St. Vincent College v. Hallett

MACK, Circuit Judge. A single question is presented for adjudication in each of these cases: Is a promissory note in the hands of a holder in due course, executed in the name of an Illinois corporation organized under the general act relating to corporations not for pecuniary profit, by its president, the obligation of the corporation, if such execution was neither expressly nor impliedly (either generally or in the specific instances) authorized or ratified, either by the members or the board of directors (unless such general authority arises from the provisions of the statute, charter, or by-laws hereinafter set forth), if it was done for the president’s own purposes, and if the corporation received no benefit therefrom or consideration therefor, either directly or indirectly? The trial judge to whom the cases were submitted, by his rulings on the pleadings and the evidence answered this question in the affirmative, and rendered judgments against St. Vincent College on nine such notes ranging in amount from $5,000 to $40,000. The objects of the corporation as stated in its articles of incorporation are “to obtain sites for and to build college and school buildings for its own use, and such appurtenances thereto a's may be necessary for its own use; and to employ professors, teachers and such other employés as may be necessary; to provide and establish courses of study, classical, scientific, commercial, divinity, art and mechanics, and in all lower branches of learning.” — 473 — Chapter 32, Hurd’s Rev. Sta.t. of Illinois, 1905, being the act under which the corporation was formed, provides, in so far as here material, as follows: ‘"See. 31. Corporations, associations and societies not for pecuniary profit, formed under this act shall be bodies corporate and politic; * * * may-have power to- make and enforce contracts in relation to the legitimate business of their corporation; * * * and they and their successors, by their corporate name shall, in law be capable of taking, purchasing, holding and disposing of real and personal estate for purposes of their organization; may by their trustees, directors or managers, make by-laws not inconsistent with the laws of this state, or of the United States, which by-laws, among other things, shall prescribe the duties of all officers of the corporation. * * * “Sec. 32. Corporations, associations, and societies, not for pecuniary profit, formed under the provisions of this act, may select trustees, directors or managers from the members thereof, in such manner, at such times and places and for such periods, as may be provided by the certificate of incorporation, or in Case such certificate does not contain such provision's, .then as may be provided in the by-laws, which trustees, directors or managers shall have the control and management of the affairs and funds of the corporation, society or association. Said trustees, managers or directors may, upon consent of the corporation, society or association, expressed by the vote of the majority of the members thereof, borrow money, to be used solely for purposes of their organization, and may pledge their property therefor. Whenever trustees, managers or directors shall be elected, a certificate under the seal of the corporation, giving the names of those elected and the term of their offices, shall be recorded in the office of the recorder of deeds, where the certification of organization is recorded. Vacancies in the board of trustees, directors or managers shall be filled in the manner provided by their by-laws, and upon filling any vacancy a like certificate shall be recorded. * * * ” [1] The only by-laws that in any manner refer to the powers of the president or the trustees are as follows: “Five trustees shall be elected by the college every three years, commencing at the expiration of the term of the first board. * *■ * The trustees shall exercise control over the affairs of the college. Any three of them shall form a quorum for the transaction of business, but no purchase of real estate, no deed of transfer or mortgage of the real property of the college, or note to secure a loan, shall be made unless authorized by resolution of and at a meeting of the members of the college, a quorum being present. * * * ********* “The president shall call or order the secretary to call all meetings. He shall preside at such meetings. He shall execute all instruments of every kind in and about the business of the college, and he shall in general exercise all authority and perform all acts usually exercised and performed by presiding officers of colleges.” All the notes in these suits, with one exception, are in the following form, differing only in amount, date, name of payee, and place and time of payment: “825.000.00. Chicago, Illinois, February 8, 1908. “Four months after date we promise to pay to the order