Case Name: McLEOD STATE BANK, a Corporation, Appellant, v. ED. VANDEMARK, Respondent
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1924-07-25
Citations: 51 N.D. 573
Docket Number: 
Parties: McLEOD STATE BANK, a Corporation, Appellant, v. ED. VANDEMARK, Respondent.
Judges: Bronson, Oh. J., and Nuessle, Johnson, and Christianson, JJ.y concur.
Reporter: North Dakota Reports
Volume: 51
Pages: 573–581

Head Matter:
McLEOD STATE BANK, a Corporation, Appellant, v. ED. VANDEMARK, Respondent.
(200 N. W. 42.)
Opinion filed July 25, 1924.
Rehearing denied September 15, 1924.
KveMo & Adams, for appellant.
Chas. 8. Ego, for respondent.

Opinion:
Birdzell, J.
This action was tried in the county court of Ransom County and resulted in a verdict in favor of the plaintiff for the amount of the note sued on, which verdict, on motion, was set aside and judgment was entered for the defendant. The plaintiff sues as the owner and holder of a note for $102.00, which was executed by defendant, payable to the Publishers National Service Bureau on November 1, 1920. Upon the trial the plaintiff produced the note, and upon proof of the defendant's signature and after offering evidence of its purchase by the plaintiff, introduced the note in evidence. The note bears the following indorsement: Publishers National Service Bureau, underneath which is written W. G. Tesler. When the note was introduced the following objection was made:
"The defendant objects to the reception of Exhibit D (the note) in •evidence, upon the ground that it is incompetent; and objects further to the reception in evidence of the indorsement appearing upon the back of it, for the reason that it is, in the present state of proof, incom"petent, irrelevant and immaterial, no proper foundation has been laid, in that no proof of the authority of the agent to indorse has been offered." .
The court ruled:
"Objection overruled as to the introduction of the face of the note; sustained as to the indorsement; on the theory that the evidence is not sufficient to show the indorser was authorized to make the indorsement."
The defendant's attorney stated:
"The objection does not go to the specific fact that no evidence has been offered that the signature c£ W. G. Tesler is not the genuine sig nature of W. G. Tesler, but does go to the fact that no competent proof has been introduced to show the authority of the agent whose purported signature appears thereon to indorse negotiable paper on behalf of the corporation."
The court likewise excluded evidence which was offered to establish that the plaintiff had paid for the note by issuing two drafts representing the aggregate sum of a large number of notes of which it claims to be the holder through the same transaction. We are unable to find in the record where the court admitted any evidence of the authority of W. G. Tesler to indorse paper of the Publishers National Service Bureau. The record shows that Tesler was a bookkeeper for the payee and that possibly he might have acted in some official capacity for the company. The respondent contends that no evidence of authority on his part to transfer title to the paper of the bureau would be legally sufficient unless it were in writing, and it is apparent from the record that the trial court supported the respondent's contention in this respect. It was, of course, incumbent on the plaintiff to prove its title. Citizens' State Bank v. Skeffington, 50 N. D. 494, 196 N. W. 953. In the view we take of this case, the only question for consideration is whether or not such authority must be in writing. The respondent relies upon certain sections of the Compiled Law's of 1913, providing, in effect, as follows: § 6915, Comp. Laws 1913 provides that an instrument payable to order is negotiated by the indorsement of the holder completed by delivery. Section 6916, Comp. Laws 1913 provides that the indorsement' must be on the instrument itself or om a paper attached thereto. Section 6904, Comp. Laws 1913 (§ 19; Uniform Negotiable Instruments Law) provides that the signature of any party to a negotiable instrument may be made by an authorized agent, that no particular form of appointment is necessary and that the authority of the agent may be established as in other cases of agency. Section 6330, Comp. Laws 1913 provides that an oral authorization is sufficient for any purpose, "except that an authority to enter into a contract required by law to be in writing can only be given by an instrument in writing." It is said that since the indorsement is necessary to transfer title and since it must be written upon the instrument or upon a paper attached thereto, the authority of the agent to attach it must be in writing because of the exception quoted from § 6330. In this connection, counsel cites, in support of his contention, State Bank v. Weeks, 45 S. D. 639, 189 N. W. 941, in which the Supreme Court 'of South Dakota holds specifically (page 942) "the indorsement of commercial paper being an act that must be done in writing, the authority to perform such act must be conferred by written authority. Devised Code 1919, § 1723."
' Before proceeding to a consideration of the argument based upon our statutes, we may well note wherein the South Dakota case is not in point. The case clearly turned upon § 19 of the Negotiable Instruments Act, as adopted in that state, § 1723 of the Devised Codes of South Dakota 1919. The section of the Negotiable Instruments Law, as there adopted, was modified to read as follows:
•' "The signature of any party may be made by an agent duly authorized in writing. No particular form of written appointment is necessary for this purpose."
The section as originally drafted and as adopted in this state (Negotiable Instruments Act, § 19, Comp. Laws 1913, § 6904) reads:
' "The signature of any party may he made by a duly authorized agent. No particular form of appointment is necessary for this purpose; and the authority of the agent may be established as in other cases of agency."
