, 189 Mass. 535, 536. Cauman v. American Credit Indemnity Co. of New York, 229 Mass. 278, 283. Exceptions overruled.