Source: https://www.legalcrystal.com/case/89639/national-exchange-bank-vs-wiley
Timestamp: 2019-04-25 04:47:06+00:00

Document:
A warrant of attorney executed by the maker of a note and authorizing, in case of nonpayment, an attorney to appear, waive process, confess judgment, waive error and right of appeal in favor of the "holder" of the note, must be construed strictly in favor of the maker, and does not, in the absence of express terms, authorize the confession of judgment in favor of the original payee after it ceases to be the owner of the note, even though he may have the note in his possession. A judgment so entered would be a personal judgment without service of process or appearance, the the court would have no authority or jurisdiction to enter it, and the proceedings would be wanting in due process of law. Such a judgment can be attacked collaterally without violating the full faith and credit clause of the federal Constitution in an action thereon in a state other than that in which it was entered, on the ground that the party in whose favor it was rendered was not in fact the holder, because not the owner of the note, and that therefore the court entering the judgment was without jurisdiction.
This is an action upon a judgment rendered in one of the courts of Ohio, and the question to be considered is whether the final judgment under review gave to the proceedings in the Ohio court such faith and credit as are required by the Constitution and laws of the United States.
and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may, by general laws, prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof."
The Wiley Construction Company, a Massachusetts corporation, and Wiley, the defendant in error, executed and delivered to the National Exchange Bank, the plaintiff in error, a written instrument, being a note with warrant of attorney annexed, dated Tiffin, Ohio, April 26, 1884, in which, for value received, they jointly and severally promised to pay to that bank, or order, on the first day of October, 1884, at its office in that city, $10,000, with eight percent interest after maturity. The instrument authorized N. L. Brewer, or any attorney at law in the United States, or elsewhere, to appear before any court of record, after such obligation became due, waive the issuing and service of process, and confess judgment against the obligors or either of them "in favor of the holder" for the amount then appearing to be due, together with the cost of suit, and thereupon to release all errors and writs of error, and, in behalf of the obligors or either of them, waive all right to appeal and stay of execution.
1887 at eighth percent. Upon it was credited a payment of $6,311.75, as of May 9, 1887.
It may be here stated that there was no indorsement on the note showing that it had ever been assigned or transferred by the original payee.
With the petition in that suit were filed copies of the paper constituting the note and warrant of attorney. With it was also filed an answer in which an attorney, assuming by virtue of the above warrant and not otherwise, to be the attorney of the construction company and of Wiley, confessed judgment against them for the full amount claimed by the bank.
On the very day of the bringing of that suit, judgment was entered against the defendants therein for $11,419.68, being the amount of the obligation with interest as eight percent from May 9, 1887, the judgment reciting that the attorney who acted under the warrant of attorney, naming him in person, by virtue of that warrant, entered the appearance of the defendants, waived the issuing and service of process, confessed judgment, and released and waived all exceptions, errors, and right of appeal.
The present action was by the National Exchange Bank against Wiley on the judgment rendered in the Ohio suit. The defendant disputed the plaintiff's right to recover upon several grounds, one of which was that, prior to the institution of the Ohio suit and more than twelve years before the commencement of the present action, the note had been fully discharged, so far as he was concerned, pursuant to an agreement between him and the holder. But on this writ of error, we are concerned only with the part of the defense which distinctly raises a federal question.
became the holder of the obligation, and thereafter remained and still was the holder; that therefore the attorney professing to act in behalf of the defendants in the Ohio suit had no authority, in virtue of such warrant of attorney, to represent them in that suit or to confess judgment in favor of the National Exchange Bank; that the defendant was neither served with process in the Ohio suit nor had any notice thereof; that the Ohio court was entirely without authority or jurisdiction to render judgment against him in favor of the plaintiff bank, and that its authority or jurisdiction could not be upheld consistently with the Fourteenth Amendment of the Constitution of the United States.
The plaintiff insisted that it was the holder of the note when put in suit; further, that the court in Ohio had full power and jurisdiction to render the judgment in question, and that neither personal service of process, on nor notice to the obligors was necessary in order to give that court jurisdiction of the parties and subject matter.
Both at the trial and in the Supreme Court of Nebraska, the bank contended that full faith and credit, as required by the Constitution and laws of the United States, would not be given to the proceedings in the Ohio suit if the judgment in its favor was held not to be conclusive in respect of the authority of the Ohio court to render such judgment.
It is unnecessary to set out all the instructions. It is sufficient to say that the jury were, in substance, instructed that the warrant of attorney authorized a confession of judgment in favor of the holder of the note; that it was to be presumed upon the showing made by the record of the Ohio court that it had jurisdiction to render the judgment sued on, and that such presumption continued throughout this case unless the defendant, by a preponderance of evidence, proved that the plaintiff bank was not, in fact the holder of the note when put in suit in Ohio. The jury were also instructed that, if the plaintiff was found not to be such holder, the verdict should be for the defendant.
The jury's verdict was for the defendant, and the judgment thereon was affirmed. Upon the issue as to the ownership of the note at the time it was sued on in Ohio, there was, as the Supreme Court of Nebraska held, proof both ways.
Did the Ohio court have jurisdiction to render the judgment in question? It is a settled doctrine, Chief Justice Marshall said in Rose v. Himely, 4 Cranch 269, that the effect of every judgment must depend upon the power of the court to render that judgment. In determining whether the Ohio court had authority to render the judgment against the obligors in the note, we must look first into the decisions of the highest court of that state.
"The power of attorney is not negotiable, and when the legal title to the note is transferred, the power of attorney becomes invalid, and no power whatever can be exercised under it, for the benefit of the indorsee, and he holds the note as if no such power had ever been attached to it."
