Case Name: The Bank of Hamburg, S. C. vs. Henry G. Johnson
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1846-05
Citations: 3 Rich. 42
Docket Number: 
Parties: The Bank of Hamburg, S. C. vs. Henry G. Johnson.
Judges: O’Neall and Evans, JJ. concurred.
Reporter: South Carolina Law Reports
Volume: 37
Pages: 42–48

Head Matter:
The Bank of Hamburg, S. C. vs. Henry G. Johnson.
In order to charge one with a contract alleged to have been made with his agent, the authority of the agent, and that it has been strictly pursued, must he clearly proved.
Defendant established a large store in Hamburg, for the sale of groceries and purchase and sale of cotton, under the entire charge of W. as his agent, and gave public notice that W. would conduct the business and act as his agent, in the purchase of goods and every thing appertaining to his business in the mercantile line. W. sold cotton as defendant’s agent, and, in order to enable the purchaser to raise money to pay for it, indorsed, in the name of his principal, a bill to be discounted by the purchaser in Bank. The bill was discounted, and with money thus raised the purchaser paid for the cotton. He'd, that W. had not acted within the scope of his authority, and, there, fore, that the defendant was not bound by the indorsement. After the bill had been protested, W., in the name of the defendant and styling him “security,” signed with the purchaser anote to the Bank which, when paid, was to be in satisfaction of the bill .Held, that the defendant was not bound by the note.
A bill of exchange drawn on a me-chant in Savannah, payable u in sight check on Charleston,” is not negotiable within the custom of merchants.
Before O’Neall, J. at Edgefield, Fall Term, 1845.
The report of his Honor, the presiding Judge, is as follows :
“This was an action of assumpsit brought against the defendant, in the first count of the declaration, on the following note, viz:
“ — 3435. Hamburg, S. C., June 9th, 1841. One day afterdate, we jointly and severally promise to pay H. Hutchinson, Cashier^.of the Bank of Hamburg, S. Carolina, thirty-four hundred and thirty-five dollars, for value received.
Wm. Holmes,
H. G. Johnson, per
A. Wray, Agent.
| Security.
Indorsed,
‘ H. Hutchinson.’
In the second count, on the following .bill of exchange :
“Exchange $3400. Hamburg, S. C., May 15,, 1841. Thirty days after date of this second, of exchange, (first of same tenor and date Unpaid,) pay to the order of H. G. Johnson, thirty-four hundred dollars, payable in sight check on Charleston, at par. Yalne received, and charge.to account of your obedient servant, Wm. Holmes.
To Messrs. Holmes and Sinclair, Savannah.
Indorsed, H. G. Johnson, per A. Wray, Agent.”
■It appeared from the testimony of witnesses, as well as an advertisement published in the Hamburg Journal, that from the 1st of October, 1840, the defendant carried on a large grocery business, in the town of Hamburg, and purchased and sold large quantities of cotton. The advertisement stated that “ A. Wray will conduct the business and act as my duly authorized agent, in the purchase of goods and every thing appertaining to my business, in the mercantile line." In pursuance of this advertisement, Mr. Wray has ever since conducted the business; the defendant having personally nothing to do with it. From the proof in this case, it appeared that one William Holmes, of Augusta, in 1841, was largely in the cotton trade. Holmes qnd Sinclair, of Savannah, were his factors. He drew bills on them, and by an arrangement with the Bank of Hamburg, he was to draw funds from it to the amount of $10,000, on the indorsement of Britton Mims. About the 15th of May, 1841, Holmes had purchased cotton to theamountof the bill of exchange herein before set out; part of the cotton (if not all) he had bought from A. Wray, the agent of the defendant, who required the money. Holmes’ indor-ser, Mims, was out of town ; he proposed to the Bank to advance him the money, on depositing the cotton bills and receipts. This was refused, and he was told, if Wray wanted the money, let him indorse the bill of exchange, and he should have the money. Wray, (according to Holmes’ testimony,) indorsed the bill, upon the understanding, among all parties, including Mr. Hutchinson, the Cashier, that upon the return of Britton Mims, a new bill, with his indorsement, was to be substituted, and Mr. Wray discharged. The bill was originally drawn payable to H. Hutchinson ; that was struck out, and H. G. Johnson written as the payee by Mr. Wray. Before Mims returned to town, this bill of exchange was sent on to Savannah, and a new bill was thus prevented from being substituted. The money, the proceeds of the bill, went to the credit of Holmes, and was drawn by his check. Before the 9th of June, 1841, intelligence of the failure of Holmes and Sinclair reached Hamburg. Holmes testified, that to secure Britton Mims and Johnson, he confessed a judgment to the Bank of Hamburg. That the note made by himself and Wray, herein before stated, was made to be embraced in the confession, inasmuch as the bill of exchange was not due. The bill of exchange was noted for non-payment on the 18th of June, 1841. No notice of non-payment was given to the indorser.
