Binghampton Trust Company v. Auten

• Decision Date: 16 June 1900
• Citation: 57 S.W. 1105,68 Ark. 299
• Parties: BINGHAMPTON TRUST COMPANY v. AUTEN
• Court: Arkansas Supreme Court

57 S.W. 1105

68 Ark. 299

BINGHAMPTON TRUST COMPANY v. AUTEN

Supreme Court of Arkansas

June 16, 1900

Appeal from Pulaski Circuit Court, Second Division, JOS. W. MARTIN Judge.

STATEMENT BY THE COURT.

The McCarthy-Joyce Company, an Arkansas corporation, was on 7th of December, 1892, indebted to the First National Bank of Little Rock in the sum of thirty thousand dollars; its account with the bank being overdrawn to that amount. For the purpose of raising money to pay off a portion of this debt the company on that day executed to James Joyce two notes for five thousand dollars each, one due in four and the other in five months. We copy one of them: "Little Rock, Ark December 7, 1892. $ 5,000. Four months after date we or either of us promise to pay to the order of James Joyce $ 5,000, for value received, negotiable and payable without defalcation or discount at the First National Bank of Little Rock, Ark., with interest from maturity at the rate of 10 per cent. per annum until paid. McCarthy-Joyce Company, Geo Mandlebaum, Secretary and Treasurer."

The notes were indorsed by James Joyce, the payee, in blank, and were delivered by the company to H. G. Allis, president of the bank, to be negotiated by him, the proceeds thereof to be applied on the debt of the company to the bank. Allis indorsed the notes, and then transmitted them to the Binghampton Trust Company, of Binghampton, N. Y., in the following letter:

"Capital and surplus, $ 600,000. H. G. Allis, President. W. C. Denny, Cashier. First National Bank of Little Rock, Ark. December 10, 1892. Binghampton Trust Company: Gentlemen--I enclose you two notes of the McCarthy-Joyce Company, one at four months, the other at five months, from the 7th inst., for $ 5,000 each. This company now has on hand 1,500 bales of cotton, worth in the neighborhood of $ 70,000. It is probable they will have to hold this cotton for sixty or ninety days. I indorse the paper myself, in order that it may be subjected to any collateral of mine in your hands. The paper is absolutely good, as we hold insurance and warehouse receipts on all this cotton. If you can handle it, kindly remit the amount of the notes to the United States National Bank of New York for our credit, and advise me proceeds by wire; otherwise, return. Yours very truly,

"H. G. ALLIS, President."

The statements in the letter were false. The McCarthy-Joyce Company was insolvent. It did not have on hand the cotton mentioned, nor did Allis or the bank have warehouse receipts for the cotton. The trust company, being misled by these false statements, accepted the note, and remitted in payment for the same $ 9,710 to the United States Bank of New York, which was placed to the credit of the First National Bank, and by that bank credited on the account of the McCarthy-Joyce Company. One of the notes was taken by the trust company for itself, and the other for the Deposit Bank of New York.

The trust company afterwards brought this action against the First National Bank to recover damages for deceit on account of the false statements of its president, Allis. The circuit court found in favor of the defendant, and the trust company appealed.

Judgment reversed.

Blackwood & Williams, for appellant.