of Fidelity Funding Company, twenty-five thousand dollars at Central Trust Company, Chicago. Value received. St. Vincent College, by P. V. Byrne, C. M. Pres. “No. 2605. “Due June 8, ’08.” The one exception referred to is a note in the same form as the others except that it is signed: “St. Vincent College, by P. V. Byrne, C. M. Pres. Hugh J. O’Connor, Acting Treas.” . — 474 — The undisputed facts appearing from the record are that the notes were signed by P. V. Byrne and Hugh J. O’Connor,; that at the time of the signing P. V. Byrne was the qualified and acting president, and Plugh J. O’Connor was the qualified and acting treasurer of the defendant below; that the indorsements on the notes were genuine; that the several plaintiffs below were holders in due course; and that none of the notes had been paid. Many questions have been argued that are beside the real point in the case. Ultra vires is not involved; the corporation had power to issue negotiable paper. Nor is the fundamental question one that is governed by the law of negotiable instruments. It is essentially a question of agency. Is the president of such a corporation, solely by virtue of his office, authorized to bind the corporation as principal ? It is contended by defendants in error that the by-laws expressly authorize the president to execute corporate notes, and that therefore the real question in the case is whether or not the act of the president, although not authorized in the specifip instance and although not for corporate purposes, is nevertheless binding on the corporation because the power of the board of directors has been fully and lawfully delegated to him. If the by-laws had provided that not only the power to execute instruments, but the power to determine when such execution is necessary or desirable in the management of the affairs of the corporation, shall be vested in the president, either the holder in due course of negotiable paper or the other innocent party to any ordinary contract made by the president apparently on behalf of the corporation, could hold the corporation to the same extent as if the board of directors had specifically authorized or ratified the transaction. Under such a by-law, the sole 'question would be whether or not 'the action of the president or the board of directors would be binding without a vote of a majority of the members. Louisville, New Albany & Chicago Railway Co. v. Louisville Trust Co., 174 U. S. 552,, 19 Sup. Ct. 817, 43 L. Ed. 1081, would be a strong authority in favor of the note holder in that event. In that case the defendant railway company was a corporation organized under a statute of the state of Indiana, which contained the provision that: “The board oí directors oí any railway company organized under and pursuant to the laws oí the state of Indiana, whose line of railway extends across the state in either direction, may, upon the petition of the holders of the majority of the stock of such railway company, direct the execution by such railway company of an endorsement guaranteeing the payment of the principal and interest of the bonds of any railway company organized under or pursuant to the laws of any adjoining state, the construction of whose line or lines of railway would be beneficial to the business or traffic of the railway ■so endorsing or guaranteeing such bonds.” A negotiable guaranty of certain bonds was executed under the seal of the corporation by order of the board of directors, and signed by the president and secretary of the corporation, although a majority of the .stockholders did not petition for the execution of the guaranty, as required by the statute. There was no evidence that the stock — 475 — holders ever authorized the contract or the guaranty; on the contrary, at their next annual meeting it was voted to reject and disapprove both the contract and the guaranty as having been made without legal authority. Before the stockholders’ meeting was held at which this action of disapproval took place, 135 of the bonds on which.- the guaranty was made had been negotiated and sold to bone fide purchasers. The corporation was. nevertheless held liable because the act of .the board of directors binds the corporation as against one who has no knowledge that the board of directors is violating its duty. As Mr. Justice Gray says (174 U. S. 573, 19 Sup. Ct. 825, 43 L. Ed. 1081): ■ “One who takes from a railroad or business corporation, in good faith, and without actual notice of any inherent defect, a negotiable obligation issued by order of the board of directors, signed by the president and secretary in the name and under the seal of the corporation, and disclosing on its face no want of authority, has the right to assume its validity, if the corporation could, by any action of its officers or stockholders, or of both, have authorized the execution and issue of the obligation.” The