Dexter Sav. Bank v. Friend

• Decision Date: 26 November 1898
• Docket Number: 5,125.
• Citation: 90 F. 703
• Parties: DEXTER SAV. BANK v. FRIEND.
• Court: U.S. District Court — Southern District of Ohio

90 F. 703

DEXTER SAV. BANK v. FRIEND.

No. 5,125.

United States Circuit Court, S.D. Ohio, Western Division.

November 26, 1898

R. D Marshall, for plaintiff.

McMahan & McMahan, for defendant.

THOMPSON District Judge.

A motion was filed to the petition in this case to require the plaintiff (1) to separately state and number its causes of action; (2) to make its petition definite and certain by stating how and wherein it was damaged. Upon the hearing the case was submitted to the court upon the second assignment of the motion.

The petition shows: That in the year 1895 the defendant, J. H Friend, was the president and treasurer of the Friend-Stebbins Manufacturing Company. That it was no part of the business of that company 'to make, execute, or put in circulation promissory notes or obligations other than notes or obligations in its business transactions, and connected with the management of its business affairs; all of which the defendant, J. H. Friend, well knew. ' That the defendant J. H. Friend, without right or authority, and for the accommodation of E. C. Hargrave & Co., executed and delivered to E. C. Hargrave & Co. two promissory notes, of which the following are copies:

$3,000.00 West Carrolton, O., Sept. 6th, 1895.

'Four months after date we promise to pay to the order of E. C Hargrave & Co., three thousand dollars, at First Natl. Bank, Miamisburg, O. Value received. Friend-Stebbins Mfg. Co.,

'No. 186. Due Jan. 6/9/96. By J. H. Friend, Pt. & Treas.'

'$3,500.00 West Carrolton, O., Dec. 2nd. 1895.

'Four months after date we promise to pay to the order of E. C. Hargrave & Co., thirty-five hundred dollars, at First Natl. Bank, Miamisburg, O. Value received. Friend-Stebbins Mfg. Co.,

'No. 218. Due April 2/5/96. By J. H. Friend, Pt. & Treas.'

-- That said notes were not given on account of any business transaction of the Friend-Stebbins Manufacturing Company, nor did it receive any consideration therefor, but that they were given solely for the accommodation of E. C. Hargrave & Co. That the plaintiff purchased these notes before 'without any knowledge of the manner or purposes' for which they were given, believing that they 'were issued in a business transaction, and for the use and benefit of the said Friend-Stebbins Manufacturing Company. ' That said plaintiff paid for said notes $6,368.

The second assignment of the motion is predicated upon the fact that the plaintiff is an innocent holder of the notes, and has a right of action thereon against the Friend-Stebbins Manufacturing Company to recover the amount of the moneys mentioned therein, and that, therefore, in this action, which is one to recover damages against the defendant, Friend, for falsely representing that he had authority to sign and put the notes in circulation, the plaintiff is only entitled to recover nominal damages, unless special damages be assigned and definitely set forth in the petition. This proposition concedes the right of the plaintiff to sue the Friend-Stebbins Manufacturing Company upon the notes to recover the amount thereof, and also to sue the defendant, Friend, for damages for falsely warranting that he had authority to sign and put the notes in circulation. I doubt if this position can be maintained. In my opinion, the plaintiff is either limited to an action against the Friend-Stebbins Manufacturing Company on the notes, or has an election either to sue that company upon the notes, or the defendant, Friend, for damages, and cannot pursue both remedies. If the plaintiff can recover its moneys, with interest, by an action on the notes against the company, it has no claim against the defendant, Friend; and, on the other hand, if the present action can be sustained, and the plaintiff is entitled to be made whole for the moneys expended by it in the purchase of these notes, then it has waived its right of action against the company.

The questions, therefore, for consideration upon this motion are (1) Is the plaintiff limited to an action on the notes against the Friend-Stebbins Manufacturing Company? (2) Or has it an election between an action on the notes against the company and an action against the defendant for damages, for falsely warranting his authority to sign and where there is an absolute want of authority on the part of the agent and cases where the agent has authority, but abuses it. Where the agent has authority, and where negotiable commercial paper is the subject of the transaction, an innocent holder of the paper gets just what he bargained for; but where the agent is without authority the holder gets nothing. Where the agent is without authority, according to some of the cases, the holder has an...