Case Name: RIDGWAY against The FARMERS' BANK of BUCKS County
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1825-01-22
Citations: 12 Serg. & Rawle 256
Docket Number: 
Parties: RIDGWAY against The FARMERS’ BANK of BUCKS County.
Judges: 
Reporter: Reports of cases adjudged in the Supreme Court of Pennsylvania (Sergeant & Rawle)
Volume: 12
Pages: 256–266

Head Matter:
[Philadelphia,
January 22, 1825.]
RIDGWAY against The FARMERS’ BANK of BUCKS County.
IN ERROR.
An examined copy of flic boots of an incorporated bant, uncorroborated by any other proof, is not evidence. It seems, that it would be evidence, if accompanied by proof that the original entries were made by an officer of the bank; this proof to be made by the officer himself, if to be found, and, if not, his handwriting' to be proved.
The act of 1814, gives'no power to the presidents of the banks, thereby created, to raise money by drafts upon the bunk, nor is any such power given to the president alone, by a resolution of the directors, authorizing the president anti cashier to raise money or obtain discounts for the use of the bank; but if both agree upon a plan of borrowing money, or of obtaining discounts, it is not necessary that both should sign the paper, to carry it into effect.
The board of directors have power to authorize the president and cashier to borrow money, or obtain discounts for the use of the bank.
Independently of any resolution, the sanction of the directors, to a draft made on the bank by the president, may be inferred from the evidence given on the trial.
If the president of a bank who is authorized to borrow money, or oblain discounts for the use of the institution, fraudulently draws a draft 'in favour of one, by Whom it is endorsed to the plaintiff who receives it in the usual course of business fairly, and without notice of the fraud, his right to recover is not affected by collusion between the drawer and endorser.
On a writ of error to the Court of Common Pleas of Bucles county, it appeared that au action was brought in that court by Jacob Ridgioay, the plaintiff below, against the Farmers’ Bank of Bucks county, on an order, or bill, for six thousand dollars,' drawn by Joseph Ilulme, president of the said bank, on the cashier of the same, dated the 23d of June, 1821, payable sixty days after date, to R. J. Hollingshead, or order, by whom the same was endorsed to the plaintiff. The bank refused .payment, and denied the authority of the president to draw the bill. In order to prove the authority of the president, the plaintiff gave in evidence, the following resolution of the board of directors, dated July the 6ih, 1819: — “ Resolved, that it is the duty of the board of directors, to support the credit of the paper of the bank; and that funds, during the present stagnation of trade, must be raised. We therefore authorize the president and cashier, as often as they find occasion, to borrow money, or obtain discounts, in order to raise funds for the purpose aforesaid.” In the course of the trial, both the plaintiff and defendants examined the officers of the hank, and the entries in its books, and minutes of the board of directors. The plaintiff examined also the officers of two of the banks of the city of Philadelphia, in order to show the transactions between them and the defendants, and offered in evidence, an examined copy of certain entries in the discount book of the Bank of Pennsylvania, to show, that the notes therein mentioned, were discounted by the said bank. To this evidence, the counsel for the defendants ob jected, and the court rejected it, upon which an exception was taken to their opinion.
An exception was likewise taken to the charge of the court, of which the material parts, were as follows:
“The first question arises upon the charter of the 31st of March, 1814; and it is asked, does this charter authorize a president of a bank, by virtue of his office, to draw a check, such as the one on which this suit is brought? I think thischarter does not, in any of its provisions, authorize the president, as president merely, to draw such a draft to bind the bank. No such authority is given him in the act or in the articles for the regulation of the bank, and therefore I apprehend he has clearly no such authority. The first article, in the seventh section, declares, that the bank shall be conducted by thirteen directors. By the eighth article, a majority of the directors shall be a quorum for the transaction of business; but discounts may be made by the president and four directors. Them is nothing in these provisions which authorizes the president, merely in virtue of his office, to control the funds without the authority of the board. Nor does it appear, that he was ever intended to be trusted with the funds of the bank. The cashier must give security, in not less than five thousand, nor more than one hundred thousand dollars, and is forbidden to" follow any other business. This is worthy of remark; — and to say this, is to say that the man who has care of the funds of the bank, shall not mingle his private business with its concerns. Hence I infer, and lay it down as the law, that the president of this bank, merely as such, has no authority to draw such a draft.