On the foot of the bill was this receipt:
“June 9th, 1841. Received of Wm. Holmes and H. G. Johnson, their note for the debt, interest, and expense of this draft, which, when paid, will be in full.
H. Hutchiwson, Cashier.”
The usage of Banks, to require written powers of attorney, authorizing third persons to draw, make and indorse bills of exchange and promissory notes in the name of another, was fully proved. No fact was proved in the case, which shewed that Johnson had ever conferred the power to draw, make, or indorse bills of exchange or promissory notes for him, to be discounted in the Bank of Hamburg. On the closing of the plaintiff’s case, a motion was made for non-suit, on the ground that A. Wray had no authority to bind his principal by either the note or bill. The motion was granted.”
The plaintiff appealed, and now moved this court to set aside the non-suit, and for a new trial, on the grounds:
1. That by the case stated and proved, the plaintiff was entitled to a verdict for the amount sued for, against the defendant, H. G. Johnson.
2. That in the whole transaction, Addison Wray, as agent, had authority to bind the defendant, both by the draft and note.
3. That the order of non-suit was, as is submitted, against the law of the case.
Bauskett, for the motion,
cited Oh. on Bills, 32-3; Story on Agency §§ 55, 57, 80, 85, 95, 133; 15 Mass. R. 39; 2 Kent Com. 620 ; 1 Liv. on Agency, 107,120 ; 2 lb. 193; 2 Kent Com. 614, 629; 1 Esp. R. Ill; 3 T. R. 757; 4 lb. 177; 1 Ld. Ray. 224; 15 East, 38.
Carroll, contra,
contended, 1st. that the acts of Wray were not within the scope of his authority. He had no power to draw or indorse accommodation paper. The in-dorsement of the bill was for the benefit of Holmes, and the note was given to secure the payment of the bill. 2d. That the bill was not negotiable within the custom of merchants. Ch. on Bills, 152; 4 Mass. R. 245 ; 5 Cowen, 186; 10 Serg. & R. 94; Story on Prom. Notes, 20.

Opinion:
Curia, per
Fhost, J.
The plaintiff declares on the bill and note, representing the same liability, that he may recover on either for which the action may be maintained.
The bill is indorsed, í£H. G. Johnson, per A. Wray, agent." The liability of the defendant depends on the authority of Wray to make that indorsement, and the legal effect of it, if made within the scope of his authority.
The only proof of Wray's authority, is the advertisement in the Hamburg Journal. That public notice, that Wray was the defendant's agent in every thing pertaining to his business in the mercantile line, and the conduct of the business by Wray in the store, at which the name of the defendant was exhibited on the sign board, conferred on Wray authority to bind the defendant to all contracts and engagements which were necessary or customary in the conduct of the trade. The powers of Wray, being otherwise undefined, must be ascertained by proof of the kind of mercantile business he did carry on for the de fendant, and what contracts and engagements were necessary or convenient for the advantageous prosecution of it. It is required, in order to charge one with a contract, alleged to have been made by an agent, clearly to prove the agent's authority, and that it has been strictly pursued. It was therefore incumbent on the plaintiff to supply proof of the specific powers which were incident to Wray's agency, and to shew that the contracts declared on were within the scope of his authority. The only evidence on this subject was, that'the defendant traded in groceries ; and that the purchase and sale of cotton was a necessary incident to that business. The use of negotiable securities so universally prevails in trade, as the means of credit, that, from Wray's general agency, his power may be inferred to make bills and notes in the defendant's name, in payment of his liabilities in the course of business: and in like manner to take such securities in settlement of debts due; and to negotiate and discount them. But this authority of the agent to bind his principal ns a party to bills and notes, must be restricted to such as derive a consideration from liabilities contracted by the agent in the course of trade, or from the direct use and application of them for the convenience or necessities of the business.