reason for this principle is found in the opinion of Judge Taft when the case was decided by the Circuit Court of Appeals. He said (75 Fed. 433, 452, 22 C. C. A. 378, 398): “The requirement that, in the exercise of the power of guaranty, the initiative should be taken by the stockholders by petition, was a regulation of the internal management of the corporation for the benefit and protection of the stockholders.” If, however, the by-laws contain no such grant of power, if soundly interpreted they merely designate the officer who is to perform'the ministerial acts necessary to carry into execution the orders of the board of directors in whom by- the statute the management of the business is vested, the Louisville Case is no authority in favor of the contention that the president, even of a business corporation, may virtute officii bind the corporation. On the contrary, all of the intimations in the opinion of the Supreme Court are to the contrary. And in the opinion of Judge Taft in the Circuit Court of Appeals (75 Fed. 433, 22 C. C. A. 378) the reason for this distinction between the binding effect of an act authorized by the board of directors, even though without the prescribed consent of the members, and the act of a mere officer unauthorized by and without the consent of the board of directors, is pointed out at page 461 of 75 Fed., page 407 of 22 C. C. A., as follows: “It bas been urged by -way of reductio ad absurdum that the same reasoning which raises a conclusive presumption of regularity in favor of a stranger advancing money on the faith of action by directors would require that the presumption arising from the affixing of the seal by the secretary and the signature of the corporation by the president, that the board of directors ordered them upon due authority received from the stockholders, should be equally conclusive. It is not necessary for us to decide the question suggested until it arises. It will suffice to point out the manifest distinction between such a case and the one under discussion. The secretary and the president, in affixing the seal and signature, are mere ministerial officers. They have no discretion to exercise in the matter of guaranty. They are the mere subagents of the corporation — the fingers of the board of directors, so to speak — in this mat7 ter; and it would seem that in a case in which not only the action of the directors is necessary, but that of the stockholders, the unauthorized use of the — 476 — seal by the secretary, or of the name of the company by the president, to give the appearance of validity to a pretended guaranty, would be as far short of binding the company as a forgery.” See, too, Cook on Corporations (6th Ed.) § 725, p. 2355: “These rules (referring to 174 U. S. 552, 19 Sup. Ct. 817, 43 L. Ed. 1081), however, do not apply to usurpations of authority by corporate officials.” In our judgment, the by-laws of St. Vincent College do not invest the president with any general authority to issue notes. They merely designate him as the one officer who is to perform the ministerial duty of signing such instruments as may, under proper authority, be required in and about the business of the corporation. The final clause of the by-laws (hereinabove quoted) vesting in him such authority as. is usually exercised by presiding officers of colleges, adds nothing to his power in the absence of any evidence as to the usual authority of such officers. [2] We come, then, to a consideration of the vital question in the case: Has the president such authority solely virtute officii ? The authorities are in irreconcilable conflict in the case of an ordinary trading corporation. Three rules may be found: First. That there is no presumption in favor of such authority. This conservative view is supported probably by the weight of authority. Second. That there is a presumption in favor thereof, but the presumption may be rebutted. The weight of the more recent authorities-supports this view. Third. The so-called Illinois doctrine, that as against an innocent party the act of the president binds the corporation. This is not limited to negotiable paper, but extends to any ordinary business transaction. The authorities on the question will be found collected by the text-writers: 3 Cook, Corporations (6th Ed.) § 716; 2 Thompson on Corporations (2d Ed.) § 1452 et seq.; 3 Clark & Marshall, Private Corporations, § 701. If we were to decide this question as one of general commercial law, and not of Illinois law, we should follow the great weight of American authority and hold that no irrebuttable presumption of the president’s authority arises by virtue alone of his office. One federal case has been cited holding the contrary view. American Exchange Nat. Bank v. Oregon Pottery Co. (C. C.) 55 Fed. 265. No reasons are given in support thereof, and we agree with the Supreme Court of Arkansas (City