“ Whence, then, did he derive his authority to draw this check or draft? It is said, that it was by a resolution of July 6th, 1819, I lay it. down to you as the law, that by that resolution, the prest-dent, singly, had no such authority. That resolution was conformable to the provision in the eighth section of the charter, and gave the president and cashier precisely the authority intended by that portion of the charter, — that is to say, to raise money by the use of their joint names.
“ If he did not derive it either from the charter or from the resolution of the 6th of July, 1819, whence came it, was it from any by-law? — for they are authorized to make by-laws. None such is pretended. Did he derive it from the usage of banks? If he had previously drawn such a check as this on the bank, and it had been paid, it would be strong presumption of his authority; but there is no such precedent. There was one other of a similar character, and that is resisted. Hence no conclusion can be drawn from them as authority. By what authority, then, did he draw it? I endeavoured to collect it from him. He said, he drew his authority from his practice of getting notes discounted for the uso of the bank, and that the board knew it. If Joseph Ilulme was permitted to do acts which were ratified by the bank, it would bind them for such acts, no doubt.
“ This involves a most important point for the jury. Joseph Ilulme was asked for his authority — he pointed to the resolution. The court have said, that that resolution gave him no power, singly. He said he thought he had an authority. He spoke with less precision throughout, than was desirable from an intelligent man. It involves, then, this question for your consideration: 3)id Joseph Hvlme assume the power of getting discounts in Philadelphia, with their knowledge or authority, express or implied? If he did either, they are evidences of his agency.
‘ ‘ It is to be regretted, that the bank have intrusted their concerns to the exclusive management of an individual. Monied institutions, in point of fame, are like females, — they should stand above suspicion. They should have taken care, that there was no ground for suspicion. You have heard the evidence of Lynch and Leslie; you will have the notes out with you. If they were endorsed and discounted, with the approbation of the board, they would be evidence of the agency.
“But this difficulty arises; — if those acts were recognised as the acts of the board — is this check of so similar a character as to come within the agency? If a man give his servant credit to buy goods, he may buy again and again; but it would not give him a credit to borrow money. If a man may raise money by promissory notes, and by having them discounted at other banks, — when all the matters appear on the books, — this is a very different thing from drawing a check to an individual. The resolution of July Hth, 1819, does not authoi’ize the president alone, without the consent of the cashier, to go into the market and give checks in the name of the bank. The operations were very different: to give checks to brokers to take up notes, to put again into circulation, was a project very uncertain, as to its utility to the bank. If there is any evidence of the recognition of such an act as this check, you will consider it as authority to do it again.
“ As to the right of the bank to borrow money, it was certainly never the intention of the charter, that the institution should engage in that kind of business. If it was, the object was dangerous. But still, though it were not the object, yet, in a fair management of their business, their necessities required that they should relieve themselves by borrowing, I think they had a right to borrow. You may therefore consider it as law, that the bank had a right to borrow. The great question, then, to settle is, — did Joseph Ilulme assume an agency recognised by the board, to raise money for the use of the bank, in the manner in which this check has been given? If he did, your verdict should be for the plaintiff, — otherwise, for the defendant.
“But there are some other matters of consequence to be consi dered, and on which the decision of the court may turn. Was this check given by Hulme to Hollingshead, in fact to borrow money for the use of the bank ? If not, though the plaintiff was an innocent endorsee, and paid value for it, without notice, he cannot recover.
“Was the check delivered to Hollingshead, as an escrow to be locked up in his desk for sixty days? This is the evidence of Mr. Hulme. If it was, the plaintiff, though he paid value for it, and was without notice of this fact, cannot recover. One fact from the book of minutes is of consequence. The entry is dated the 24th of July, 1821. Joseph Hulme declared to the committee, that Hollingshead owed him twenty thousand dollars, and that he had placed in Hollingshead’s hands the six thousand dollars which he had taken to Philadelphia.