Under the South Dakota statute, therefore, it is clear that a principal could not be bound by an indorsement unless the agent's authority to indorse were in writing, and that under the original section, standing alone, parol authority would be sufficient.- Hence, the South Dakota case which merely applied the peculiar statute existing in that state is not in point here.
If parol authority to indorse he legally insufficient, it must be so by virtue of § 6330, Comp. Laws 1913, which reads:
"An oral authorization is sufficient for any purpose, except that an authority to enter into a contract required by law to be in writing can only be given by an instrument in muting."
One of the first requisites of a negotiable instrument is that it must he in writing and be signed by the maker or drawer (Uniform Negotiable Instruments Law, § 1, Comp. Laws 1913, § 6886); and it is elementary that no one is liable upon a negotiable instrument, whose signature does not appear thereon (Negotiable Instruments Lav/, § 18. Comp. Laws 1913, § 6503). But § 19 of the Negotiable Instruments Act, § 6904, Comp. Laws 1913, provides that the signature may be made by a duly authorized agent, and this court has held, in construing this section, that a corporation might be bound as a party to a negotiable instrument where it was executed by an agent in whom it had vested ostensible authority. Grant County State Bank v. Northwestern Land Co. 28 N. D. 419, 150 N. W. 136. Recognition of the legal sufficiency of an ostensible authority negatives the contention of the respondent that only written authority is sufficient. The argument of the respondent treats the Negotiable Instruments Law, in its requirements respecting the form of the instrument and the signatures, as quite analogous to the statute of frauds, yet it is apparent that the analogy fails in that there is no provision of the act which seeks to render invalid or unenforceable, as a simple contract, any contract respecting the obligations of a negotiable instrument or its transfer on account of the fact that such contract rests in parol. The law of commercial paper is nothing more or less than a group of principles springing from current usages in transactions where written instruments are employed in commerce. Hence, the whole body of the law of negotiable instruments pre-supposes the existence of an instrument in writing, and it is not concerned with the sufficiency of a parol contract from a common law standpoint. Even in the Negotiable Instruments Act there is some recognition of the legal sufficiency of a common law contract and of one who sustains certain relations to commercial paper being bound without his having signed. Eor instance, § 49, Negotiable Instruments Act, § 6934, Comp. Laws 1913, says that where one trans-" fers paper payable to order without indorsing it, the transfer vests in the transferee "such title as the transferrer had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferrer." There is no provision requiring such a contract of transfer to be in writing. From this it is apparent that the test of the transferee's right to enforce the instrument, .where it has been transferred to him by one purporting to act for a corporation, is not the existence of a written authority to attach an indorsement. Rather, it is whether or not the one purporting to act had authority sufficient at common law to bind the corporation by his act of transfer.
Again, the analogy to the shitute of frauds fails when other statutes are considered and, on the contrary, we find express recognition of the legal sufficiency of a parol contract to transfer negotiable instruments. Section 6654, Conap. Laws 1913, enacts the requirement of the statute of frauds that a guaranty must be in writing, but § 6655, Comp. Laws 1913, says:
"A promise to answer for the obligation of another in any of the following cases is deemed an original obligation of the promisor and need not be in ivritingj . . .
"5. When the holder of an instrument for the payment of money upon which a third person is or may become liable to him, transfers it in payment of a precedent debt of his, or for a new consideration, and in connection with such transfer enters into a promise respecting such instrument." (Italics are ours.)
Hence, it will be seen, if the respondent's contention be granted it 'would result that a contract, which the statute of frauds says need not be in writing and which the Negotiable Instruments Act says shall entitle the transferee to an indorsement, would be, nevertheless, ineffectual where made by an agent, unless the authority of the agent be in writing. As the contract of transfer is valid without a writing, it follows that the statute relied upon by the respondent does not require the agent's authority to be in writing. We are of the opinion that counsel's argument óonfuses language which is definitional in character and largely descriptive of the form of subject matter upon which the Negotiable Instruments Act operates with statutes which are concerned with public policy and which, in an effort to prevent frauds and perjuries, require something more than a parol contract as a condition of legal liability. We are further of the opinion that § 6330, Comp. Laws 1913, where it speaks of the necessity for an agent's authority to be in writing to enable him to "enter into a contract required by law to be in writing" refers to contracts of the latter sort and not to the former. In other words, we are of the opinion that this statute applies to contracts which would be invalid as legal obligations unless evidenced by writing and not to contracts which are valid as legal obligations but «only insufficient in form, possibly, to be governed by the Negotiable Instruments Act. It follows that the trial court erred in excluding evidence of the actual or ostensible authority of Tesler to transfer the note 7m suit to the plaintiff.
In view of the more extended opinion in the Skeffington Case, 50 N. D. 494, 196 N. W. 953, covering many of the features of this case, the facts and circumstances of both being almost identical, further discussion here is not required. As hereinbefore indicated, in the absence of proper proof of title, judgment can not properly be entered on the verdict. It follows from what has been said that a new trial must be had. It is so ordered.
Bronson, Oh. J., and Nuessle, Johnson, and Christianson, JJ.y concur.