Second National Bank v. Diefendorf

Mr. Justice Sheldon delivered the opinion of the Court: The points raised upon the record as grounds of reversal are, that the contract alleged being made by the president of the Second National Bank of Peoria, was not binding upon the bank, it being one outside of the usual course of banking business, and one which the president of the bank, by virtue of his power as such, (he having no special authority,) was not authorized to make so as to bind the bank,—that the conditions of the contract were not performed, Diefendorf not having complied with instructions in his purchase of the grain,— and that the undertaking in question was with the Northwestern National Bank alone, and not with the plaintiff in this suit. We find it unnecessary to consider any more than the last mentioned question in order to the disposal of the case. The supposed cause of action rests wholly upon the correspondence by the letters and telegrams in evidence. The Peoria bank is sought to be charged upon the telegram signed by its president to the Northwestern National Bank, that “ Draft on Rae will be protected, provided bills of lading, transfers, insurance and amount drawn for are all right.” There is no evidence whatever that the telegram was dictated by any communication from Diefendorf other than the letters and telegrams to Rae, or by any communication from the Northwestern National Bank, or from Rae beyond what may be inferred from the telegram itself. Nor does it appear otherwise than from that, that any of the correspondence between Diefendorf and Rae was made known to the Peoria bank. The letters and telegrams between Diefendorf and Rae are merely declarations inter alios, and obviously not binding upon that bank. The promise by the telegram is clearly one to the Northwestern National Bank, to which the dispatch Avas directed, and not to Diefendorf, and all the correspondence, even if that should be taken as evidence against the Peoria bank, shows nothing different. It all shows that the undertaking which was wanted from that bank was one to the Northwestern National Bank, and not to any one else. There is no privity of contract between the Peoria bank and Diefendorf to enable the latter to maintain an action on the promise of the telegram. But the claim is set up that the Northwestern National Bank was acting as the agent of Diefendorf, and that the latter can maintain an action in his own name on the promise to his agent, the Northwestern National Bank; and Diefendorf, and Clary who transacted the business for Diefendorf, give their testimony as follows: Clary says the Northwestern National Bank obtained the guaranty from the Peoria bank at his instance, in behalf of Diefendorf; that “in so large a purchase as fifty thousand bushels of wheat we would not undertake to, without a margin, and as he (Rae) evidently could not put up a margin except through his bank, the idea occurred to me that he should get his bank to telegraph our bank, and then we could buy it the same as if we had a margin.” And Diefendorf says: “ The telegram read in evidence from Second National Bank of Peoria, was obtained at my instance, or through my instance, to indemnify me against any losses, or rather in favor of the margin on the wheat, in case there should be a decline on it. I took the guaranty from the defendant in this case in place of a margin.” Although this is now, several years afterward, testified to as being the transaction, the correspondence between the parties contains no intimation whatever of such being the character of the transaction, or that any security was desired by Diefendorf that Rae should perform his part of the contract, or that the Peoria bank was requested to make any promise to or for the benefit of any other person than the Northwestern-National Bank. Diefendorf wished to get the money to pay for the wheat from the Northwestern National Bank. Although Rae had said he was ready to pay the draft on presentation, the Northwestern National Bank would appear not to have been willing to advance the money upon the security of the names of Eae and Diefendorf, and to have insisted upon some undertaking in the matter from the Peoria bank; and the whole purpose that is shown was, that the latter bank should give some assurance to the Northwestern National Bank to induce it to let Diefendorf have the money. It was to be an arrangement between the two banks. However the transaction was as between Diefendorf and the Northwestern National Bank, and whatever the secret thoughts and purposes of Diefendorf and Clary, the same were unknown to the Peoria bank, and can not affect it; it had nothing to go by but the letters and telegrams, if it had even that much. Eae telegraphs back to Diefendorf that the Peoria bank do not know what is meant by asking them to advance on wheat. And their telegram is, not that they will advance on bill of lading, as had been asked, or that they would pay the draft, but it simply is to the Northwestern National Bank, that “draft on Eae will be protected, provided,” etc.,—that is, as we understand it, the Peoria bank will see that you, the Northwestern National Bank, are protected. The telegram is directed to that bank, and it is a promise only to and for the benefit of that bank. A surety can only be charged where the case is brought within the very terms of his contract. A promise to Diefendorf is not within the terms of this contract, nor is it so when taken in connection with the whole correspondence. Such a written undertaking is not negotiable, nor can any person but the one to whom it is addressed maintain an action upon it. Birckhead v. Brown, 5 Hill, 634. The promise was with respect to a specific instrument, viz: a bill of exchange drawn by Diefendorf on Eae, in which the Northwestern National Bank was the payee,—the promise ran to and was for the benefit of the payee of the draft, and not to or for the benefit of the drawer, Diefendorf. As Eae had promised to pay the draft, that was equivalent to an acceptance. Had the Peoria bank been compelled to pay the loss in this case to the Northwestern National Bank, then Diefendorf would have become liable to the Peoria bank for the same. If that bank guaranteed the paper, it became guarantor of drawer as well as acceptor, and if it had suffered loss it could have held both drawer and acceptor liable to refund. Assuming the conditions named to have been performed, then the Northwestern National Bank had the liability of the three— Bae, Diefendorf, and the Peoria bank; but as between these three the liability of Bae and Diefendorf was the primary liability as that of principal debtors, and that of the Peoria bank but secondary, as surety. Such we conceive was the relation of the parties and the nature of the undertaking of the Peoria bank, so far as appears upon the face of the correspondence, and as the Peoria bank had the right to regard and understand the transaction. The principle that appellee insists on here, under Clary’s and his own evidence, that a promise to an agent is in law a promise to the principal, and that the latter may sue upon it in his own name, is not applied to the prejudice of a promisor who is ignorant of the existence of that relation-. It manifestly can not be applied, as attempted in this case, in behalf of an unknown principal, so as to convert a promise of indemnity upon a draft, understood by the promisor as made to the payee, into one as made to the drawer, and change the relation of the promisor toward the drawer from one of guarantor as supposed, into that of principal debtor. . An undisclosed pi’incipal is not to be brought into a contract, thus to the prejudice of one dealing with an unknown agent. We come to the conclusion that under the evidence as affecting the Second National Bank of Peoria, that bank is neither the acceptor of the draft, nor, as between drawer and drawee, is it a guarantor to the former of acceptance or payment;—that there is no contract between that bank and Diefendorf, and that when he took up the bill he did it in discharge of his own obligation, which the bank had guaranteed, and that consequently he had no right of action against that bank. The judgment will be reversed and the cause remanded. Judgment reversed.