“The whole character of this transaction between Hulme and Hollingshead is mysterious, even on his own explanation of it; and I have in vain endeavoured to understand it. It is said, that this is not a matter which can be set off against the plaintiff, and that if this check were ever so fraudulently given by Hulme to Hollingshead, it is no defence against the plaintiff’s claim. It is high time that the law on this subject should be settled. It has been certainly veering from point to point. It has, however, been decided, that fraud in obtaining a note may be set up in defence against an innocent endorsee, and that notes and bonds stand on the same principles in this respect, with the exception of bearing date within the city or county of Philadelphia, — by the provision of an act of assembly. If I send an agent to the bank of Pennsylvania, with a note to be discounted, endorsed by me in blank, would the act of sending him be a sufficient authority to him to give it to another person, so as to enable that other person to recover on it? I think not.
“ In the case of the draft on which this suit is founded, I am of the opinion, that if there was fraud between Hulme and Hollings-head, or if the draft was not given with the intention of applying; the proceeds to the use of the bank, these matters may be set up in defence against the present plaintiff; and that although he had no notice of the fraud, and paid value for it, he cannot recover.
“If this was not like any other case, in which his agency had been recognised, then the evidence from usage and custom is nothing. I do not mean to examine the bank books, — you will have them out with you.”
M‘Ilvaine and Condy, for the plaintiff in error.
1. The examined copy of the discount book of the Bank of Pennsylvania, ought to have' been received in evidence. If the original was evidence, so was the examined copy. The entries in this book were evidence, because they showed that money had been raised for the Farmers’ Bank of Bucks county, by discounts in the Bank of of Pennsylvania. An examined copy of public books, such as this, are always admitted in evidence. Phill. Ev. 339, 345, 346. 14 Mass. Rep. 178.
2. In charging the jury, that the resolution of the 6th of July, 1819, did not authorize the president alone to borrow money on the draft in question, the court below erred. By the eighth section of the charter of the'corporation, (Purd. Dig. 58,) bills or notes promising to pay money, are to be signed by the president, and countersigned by the cashier. But this section directs only the form of the note, aud does not relate to the power to borrow money. The resolution of the 6th of July has no reference to it, and does not require any paper upon which money is borrowed under its sanction, to be signed by both those officers. It was necessary that both should assent to the plan of borrowing, but not that both should join in the mode of carrying that plan into operation. This position is fully established by the case of Fletcher v. Bank of the United States, 8 Wheat. 338. That the bank possessed the power to borrow money, in the manner indicated by the resolution, is to be inferred from the nature of its business, and the terms of the charter. By the act of the 21st of March, 1814, very considerable powers are conferred upon these institutions, and no restriction is imposed, as to the mode of raising money. They may deal in bills of exchange. By the seventh section of this charter it is provided, that “ the affairs of this company shall be conducted by thirteen directors,” who of course must possess all the powers necessary to carry into effect the objects for which the company was incorporated. It was necessary, for the successful operations of this company to borrow money, and, for this purpose, the directors authorized the president and cashier to obtain discounts, or borrow money, without restriction as to the kind of paper to be used. The bank books show that money was frequently borrowed, by discounts, of banks in the city of Philadelphia, upon paper not signed by both the president and cashier) and this must, or ought to have been known to the directors. The Court of Common Fleas has erroneously drawn a distinction between an authority to draw notes and an authority to draw a draft,'such as the one in question. It could surely make no difference to the bank, whether the loan was accomplished by means of one or the other; and it having frequently sanctioned loans upon notes signed by one of their officers only, is evidence of the right of the president to make this draft. Indeed, it was not necessary that the loan should have been effected through the medium of paper of any kind. It might have been done on a verbal promise only, Chitty on Bills, 34— 36. 15 Mass. Rep. 39. 11 Mass. Rep. 97. Paley on Agency, 144. Whitehead v. Tuckett, 15 East, 400.
