Mutual Investment Co. v. Wildman

Mr. Justice Gridley delivered the opinion of the court. It appears from the evidence in this case that the one thousand dollar note in question was signed by the defendants because they at that time believed that the representations of J. H. Frank, president of the Federal Co., that T. T. Wildman was then indebted to that company, were true, although as a matter of fact he was not then so indebted, and because of the agreement that the commissions to be earned by said Wildman should be applied in payment of said note, evidencing said supposed indebtedness. Three days after the execution of the note and before its maturity, J. H. Frank, as president of the Federal Co., in violation of said agreement, indorsed said note over to plaintiff and plaintiff delivered to the Federal Co. its check for one thousand dollars, payable to the order of the Federal Co., which check that company subsequently cashed. The check was signed by Emil H. Koepke, the secretary of plaintiff, and was countersigned by said J. H. Frank, the vice-president and treasurer of plaintiff. It appears that all checks of plaintiff under the sum of two hundred dollars were signed by said Koepke, as secretary, but that all checks over that sum were required to he countersigned by either the president of plaintiff or by J. H. Frank; that after Koepke had made out the check and had signed it as secretary he endeavored to get the president to countersign the check, but that the latter was not in his office; and that said J. H. Frank subsequently countersigned the check, as vice-president and treasurer of plaintiff, and the note, indorsed as aforesaid, was delivered to plaintiff. It thus appears that while J. H. Frank was representing the Federal Co. he was an essential representative of plaintiff in the transaction. In the absence of the president of plaintiff, the countersignature of J. H. Frank was necessary to then transfer the one thousand dollars named in the check to the Federal Co. “The rule now is, that the endorsee or assignee of commercial paper who takes the same before maturity for a valuable consideration, without knowledge of any defects and in good faith, will be protected against the defenses of the maker, and mere suspicion of defect of title or the knowledge of circumstances calculated to excite suspicion in the mind of a prudent man, or even gross negligence on his part at the time of the transfer, will not defeat his title.” Bradwell v. Pryor, 221 Ill. 602. Counsel for plaintiff contend that the trial court erred in directing the jury, at the conclusion of all the evidence, to return a verdict in favor of the defendants, and argue that the plaintiff took the note before maturity for a valuable consideration, without knowledge of any defects and in good faith, and for the reason that the knowledge of J. H. Frank of the defect in the paper and of the fraud practiced upon the defendants is not imputable to the plaintiff. Counsel have cited, among others, the cases of Higgins v. Lansingh, 154 Ill. 301, and Seaverns v. Presbyterian Hospital, 173 Ill. 414, as supporting their position. In the Higgins case, supra, it was decided that a corporation making a purchase from its president of certain securities is not chargeable with his knowledge of the infirmities in his title thereto. In the Seaverns case, supra, it was decided that where the president of a corporation negotiates a loan from the corporation to a third party, which will operate to the president’s individual interest and against the interest of the corporation, the president stands as a stranger to the corporation, and must be held not to represent it in the transaction so as to charge it with the knowledge which he possessed but did not communicate to it, and which it did not know. In the Higgins case, supra, at page 387, our Supreme Court quotes with approval from the case of Barnes v. Trenton Gas Co., 27 N. J. Eq. 33, in which quotation there is, first, a statement of the general rule, viz: “that notice of facts to an agent is constructive notice thereof to the principal himself, where it arises from, or is at the time connected with, the subject matter of his agency,” and, second, a statement of an exception to the general rule, viz: that where the agent is an officer of a corporation, and is dealing with the corporation in his own interest and opposed to the interest of the corporation, he is held not to represent the corporation in the transaction, so as to charge it with the knowledge he possesses, which he does not communicate to the corporation and which the corporation does not otherwise possess. In the Higgins and Seaverns cases, supra, the foregoing exception to the general rule was considered as being properly applicable to the facts in those cases, but we do not think that said exception should, under all the facts in evidence, be applied to the present case. There are several well considered cases which recognize a qualification to said exception to the general rule, viz: where the officer of the corporation (though he also acts in his own interest or the interest of another corporation) is the sole or an essential representative of the corporation in the transaction in question, in which event his knowledge is held to be imputable to the corporation. See Brobston v. Penniman, 97 Ga. 527; Morris v. Georgia Loan Co., 109 Ga. 12; Black Hills Nat. Bank v. Kellogg, 4 S. D. 312; Steam Stonecutter Co. v. Myers, 64 Mo. App. 527; Traders Nat. Bank of Ft. Worth v. Smith, (Tex. Civ. App.) 22 S. W. Rep. 1056; Niblack v. Cosler, 74 Fed. Rep. 1000. In 2 Pomeroy’s Eq. Jur. (3d. Ed.) sec. 675, note 1, the author expresses a doubt whether said exception to the general rule can apply to “presidents, and other such managing officers of a corporation, through whom alone the corporation can act.” In an exhaustive note, following the report of the case of Waynesville Nat. Bank v. Irons, 8 Fed. Rep. 1, at page 11, it is stated that “in order to charge the corporation with notice of facts of which a director or other officer had knowledge, he must have acted in the transaction on behalf of the corporation.” Several cases are there cited in support of the statement, in which cases the officer of the corporation acted in its behalf in the transaction and his knowledge was held to be imputable to the corporation. See Bank of U. S. v. Davis, 2 Hill (N. Y.) 451; First Nat. Bank of New Milford v. Town of New Milford, 36 Conn. 93; Clerks’ Sav. Bank v. Thomas, 2 Mo. App. 367; National Security. Bank v. Cushman, 121 Mass. 490. Under the stipulated and other facts in evidence in this case, we have reached the conclusion that the knowledge of J. H. Frank was imputable to the plaintiff. It is also urged that the question whether the plaintiff had notice, etc., was a question of fact which should have been submitted to the jury. Under the stipulated facts, J. H. Frank admittedly had knowledge of the defects in the paper and of the fraud, and the question was whether that knowledge was constructive notice to the plaintiff. We think this was a question of law on the admitted facts (10 Cyc. 1061), and we are of the opinion that the trial court in this case did not err in directing a verdict in favor of the defendants. And we do not think that the court committed prejudicial error in its rulings as to the admissibility of certain testimony offered by plaintiff. The judgment of the Municipal Court is therefore affirmed. 'Affirmed.