Electric Street Ry. Co. v. Bank, 62 Ark. 33, 34 S. W. 89, 31 L. R. A. 535, 54 Am. St. Rep. 282) that the two cases cited-by the learned judge do not sustain his own conclusions. In National Bank of Commerce v. Atkinson (C. C.) 55 Fed. 465, the opposite result was reached. The court says: “The president of a bank has no power inherent in his office to bind the bank by the execution of a note in its name, yet the power to do so may be conferred upon him by the board of directors, either expressly, by resolution to that effect, by subsequent ratification, or by acquiescence in transactions of a similar nature, and of which the directors have knowledge,” — 477 — While the Oregon Pottery Case has been cited in no other federal case, the Atkinson Case was affirmed in the Circuit Court of Appeals (Nat. Bank of Commerce v. First Nat. Bank of Kansas City, 61 Fed. 809, 10 C. C. A. 87), cited in Wilson v. Pauly, 72 Fed. 135, 18 C. C. A. 475, and followed in Park Hotel Co. v. Fourth Nat. Bank of St. Louis, 86 Fed. 745, 30 C. C. A. 409. In a recent federal case (In re Jefferson Casket Co. [D. C.] 182 Fed. 689) it was held that the president of a corporation, as such, had no authority to represent the corporation. In that case, a voluntary petition in bankruptcy was filed on behalf of a corporation, signed and verified by its president. It failed, however, to show that any corporate action had been taken by the board of directors authorizing the filing of the petition, or empowering the president to execute the petition in the name of the corporation. It was held that the petition was insufficient to confer jurisdiction on the court to adjudge the corporation a bankrupt. Although this case could have been rested on the ground that filing a petition in bankruptcy is not an act done in the ordinary course of business, the court cites, among other authorities state and federal, People’s Bank v. St. Anthony’s Roman Catholic Church, 109 N. Y. 512, 17 N. E. 408, infra, and the other New York cases to the same effect. In Dexter Savings Bank v. Friend (C. C.) 90 Fed. 703, the court expressly based its decision on the ground that the president-treasurer had been given a general authority to execute notes in the ordinary course of the business of the corporation. The court, however, significantly said: “A distinction must be made between cases where there is an absolute want oí authority on the part of the agent, and cases where the agent has authority, but abuses it. "Where the agent has authority, and where commercial paper is the subject of the transaction, an innocent holder of the paper gets just what he bargained for; but, where the agent is without authority, the holder gets nothing.” Farmers’ National Bank v. Sutton Mfg. Co., 52 Fed. 191, 3 C. C. A. 1, 17 L. R. A. 595, was likewise a case where the agent (secretary-treasurer) had “full and general authority” to sign and issue business paper on behalf of the corporation, and the decision was based thereon. But even in those cases in which authority is presumed from the nature of the business, an executive officer cannot bind a bank by a transaction out of the ordinary course of business. Western National Bank v. Armstrong, 152 U. S. 346, 14 Sup. Ct. 572, 38 L. Ed. 470. In that Case it was held that the vice president (the principal executive officer of the bank), as such, could not, without the authority of the board of directors, bind the bank by borrowing some $200,000 on four months’ time, because such a transaction could not be said to be in the ordinary course of business. Similarly, it may well be said that the execution of notes from $5,000 to $40,000 is not a transaction in the ordinary course of the business of a college. [3] Assuming, however, that we are to apply the law of Illinois, inasmuch as the plaintiff in error is an Illinois corporation and executed the notes in this state, it becomes necessary to consider the de — 478 — Visions which it is claimed establish the so-called Illinois rule and to determine whether or not they are applicable to the instant case. Such an examination will disclose that while in many cases the principle is stated broadly, yet in many others, and among these the more recent ones, the presumption of authority-is not .deemed irrebuttable. For example, in Alton Manufacturing Co. v. Garrett Biblical Institute, 243 Ill. 298, at page 303, 90 N. E. 704, at page 706, the court says: “Tbe trustees, having power to borrow money for proper corporate purposes and execute notes therefor, might exercise this authority in a number of ways: (1) They might appoint one of their number as agent of the corporation for that purpose and expressly or impliedly clothe him with authority to borrow money and give notes; (2) where no actual authority has been conferred upon the agent of the corporation to borrow money and give notes, but where the agent has done so, and