3. Admitting that there was collusion between Hulme and Hol-lingshead, to defraud the bank, it cannot affect the rights of a third person, who acquired .an interest in the draft, without notice and for a valuable consideration. This paper is an inland bill of ex change, and a negotiable instrument. In England, it would undoubtedly be so considered, and in Pennsylvania, there is nothing to restrict its negotiability. A promissory note is a distinct thing. Bills of exchange were negotiable in the time of Charles II. before the settlement of Pennsylvania. The statutes of 9 and 10 Will. 3. and 3 and 4 Jinn, do not create, but only declare their negotiable character, and there is no difference between foreign and inland bills of exchange, as to negotiability. Promissory notes, which are not necessary to commerce, are negotiable only by statute; but bills are so by the law-merchant. By the act of the 28th of May, 1715, Purd. Dig. 97, bonds, specialties, and notes in writing, are made assignable, and by the act of the 27th of February, 1797, Purd. Dig. 98, notes in a certain form, and bearing date in the city or county of Philadelphia, are rendered negotiable; and it has been decided, even in the case of a note not bearing date in the city or county of Philadelphia, that if it be made payable, 11 without defalcation,” it is negotiable. Lewis v. Feeder, 9 S'erg. & Fawle, 193. Foberts’ Dig. of Stat. 375. Chilly on Bills, 53, 54, 411, 412. The president was the acknowledged agent of the bank, and if the agent acts fraudulently with regard to his principal, the principal is bound, if the person who claims under the act of the agent, has conducted himself fairly.
.Ritiera and HopUinson, for the defendants in error.
1. The copy of the book of the Bank of Pennsylvania, was properly rejected. It was not evidence on two grounds, In the first place, the original was not evidence, and if it was, a copy could not be received. The bank was a private corporation, and might have been compelled to produce the book itself, by a subpoena duces tecum. The original should therefore have been produced, or at least the clerk who made the entry, or, in case of his death or absence from the state, his handwriting should have been proved, together with proof that he was a clerk. Besides, in the stage of the cause in which the evidence was offered, it was not relevant.
2. It is the defendants in error who have reason to complain of the charge. It was left to the jury, to infer an authority in the president of the bank to make this draft, from circumstances, "We deny that the directors had a right to delegate to the president and cashier, the power to raise money. The charter gives no such right. The eighth section directs the form of notes to be issued, and where the act prescribes the manner of doing a thing, no other can be adopted. Neither can the directors authorize a thing to be done, out. of the usual course of business. All paper issued by the bank should be signed by the president, and countersigned by the cashier. If signed by one, it'is not sufficient. Thus, where a parish authorized a committee of three to build a meeting house, the acts of one, were held not to be binding. 12 Mass. Fep. 1S5. The directors are but the agents of the stockholders, and are subject to the restrictions imposed by the- charter.» which -are known to the public. They have, it is true, certain implied powers, to be exercised in the usual course of business; and thus they may authorize the cashier alone to draw on other banks, because this is necessary to carry on their operations; but corporations have no powers, except those which are expressly granted, and such as are necessary to carry them into effect. 15 Johns. 283. 2 Cowen, 709, 711. 2 Johns. 109. 14 Mass. Hep. 58. The power exercised in this case, goes to charge the corporation to any amount, and the acts of the president and cashier have not been recognized by the directors or the stockholders.
If, however, the directors had power to authorize the president and cashier to raise money for the bank, this power could only be exercised by them jointly. In all the instances, except a very few, in which money has been raised under the resolution of the 6th of July, 1819, the names of both the president and cashier were upon the paper. There is good reason why the president should not alone be allowed to exercise this power; he does not give security; but the cashier does. There was no evidence whatever, that the cashier consented to this act of the president. The object was, to borrow money for the use of the bank, but no money was raised on this draft for the use of the corporation, nor was there any evidence what the plaintiff below paid for it. The resolution under which the president pretended to act, was passed in 1819, and spoke of the present stagnation of trade, and the draft was not made until 1S21. The cashier swore, that the resolution was considered as confined to the emergency existing at the time it was passed, and that he never acted under it. There was therefore no question about the law, with respect to the consent of both, and the act of one.
3. If there was fraud between Hulme and Hollingshead, the plaintiff cannot recover. Bank checks are not inland bills of exchange. A check should be carried in during banking hours of the day after it is issued. Chitiy on Bills, 17,192, 413. But this check or draft is out of the usual course of business, being payable sixty days after date. But, admitting it to be an inland bill, it is not negotiable. Foreign bills are negotiable by the law-merchant, but inland bills are in England made so by statutes 9 and 10 W. 3. c. 17, and 3 and 4 Jinn. c. 9., which are not in force in Pennsylvania, so far as relates to inland bills of exchange. The draft in question is rather in the nature of a promissory note, than an inland bill, and must be governed by the act of the 28th of May, 1715. Without the words “ without defalcation,” a note is not negotiable.

Opinion:
The opinion of the court was delivered by
Txughman, C. J.