130, that a warrant of attorney to confess judgment, attached to a note, and forming a part of the same instrument, is not negotiable, and when the note is transferred becomes invalid and inoperative. It is true, the report of that case does not inform us whether the warrant of attorney in that case purported to authorize the confession of a judgment in favor of the payee of the note alone, or whether its terms extended, as in this case, to any holder of the note after due. But, however this may have been in that case, we suppose that, if this judgment rested upon the confession under the warrant of attorney alone, it would be very questionable whether the court of common pleas had any rightful jurisdiction of the defendants in the judgment."
only 'in favor of the legal holder' of the note. The plaintiff below was not the 'legal' holder of the note, for the note had not been indorsed to him. He could become the 'legal holder' of the note only 'by indorsement thereon,' as authorized by the statute. S. & C.Stat. 862; Avery v. Latimer, 14 Ohio 542. The waiving of process, and confession of judgment in favor of the plaintiff below, was not, then, within the authority conferred by the power of attorney. Under the rule of interpretation applicable to such instruments, we must conclude that the jurisdiction of the defendants below, obtained through the warrant of attorney only, and the confession of judgment by means thereof, exceeded the authority conferred by the defendants in their power of attorney, and that the court therefore erred in overruling their motion to set aside the judgment, irregularly obtained against them."
In Watson v. Paine, 25 Ohio St. 340, which was an action upon a judgment based on a warrant of attorney attached to a promissory note, and which authorized any attorney at law to confess judgment in favor of the holder of the note, the point was made that the warrant of attorney did not authorize the waiving of process or an appearance for the defendants in an action brought by an indorsee. The members of the Supreme Court of Ohio were divided in opinion on that point, and it was left undecided. The case went off upon another ground, but McIlvaine, J., delivering the judgment of the court, expressed his individual opinion that a power to confess judgment in favor of any holder of the note may be exerted as well in favor of an indorsee as of the payee.
judgment in favor of the holder of said note,' and we think these words were intended, and should be construed, to embrace any holder who might lawfully prosecute an action on said note, in his own name and for his own use."
holder or holder of the note. The decisions have all been based upon a strict interpretation of the power granted, without aiding any omission or defect in its terms by liberal intendment or construction. In accordance with the views which we have expressed, our conclusion is that the warrant of attorney attached to the note sued on did not authorize a confession of judgment in favor of defendant in error, and, there having been no summons or other notice to the plaintiff in error of the bringing of the original action, the court of common pleas acquired no jurisdiction over the person of the plaintiff in error, and erred in rendering a judgment against him."
its name and for its own use. Here, the confession of judgment was in behalf of the payee bank, which was not entitled to sue for its own use or to receive the proceeds if it sold the note in 1885, and never afterwards became the owner. The words, in the warrant of attorney, "in favor of the holder of this instrument," ought not, as between the National Exchange Bank and the obligors, to be construed as embracing the former after it ceased to be the owner of the note, but at most, as only authorizing a confession of judgment in favor of the party who had become its real owner. It should not be supposed that the obligors intended, or that the payee bank ever understood them as intending, to authorize a confession of judgment in favor of one who was not entitled, or right, to demand payment from the obligors. That view accords with justice, and, not being inconsistent with the words in the warrant of attorney, it should be adopted.
" holder is a general word, applied to anyone in actual or constructive possession of the bill, and entitled at law to recover or receive its contents from the parties to it."
"by the holder of negotiable paper is meant, in law, the owner of it, for if it be in his possession without title or interest he is, in general, considered only as the agent of the owner."
person or by an attorney authorized to represent him. If law and usage in Ohio were to the contrary, then such law and usage would be in conflict with the Constitution of the United States; for it is thoroughly settled that a personal judgment against one not before the court by actual service of process, or who did not appear in person or by an authorized attorney, would be invalid as not being in conformity with due process of law.
"did not make the judgments of other states domestic judgments to all intents and purposes, but only gave a general validity, faith, and credit to them, as evidence,"
proceeding in another state, notwithstanding the provision of the fourth article of the Constitution and law of 1790 [Rev.Stat. § 905, et seq. ], and notwithstanding the averments contained in the record of the judgment itself."
There has been no departure in the decisions of this Court from the doctrines announced in Thompson v. Whitman, whether the question related to courts of general or to courts of limited or special jurisdiction. It has been repeatedly affirmed. Knowles v. Logansport Gaslight & Coke Co., 19 Wall. 58, 86 U. S. 61 ; Hall v. Lanning, 91 U. S. 160 , 91 U. S. 165 ; Pennoyer v. Neff, 95 U. S. 714 , 95 U. S. 732 ; Cole v. Cunningham, 133 U. S. 107 , 133 U. S. 112 ; Grover & Baker Machine Co. v. Radcliffe, 137 U. S. 287 , 137 U. S. 295 ; Thormann v. Frame, 176 U. S. 350 , 176 U. S. 356 ; Bell v. Bell, 181 U. S. 175 , 181 U. S. 178 ; Andrews v. Andrews, 188 U. S. 14 , 188 U. S. 34 . The general jurisdiction of the Ohio court undoubtedly embraced such a cause of action as was set forth in the suit on the note. But we are of opinion that that court had not authority or jurisdiction to render judgment against the obligors if the National Exchange Bank had in fact sold the note, and ceased, before the commencement of that suit, to own it or to be entitled to receive the proceeds to its own use. It was, in such case, in legal effect, a personal judgment without service of process upon the defendants, and without their appearance in person or by an authorized attorney. The proceedings were wanting in due process of law. The obligors never consented to judgment by confession in favor of one who was not the owner of the note or entitled to receive its proceeds, and the warrant of attorney cannot be held to have authorized such a confession.
Perceiving no error of law in the record the judgment must be affirmed.

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