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Potter v. Merchants' Bank

Court of Appeals of the State of New York
Sep 1, 1863
28 N.Y. 641 (N.Y. 1863)


In Potter v. Merchants' Bank (28 N.Y. 641), Booth v. Powers (56 id. 22), and Thayer v. Manley (73 id. 305), it was held that in an action to recover damages for the conversion of a promissory note, the amount appearing to be unpaid thereon at the time of the conversion with interest, is prima facie the measure of damages, but that the defendant has the right to show in reduction of damages the insolvency or inability of the maker, or any other fact impugning the value of the note.

Summary of this case from Griggs v. Day


September Term, 1863

Learned Cook, for the appellant.

S.E. Church, for the respondent.

The Bank of Medina owned the note in question, and in order that the defendant may retain it from its lawful owner, it must appear that the defendant obtained it bona fide before maturity, in the regular course of business, and for value paid, or that said note was transferred to it by the Bank of Medina, with the intention of transferring to the defendant the title thereto.

It is not pretended that the defendant has paid value for the note, or that it is entitled to be considered as the bona fide holder of commercial paper.

All questions, therefore, as to the presumed or implied authority of the officers of the Bank of Medina, which usually arise between banks and the bona fide holders of securities of the bank for holders, and which such officers have transferred or created in violation of their duty to the bank, are out of this case. And the inquiry is as to the actual power which the officer had in this case to transfer to the defendant this note, and thereby pledge the same as security for the debt of the bank.

The indorsement to the defendant was made by Brown, who was not at the time an officer of the bank, and although he had been, yet the defendant's cashier knew he was an officer no longer. So far then as the handwriting in which the indorsement was made could affect the question, the defendant knew it was not indorsed by any of the then officers of the bank.

The note was transmitted by Beach, who was a mere clerk, in the absence of the cashier of the bank. He was at the time of the transmission of the note acting as cashier, and clothed for the time with the powers of that officer, so far forth as the business of the bank demanded the services of that officer. STORY, J. in Wilde v. The Passamaquody Bank, (3 Monroe, 505,) discusses the power of the cashier as follows: "The cashier of a bank is, virtute officii, generally intrusted with the notes, securities and other funds of the bank, and is held out to the world by the bank as its general agent in the negotiation, management and disposal of them. Prima facie, then, he must be deemed to have authority to transfer and indorse negotiable securities held by the bank for its use and in its behalf. No special authority for this purpose need be proved. If any bank chooses to depart from this general course of business, it is certainly at liberty to do so, but in such case it is incumbent on the bank to show that it has interposed a restriction, and that such restriction is known to them with whom it is in the habit of doing business." It can not be doubted but that the cashier had the power to transmit the note in question to the defendant for discount and collection, and to transfer the title thereto to the defendant. This would have been within the general scope of his authority as defined by Justice STORY, and in accordance with the practice of the bank for two years.

But although such was the power of the cashier, it does not follow that Beach while acting for the cashier had the same power. Beach as clerk had no authority to transfer any of the notes or securities of the bank. The directors had conferred on him no such power, and the cashier could not clothe him with any more of his power than was necessary to enable the latter to carry on the usual and ordinary business of the bank. Beach, in the absence of the cashier, had authority, undoubtedly, to pay checks, receive payment of notes and surrender them to the persons entitled, and, in a word, to do whatever was necessary and proper to be done in the ordinary course of business.

I do not doubt but that Beach had power to transmit notes owned by the bank, or held by it for collection, and payable in other places, or at other banks, to its agents for that purpose, and as, in order to do so, it becomes necessary to indorse the paper for the bank, he had power to make such indorsement. But he had no power to pledge its securities, unless they become pledged by the mere act of transmitting for collection.

It seems to me that Beach had the power to send forward this note for collection, and that the defendant legally acquired possession of it for that purpose.

The cashier had refused to send forward this note to the defendant. Whether Beach knew of this refusal does not appear, and we must assume that he did not. This refusal by the cashier shows that it was not the intention of the bank to transfer the note to the defendant, and Beach's authority was therefore limited to the making of such transfer of the note as the interests of the bank required to be made. He could transmit it for collection, but could not otherwise transfer or dispose of it.