It appears that the bill was not taken by Wray in payment of the cotton sold to Holmes ; nor was it ever transferred to Wray, or in his possession ; nor, when discounted, applied to the use of Johnson. The amount was passed to the credit of Holmes; and after paying what was due to Johnson on the cotton bili (the amount of which is not ascertained) he applied the balance to other purchases of cotton. The whole negotiation shews that the bill was discounted for the accommodation of Holmes, and that Hutchinson, the Cashier, knew it. It was drawn for the balance of the credit of ten thousand dollars which Hoi mes had obtained in bank on Mims' indorsement; and Wray was only a temporary indorser, to be released and the bill cancelled when Mims should return to Hamburg. Holmes confirms the proof, apparent in every circumstance of the transaction, by his deposition that the bill was indorsed and discounted for his accommodation. In the absence of any proof of authority for Wray to make such indorsement, derived from the course of business in Hamburg, it cannot be inferred by law from his general agency for the defendant.
The nonsuit on the bill may also be maintained on the ground that the instrument was not negotiable. It was payable in sight checks on Charleston. A principal requisite of a bill is, that it must be for the payment of money only. It cannot be for payment "in paper medium," Lange vs. Kohne, 1 McC. 115; nor "in foreign bills," Jones vs. Fales, 4 Mass. 245 ; nor " in Canada money," Thompson vs. Sloan, 23 Wend. 71. A sight check on a bank in Charleston, drawn in Savannah, is, in effect, a foreign bill of exchange. In every material particular it ful-fils the definition of a bill. The bill not being negotiable, the action cannot be maintained against the defendant as indorser.
The indorsement being ineffectual as a negotiable security, neither can the action be maintained on it as a common law agreement, by any proof of consideration which appears in the case. The proceeds of the bill when discounted, were placed to the credit of Holmes, that is, paid to him. From the money thus obtained, Holmes paid Johnson's account. This payment by Holmes created no privity of contract between Johnson and the plaintiff. Holmes might have applied the money in any manner he chose. That a part was applied to the payment of Johnson's debt, was the act of Holmes. The Bank did not advance to Johnson the amount of Holmes' debt on the security of the bill, and cannot, therefore, charge him with money lent and advanced, as if the bill had been discounted for him and the proceeds paid to him or his agent.
The note was given for the debt, interest and expenses of the bill, and when paid, was to be in satisfaction of it. It was subject to the same objection to Wray's authority to make it as the indorsement of the bill; strengthened by the fact that it was given for a larger amount than the bill, to cover the loss on other bills indorsed by Mims: and was signed by Wray expressly as surety. The bill being the consideration of the note, since the action cannot be maintained on that, it must fail on the note also.
The motion is refused.
O'Neall and Evans, JJ. concurred.
Richardson, J.
Whether indorsing the bill or signing the note in the name of Johnson came within the legal agency of Wray, was a question of fact to be decided by the jury, and not to be assumed by the Judge.
If the object of Wray was to raise the money, nominally to be drawn by Holmes, but truly to cash the debt due by Holmes for the cotton ; and the money was actually so paid, (and such facts were at least inferrible,) then, neither the bill, nor note, was made merely to accommodate Holmes ; but to accommodate Johnson with ready money: and if such was the object of Wray, he acted within his agency.
But however doubtful such inference might be, the Judge ought not to have assumed that the bill and note were exclusively what is called accommodation paper, and taken the case from the jury. But should have left it to them, to decide for the plaintiff or defendant, according to their interpretation of the true object of Wray ; that is, whether to serve Johnson, or only to befriend Holmes with the name of Johnson, when Johnson had no manner of interest in the transaction.
This was a complex fact, in which the Judge had but to instruct the jury how to find the verdict, in the event of either inference, as made by themselves.
Wardlaw, J. concurred.