Court Opinion

ID: 8859607
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:43:41.857041+00
Date Added: 2024-06-11T17:05:46.557602
License: Public Domain

HAWLEY, District Judge
(aiter stating tlie facts as above). About the time the First National Bank of Arlington, Or., sued out the attachment against Cecil, Robinson, the defendant in error, sued out an attachment in the same county against one L. D. Hoy and one Charles Butler, as partners under the firm name of Hoy & Butler, for a sum in excess of the amount for which the bank sued Cecil, and caused a garnishment to be served on the First Rational Bank of Arlington. Afterwards Hoy & Butler, as principals, and J. E. Frick, as surety, executed a bond or undertaking whereby they agreed to pay to defendant in error the amount of any judgment which he should recover in said action, and thereby procured the discharge of his attachment. The contention of the defendant is that, in the adjustment of these judgments, Frick, on behalf of the bank, and in its name, and as its vice president, assigned to him the bank’s judgment against Cecil, and that he assigned to Frick his judgment against Hoy & Butler, taking from Frick his personal note for some $1,200, and a few dollars in cash to cover the difference in amount between the two judgments; that in executing the bond as surety for Hoy & Butler, and in assigning the judgment of the bank against Cecil, Frick acted for the bank as its managing agent. The contention of the plaintiff in error is that there is no evidence tending to show any authority in Mr. Frick to transfer the Cecil judgment. The argument on behalf of the plaintiff is to the effect that the cashier of a bank is the executive officer of the bank, through whom the entire financial operations of the bank are conducted; that neither the cashier nor any other officer could make any contract involving the payment of money or transfer of property without express authority from the directors; that there was no such officer as “general manager” or “managing agent” of the bank known to the law, or mentioned in the by-laws of the corporation; that the evidence was wholly insufficient to justify a jury in finding that Frick had any authority to bind the bank in the transaction between himself and Robinson; that his acts in attempting to do so were never ratified by the directors; that the bank received no consideration for the transfer of the Cecil judgment, and that the entire transaction was in the personal interest of Frick,- and that this fact was known to Robinson at the time of the transfer of the respective judgments; that the clause in the charge of the court, that “Frick’s authority to act was to be determined by the manner in which the ordinary business of the bank was transacted,” and the clause in the charge; “it is sufficient if Robinson parted with something of value,” etc., were erroneous; and that the court erred in not instructing the jury to find a verdict for the plaintiff.
(1) Did Frick have authority to transfer the Cecil judgment to Robinson? (2) Did the bank receive any benefit from the transaction? (3) Did the court err in submitting these questions to the jury? (4) Are the principles of law announced in the charge of the court erroneous?
The correspondence between Frick and Robinson (which is copied in full in the dissenting opinion), considered by itself, tends verv strongly to sustain the contention of the plaintiff in error that the assignments of the respective judgments by Frick and Robinson were *281transactions between them as individuals. If the case rested upon that testimony alone, it may be that the judgment should be reversed. But the entire testimony must be considered. The record shows ihat Frick, as vice president, was expressly authorized by a resolution of the board of directors to transact such business “as would be transacted by the president, were he in the county.” The assignment of the Cecil judgment purports upon its face to have been made by the bank. It reads as follows:
“Know all men by these presents, that the First National Bank of Arlington, a corporation, for a valuable consideration to it paid by J. h. Robinson, the receipt whereof is hereby acknowledged, has sold, assigned, and transferred, and does by rhese presents sell, assign, and transfer, to said J. R. Robinson, all its right, title, and Interest in and to that certain judgment entered in the circuit court of the state of Oregon for Gilliam county on April 18th, 1893, in favor of said First National Bank, and against N. Cecil, for $3,833.23, and $300.00 attorney’s fees, and $149.46 costs, which said judgment is docketed in the Judgment Lien Docket of said county, at page 55 thereof.
“First National Bank, Arlington, Ore.
“J. B. Frick, Vice Pres.”