The Little Rock bank was bound by the representations of Allis its president. 4 Thomp. Corp. § 4627; 1 Morawetz, Corp. § 538; 137 U.S. 107; 39 Me. 317; 72 Me. 170; 7 Metc. 274; 101 U.S. 194; 110 U.S. 7; 62 Ark. 19, 20; 44 Hun, 136; 5 N.Y. 291, 293; 106 N.Y. 195, S. C. 12 N.E. 433; 6 Am. & Eng. Corp. Cas. 245, S.C. 46 N. J. Law, 237; 61 N.W. 904; 25 Am. St. Rep. 134; S. C. 86 Mich. 134; 4 Bosw. 630; 1 Head, 164; 54 Pa.St. 380; 71 N.W. 652; 17 S.W. 644, 646, S. C. 107 Mo. 133; 31 N.E. 201, S. C. 138 N.Y. 480; 87 N.Y. 628; 45 F. 671; 16 W.Va. 555; 30 Vt. 170; 76 F. 339; 26 Am. St. Rep. 352, S. C. 104 Mo. 531; 10 Wall. 604, 645; 1 Salk. 289; 5 Pet. 566; 1 Dan. Neg. Inst. 389; 4 Th. Corp. §§ 4930-4933; 62 Ark. 40; 1 Am. & Eng. Corp. Cas. 235; 83 F. 556; 58 N.W. 943. The presumption is in favor of the authority of the president to make the contract. 73 F. 50; 12 Wheat. 70; 8 id. 356-7; 101 U.S. 181-3; 104 U.S. 192-5; 61 F. 804; 116 N.Y. 193; 143 N.Y. 430; 436; 37 S.W. 339; 34 Pa.St. 148; 4 Thompson, Corp. §§ 4789, 4781, 4815, 4741; Morawetz, Corp. §§ 336, 538, 593. An action for deceit will lie for fraudulent misrepresentations of the credit of a third person. 3 Term R. 51; 6 Johns. 181. Corporations are liable therefor to the same extent as are persons. 64 Ark. 613; 34 N.Y. 30; 42 Ark. 542. Corporations are liable in actions for deceit, where that deceit was committed by its agent in the performance of acts within the scope of his employment and for their benefit. 4 Am. & Eng. Ene. Law, 255; 5 H. L. C. 72; 106 Pa.St. 175; 77 N.C. 233; 37 N.J.Eq. 175; Benj. Sales, § 466; L. R. 8 Q. B. 244. 54 Ga. 635; 40 N.Y. 454; 2 Beach, Priv. Corp. § 448; 80 N.Y. 167; 2 Exch. 259; L. R. 5 P. C. 394; 10 Ch. D. 514; 5 App. Cas. 317, 326; Poll. Torts, *82; 3 App. Cas. 106. The bank, by receiving the benefits of Allis' deceit, estopped itself to allege his want of authority. 2 Hill. Torts, 434; 4 Inst. 317; 9 Johns. 118; 14 Johns. 247; 8 Barb. 357; Ames, Corp. 311; 83 F. 565; 1 Laws, Rights, Remedies & Pr. §§ 29, 1041; Evans, Ag. 49; 30 N.Y. 211; 51 Md. 290; 43 Conn. 434; 79 F. 296; 64 ib. 985; 1 Pars. Cont. 47n.; 2 Am. Dec. 285; Story. Ag. §§ 455, 242, 244; Year Book, 7 Henry 4, p. 35; 1 Am. & Eng. Enc. Law, 437; 7 N.E. 85; Mech. Ag. § 113; Cooley, Torts, § 146; 4 Am. & Eng. Enc. Law, 252; 64 Ark. 208. Allis' knowledge of the deceit was the knowledge of the bank. Mech. Ag. § 72; 11 Wall. 356; 38 Vt. 402; 33 Vt. 252; 52 Mo. 181; 70 M. 290; 13 N.H. 145; 40 N.H. 375; 58 Vt. 113; 29 Minn. 322; 14 R. I. 293; 68 N.Y. 434; 10 N.Y. 178; 66 Ill. 438; 29 Ind. 553; 27 Ala. 336; 32 Ill. 517; 10 Rich. (S. C.) 293; 9 Heisk. 479; 72 Me. 226; 7 Biss. 260; 17 C. B. (N. S.) 446; 6 Ch. App. 678; 12 Cal. 377; 31 Cal. 160; 34 Ga. 304; 33 Ind. 147; 14 La.Ann. 711; 4 Humph. 396; 39 Mich. 362; 43 Vt. 403; 56 id. 77; 113 Mass. 391; 53 Wis. 361; 36 Minn. 112; 35 Barb. 330; 2 Hill, 451; 4 Pa. 127; 29 N.Y.S. 77; 82 F. 277. Estoppel applies as well to corporations as to individuals. 10 Wall. 604; 73 F. 951; 56 F. 967; 147 Mass. 268, S. C. 17 N.E. 496; 4 Thompson, Corp. § 4608, 5210, 5224; 50 N.H. 571; 57 F. 821; 38 Ark. 71; 9 Heisk. 437. There was no usury in the contract as to interest. An accidental overcharge does not constitute usury. 62 Ark. 380; 25 Ark. 260. Where an instrument is susceptible of two constructions, the one rendering it lawful and theother unlawful, the former construction should be adopted.13 Ark. 363; 54 ib. 471; 46 ib. 129; 35 Ark. 55. The transaction was not. a loan, but a sale of the notes for a discount, and hence not usurious. 1 Cranch, C. C. 556; 1 Barb. 462; 1 Bouv. Diet. "Discount;" 79 F. 296, 299. The burden was on appellee to show usury, and he has failed, since he has shown no corrupt agreement and no illegal charges. 59 Ark. 368; 25 ib. 191; 47 N.J.Eq. 8; 103 Ill. 362; 8 A. 555; 85 Ala. 394. The presumption is against usury, and it must be clearly proved. 81 N.Y. 363; 8 ib. 276; 40 ib. 248; 96 ib. 100; 25 N.J.Eq. 422; 47 N.J.Eq. 8. The laws of Arkansas govern as to usury. The contract was not usurious thereunder. 33 Ark. 648; 39 Am. Dec. 205; 55 ib. 387; 94 ib. 546; 31 ib. 264; 27 Am. & Eng. Eric. Law, 972.Allis' proposition was, presumably, that the notes bediscounted at a legal rate, and the appellant had no power to bind him by an acceptance on any other terms. 23 N.J.Eq. 512; 103 Mass. 356; 2 Sandf. 133; 14 Pet. 77; 103 U.S. 155; 4 Wheat, 225; 1 Pars. Cont. *477, *478; Poll. Cont. (4th Ed.) *2; Bish. Cont. § 313; 4 Minor's Inst. (2d Ed.) 17; 132 Mass. 129; 25 Ark. 545; 101 N.Y. 45; 94 U.S. 47; 34 N.H. 303; 35 Me. 388; 26 Ark. 382; 41 Wis. 504; 34 N.H. 304; Benj. Sales (4th Ed.) § 87. The proposition must be clear and definite, or its acceptance will not close a contract. 1 M. & S. 290; 2 B. & Ad. 232, S. C. 22 Eng. C. Law, 63; L. R. 20 Eq. 492; S. C. 44 L. J. Ch. 492; 59 Wis. 316; 8 Allen, 566; 4 Whart. 369; 142 Mass. 442. The law of the place where an offer is accepted by mail or telegram governs the contract. 4 Cliff. 598, S. C. 21 Fed. Cas. (No. 12, 715); 4 Ga. 1; 40 N. J. Law, 476; 15 R. I. 380, S. C. 2 Am. St. Rep, 902; 20 Q. B. Div. 640; 1 C. P. Div. 87; 2 Kent's Comm. 477; 6 Wend. 103; 32 Md. 196; 48 N.H. 14; 47 Ark. 525; 1 B. & Ald. 681; 1 H. L. Gas. 381; 23 Wall. 85; 61 Ark. 1; 60 F. 693. Lex loci contractus governs as to validity and interpretation of contract. 7 Ark. 231; 20 ib. 356; 25 ib. 261; 40 ib. 423.

