Bank of America, Nat. Trust & Sav. Ass'n v. Horowytz

• Citation: 248 A.2d 446,104 N.J.Super. 35
• Decision Date: 03 December 1968
• Docket Number: No. 67--880,67--880
• Parties: BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION, Plaintiff, v. Carol HOROWYTZ, Defendant.
• Court: New Jersey County Court

Page 35

104 N.J.Super. 35

248 A.2d 446

BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION, Plaintiff, v. Carol HOROWYTZ, Defendant.

No. 67--880.

Bergen County Court, Law Division, New Jersey.

Dec. 3, 1968.

Milton T. Lasher, Hackensack, for plaintiff.

Kenneth F. Lay, Union City, for defendant (Spingarn & Sachs, Union City, attorneys).

O'BRIEN, J.C.C.

This is a suit on a promissory note, dated October 26, 1961, signed in the name of defendant, 'Carol Horowytz d/b/a E.D.S. by J. Pearl,' and endorsed on the reverse side by 'Jack Pearl.'

Defendant has admitted in the pretrial order that J. Pearl is her father and that he engaged in business in defendant's name from time to time.

It appears from the exhibits introduced into evidence that on April 8, 1957 a checking account was opened with plaintiff bank in the name of defendant doing business under the tradename E.D.S., as a men's clothing business at 957 Market Street, San Francisco, California. The signature card, containing defendant's authorized signature, also contains the statement, 'J. Pearl power of attorney attached.' The original of this 'signature card: power of attorney' was received into evidence and defendant admits signing it.

No oral testimony was offered by either party. The evidence consisted of the admissions contained in the pretrial order and the instruments introduced into evidence. The question presented is whether J. Pearl had the authority to obligate defendant on the note in question. Plaintiff relies solely upon the power of attorney as establishing such authority.

Thus the court is called upon to determine whether the power of attorney can be construed as clothing the attorney-in-fact with the authority to borrow on behalf of defendant principal.

A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. The primary purpose of a power of attorney is not to define the authority of the agent as between himself and his principal, but to evidence the authority of the agent to third parties with whom the agent deals. 3 Am.Jur.2d, Agency, § 23, p. 433.

The authority to borrow money on the credit of the principal is among the most important and also dangerous powers which a principal can confer upon an agent, since manifestly there is a great possibility of the abuse of the power. For this reason, in the absence of express authority, the authority of an agent to borrow on the principal's credit will not be inferred unless it is necessarily implied by the scope and character of the authority which is expressly granted. 3 Am.Jur.2d, Agency, § 88, p. 490. Unless otherwise agreed, an agent is not authorized to borrow unless such borrowing is usually incident to the performance of acts which he is authorized to perform for the principal. Restatement, Agency 2d, § 74, p. 192.

These principles have been well expressed by the court in Williams v. Dugan, 217 Mass. 526, 105 N.E. 615, L.R.A.1916C, 110 (1914):

'The power to borrow money or to execute and deliver promissory notes is one of the most important which a principal can confer upon an agent. It is fraught with great possibilities of financial calamity. It is not lightly to be implied. It either must be granted by express terms or flow as a necessary and inevitable consequence from the nature of the agency actually created.'

Courts are reluctant to find an authority to borrow where such authority is not explicitly conferred. 55 A.L.R.2d, p. 1215 (in particular, § 3(b), p. 1221 and § 5, p. 1228). See Consolidated National Bank v. Pacific Coast S.S. Co., 95 Cal. 1, 30 P. 96 (1892).

Since the determination of this case rests entirely upon a construction of the power of attorney, it is set forth herein in full.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

It is apparent that the authority to borrow money is not given to the attorney-in-fact in so many words. Thus, it becomes necessary to determine whether such authority may be implied by a reasonable construction and interpretation of the instrument, or whether such power may be inferred or necessarily implied by the scope and character of the authority which is expressly granted.

The power of attorney was executed in California and the court must therefore construe it in accordance with the laws of that state.

The instrument delegates power 'to sign and endorse checks, notes and drafts and transact all business with your Day and Night Branch San Francisco Calif.' The delegation is in both specific and general terms. If the power to borrow money is necessarily to be implied by the terms of the instrument, it must be expressed by the specific terms 'sign * * * notes' rather than by the general term' 'and transact all business.' For, by the law of California:

'When authority is given partly in general terms and partly in specific terms, the general authority gives no higher powers than those specifically mentioned.' Byer v. Canadian Bank of Commerce, 8 Cal.2d 297, 65 p.2d 67, 69 (1937), citing Cal.Civil Code, § 2321.

Focusing, therefore, on the words 'sign * * * notes,' plaintiff construes that language to mean 'make and deliver promissory notes as evidence of a debt,' i.e., the power to borrow money. Defendant, on the other hand, construes the same language to mean 'endorse notes presented for payment' or 'sign notes payable at the bank', which amounts to an authorization to the bank to pay such notes from funds credited to the checking account.

Powers of attorney are to be construed in accordance with the rules for the interpretation of written instruments generally. 3 Am.Jur.2d, Agency, § 28, p. 436 (citing Todd v. Superior Court, 181 Cal. 406, 184 P. 684, 7 A.L.R. 938 (1919).

It is a general rule of construction, and it is the rule in California, that in case of uncertainty in a contract, it is to be construed most strongly against the party who caused the uncertainty to exist--the party drafting the instrument. Burr and Ladd, Inc. v. Marlett, 230 Cal.App.2d 468, 41 Cal.Rptr. 130 (1964). As otherwise expressed, a contract is to be construed most firmly against the party who drafts or supplies it. Warshauer v. Bauer Construction Co., 179 Cal.App.2d 44, 3 Cal.Rptr. 570 (1960), citing Cal.Civil Code, § 1654; Distillers Distributing Corp. v. J. C. Millett Co., 310 F.2d 162 (9 Cir. 1963); Riess v. Murchison, 329 F.2d 635 (9 Cir. 1964), certiorari denied 383 U.S. 946, 86 S.Ct. 1196, 16 L.Ed.2d 209. In New Jersey see Forbes v. First Camden Nat. Bank & Trust Co., 25 N.J.Super. 17, 21, 95 A.2d 416 (App.Div.1953), a case involving the construction of a signature card and the rules printed in a passbook.

If the third party who loaned money to the agent was a stranger to the power of attorney, this rule of construction would probably be properly invoked against the principal, who adopted the language used by signing it.

However, in this case, plaintiff lender is Not a stranger...