Voltz v. National Bank of Illinois

Mr. Justice Baker delivered the opinion of the court: There was no real inconsistency in the rulings of the trial court upon the written propositions submitted to it, in holding proposition 1 and refusing to hold propositions'2, 7 and 9 as law in the decision of the case. Assuming it to be true that, while appellee represented Herman Schaffner & Co. in the clearing house, the relation that existed between them -was that of principal and agent, yet that relation ceased to exist early on the morning of June 3, 1893, when Herman Schaffner & Co. made a general assignment for the benefit of their creditors and ceased doing business, and appellee refused longer to represent them in the clearing house, and threw out and returned their clearings, amounting to $6976.01. The evidence is, that in the forenoon of June 3 appellee refused longer to pay checks certified by them, and that the check in question was not paid through the clearing house. The testimony of Moll, who was assistant cashier of appellee, is explicit, that the check was paid by appellee on account of the guaranty in writing held by the First National Bank. And Street, cashier of the First National Bank, testifies in chief: “This check was shown to me by our note teller, and I remembered the fact that we had a guaranty from the National Bank of Illinois, and I held them to their guaranty, simply, and they took the check up.” And he testifies on cross-examination: “When that check was not paid through the clearing house, our bank, either on June 3 or June 5, demanded that the National Bank of Illinois should give us the face of it.” And also says that he endorsed the check by way of transfer to the National Bank of Illinois, but to protect his own bank made the endorsement “without recourse.” In holding proposition 1, the trial court did not, either in terms or by necessary implication, find, as matter of fact, that appellee, in paying the check, did so as agent of Herman Schaffner & Co., and when that proposition is read in the light of the refusal to hold propositions 2, 7 and 9, it is manifest that court must have found that appellee did not pay or come into possession of the check “for and as the agent” of Herman Schaffner & Co. Therefore the doctrine that payment by the agent of the maker of a note or drawee and acceptor of a check is a payment of the note or check, and an extinguishment of the liability of the indorser of such note or drawer of such check, has no application to the case, and the authorities cited by appellants upon this branch of the controversy, —i. e., Mechem on Agency, sec. 487, Burton v. Slaughter, 26 Gratt. 914, and Johnson v. Glover, 121 Ill. 283,—are not in point. In our opinion, the conclusion here must be, that when appellee gave to the First National Bank its cashier’s check for the face of the F. L. Voltz & Co. check, and took an assignment of the latter check, it did so, not as the agent of Herman Schaffner & Co., but as guarantor of said check; and it follows, since appellee did not pay the check as agent, that by the endorsement it took the legal title to the check, and has a legal right, as assignee, to recover the money therein specified from appellants, the drawers of the check, the said Herman Schaffner & Co. having failed and refused to make payment,—and this, wholly regardless of the considerations that may have induced it to make the payment and take the assignment. Appellants, the drawers, procured the certification of the check prior to its delivery to the payee, and they are primarily liable to such payee or its assignee. Metropolitan Nat. Bank v. Jones, 137 Ill. 634; Brown v. Leckie, 43 id. 497; Bickford v. First Nat. Bank, 42 id. 238; Rounds v. Smith, id. 245. It is claimed in some of the refused propositions that were submitted to the court, and also in the argument of appellants, that the contract of guaranty given by appellee to the First National Bank was ultra vires and void; that it was also void as rendering appellee liable for an amount in excess of its capital stock actually paid in, and void as being against public policy; and that therefore the First National Bank could not have maintained any action thereon against appellee for the recovery of the amount of the check in suit, and consequently the payment made by appellee was made as a volunteer, and it is not entitled to be subrogated, as against appellants, to, the rights of the First National Bank. Even if all these claims should be conceded, yet if we are right in the conclusions we have announced above, appellee, as assignee of the check, has a complete legal right of recovery, and it is wholly immaterial even if it has not the equitable right to be subrogated to the position of the First National Bank. But the determination of the question whether the guaranty contract is ultra vires and void, or void as being otherwise contrary to the statute under which appellee was organized, or against public policy, depends upon the interpretation that is to be placed upon the National Bank act and the effect to be given its provisions. It may be that if a statute of this State was involved, then the rule that no right of action can spring out of an illegal contract, (held in Penn v. Bornman, 102 Ill. 523, and in other cases,) would apply. But in the very case just cited the paramount authority of the Supreme Court of the United States to construe all Federal statutes, including the National Bank act, is fully conceded. The doctrine of the Federal courts, as applied to this case, is: that even if the guaranty which appellee gave to the First National Bank was ultra vires, or given in violation of the National Bank act, yet appellee could not urge that defense after the First National Bank, in relianee upon that guaranty, had taken the certified check in payment of the acceptance of F. L. Voltz & Co., and that the power to redress the wrong committed by the appellee bank was in the government only, by a proceeding to forfeit the charter of the bank. National Bank v. Matthews, 98 U. S. 621; National Bank v. Whitney, 103 id. 99; Weber v. Spokane Nat. Bank, (C. C. A.) 64 Fed. Rep. 208. It would seem that, under the decisions of the Federal courts, appellee could not have availed itself of the defense of ultra vires in an action brought on the guaranty. But even if it could have done so, it did not, but paid the check in accordance with its guaranty, and the question of the validity of such guaranty was one in which appellants had no interest, and it is a matter of indifference to them whether they pay the First National Bank or appellee, and therefore they can not be heard to say that appellee shall not have the benefit of the doctrine of subrogation. (Slack v. Kirk, 67. Pa. St. 380; 2 Morse on Banks and Banking, sec. 723.) Here, the guaranty was not endorsed on the check, but was written on a separate paper, and that paper was addressed only to the First National Bank, and upon the face of the guaranty -there was an express restriction that the obligation assumed should “apply only to such drafts and checks as may be received by you, in the course of your business, in payment of collections or discounted items.” And the rule is, that a guaranty so given and addressed to a particular person or corporation only, is not negotiable, and is a mere personal contract. (2 Daniel on Neg. Inst. sec. 1774.) And it results from this rule, that appellants, the drawers of the check, are total strangers to this contract of guaranty, and it does not inure to their benefit or invest them with any right. Appellee being legally liable, or, at the very least, under moral obligations for the payment of the certified check to the First National Bank, it cannot be said that it was a mere volunteer when it paid the money and took up the check. A person who, though not obliged to do an act, yet has an interest in doing it, is not to be regarded as necessarily and simply a volunteer. (Wright v. London and, N. W. Railway Co. L. R. 1 Q. B. Div. 252; Holmes v. N. E. Railway Co. L. R. 4 Ex. 254; 6 Ex. 123.) And where one guarantees payment of a note or check, and on default of payment by the principal debtor pays the .same to the holder, the law will imply a promise to repay on the part of the persons primarily liable, and the guarantor will be subrogated to the rights of the holder to whom he makes payment, and may maintain assumpsit against such persons. Babcock v. Blanchard, 86 Ill. 165; Hamilton v. Johnston, 82 id. 39; Sheldon on Subrogation, (2d ed.) sec. 186, p. 285. We think there was no substantial error in the rulings of the circuit court upon the written propositions that were submitted to it. The judgment of affirmance rendered by the Appellate Court is affirmed. _ , . „ , _ , . „ , Judgment affirmed.