Court Opinion

ID: 6544337
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:18:21.181575+00
Date Added: 2024-06-11T15:55:55.496531
License: Public Domain

Riddick, J., (after stating the facts.) This is an action by the Binghampton Trust Company against the First National Bank of Little Rock to recover damages for deceit. The company does not ask for a rescission of its contract with the president of the bank by which it became the owner of the note of McCarthy-Joyee Company. It asks for damages for deceit and fraud practiced upon it by which it was induced to pay out a large sum of money for the worthless note of an insolvent company. A party who is induced to purchase property by deceit and fraud has an election of remedies. He may rescind the contract, and to do this he must return or offer to return what he has received under it. On the other hand, he may affirm the contract, and sue for damages occasioned by the deceit and fraud, and in that event he is not required to return or offer to return what he has received under the contract. These rules are well settled, and the contention of the bank that plaintiff should have returned or offered to return the notes must be overruled. Goodwin v. Robinson, 30 Ark. 535; Matlock v. Reppy, 47 Ark. 148; 14 Am. & Eng. Enc. Law (2d Ed.) 168, and cases cited. The next contention is that Allis was not acting for the bank, but for the McCarthy-Joyce Company, and that he had no authority to bind the bank by his false representation. Allis was president of the bank to which the McCarthy-Joyce Company was indebted in a large amount.- This company was financially embarrassed, and in fact insolvent. As president of the bank, Allis was endeavoring to collect this debt. For this purpose these notes were executed and delivered to him, and for this purpose he negotiated them to the trust company. His letter to the trust company by which he effected the sale of the notes is written on paper upon which is the bank’s letter head. He assumes in the letter to be' acting for the bank, and directs the company to remit the proceeds to “our credit” (meaning the bank), and signs the letter, “H. G. Allis, President.” As president of the bank, it was his duty to endeavor to collect the debt which McCarthy-Joyce Company owed it. While he may have been trying to befriend the McCarthy-Joyce Company as well as to protect the bank, the evidence leaves no doubt in our minds that in this matter he was acting for the bank, and endeavoring to protect its interests. It is a matter of no moment that the directors of the bank did not know or authorize the false representations of Allis. We must, to quote the language of Mr. Benjamin, “distinguish between authority to commit a fraudulent act and-authority to transact the business in the course of which the fraudulent act was committed.” The bank, of course, did not authorize Allis to commit a fraud, “but it entrusted him with the conduct of this class of business, and he conducted it unfairly, and committed the fraud in the course of his employment.” Benjamin, Q. C., in Mackay v. Commercial Bank, Law Rep. 5 P. C. 402. If a conductor having charge of a railway train in the course of his business commits an assault upon a passenger, the company may be liable for the damages, though it neither authorized or desired its agent to commit such an assault; for the principal is liable for the .wrong of the agent committed in the course of his duties as agent. On the same principle, a bank is liable for the fraud of its agent committed in the course of the bank’s business. This rule is often applied, and hardly needs citation of cases to support it. In this case, as before stated, the fraud was committed by Allis as a means of collecting a debt due the bank from another party. It was done in the interest of the bank, and the bank received the money obtained by his fraud. Under these circumstances, the bank cannot at the same time retain the benefit and avoid the liability. That the bank is liable for the damages occasioned by this fraud of its agent, at least to the extent of the benefit received by it from the fraud, follows from settled rules of law, as well as from the plainest principles of justice. Mackay v. Commercial Bank, Law Rep. 5 P. C. 394; Barwick v. English Joint Stock Bank, Law Rep. 2 Exch. 259; Swire v. Francis, Law Rep. 3 App. Cases, 106; Fishkill Savings Inst. v. National Bank, 80 N. Y. 162. The question of the authority of the company to discount notes is also involved in this case, but we have already determined that the bank had such authority, in another case between the same parties, and refer to our opinion in that case for our reasons for this conclusion. Binghampton Trust Co. v. Auten, ante, p. 294. The only remaining question arises on the contention by the bank that the discount of the notes by the trust company at the rate of seven per cent, per annum was, under the laws of New York, illegal and usurious. Now, conceding that this was a loan, and not a mere purchase of the note, the trust company could, under the New York statute of 1892, charge six per cent, interest and reasonable collection charges. In the absence of any proof as to what the collection eharges were, we are not sure that we could hold the seven per cent, to be usurious under New York law, and it certainly would not be under the law of this state. But we need not discuss that question further; for, in order to show usury in this transaction, the defendant corporation relies upon a law of New York, but under another statute of that state a corporation cannot interpose the defense of usury. The statute, as construed by the courts of that state, operates to make lawful the contract of a corporation for the loan of money to itself which would otherwise be usurious and void. Rosa v. Butterfield, 33 N. Y. (665; Lane v. Watson, 51 N. J. L. 188; Junction Railroad Co. v Bank of Ashland, 12 Wall. (U. S.) 226. This statute applies to all corporations borrowing money in New York, and we know of no reason why it should not apply to a national bank. If there is any class of corporations which should not be permitted to plead usury, certainly banks should not be allowed to do so. All parties to this contract were corporations, and the contract was valid under the law of New York; and, if valid in the state where made, it is valid everywhere. If it was an Arkansas contract, it was valid, because it is not unlawful to charge seven per cent, in this state. So there is no usury, whether it is a New York or an Arkansas contract. The note which the trust company was led to purchase through the fraud of the bank’s president was shown to be worthless, and we think the trust company has made out a clear case to recover damages to the amount it paid to the bank on the note purchased. The judgment of the circuit court will be reversed, and a judgment entered here for that amount in favor of the trust company, with interest from date of payment. Battle, J., did not participate.