It is a rule of law, that where an original is of a public nature, and admissible in evidence, an examined copy is evidence. This rule is necessary, for the preservation of public papers, and for the public convenience, because those papers should always be in a known place, to which access may be had by all.. As au example of what may be called public papers, the English authors mention the journals of both houses of parliament, entries in the books of the Bank of England, and of the East India Company, parish registers, the books of the commissioners of the land tax, and excise, and court rolls of manors. The Bank of England and East India Company, have such immense concerns connected with the government, that their interests arc inseparable, and their books and papers are truly of a public nature. But to give that name to the banks of Pennsylvania, and, on the same principle, to incorporated insurance companies, &c., with which the country has been inundated, might produce serious consequences. We know, that these books are often badly kept, and it would be dangerous to admit copies in evidence, when the originals may easily be had, nor should even the originals be admitted, without proof, by whom the entries were made. The proper witnesses to prove the entries, are the clerks by whom they were made, if to be found. But, if dead, or out of the jurisdiction of the court, proof may be made of their handwriting. I would not be understood, however, as laying it down as a general rule, that in all cases the original books must be produced. That might often be extremely inconvenient; and perhaps there would be no danger in admitting an examined copy, with pi'oof that the original entry was made by an officer of the bank, — the officer himself to prove this, if to be found, and, if not, his handwriting to be proved. But in the case before us, there was a naked offer of an examined copy, uncorroborated by any other evidence whatever. This is not a new point. We decided it at Pittsburg, in the case of The Philadelphia Bank v. The Executors of Thomas Officer, at September term last; and, in accordance with that decision, I am of opinion, that the copies offered in this ease were properly rejected.
Besides this exception to the evidence, exceptions were taken to the charge of the court, which I will now consider.
1. It. was given in charge to the jury, that neither by the charter of the bank, nor the resolution of the board of directors, of the 6th of July, 1819, had the president alone power to draw the bill in question. To this I agree, with some explanation. The act of incorporation gives no authority to the president alone, to issue paper. It is enacted, by the eighth section of the incorporating act, " that bills or notes issued by order of any of the said corporations, signed by the president and countersigned by the cashier, promising the payment of money, to any person or persons, his, her, or their order, or to bearer, though not under seal of the said corporation, shall be binding and obligatory on such corporation."
This provision does not apply to the case before us, for this is not a bill promising to pay money; npr is it to be construed as a prohibition of drawing a bill like the present, unless under the seal of the corporation, or signed by the president and countersigned by the cashier. When one bank draws on another, or an individual, I believe the usual course of transacting the business, is, to have the draft signed bjr the cashier, and not by the president. And this is authorized by the general practice, recognised by the. directors. The old doctrine, that a corporation can do no act, but under seal, has been frequently determined, not to be applicable to banks created by statute, so far, at least, as concerns the usual course of business, in drawing and discounting notes and bills. Still, the charge of the Court of Common Pleas was accurate, in laying down the law, that the charter of this bank gives the president alone no pojver to make this draft. I think it was accurate, also, in saying that no such power was given to the president alone, by the resolution of the directors of the Gthof July, 1819. That resolution confines the power to the president and cashier, jointly; and for this there was good reason. The cashier of the country banks is generally a more efficient and intelligent officer than the president. The cashier and president, jointly, but neither, separately, were authorized to borrow money or obtain discounts. Hut if it was intended to instruct ihe jury, that although both these officers had agreed to a plan of borrowing money or obtaining discounts, yet this plan could not be executed but by the use of paper signed by both of them, I cannot assent. The resolution required no such thing. It was satisfied by the agreement of both president and cashier, though the mode of effecting their purpose should be, by a note or bill, signed or endorsed, by only one of them. This very point came before the Supreme Court of the United States, in the case of Fletcher v. The United States Bank. There, the board of directors of the Planters' Bank" (of New Orleans,) passed a resolution, " that the president and cashier be authorized to adopt the most effectual measures to liquidate, the soonest possible, the balance due to the office of discount and deposit in this city, (Neto Orleans,) as well as others presently due, and which may in the future become due, to any banks in this city." A note for ten thousand dollars, drawn by Fletcher, came to the possession of the Planters' Bank, and was endorsed by their cashier, to the Bank of Discount and Deposit, in part payment of a balance due. It was objected, that the cashier, alone, had no authority to make the transfer. But Judge Stohy, who delivered the opinion of the court, held the contrary, and thus expressed himself: "The president and cashier were ,.t liberty to raise money for this purpose, from the general funds, in any way which the ordinary course of business would justify, and which they should deem the most effectual measure. They might therefore agree, that the cashier should endorse ihe note in question, and should procure it to be discounted at the Bank of the United States, and the proceeds to be carried to their credit." I perfectly agree with the law,, S.s thus laid dowft by Judge Sxoltvy and therefore, when this cause comes to trial again, it will be proper for the Court to instruct the jury accordingly.
