Merchants' Nat. Bank v. Citizens' Gaslight Co. of Quincy

Decision Date19 October 1893
Citation34 N.E. 1083,159 Mass. 505
PartiesMERCHANTS' NAT. BANK OF GARDINER v. CITIZENS' GASLIGHT CO. OF QUINCY et al.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court
COUNSEL

Hollis B.

Bailey and William G. Waitt, for plaintiff.

William L. Putnam, for defendants.

OPINION

BARKER J.

1. The defendant's first request for instructions relates to the effect of St.1886, c. 346, upon the powers of the defendant corporation to issue promissory notes. The third section of that statute relates to the issue of bonds by a gas company, and gives a company the right to secure bonds issued in accordance with the provisions of the section by a mortgage of the franchise and property of the company; but we find nothing in the chapter which affects the right of such a company to issue promissory notes when convenient or necessary in the prosecution of its business.

2. As the plaintiff discounted this note before maturity, "in the usual course of its business, without notice or knowledge of any defect or infirmity," and as its good faith is not questioned, if the note were signed by an officer authorized generally to give notes in its behalf the defendant company would be liable, although the agent in signing this particular note exceeded his authority, or the powers of the corporation. Monument Nat. Bank v Globe Works, 101 Mass. 57. It is not necessary that the authority of an officer or agent to sign notes in behalf of a corporation should appear in the bylaws, or should have been expressly given by a vote of the directors or of the stockholders. In Lester v Webb, 1 Allen, 34, it was said. "The rule is well settled that if a corporation permit their treasurer to act as their general fiscal agent and hold him out to the public as having the general authority implied from his official name and character, and by their silence and acquiescence suffer him to draw and accept drafts, and to indorse notes payable to the corporation, they are bound by his acts done within the scope of such implied authority. Fay v. Noble, 12 Cush, 1 Williams v. Cheney, 3 Gray, 215; Conover v Insurance Co., 1 N.Y. 290. On the facts proved at the trial the plaintiff might well claim, if the jury believed the evidence, that the treasurer had authority to indorse the notes in suit, derived, not from any express direction, but from the course of conduct and dealing of the treasurer with the knowledge and implied assent of the directors of the corporation." See, also, McNeil v. Chamber of Commerce, 154 Mass. 285, 28 N.E. 245; Mining Co. v. Anglo-Californian Bank, 104 U.S. 192.

3. But cases where the actual authority of an officer is inferred from a course of business known to and permitted by the stockholders or the directors of a corporation do not touch the question whether authority is to be implied as matter of law from the name and nature of the office itself. In the present case the jury were instructed that the treasurer of such a corporation as the defendant company has by virtue of his office authority to sign a note which shall bind the corporation, and the defendant contends that this instruction was incorrect. The incidental powers of some officers or agents have become so well known and defined, and have been so frequently recognized by courts of justice, that certain powers are implied as matters of law in favor of third persons who deal with them on the assumption that they possess these powers, unless such persons are informed to the contrary. The officers and agents usually mentioned in this category are auctioneers, brokers, factors, cashiers of banks, and masters of ships. See Merchants' Bank v. State Bank, 10 Wall. 604; Case v. Bank, 100 U.S. 446. Treasurers of towns or cities in this commonwealth are well-known officers, and their powers are very limited. They are in general to receive, keep, and pay out money on the warrant of the proper officers of the towns and cities. Treasurers of business corporations usually have much more extensive powers, and the decisions of this court hold that the treasurer of a manufacturing and trading corporation is clothed by virtue of his office with power to act for the corporation in making, accepting, indorsing, issuing, and negotiating promissory notes and bills of exchange, and that such negotiable paper in the hands of an innocent holder for value, who has taken it without notice of any want of authority on the part of the treasurer, is binding on the corporation, although with reference to the corporation it is accommodation paper. Narragansett Bank v. Atlantic Silk Co., 3 Metc. (Mass.) 382; Bates v. Iron Co., 7 Metc. (Mass.) 224; Fay v. Noble, 12 Cush. 1, Lester v. Webb, 1 Allen, 34; Bank v Winchester, 8 Allen, 109, Bird v. Daggett, 97 Mass. 494; Monument Nat. Bank v. Globe Works, ubi supra; Corcoran v. Cattle Co., 151 Mass. 74, 23 N.E. 727. While it is possible that most, if not all, of the cases in which this rule has been stated as law have some special circumstances from which the treasurer's authority could be inferred, and that the court was influenced in the decisions by the well-known fact that in many of the manufacturing corporations of this commonwealth the treasurer not only has the custody of the money, but is the general financial manager, and often the general business manager, of the corporation, the rule itself has been frequently and broadly stated in our decisions, and is well known both to the officers of manufacturing and trading corporations and to those of banks and financial institutions. It could not now be abrogated or unsettled without disturbing commercial transactions. There are, however, many corporations which transact more or less business to which the rule has been held not to apply. Thus it does not apply to a college, (Webber v. College, 23 Pick. 302;) nor to a parish, (Packard v. Society, 10 Metc. [ Mass.] 427;) nor to a monument association, (Torrey v. Association, 5 Allen, 327;) nor to a municipality, (Bank v. Winchester, 8 Allen, 109;) nor to a savings bank, (Tappan v. Bank, 127 Mass. 107;) nor to a horse-railroad company, ( Craft v. Railroad Co., 150 Mass. 207, 22 N.E. 920.) Upon consideration of the decisions cited, we think it fair to say that the making and indorsing of negotiable paper is to be presumed to be within the power of the treasurer of a manufacturing and trading corporation whenever from the nature of its ordinary business as usually conducted the corporation is naturally to be expected to use its credit in carrying on commercial transactions. Such paper is the usual and ordinary instrument of utilizing credit in commercial transactions, and it is for the interest of the corporation and of the community that the best instrument should be employed. It is no less for the interest of all that, if negotiable paper is to be employed, its validity should not be open to objections which would impair its usefulness by requiring at every step an inquiry into the authority by which it is issued. There are matters of common knowledge pertinent to the present question. Gaslight companies like the defendant are chartered for the purpose of making and selling gas. They are located in every city of the commonwealth, and in most of the larger towns and villages. In the recent development of the use of electricity many electric light or light and power companies have been established where gaslight companies are in operation. The powers, obligations, and business of these electric companies are so similar to those of gaslight companies that they are classed with them in the minds of business men, and are under the supervision of the same state board. We see no reason why, in respect to the present question, all of this general class of corporations should not be governed by one rule. They are all in fact "manufacturing and trading corporations" in the same sense that companies whose business it is to manufacture and sell cottons, woolens, shoes, or paper are manufacturing and trading corporations. None of these companies are traders in the strict sense contended for by the defendant, since none of them make it their "business to buy merchandise or goods and sell the same." All of them, and the gaslight companies equally with the others named, buy merchandise and goods in large amounts, expend large sums in transforming by their processes of manufacture the articles purchased into other commodities which they sell for the purpose of making a profit. Neither the fact that pipes which a gaslight company uses only to deliver to its customers one of the commodities which it sells, nor that its price for that commodity may be regulated by civil authority, nor that the municipality in which its plant is located may purchase or take its franchise and property,...

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