Court Opinion

ID: 6582109
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:39:07.218177+00
Date Added: 2024-06-11T15:57:19.477176
License: Public Domain

Park, C. J.,
(dissenting.) I think the plaintiff corporation is not a bond fide holder of the drafts in question, for the following reasons :—
The defendant corporation was limited by its charter to such use of mercantile paper as might be necessary in the prosecution of its business. The plaintiff was bound to take notice of this limitation and to conduct itself accordingly. The plaintiff knew, through Hume Webster, its managing director, that the proceeds of these drafts were not to be used by the defendant in the prosecution of its business, but were to be used by the drawer, A. B. Stock-well, for his own individual purposes in London, while engaged in speculating in stocks.
But it is said that corporations as well as individuals are bound to pay their debts ; that if the defendant was owing A. B. Stockwell to an amount equal to the face of these *391drafts, the defendant had the right to pay the indebtedness by the acceptance and payment of the drafts, no matter to what purpose the proceeds might be applied.
It is further said that the plaintiff, when it discounted these drafts for A. B. Stockwell at his request, did not know that Stockwell had no funds in the hands of the defendant, and had therefore the right to assume from the act of Stock-well in presenting the drafts for discount, that he had funds in the hands of the defendant sufficient for the payment of the drafts, which presumption was enough to constitute the plaintiff a bond fide holder of the drafts for value, although Stockwell at the time was owing the defendant a large amount.
I concede that the claims of the plaintiff would be sound if the facts of the 'case 'admitted of them.
It will be observed that A. B. Stockwell, when he presented the drafts to the plaintiff for discount, made no declaration, in fact, that he had funds in the hands of the defendant on which they were drawn. I fully concede that if the drawer of a draft presents it to a party for discount, an implication arises that the draft is drawn on funds of the drawer in the hands of the drawee, if nothing whatever is said by the drawer on the subject, and the party to whom the draft is so presented knows nothing to the contrary. And I further concede that such presumption, in such circumstances, would be sufficient to make such party a bond fide holder of the draft for value, should he discount the paper. But this is only a presumption of law, which must give way to express declarations to the contrary, made by the drawer at the time he presents the draft for discount. The majority of the court treat this presumption of law, in the present case, as equivalent to a positive declaration of Stockwell that he had funds in the hands of the defendant sufficient to pay the drafts, to the truth of which he pledged his honor and credit as a business man. I cannot so regard the matter in the case we have here on paper to determine. Let the finding of the committee decide the matter.
The committee finds on this point as follows:—’ In the *392spring of 1874 A. B. Stockwell went to London, England, He presented letters of introduction to J. Hume Webster, the managing director of the Credit Company (Limited), and at the same time represented that he was president of the Howe Machine Company; that he was the principal stockholder ; that he had the right to pledge the credit of the company, and was their representative in Europe, and that the business was very profitable. The Credit Company, relying on these representations made to its managing director, had the following business transactions with said Stock-well and said Howe Machine Company, the defendant.”
Then follows a description of the drafts that were after-wards drawn by A. B. Stockwell on the defendant and discounted by the plaintiff, and among them are the drafts under consideration.
Here it appears that Stockwell, on his arrival in London in 1874, applied to the plaintiff’s managing director for a line of discounts by the plaintiff, of drafts to be drawn bj* him on the defendant, from time to time. In order to induce Mr. Webster, acting for the plaintiff, to make the discounts, he represents that he himself is a person of large property, being the principal stockholder of the defendant company; that the defendant was a rich corporation, doing a very prosperous business; that he had the authority to pledge its credit, and was its representative in Europe. And it is to be presumed that he stated all that could be said to induce Mr. Webster, acting for the plaintiff, to make the discounts, and Mr. Webster must so have understood it. If the drafts were to be drawn on funds of Stockwell, would he not have so stated, when he was making a statement of his case ?
It seems that the representations which were made had the desired effect, for the committee finds that the drafts under consideration, as well as all the others, were discounted by the plaintiff relying upon these representations; that is, were made upon the faith of them and in .consequence of them. The plaintiff relied upon the ability of Stockwell to render the defendant liable to pay these drafts, *393the proceeds of which, the plaintiff knew, were to be used by Stockwell in stock speculations ; which could not be the case without the drafts being accommodation drafts, as they were in fact. How then can it be said that the plaintiff, in discounting the drafts, was induced to do so by the presumption of law that they were drawn by Stockwell upon funds of his in the hands of the defendant ? The acts and declarations of Stockwell were equivalent to an express declaration that he pledged the credit of the defendant to accept and pay the drafts at maturity as accommodation paper of his, the plaintiff knowing that the proceeds were to be used by him in stock speculations. Suppose that the drafts in question were the first that were discounted by the plaintiff for Stockwell, and that when Stockwell asked Mr. Webster for the plaintiff’s discount, the following conversation on the subject had occurred. Mr. Webster inquires: “What do you propose to do with the proceeds of the drafts ? ” To which Mr. Stockwell replies : “ I intend to use them in my stock speculations here in London.” To this Mr. Webster rejoins: “ I see by the charter of the drawee that it is limited to such use of mercantile paper as may be necessary in the prosecution of its business. What security have we that the drafts will be paid?” To this Mr. Stockwell replies: “I am president of the company; I am its principal stockholder; I am its representative in Europe ; I have authority to pledge the credit of the company to the payment of the drafts.” Mr. Webster, not satisfied with this, says : “ I see by the by-laws of the company that none of its officers have authority to pledge the company’s credit. How is this ? ” Mr. Stockwell answers : “ But I have authority notwithstanding.” Mr. Webster then says : “ Relying upon your declarations, that you are the president of the company on whom the drafts are drawn, that you are its principal stockholder, that you are its representative in Europe, that you have authority to pledge the credit of the company to pay these drafts, we will discount them.”
If such dialogue had occurred, and the case finds that it *394did so substantially, could it be said that a presumption of law existed in tbe case in fayor of tbe plaintiff, tbat tbe drafts were drawn on funds of Stockwell in tbe bands of tbe defendant, and could Webster baye supposed tbat tbe drafts were drawn on tbe funds of Stockwell ? I tbink not. I tbink tbe declarations of Stockwell gaye Webster clearly to understand tbat tbe drafts were accommodation paper, and tbat consequently tbe plaintiff was not a bond fide bolder of them.
I tbink judgment should be rendered for tbe defendant.