Robinson testified that he had transacted considerable business with the bank through Frick, that Frick always acted as general manager of the bank, and that Frick made the proposition to him to settle the judgments by transferring the same. “He assigned the judgment of the bank to me, and I assigned the Hoy & Butler judgment to him, and I took his note for the difference. * * * Frick represented the bank. He .seemed to he manager of the bank’s affairs, and represented himself in that way. He signed the judgment, ‘The First National Bank of Arlington, by J. E. Frick, Vice President.’ He represented to me that he was doing business for the bank. That was my understanding; it was all done for the bank; he assigning me that judgment.” Several other witnesses testified to the effect that Frick was not only the vice president and acting president of the bank, but its managing director, and the active agent in all Its business affairs and transactions; that he was the principal stockholder thereof; that the public regarded him as having unlimited power to transact any business in which the bank was interested; that the bank was known in the community as “Frick’s Bank”; that the power of transferring the property of the bank had been exercised by Frick in other cases, with the knowledge of, and without objection on the part of. the directors of the bank; that he had indorsed the bills and notes of ike bank in order to ¡secure loans for the bank, and had disposed of other kinds of property belonging to the bank. J. A. Blakely, who was connected with the bank at different times as director and vice president, testified on behalf of defendant that Frick “was the general manager of the bank, so far as transacting its business was concerned.” He gave several instances where, in transacting various kinds of business, Frick acted as agent and manager of the bank, and stated that the directors took no action that he was aware of to prevent Frick “from transacting the business which he did.” Dan O’Connor was acquainted with the hank for four years; knew the general repute and understanding in the community as to the authority, of Frick to represent the bank. He testified that:
*282“It was generally called ‘Frick’s Bank.’ I know nothing more as to his authority than that he was regarded, so far as I know, as the manager of the hank, and the owner of it. * * * The general reputation in the community in which I live was to the effect that this bank w7as Frick’s bank. This community took in part of Oregon, and all of Klikitat county [Wash.]”
Several other witnesses testified substantially to the same effect. Mr. Frick testified on behalf of the plaintiff in error that he was the vice president, and acted as such “sometimes with the knowledge of the directors, and sometimes without”; that in transacting the business of the bank he took the title to property for the bank in his own name, or the name of the cashier of the bank—
“And the directors would know nothing about it until they, happened to see it in examining the bank. * * * The assignment of the judgment of Kobinsou in this case against Hoy & Butler was made to me in order to release me from liability for its payment, and from liability assumed by me for the benefit of the bank upon the undertaking already referred to. * * * I had very grave doubts at the time of transacting this business whether I had a legal right to do it or not. * * * I was led in the matter of signing the bond through my relations with the bank, and signed this bond where in no event it could be of any value to me, except benefits arising through the bank.”
In reply to the question, “Were you not recognized by the directors of the bank, and by the public and those dealing with the bank, as the general superintendent and manager of its business, and as having full authority to-transact any kind of business for it?” he said, “I was recognized by the public as being the main official of the bank in transacting all business, and at the same time only had the authority of a vice president.” The books of the bank show that Frick was elected director and vice president of the bank for five successive years, from 1890 to 1894, inclusive, “and that his acts, as such vice president, in the way of indorsing and transferring the notes and other securities belonging to said bank, were at the different times ratified and confirmed by said board of directors.” The cashier of the bank testified that the vice president and himself assisted each other in the management of the bank; that—
“During the operation of the bank it became necessary for the bank to borrow or raise money, and for the bank to transfer or pledge security for that purpose. * * * Sometimes the board of directors authorized us to do this, and in other cases they did not. * * * I recollect of several instances of such loans being-made and such securities being pledged without the ratification being shown in the minutes. * * * Frick made transactions in the general management of the business of the bank without consulting me.”