with full knowledge of all the facts the corporation has approved and ratified the acts of the agent, it will be liable to the same extent as if actual authority had been given to perform -the acts; (3) where no authority had been given or existed in the agent to borrow money but where the corporation received the use and benefit of -the money it will be-liable; (4) by holding an agent out to the public as possessing authority to exercise the powers assumed by the agent and to do the acts performed by him, in which case the corporation would be bound to the extent of the agent’s apparent authority.” In Lloyd v. Matthews, 223 Ill. 477, 79 N. E. 172, 7 L. R. A. (N. S.) 376, 114 Am. St. Rep. 346, the court says: “The president is by virtue of his office, recognized as the business head of the company, and any contract pertaining to the corporate affairs, within the general powers of such officer, executed by -the president on behalf of the corporation, will, in the absence of proof to the contrary, be presumed to have been by authority of the corporation. If the contract in question had been executed by some agent who ordinarily does not have the power to sign such instruments, and the execution had been put in issue by properly verified plea, then it would be necessary to go beyond the mere fact of -the execution of the instrument, and prove the authority of the agent to execute the same. But when -the contract is properly executed for the corporation by its president; and it is such a contract as the corporation might lawfully make, the proof of the execution by the president is all that is required, in the absence of any evidence to the contrary showing that the contract was not made by the authority of the corporation.” Moreover, in every Illinois case in which the so-called Illinois rule is laid down, it will be found that the corporate liability could have been based on the evidence of implied authority arising from the prior course of business, ratification either express or implied, or so-called estoppel; more properly unjust enrichment arising from the retention of benefits derived by the corporation from the transaction. Assuming, however, that in Illinois a business corporation would be absolutely bound by the wrongfully issued notes executed in its name by its president and held by a bona fide purchaser, has the same principle been extended, or shall it be extended, to a corporation not for pecuniary profit, either because such a corporation, too, may engage in some business transactions, or for any other reason? ■ This question has never been expressly decided by the Supreme Court of Illinois. In St. Patrick’s Roman Catholic Church of East St. Louis v. Abst, — 479 — 76 Ill. 252, the liability of the church for the salary of a sexton employed by the priest without direct authority from the board of trustees as such, but with the approval of a majority of the individual trustees, was based on ratification by subsequent conduct. In St. Patrick’s Roman Catholic Church v. Gavalon, 82 111. 170, 25 Am. Rep. 305, the officiating priest of a church, who was a member and the chairman of its board of three trustees, employed a person to work for the church, without authority of the other trustees. A majority of the court held the church not liable, both on the ground that the priest had no authority to bind the church without being authorized by the board of trustees, and also because there was some evidence that the priest personally engaged him. They say: “The unauthorized act of one of the trustees could not be held to bind the church as a corporation. This has been held as to directors of schools, and as to trustees of other churches, where they have given notes in their individual names for property applied to the use of the church. Powers v. Briggs, 79 Ill. 493 [22 Am. Rep. 175]; Burlingame v. Brewster, 79 Ill. 515 [22 Am. Rep. 177]. “In this case, it would not matter that some of the labor was performed for the church, if the priest alone employed the appellee, without express or implied authority from the other trustees, or the act was ratified by them.” The three dissenting judges based their dissent on the fact that the church had received the benefits: “At all events, he assumed to act on its behalf, without objection from.any one, and the society or church availed of the benefit of his acts.” Nor has any other court, so far as we have been able to find, held a charitable’corporation bound on the contracts or notes of its president or any other officers, in the absence of some showing either of authority, ratification, or estoppel. All the authorities are the other way. It is no answer to say that in other states, unlike Illinois, even a business corporation is not absolutely bound by such acts of its officers, for a distinction is made between the two classes of corporations, in that in many of the states