It is said that the defendant received the note in the usual course of business without notice of any want of authority on the part of the officer transmitting it to transfer it, and that they must be considered bona fide holders for value. I have already said that the defendant is not a bona fide holder for value, and it must rest its defense on the right acquired, if any, by possession of a note acquired through an officer of the bank in the same manner in which for two years past it had acquired title to notes from the Bank of Medina. But it was competent for the Bank of Medina at any time to cease to transmit to the defendant paper for discount or collection, and when it did so, the defendant could not legally acquire any title to or interest in the notes of that bank, unless through third persons.

The Bank of Medina did not transmit this note; nor did it assent to any transfer of it to the defendant. The act of Beach was wholly without authority and in favor of the bank if it was intended to do more than transmit the note for collection.

Again, the defendant must have known that the act of Beach, so far as it was claimed to amount to a pledge of the note, was unauthorized. Although notes had been sent to the defendant indorsed as this one was, yet it was so seldom done that the cashier could recall no instance of the kind, and knowing that mere possession of the note thus indorsed might not enable the defendant to hold it as against the bank, application was made for the indorsement of the bank, or evidence of a transfer by it to the defendant. This request was never complied with. The Bank of Medina, therefore, never authorized the transfer to the defendant, nor ratified it. It is true the bank did not repudiate the act of Beach. But it was not called on to do so, and its silence has not in any manner prejudiced the defendant.

I am of the opinion, therefore, that Beach had the power to transmit the note to the defendant for collection, and to vest in it such title as was necessary and proper to enable it to accomplish that object, but he did not have power to transfer any other or higher title thereto; and that the defendant did not, as against the plaintiff, acquire any lien on said note for any balance due from the Bank of Medina.

If I am right on this proposition, it becomes unnecessary to discuss the question whether a bank acquires a lien on the securities in its possession belonging to a customer, for any balance which may be due to it on account.

The defendant, after it acquired possession of the note, held it as the agent of the Bank of Medina for the purposes of collection, and as the demand was made before maturity of the note there is no ground for claiming that a title to it passed to the defendant. The demand terminated the agency, and the refusal was evidence of a conversion.

I do not deem it necessary to inquire what effect, if any, the pending insolvency of the bank had on the right of the officers of the Bank of Medina to transfer this note to the defendant, to apply on the balance due from it to the defendant, if there was an intention to transfer it; because there is no finding in the case whether, at the time of the transfer, insolvency was contemplated or even conjectured.

After the plaintiff closed his evidence the defendant moved for a nonsuit, on the grounds: 1st. That the pendency of an action in favor of Horton against the Medina Bank, in which the order for the appointment of a receiver purported to be made, was not proved; and 2d. That there was no evidence of the value of the note.

The only evidence in relation to the appointment of the receiver was a copy of the order of appointment, and the giving of a bond in conformity thereto. The pendency of the action was not proved, except by recital in the order, and the objection is that a fact material to jurisdiction can not, in a case like this, be proved by recital in an order or record, but must be proved aliunde. It is urged that the power to appoint receivers in cases of insolvent corporations is given by statute, and the mode of procuring the appointment is fully and particularly prescribed; and although the Supreme Court is one of general jurisdiction, yet in the exercise of powers thus specifically conferred there is no presumption of jurisdiction in its favor; and in such cases it stands on the same footing with an inferior court. But it was held by this court in Bangs v. Duckinfield, ( 18 N.Y. Rep. 592,) that the Supreme Court in the appointment of a receiver, under § 36 (2 R.S. 463) of proceedings against corporations in equity, is a court of general jurisdiction, and not as exercising a special statutory power. The question then is, could the pendency of the action in which the order appointing the receiver was made be proved by the recitals in the order? It can not be denied that the pendency of the action, after personal service of the summons and complaint, and the appearance by the corporation on the motion, are fully recited.

There is a great diversity of opinion on the question; nevertheless I apprehend the weight of authority is in favor of the doctrine that jurisdiction may be established prima facie by recitals in the record. In 2 Cowen Hill's Notes, 1016, the authors say: In New York we may safely consider these jurisdictional recitals as prima facie evidence; and they cite in support of the proposition Barber v. Winslow, (12 Wend 102,) in which Justice NELSON, delivering the opinion of the Supreme Court, adopts the ruling in Jenks v. Stebbins, (11 John. 224.) These were cases of insolvents' discharges, and the recitals were in the record of an inferior jurisdiction. If recitals are evidence of the performance of acts necessary to be done to confer jurisdiction in one court, and for one purpose, they must be for all. There can not be one rule of evidence for the superior and another for inferior courts. In addition to the cases cited supra from our own reports, the following cases may be referred to: Shumway v. Stilwell, (4 Cowen, 292;) 6 Wend. 447; Starbuck v. Murray, (5 id. 148;) Borden v. Fitch, (15 John. 141.) The cases in the courts of other states are collected in the notes to Mills v. Duryea and McElmoyle v. Cohen, (2 Am Lead. Cas. 719 and seq.) and it will be found that the courts agree that a recital in the record, of appearance or of service of process, is evidence of the fact recited, and they differ only as to whether the fact recited is conclusive or only prima facie. Our courts hold the recital prima facie only.