Did the court err in refusing to instruct the jury to find a verdict for the plaintiff? The national courts have uniformly held that a case should not be withdrawn' from the consideration of the jury unless the conclusion follows, as matter of law, that no recovery can be had upon any view which can be properly taken of the facts the evidence tends to establish. Beatty v. Association, 21 C. C. A. 227, 75 Fed. 65, 68, and authorities there cited. In Railway Co. v. Lowery, 20 C. C. A. 596, 74 Fed. 463, there is an elaborate review of the English as well as of the American cases, resulting in the conclusion that to justify the court in withdrawing the case from the jury the evidence must be so insufficient in fact as to be insufficient in law, amounting to an absence of any material and substantial *283evidence which if credited by the jury would in law justify a verdict in favor of the other party; that it is Üie duty of the trial court, when a motion is made to direct a verdict, to take that view of the evidence most favorable to the party against whom it is desired that a verdict; should be directed, and from that evidence, and the inferences reasonably and justifiably to be drawn therefrom, determine whether or not, under the law, a verdict might be found for that party, in the light of all the evidence, we are of opinion that it was within the exclusive province of the jury to determine whether or not Frick had the authority to transfer the Cecil judgment, and to represent the bank in the transaction with Robinson, and whefher or not the business was transacted on his part for the bank or for himself. Merchants' Bank v. State Bank, 10 Wall. 604, 644, 649; Trust Co. v. Howell (Minn.) 61 N. W. 141; Kraniger v. Building Soc., Id. 904; Mining Ass’n v. Meredith. 49 Md. 389, 401; Reed v. Railroad Co., 120 Mass. 43, 46; Prescott v. Flinn, 9 Bing. 22; Collins v. Cooper, 65 Tex. 460; Cooper v. Schwartz, 40 Wis. 54; 2 Mor. Priv. Corp. § 633; 4 Thomp. Corp. § 4644. The jury had the right to fairly infer from all the evidence that Frick had the authority, with the knowledge and consent of the directors of the bank, in relation to the powers usually exercised by the vice president, and the custom and usage of the bank in its general business dealings with its customers in the community, to make the contract with Robinson for the bank. It is unnecessary to attempt any general definition of the duties of the respective officers of banking cornorations. The usage is not uniform in different cities, and sometimes not the same in different institutions in the same city. Country banks, and banks in small towns and cities, have different' rules from those in large cities. Of course, there are certain general rules as to the duties of the cashier, teller, president, or directors. Courts have oftentimes recognized the fact, and have frequently decided that these officers have or have not either exclusive or concurrent powers to do certain acts of the nature designated in the particular case. Customs have sprung up from the necessity and the convenience of business in certain localities, and have prevailed in duration and extent until they have acquired in such localities the force of law. In the present case it is the exceptional class with which we have to deal. It is now well settled by the weight of reason and authority that whenever, in the usual course of the business of the corporation, the president: or other officer has been allowed to manage and control its affairs, his authority to represent and bind the corporation may be implied from the manner in which he has been permitted by the trustees or directors of the corporation to transact its business. The acting head of the corporation, whether it is the president, vice president, cashier, or general manager, through whom and by whom the general and usual affairs of the corporation are transacted which custom or necessity has imposed upon the officer, — such acts being incident to the execution of the trust reposed in him, — may be performed by him without express authority; and in such cases it is immaterial whether such authority exists by virtue of his office, or is imposed by the course of business as conducted by the corporation. *284Mining Co. v. Anglo-Californian Bank, 104 U. S. 192, 194; Sparks v. Transfer Co., 104 Mo. 531, 539, 15 S. W. 417; Washington Sav. Bank v. Butchers’ & Drovers’ Bank, 107 Mo. 134, 144, 17 S. W. 644; Lee v. Mining Co., 56 How. Prac. 373; Bank of Batavia v. New York, L. E. & W. R. Co., 106 N. Y. 195, 199, 12 N. E. 433; Calvert v. Stage Co.. 25 Or. 412, 414, 36 Pac. 24; Ceeder v. Lumber Co., 86 Mich. 541, 49 N. W. 575; Davenport v. Stone (Mich.) 62 N. W. 722; Libby v. Bank, 99 Ill. 622, 630; Kraniger v. Building Ass’n (Minn.) 61 N. W. 904; Dougherty v. Hunter, 54 Pa. St. 381; Hamm v. Drew, 83 Tex. 77, 81, 18 S. W. 434; Carrigan v. Improvement Co., 6 Wash. 590, 34 Pac. 148; Bank v. Wintler (Wash.) 45 Pac. 38; 1 Mor. Priv. Corp. § 509; 4 Thomp. Corp. § 4883.