Hill & Auten, for appellee.

Allis did not represent the bank, so as to bind it. Nor was there ever any ratification of his acts. Mechem, Ag. §§ 129, 132. Appellants should have tendered back the notes. 17 N.H. 573; 43 Am. Dec. 614; 4 Mass. 502, S. C. 3 Am. Dec. 230; 105 Mass. 558; 15 Mass. 319; 98 Mass. 205; 104 Mass. 494; 8 Am. Dec. 104-5; 1 Den. 69. The bank is not estopped to dispute Allis' authority. 10 Wall. 604; 73 F. 951; 56 F. 967; 75 F. 769. The transaction was usurious. For New York statutes put in evidence on the question ef usury, see Tit. 3, Rev. St. (N. Y.) §§ 1, 2, and 5. That the contract was usurious, see 41 Ark. 331; 7 Cow. 678; 4 Scare. 29; 1 Porfer, 96. Payment and receipt of excessive interest is prima facie evidence of usury. 10 Johns. 140; 2 Cow. 712; 8 Cow. 398; 3 Cow. 284.

Blackwood & Williams, for appellants, in reply.

Whether considered as an Arkansas or a New York contract, the transaction was not usurious. The law of New York forbidding corporations to plead usury applies to a foreign corporation maker of a usurious note executed and payable in New York and sued on in another state. 51 N.J.L. 186; 12 Wall. 226; 25...