The case of Sibley v. Waffle, ( 16 N.Y. Rep. 180,) is apparently in conflict with the cases above referred to. In that case the plaintiff sued in ejectment, to recover four acres of land purchased by him at a sale made by the administrator of one Dusenbury, under an order of the surrogate of Monroe county. It appeared, on the trial, that the widow and all the heirs except two resided in the county of Monroe; the absent ones resided in Ohio. The order of sale recited the due publication of the order, and that the administrator had done all that was required by the statute to be done. But it also appeared, that the order of the surrogate requiring the heirs and next of kin to appear was not published in the state paper for the number of weeks required by the statute, to constitute a valid service on the absent heirs, and this court held the recital of due publication did not show jurisdiction in the surrogate to make the order of sale. The learned judge who delivered the opinion of the court did not refer to the cases cited, nor profess to overrule them or the principle established by them, and hence I conclude that all this court intended to decide was that the recital of due publication did not overcome the proof that the order to show cause was published only five instead of six weeks as required by the statute. If such was the view of the court, then, although full effect had been given to the recital, yet as it was only prima facie, it was overcome by direct evidence that jurisdiction was not acquired by the surrogate.

Whether a recital of a jurisdictional fact in a record is or is not evidence of such fact, I am of the opinion that in the absence of any recital the law presumes that the court had jurisdiction to make the order in question. The court making it is a court of general jurisdiction, and it had by statute jurisdiction to appoint receivers in cases of insolvent corporations; and when an order is made appointing such officer, the presumption is that all things were done required by the statute to be done in order to authorize it to make such order. This conclusion seems to follow necessarily from the decision in the case of Bangs v. Duckenfield, cited supra, that in appointing a receiver in such cases the Supreme Court acts as a court of general jurisdiction, and not as exercising a special statutory power.

The instruction to the jury that prima facie the damages which the plaintiff was entitled to recover were the amount which the maker of the note agreed to pay and interest thereon, was correct. This is held to be the measure of damages, in 2 Philips' Ev., Cowen Hill's ed. 228; 2 Parsons on Contracts, 471; Decker v. Mathews, (2 Kern. 324;) Sedgwick on Damages, 513; Paine v. Pritchard, (12 Eng. Com. Law Rep. 261.)

It was competent for the defendant to prove the insolvency of the maker, and thereby lessen the damages; but in the absence of any evidence of the want of ability to pay, the presumption is that he is solvent and able to pay the note. ( Walrod v. Ball, 9 Barb. 271.)

It was insisted, on the trial, that the proper question to put to the witness in order to arrive at the measure of damages was, what was the value of the note? and the ground on which the right to put the question rests is, that such is the inquiry in all other cases where the value of property is sought to be recovered. The general rule is that the value of property must be ascertained by answers to the direct questions as to its value. And the reason is that persons are examined who know its value, and can speak from their own personal knowledge in relation thereto. But this rule can not apply to choses in action; they have no intrinsio value, as a horse or an acre of land has. Their value depends on the pecuniary condition of the parties liable thereon. And hence, in such cases, the direct and proper inquiry would be, are the parties to a bill or note, or other chose in action, solvent and able to pay their debts? But as the law presumes that fact, in favor of the plaintiff, it is not necessary for him to prove it; and the burthen is therefore cast upon the defendant to disprove it.

I am of the opinion that the rulings on the trial were right, and that the judgment should be affirmed, with costs.

DENIO, Ch. J. concurred upon the point respecting the value of the note; but was for reversal on the single ground of receiving in evidence the final order for appointment of receiver without proof of the preliminary proceedings.

INGRAHAM, J. concurred, except upon the point respecting the value of the note.