In Merchants’ Bank v. State Bank, 10 Wall. 604, 644, which was a case involving the power and authority of the cashier of a state bank to buy and sell exchange, coin, and bullion, and to certify checks as being “good,” and thereby to bind the bank for> the payment thereof, the trial court instructed the jury to find a verdict for defendant. The questions argued by counsel were in several respects similar to' the- argument of counsel in this case. Referring to the subject of the authority of the cashier to make the purchase of the coin and bullion, the court said:
“(2) It should have been left to the jury to determine whether, from the evidence as to the powers exercised by the cashier with the knowledge and acquiescence of the directors, and the usage of other banks in the same city, it might not be fairly inferred that Smith had authority to bind the defendant by the contract which he made with the Merchants’ Bank. (3) Where a party deals with a corporation in good faith, the transaction is not ultra vires, and he is unaware of any defect of authority or, other irregularity on the part of those acting for the corporation, and there is nothing to excite suspicion of such defect or irregularity, the corporation is bound by the contract, although such defect or irregularity in fact exists. If the contract can be valid under any circumstances, an innocent party in such a ease has a right to presume their existence, and the corporation is estopped to deny them. The jury should have been instructed to apply this rule to the evidence before them. The principle has become axiomatic in the law of corporations, and by no tribunal has it been applied with more firmness and vigor than by this court. Corporations are liable for every wrong of which they are guilty, and in such cases the doctrine of ultra vires has no application. Corporations are liable for the acts of their servants while engaged in the business of their employment in the same manner and to the same extent that individuals are liable under like circumstances. Estoppel in pais presupposes an error or a fault, and implies an act in itself invalid. The rule jn-oceeds upon the consideration that the author of the misfortune shall not himself escape the consequences, and cast the burden upon another. Smith was the cashier of the State Bank. As such he approached the Merchants’ Bank. The bank did not approach him. Upon the faith of his acts and declarations it parted with its property. The misfortune occurred through him, and, as the case appears in the record, upon the plainest inineiples of justice the loss should fall upon the defendant. The ethics and the law of the case alike require this result. Those who created the trust, appointed the trustee, and clothed him with the powers that- enabled him to mislead, if there were any misleading, ought to suffer, rather than the other party.”
As.to tbe cashier’s powers to certify the checks the court said:
. “The questions whether the requisite authority was not inferable, and whether the principle of estoppel in pais did not apply, should in this comiection also have been left to the jury.”