there is at least a rebuttable presumption that the president of a trading corporation was authorized, while no such presumption arises as to the acts of the president of a charitable or even of a nontrading business corporation. In People’s Bank v. St. Anthony’s Roman Catholic Church, 109 N. Y. 512, 17 N. E. 408, where, as in the case at bar, a charitable corporation was sued on notes executed on its behalf by its officers, the notes sued on purported on their face to be the obligations of the corporation, recited that they were given for loans made by the payee to the corporation, and were signed by the president, secretary, and treasurer of the corporation (three of five members of its board of trustees) in their official character. They executed the notes without authority from the board of directors as such. In holding that the corporation was not bound, the court says; “It is not the common usage or understanding that the president, secretary, and treasurer of a religious corporation possess power, by virtue of their offices, to borrow money for or issue notes of the corporation. They — 480 — may be tbe agents usually designated to issue sucb obligations when their issuance is determined upon by the trustees; but they are special and not general agents of the corporation, and can only act in such a transaction by virtue of a special authority, and their authority must be shown by those claiming to bind the corporation upon obligations issued by them.” Columbia Bank v. Gospel Tabernacle Church, 127 N. Y. 361, 28 N. E. 29; Lyndon Mills Co. v. Lyndon Literary & Biblical Inst., 63 Vt. 581, 22 Atl. 575, 25 Am. St. Rep. 783. In Packard v. Universalist Society, 10 Metc. (Mass.) 427, the court says: “To establish the authority of a treasurer of a corporation to bind the corporation by executing promissory notes, accepting drafts, etc., the plaintiff has referred us to .the cases of Narragansett Bank v. Atlantic Silk Co., 3 Metc. [Mass.] 282, and Bates v. Keith Iron Co., 7 Metc. [Mass.] 224. , But these were cases of trading and manufacturing corporations, and they furnish no analogy for cases of parishes or religious societies. There is nothing in the nature of the business to be done, or the duties which devolve upon the treasurer of such corporations, that can require or justify the giving of negotiable instruments binding the society, without being authorized by a special vote to that effect.” See, too, Peopled National Bank v. New England Home, 209 Mass. 48, 95 N. E. 77. The same rule is applied .to a nontrading business corporation in Craft v. South Boston Street R. R. Co., 150 Mass. 207, 22 N. E. 920, 5 L. R. A. 641: “Whatever may be true of trading corporations, there is nothing in the nature of the business of a horse railroad corporation, or of the duties of a treasurer of such a corporation, which implies that the treasurer, by virtue of his office, has authority to borrow money for the company and give its notes therefor. It does not appear that the company in any way held out Keed to the public or to the plaintiff as having any such authority; or that treasurers of horse railroad corporations customarily have or exercise any such authority.” See, too, Jewett v. West Somerville Co-operation Bank, 173 Mass. 54, 52 N. E. 1085, 73 Am. St. Rep. 259. While the decision of Judge Blodgett in Palmer v. Wardens, etc. (C. C. ) 16 Fed. 742, is based primarily on the failure to prove that the persons signing the instruments were in fact the officers of the Illinois religious corporation, the reasoning in the opinion is in accord with that of the Massachusetts cases. This distinction, as to the implied or presumptive authority of an officer as agent of a trading corporation on the one hand, and of a nontrading business or of a charitable corporation on the other, is based on the character of the business of the principal. It may be necessary for the conduct of the ordinary business of a trading corporation and for the protection of those dealing with its officers, especially holders in due course of its negotiable paper, to raise such a presumption, and even to make it irrebuttable just as is done in the case of an ordinary trading partnership as to each of the members of the firm. But there is no more need of extending this principle to a nontrading corporation, or a fortiori to a charitable corporation, than to a nontrading partnership. And that a note executed by one part — 481 — ner of a nontrading firm without the authority of his" copartners is not binding on them, even in the hands of a holder in due course, has long been settled. See authorities collected in 1 Bates, Law of Partnership, §§ 343, 345: Parsons on Partnership (4th Ed.) § 85; 1 Daniel’s Negotiable Instruments (5th Ed.) § 358a; 1 Randolph on Commercial Paper (2d Ed.) § 405; 1 Lindley on Partnership (2d Amer. Ed.) star page 130. Moreover, in the absence of