Court Opinion

ID: 8175700
Source: CourtListenerOpinion
Date Created: 2022-09-09 22:20:49.762558+00
Date Added: 2024-06-11T16:39:56.996000
License: Public Domain

ON REHEARING.
It is only that labored argument was made on rehearing that I write a second opinion in the case. Reconsideration has only confirmed my opinion that the defense to the action is destitute of strength in law or justice in fact. It is only a hard case on Smith’s estate in the same sense in which *8every case where a surety pays a just debt for an insolvent principal is hard on the surety. Promptly on maturity the bank gave the administratrix notice of the non-payment and protest. She says she received and understood this notice. She thus was informed that the bank looked to Smith’s estate for payment. She could have given notice to the bank to sue, or sued herself in equity to compel the principal to pay, if it would have been of avail, the principal being insolvent. Can it be contended successfully that notice to sue could not have been given the bank because it had bound itself to extend time by taking interest in advance for renewal? It cannot for several reasons. To release a surety by extension of time, the extension must be based on valuable consideration, so as to tie ' the hands of the creditor and disable him from suing. Bank v. Parsons, 45 W. Va. 688. Concede that payment of interest in advance with promise to extend for a fixed time will discharge a surety, where the creditor is an individual. Parsons v. Harold, 46 W. Va. 122, So it Avoulcl where the creditor is a bank, if the promise of extension is made by the directors. But to tie the hands of a bank, and prevent it from suing, the act of extension must be a valid act, one binding it, else its power to sue is not affected, and the surety can notify it to sue or himself sue. Extension “will not release sureties unless the bank had entered into an agreement, whereby it bound itself legally to grant such indulgence.” Bank v. Evans & Dorsey, 9 W. Va. 314. All agree that it must be a valid, binding act of extension to tie the hands of the bank. Caston v. Dunlap, 23 Amer. Dec., 194. Here we have the same question discussed in the first opinion. Had the cashier power to make a promise to extend time and prevent suit by the bank or Smith’s estate? How, all would say that the law given in 5 Cyc. 475 is sound, that a cashier has no authority “to release the maker of a note, or a party or surety thereon.” Yet it is claimed that he may by extending time indirectly do what he can not directly do, release a surety. What more vital act is to be done by a bank than making loans or renewing them? The universal usage is, that the directory in assembled meeting does this. We know this by judicial cognizance, and the evidence shows that such was the rule with this bank — none but the direc*9tors having- this power. Our Code, chapter 53, section 49, says that the directors of a corporation “shall have power to do, or cause to he done, all things that are proper to be done by the corporation." And chapter 54, section 79, provides as to banks that the directors “shall administer the affairs of the company.'’ Surely the making- and renewal of loans are acts of gravity, deeply concerning a bank, not within the ordinary i>owers of a cashier, 'under the usual course of business proper to be done only by the directory, and committed to it by those statutes properly construed. Is not the extensions of time for a future period like the expired period, another loan, or a renewal? The cashier not merely loans, but by the loan releases an indorser. Morse on Banks, section 117, says: “Thus the making of discounts is an inalienable function of the directors. They cannot part with it, or invest any officer or officers with it. It vests with them alone and exclusively. It is a power of that degree of vital importance that it cannot be taken out of the policy of the general principle, that powers of a public nature, given by the Legislature, cannot be delegated. The Legislature imposes upon the board the duty of taking-charge of all those matters of business upon the wise and skillful conduct of which the property of the institution and the safety of persons dealing with it depend. This duty tliey cannot shift in whole or part upon others, and it covers no department of banking more unquestionably than the making of loans and discounts.’’ Abundant authority supports the statement of the first opinion that a cashier cannot release a surety or liability, or make any admission releasing any party to a debt — but only the directors can do so, if they can, in addition to authority there cited. Gray v. Farmers’ Bank, 81 Md. 65, is apt in this case. It holds that a cashier has no power to accept a new note so as to discharge a surety-on the first note. Money was paid in, and it was claimed that it was advance interest. It was held that “if the entry on the books of the bank were to be construed as payment of interest in advance, and an agreement to extend the time, so as to discharge the surety, then the cashier had no authority to make such contract or entry.” It was held that the money should only be applied pro tcmto on the note. In our case the cashier entered on the note, “May 3rd, 1898. *10Discount paid for four months, $34.15, to Seise. 3, 1898. Pd. by R. T. Wetzel, which is applied as a credit on within note.” Some evidence goes to show that the cashier began the endorsement and before completing it remarked that he had no authority to extend time, and added the words of credit. It is claimed that he later added the words of mere credit. Say so. Say that he received the money as discount and promised to extend time, which he denies. Under that Maryland case, and a volume of law, that entry, that promise, go fox naught, do not bind the bank. We are cited 5 Oyc. 473 for the words that a cashier may “extend time for paying a note.” It is inconsistent with the passage quoted above from 5 Cyc. 475. Only one case is cited, and it is relied on as pointed authority. Wakefield Bank v. Truesdale, 55 Barbour, 602. It is counter to a river of authority and wholly unsatisfactory in itself. The real point of the case was whether the payment was intended to extend time. The opinion is short. As to the authority of the cashier to extend time the case gives no consideration, but in a few closing lines simply asserts the power, giving not a syllable of authority. Moreover, it comes from a court not of high authoritjq the supreme court of New York, it not being the highest court of that state. The Court of Appeals is.
It is claimed that the bank ratified the act of the cashier. Of this there is no evidence. The bank books show that the $34.15 was entered on them as a partial payment, not as advance interest. Protest was made and notice given of it. No one but the directors could ratify. They did not. They would have to do so by resolution. They act collectively. There is no evidence they knew of the alleged extension. Ratification only occurs where there is knowledge. The ground on which ratification is mostly rested is the retention of the $34.15. Now, the open bank books showed it to be a partial payment, if the directors inspected them. So did the back of the note. We are cited to our case of Third National Bank v. Laboring Man's Co., 49 S. E. 544. That case is no authority in this case. There the president of a corporation made its note payable to him, and he negotiated it to a bank and had its proceeds credited in the bank to his company, which used the money. The company did not know of the *11making of the note, but used the money. It denied its liability on the note. As it got the benefit of the money, and did not return it to the bank discounting the note, that was held to ratify the note and bind the corporation. There the note was denied. The corporation could not keep the money and be free of the note. In the present case the note is unquestioned — the debt conceded, and this being so the bank could lawfully retain the $34.15 as part payment, and having authority to retain the money, its act did not ratify the unwarranted act of the cashier, but was justified by its note, as held in the case cited above from 81 Md.
We therefore adhere to the judgment made on the first hearing.

Reversed.