Appeal of Nat'l Shoe & Leather Bank

• Decision Date: 27 January 1888
• Citation: 55 Conn. 469,12 A. 646
• Court: Connecticut Supreme Court
• Parties: Appeal of NATIONAL SHOE & LEATHER BANK.

12 A. 646

55 Conn. 469

Appeal of NATIONAL SHOE & LEATHER BANK.

Supreme Court of Errors of Connecticut.

January 27, 1888.

Appeal from superior court.

In 1884, Brown & Bros., a corporation doing business at Waterbury, Connecticut, being in failing circumstances, began negotiation with one Franklin Farrell with the object in view of inducing him to undertake the management of the concern, and to provide for the payment of its debts. During the negotiation, a list of the company's liabilities was prepared, showing, among others, notes to the amount of $17,300 signed by Brown & Bros., and indorsed by W. H. Brown, president, held by the National Shoe & Leather Bank of New York. Farrell, before accepting the management of the company, proceeded to ascertain for himself the amount of its indebtedness, and for that purpose called upon the bank in regard to the plan of providing for the payment of Brown & Bros.' liabilities. He was told at the bank that its claim against Brown & Bros. was for certain notes amounting to $17,300, signed, "Brown & Bros.," but nothing was said about any other claims held by the bank against the company, nor did Farrell have any knowledge or information in regard to any other claims. About November, 1885, after Farrell had taken charge of the affairs of the company, a renewal of the unpaid balance of the $17,300 was requested. The officers at the bank assented to this, but said that certain other notes amounting to $29,900, signed by W. H. Brown, and indorsed by W. H. Brown, agent, and secured on the corporate stock owned by W. H. Brown, which the bank had discounted for the company, must be taken care of. Farrell would not agree to this, and thereupon proceedings in bankruptcy were instituted against the company. The superior court reversed the decision of the commissioners in insolvency rejecting the bank's claim to prove the $29,900 against the assets of the company, and from the decree of the superior court the trustees of the company appeal.

S. W. Kellogg and C. R. Ingersoll, for appellants.

The contract was executed in New York, where the notes were made and delivered, and is governed by the laws of that state. Allen v. Rundle, 50 Conn. 20, 28; Webster v. Machine Co., 54 Conn. 394, 8 Atl. Rep. 482. Whether the signature on the back of the notes for $29,900 was an indorsement or a guaranty, the company was entitled to notice of the non-payment thereof. Spies v. Gilmore, 1 N. Y. 321; Moore v. Cross, 19 N. Y. 227. W. H. Brown's general agency did not give him authority to bind the company by indorsing the notes as agent. Smith v. Cheshire, 13 Gray, 320; Taber v. Cannon, 8 Metc. 458; Paige v. Stone, 10 Metc. 160. The bank must take notice of the extent of W. H. Brown's authority as agent. Credit Co. v. Machine Co., 54 Conn. 357, 8 Atl. Rep. 472. In allowing or rejecting claims, commissioners in insolvency have both law and equity powers. Appeal of Donovan, 41 Conn. 559.

George C. Lay, D. F. Hollister, and John S. Beach, for appellee.

The company was not relieved from liability to the bank by its omission to record the agency, even if the proceeds of these loans had been misappropriated by W. H. Brown. 2 Mor. Corp. §§ 585-594, and cases there cited. The company, having received the proceeds, cannot claim that the loans are void as effected without authority. Hopson v. Spring Co., 50 Conn. 600.

LOOMIS, J. The appellant presented to the commissioners on the assigned estate of Brown & Bros., an insolvent corporation, a claim aggregating the sum of $29,900, represented originally by three notes,—one dated January 15, 1884, for $2,400; one dated March 15, 1884, for $12,500; and one dated March 27, 1884, for $15,000,—all signed, "WM. H. BROWN," and payable to H. N. Knapp, cashier of the appellant bank, four months from date, and all indorsed, "WM. H. BROWN, Agent," and discounted at the appellant bank, and the avails appropriated to pay the legitimate debts and obligations of Brown & Bros. The commissioners rejected the claim, and the bank appealed to the superior court, where the claim was allowed in full; and now the trustees of Brown & Bros. bring the case to this court to revise the rulings of the superior court.

At the outset of the discussion before this court, the counsel for the appellee made a vigorous effort to restrict the inquiry simply to the question whether Brown & Bros. could be held liable as makers, indorsers, or guarantors of the notes in question, irrespective of the fact that they received the proceeds; and many of the errors assigned, hinge upon this idea. Had the claim been so restricted in its presentation and prosecution, there would be obvious difficulties in the way of sustaining the judgment of the superior court; for one must be a party to a note, to be made liable as maker or indorser, and the face of the notes in question does not indicate that they had any relation to Brown & Bros.; and if the indorsement of "William II. Brown, agent, could be regarded as the indorsement of Brown & Bros., it would still be a mere contingent liability, without any foundation being laid to make that liability absolute. We think, however, that the record does not sustain the claim that only the notes themselves were presented and considered before the commissioners. The form of the presentation of the claim is not explicitly stated. The report of the commissioners only shows the gross amount presented, without any reference to any notes. The reasons of appeal from the doings of the commissioners, after referring to the three notes presented to the commissioners as representing the claim of the appellant, amounting in the aggregate to the sum of $29,900, give this additional reason: "that the consideration of all said notes was money loaned to the appellee, and that money so loaned was used by the appellee in conducting its business, and for its benefit." Now, it is obvious, from the record, that this last-mentioned reason was one of the issues of fact before the trial court, and much evidence was introduced on both sides bearing on this point, without any objection on the part of the appellee based on the restricted nature of the claim presented; and this issue as to the consideration and the application of the proceeds of the notes was distinctly found against the appellee. We think, therefore, there is no foundation for this objection; and what we have said in this connection is a sufficient answer to all the arguments, and all the assigned errors, which assume or imply that the claim of the appellant was based solely...