direct authority, it may fairly be assumed that this distinction based both on authority and reason will be accepted in Illinois, inasmuch as Illinois charitable corporations are exempted from the application of the principle of respondeat superior in suits for certain torts committed by their -servants, not, as is held in some jurisdictions, because of the doctrine of assumed risk by the injured beneficiary of such a charity, but for the reasons stated in Parks v. Northwestern University, 218 Ill. 381, 75 N. E. 991, 2 L. R. A. (N. S.) 556, 4 Ann. Cas. 103, as follows: “The reasons for exemption apply as well to private as to public charitable corporations. The appellee university is a private corporation, but is organized for purely charitable purposes. It declares no dividends and has no power to do so. It depends upon the income from its property and the endowments and gifts of benevolent persons for funds to carry out the sole object for which it was created — the dissemination of learning. All of its funds and property thus acquired are held in trust by it, to be applied in furtherance of 'the purpose of its organization and increasing its benefits to the public. The funds and property thus acquired are held in trust, and cannot be diverted to the purpose of paying damages for injuries caused by the negligent or wrongful acts of its servants and employSs to persons who are enjoying the benefit of the charity. An institution of this character, doing charitable work of great benefit to the public without profit and depending upon gifts, donations, legacies, and bequests made by charitable persons for the successful accomplishment of its beneficial purposes, is not to be hampered in the acquisition of the property and funds from those wishing to contribute and assist in the charitable work, by any doubt that might arise in the minds of such intending donors as to whether the funds supplied by them will be applied to the purposes for which they intended to devote them, or diverted to the entirely different purpose of satisfying judgments recovered against the donee because t of the negligent acts of those employed to carry the beneficent purpose into’ execution.” We are pressed with the contention that the doctrine, that a purchaser must at his peril ascertain whether or not the notes of a charitable corporation executed in its name by its president were issued pursuant to authority conferred upon him by the board of directors, is in conflict with the whole policy of the law of commercial paper; that “one of the constant endeavors to Legislatures and courts is to throw their protection- around negotiable instruments and to aid and not impede their free transferability from hand to hand'in the markets of the world, and with this end in view the law to-day is that even a thief who breaks in and steals from the maker’s safe a properly executed note made payable to bearer can transfer and give title thereto, and that the bona fide purchaser of such a note can recover from the maker.” The obvious answer to this is that no one can be obligated by a forgery or unauthorized use of his name, or, in the oft-quoted — 482 — language of Justice Miller in The Floyd Acceptances, 7 Wall. 666, 19 L. Ed. 169: “It is to be , kept in mind that the protection which commercial usage throws around negotiable paper cannot be used to establish the authority by which it was originally issued.” [4] That no’ burden is placed on commerce by the rule which requires a purchaser even of commercial paper to ascertain whether its issuance was authorized by the managers of the corporation, the board . of directors, is evident from the fact that such has long been the law in the state of New York and in most if not all other states. Practically, it will be found in the case of business corporations that some officers have been held out as having thié authority, either by the express terms of the by-laws or resolutions or. impliedly by the course of dealing. If, however, no such general agency has been created, if the acts are unauthorized, not ratified, and without benefit to the corporation, the loss should fall on the one dealing with the officer or on those claiming through or under him, rather than on the corporation, especially if it be a corporation not for pecuniary profit. [5] There was no error in sustaining the demurrer to the fifth and sixth pleas, inasmuch as the defense of want of authority on the part of an officer of a corporation to execute notes in its name can be made under the verified plea of non est factum. Walsh v. Marvel, 130 Ill. App. 305; Ch. Elec. L. R. Co. v. Hutchinson, 25 Ill. App. 476. The court erred, however, in excluding the evidence offered under this plea to rebut any presumption of authority. The judgment will therefore be reversed and the cause remanded, with direction to proceed further in accordance with this opinion.