In Martin v. Webb, 110 U. S. 7, 14, 3 Sup. Ct. 428, 433, the court, in considering the power and authority of a cashier to bind the bank in *285the transaction of business which is ordinarily solely within the power of the board of directors, said:
“It is quite true, as contended by counsel lor appellants, tliat a cashier of a bank has no power, by virtue of Ms office, to bind the corporation, except, in the discharge of his ordinary duties, and that the ordinary business of a bank does not comprehend a contract made by a cashier — without delegation of power by the board of directors — involving the payment of money not loaned by the bank in the customary way. Bank v. Dunn, 6 Pet. 51; U. S. v. City Bank of Columbus, 21 How. 356; Merchants’ Bank v. State Bank, 10 Wall. 604. Ordinarily he lias no power to discharge a debtor without payment, nor to surrender the assets or securities of the bank. And, strictly speaking, he may not, in the absence of authority conferred by the directors, cancel its deeds of trust given as security for money loaned, — certainly not unless the debt: secured is paid. As the executive officer of the bank, he transacts its business under the orders and supervision of the* board of directors. He is their arm in the management of its iinancial operations. While these propositions are recognized in the adjudged eases as sound, it is clear that a banking corporation may be represented by its cashier,— at least, where its charter does not otherwise provide, — in üansactions oiuside of Ms ordinary duties, without his authority to do so being in writing, or appearing upon the record of the proceedings of the directors. His authority may be by parol, and collected from circumstances. It, may be inferred from the general manner in which, for a period sufficiently long to establish a settled course of business, he has been allowed, without interference, to conduct the affairs of the bank. It may be -implied from the conduct or acquiescence of the corporation, as represented by the board of directors. When, during a series of years, or in numerous business transactions, lie has been permitted, without objection, and in his official capacity, to pursue a particular course of conduct, it may be presumed, as between the bank and those who in good faith deal with it. upon the basis of Ills authority to represent the corporation, that he has acted in conformity with instructions received from those who have the right to control its operations.”
There was some material and substantial testimony to justify the jury in drawing the inference that Frick’s undertaking to pay the judgment: of Robinson against Hoy & Butler was executed by him on behalf of the bank, and that he took the assignment of that judgment as its trustee, believing the transaction would be beneficial to the bank. The bank bad in its possession a draft of Hoy & Butler in the sum of $8,000 for collection. This was attached by Robinson. Frick supposed at the time that the bank would be liable to the extent of any judgment which Robinson might recover. If lie in good faith was acting for the bank in giving ilie undertaking, it would have been morally, if not legally, bound to indemnify him for any loss he might have sustained. The assignments of the judgments were a benefit to the bank. It placed the bank in a position to ob-rain a benefit by the collection of the Hoy & Butler draft, and a release of iis liability on the undertaking. There is no evidence in the case tending in1 the slightest degree io show any fraud or collusion between Frick and .Robinson. The testimony shows that Robinson acted throughout the entire transaction in perfect good faith, believing, and, as found by the jury, having the right to believe, that Frick had the authority to act for the bank. Under these circumstances he parted with property of value. The protection to the corporation in the management of its affairs rests upon its own course of conduct. If it conducts its business in the manner prescribed by its by-laws, through its board of directors, it will always be protected by the courts from any usurpation of power by any of its officers. West St. Louis Sav. Bank v. Shawnee Co. Bank, 95 U. S. *286557; Wardell v. Railroad Co., 103 U. S. 651, 657; 4 Thomp. Corp. § 4890. But, wbeu the directors of a bank permit an officer to hold himself out to the public as being invested with absolute power to manage and control its affairs in such a manner and for such a length of time as to lead innocent persons to make contracts with its officers in the honest belief that such officer is authorized to make such contracts, the bank cannot repudiate the contract by invoking any by-law of the corporation which the directors themselves have negligently allowed to fall into disuse. In addition to the authorities heretofore cited, see Crowley v. Mining Co., 55 Cal. 273; McKiernan v. Lenzen, 56 Cal. 61; Ditch Co. v. Zellerbach, 37 Cal. 543; Railway Co. v. Simons (Tex. Civ. App.) 25 S. W. 996; Fifth Ward Sav. Bank v. First Nat. Bank, 48 N. J. Law, 513, 7 Atl. 318; Hirschmann v. Railroad Co., 97 Mich. 384, 396, 56 N. W. 842; Greig v. Riordan, 99 Cal. 316, 322, 33 Pac. 913; The Vigilancia, 19 C. C. A. 528, 73 Fed. 452, 456; Milling Co. v. Kaiser (Colo. App.) 35 Pac. 677, 679.
We are of opinion that the court did not err in announcing the principles of law applicable to this case. Admitting it to be true that there was considerable testimony Avliich would have justified the jury to find a different verdict, yet it cannot be said that the finding of the jury is wholly unsupported by the evidence. The judgment of the circuit court is affirmed, with costs.