The only evidence which was produced by the plaintiff to show his title as receiver, was the order appointing him receiver, made at a special term of the Supreme Court, and the execution and filing of a bond in pursuance of the terms of the order. It is insisted that this is not sufficient, without additional proof showing the pendency of the action in which the order was made. Such further proof was not necessary. The appointment of a receiver was within the jurisdiction of the court; and where an order is made by a superior court which it has power to make under any circumstances, "all jurisdictional steps and matters of regularity are to be presumed." ( The People v. Nevins, 1 Hill, 154, 159; Foot v. Stevens, 17 Wend. 483.) In making such appointment the court acts as one of general jurisdiction, and not under a special statutory power. ( Bangs v. Duckinfield, 18 N.Y. Rep. 592.) The evidence, therefore, whether conclusive or not, was at least prima facie sufficient to establish the plaintiff's title. "Nothing shall be intended to be out of the jurisdiction of a superior court, but what expressly appears to be so; nor within the jurisdiction of an inferior court but what is expressly alleged to be so." ( Peacock v. Bell, 1 Saund. 74.)

The teller of the Medina Bank had no authority to transmit the note of Weld to the Merchants' Bank, and the latter bank refused to accept it on the terms on which it was transmitted. There was thus a double defect in the defendant's claim of title; and the refusal of the defendant to surrender the note on the demand of the plaintiff, amounted to a conversion of it. The right of the plaintiff to recover was therefore unquestionable. The only real controversy between the parties related to the amount of damages.

There was no error in the charge of the judge, or in his refusal to charge as requested. But on the trial, a witness, after testifying that he was acquainted with the parties to the note, and showing a somewhat intimate knowledge of their pecuniary condition, was asked by the defendant's counsel what, in his opinion, the note in question was worth. This question was excluded, and the defendant's counsel excepted. In this respect I think the court erred. As a general rule, undoubtedly, witnesses, other than experts, are required to testify to facts, and not to give opinions; but in determining the value of property, the well established rule in this state is otherwise; and I am unable to see any valid reason for making an exception in regard to the value of choses in action. It may be said that the witness can state the facts which go to determine the value, and that the jury will then be as capable of judging of the value as the witness. If the witness could state with perfect accuracy all the circumstances which constitute the basis of his own judgment, this position would be correct; but the impossibility of doing this has caused the adoption of the practice of allowing the witness to give his opinion upon questions of value, along with the reasons, as far as he is able to give them, upon which such opinion rests. The argument in favor of confining the witness to the facts, and leaving the jury alone to deduce the conclusion, as to value, would apply with as much force to many of the cases where opinions are allowed as to the present case. ( Clark v. Baird, 9 N.Y. Rep. 183.) For this error I think a new trial should be granted.

The other question addressed to the same witness, calling for his opinion in regard to the solvency of one of the parties to the note, was properly rejected. The question relating to the solvency of the maker, and that as to the value of the note, are by no means identical. There are many circumstances under which a note may have some value, although the maker be insolvent. The distinction between the two questions is not very broad, but that relating to solvency was not within the exception to the rule that opinions are not evidence, which is established in regard to the value of property, and I am not disposed to extend that exception to cases not clearly within it.

HOGEBOOM, DAVIES, WRIGHT and JOHNSON, JJ., were in favor of affirmance.

Judgment affirmed.

Summaries of

Potter v. Merchants' Bank

Court of Appeals of the State of New York
Sep 1, 1863
28 N.Y. 641 (N.Y. 1863)

In Potter v. Merchants' Bank (28 N.Y. 641), Booth v. Powers (56 id. 22), and Thayer v. Manley (73 id. 305), it was held that in an action to recover damages for the conversion of a promissory note, the amount appearing to be unpaid thereon at the time of the conversion with interest, is prima facie the measure of damages, but that the defendant has the right to show in reduction of damages the insolvency or inability of the maker, or any other fact impugning the value of the note.

Summary of this case from Griggs v. Day

In Potter v. Merchants' Bank (28 N.Y. 641), Thayer v. Manley (73 id. 305) and Griggs v. Day (136 id. 152), it was held that in an action to recover damages for the conversion of a promissory note, the amount appearing to be unpaid thereon at the time of the conversion is prima facie the measure of damages, but that the defendant has the right to show in reduction of damages the insolvency of the maker or any fact to invalidate or affect the value of the note.

Summary of this case from Pawson v. Miller
Case details for

Potter v. Merchants' Bank

Case Details


Court:Court of Appeals of the State of New York

Date published: Sep 1, 1863


28 N.Y. 641 (N.Y. 1863)

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