Court Opinion

ID: 5477511
Source: CourtListenerOpinion
Date Created: 2022-01-09 21:07:44.751444+00
Date Added: 2024-06-11T08:33:32.626156
License: Public Domain

Parees, J.
(after stating the facts.)—There is no doubt that the plaintiffs are band fide holders of the note, for value, unless they are chargeable with notice of its being an accommodation note, by reason of notice of that fact to Jessup, a director: If they are bond fide holders of the note, for value, under the rule which is now well settled,' they are entitled to recover against the defendant, notwithstanding the fact that his agent exceeded his authority in making it. The principle is as stated in North River Bank v. Aymar (3 Hill 262). “ Whenever the very act of the agent is authorized by the terms of the power, that is, whenever, by comparing the act done by the agent, with the words of the power, the act is, in itself, warranted by the terms used, such act is binding on the constituent, as to all persons dealing in good faith with the agent; such persons are not bound to inquire into facts aliwide. .The apparent authority is the real authority.”
*367This principle, although the case was reversed by the court for the correction of errors, has been since recognised and established by numerous cases in this court. (Farmers’ Bank v. Butchers’ and Drovers’ Bank, 14 N. Y. 627; s. c. 16 Id. 135; Griswold v. Haven, 25 Id. 595; Exchange Bank v. Monteath, 26 Id. 505; Bank of New York v. Bank of Ohio, 29 Id. 619.) The note being negotiable, the maker is deemed in law to enter into a contract with every one to whom it is afterwards negotiated, so that the plaintiffs thus stand in privity with the defendant, and are, within the rule, dealing in good faith with the agent, notwithstanding th”e payees and their immediate indorsers had notice that the agent was transcending his authority in the making of the note. (Farmers’ and Mechanics’ Bank v. Butchers’ and Drovers’ Bank, 16 N. Y. 141; Griswold v. Haven, 25 Id. 602.)
This principle disposes of the exception to the refusal to dismiss the complaint, and brings us to an examination of the question, whether notice to Jessup, that the note was an accommodation note, was notice to the plaintiffs. It is to be ^remembered, that Jessup, although a director of the plaintiffs’ bank, was not acting as such, in the discounting of the note, and, so far as was shown or offered to be shown, notice of the object for which the note was made, was not given to him as such director. He was no agent of the bank in this transaction, and the rule that notice to an agent is notice to the principal, does not apply.
It was said by Chief Justice Nelson, in Bank of United States v. Davis (2 Hill 463), “ I agree, that notice to a director, or knowledge derived by him, while not engaged officially in the business of the bank, cannot and should not operate to the prejudice of the latter. This is clear, from the ground and reason upon which the doctrine of notice to the principal, through the agent, rests. The principal is chargeable with this *368knowledge, for the reason, that the agent is substituted in his place, and represents him in the particular transaction; and, as this relation, strictly speaking, exists only while the agent is acting in the business-thus delegated to him, it is proper to limit it to such occasions.”
This agrees with the decision of the court in National Bank v. Norton (1 Hill 572). In that case, one member of a firm, after dissolution, renewed a partnership note, held by the plaintiff, without authority from, or knowledge of, Norton, his late copartner. Before the making of the note in question, one of the directors of the plaintiffs’ bank knew of the dissolution of the firm; and the question was, whether such knowledge was notice to the plaintiff. At the circuit, it was héld that it was, and the plaintiff was nonsuited. A motion was made to the court in banc, on a case, to set aside the nonsuit, and for a new trial, which was granted. The. court says : “ In the case at bar, the learned judge had proof of publishing the notice; and actual knowledge in the director, whose duty as one of the board, it was, to pass on the discount and renewal of notes, and who was, therefore, to be regarded as the agent of the plaintiffs, was sufficient proof of their knowledge.” In this, we think he erred. The board were the agents, for the purposes mentioned, and -they should acquire this sort of knowledge, as such, or, at least, the firm *should show notice brought home to some other agent specially authorized by the bank, or by the course of their business to receive it. (See also Angelí and Ames on Corporations,' §§ 307, 308, and cases cited.)
In the case before us, I think, the knowledge of Jessup, that the note was an accommodation note, was not notice of that fact to the plaintiffs.
The question put to the witness Jessup, whether, at the time the note in question was made, another note was made, for the same purpose, and subsequently *369diverted to other purposes by him, was manifestly immaterial and irrelevant, and therefore properly excluded. • The same is true of the question, whether Jessup & Laflin were creditors of Carson & Hard, at the time when the note in question was made.
There was no question to be submitted to the jury, and they were oroperly directed to find a verdict for the plaintiffs. The judgment should be affirmed.
Judgment affirmed.