The counsel for the defendant in error, have denied the power of the directors, to authorize the president and cashier to borrow money. But in this I think they are wrong. There again, the ease of Fletcher v. The United States Bank, (8 Wheat. 362,) bears upon the question; and, independently of that ease, the reason of the thing proves that the power exists. By the act of incorporation, section 7, " the affairs of the company shall be conducted by the directors." The power is general, and must be construed to extend to sdeh things as are convenient and usual, in the course of conducting the banking business. I have mentioned before, that the cashier is usually intrusted with the power to sign drafts by one bank on another, or on individuals. If this kind of business could only be done by an order of the board, in such case, it would be impossible to get forward. Neither would it be possible, in difficult times, when it was necessary frequently to borrow money, to transact the business with tolerable convenience, or facility, if a resolution of the board was required on each note, draft, or discount, for the purpose of borrowing. I am of opinion, therefore, that the directors dfd not exceed their powers, in the resolution of the 6th of July, 1819.
The president of the Court of Common Pleas .left it, very fairly and candidly, to the jury to decide, whether, from the evidence, it could be inferred, that the board of directors, (independently of their resolution of July, 1819,) had, directly or indirectly, sanctioned the bill drawn by Joseph Hulme; and told them, that if they had, the bank was bound by it. The plaintiff has no cause of complaint on this head. But there is another very important point, in which error has been alleged. The judge charged, that even supposing a bill like that on which this suit was brought, might lawfully have been drawn by the president alone, for the purpose of raising money for the bank, yet, if by fraud or collusion between him and Hollingshead, it was applied to the use of Hollingshead, the plaintiff could not recover, though it came to him fairly, in the usual course of business, and without notice of fraud or mal-practice. I confess, I do not see on what ground this opinion can be supported. The bill in question has been compared to a promissory note, and then the case of M'Culloch v. Houstoji, 1 Dall. 441, has been relied on; in which it was decided, that the endorsee of a note, under the act of the 28th of May, 1715, takes it at his peril. As to that case, suffice it to say, at present, that although never overruled, it has always been regretted, and must not be considered as a precedent, to influence other cases of a dissimilar nature. Now, the paper before us is not a promissory note, but a draft, or bill, with which the act of 1715 has nothing to do. The plaintiff's action, as endorsee, is not founded on that act, nor indeed does the act say one word about bills, but is confined to the assignment of bonds, specialties, and promissory notes. The endorsee of an inland bill, rests his action on the custom of merchants, and not on any statute of England or Pennsylvania. This will be proved, by reference to the statutes of 9 and 10 W. 3. c. 17, and 3 and 4 Jinn. c. 9. It will be seen, that an action by the endorsee of a bill was in use before either of these statutes, and therefore neither of them gives him an action, although they give him some advantages which he had not before. Considering the case, then, on the general principles of mercantile law, it is very clear that the holder of negotiable paper, who has obtained it for value, in the course of business, and with perfect fairness, cannot be affected by fraud or collusion between the drawer and endorser, of which he had no notice. If ho could be so affected, there would be an end to the circulation of paper, and, of course, to the transaction of mercantile business beyond a very small circle. If the president of this bank, was authorized to raise money by a bill like the present,' the directors who trusted him, must run the risk of his integrity. And, should a loss happen, it must be borne.by those who confided in him, and not by an innocent person, who trusted to nothing but the funds of the bank. Whether the president was authorized to make this draft, and in what manner it came to the hands of the plaintiff, will be questions for the jury. This court has only to decide the law. I am opinion, there was error in the charge, and therefore the judgment is to be reversed, and another trial ordered.
Judgment reversed, and a venire facias de novo awarded.