Jacobus v. Jamestown Mantel Co.

• Decision Date: 21 April 1914
• Citation: 211 N.Y. 154,105 N.E. 210
• Parties: JACOBUS v. JAMESTOWN MANTEL CO.
• Court: New York Court of Appeals Court of Appeals

211 N.Y. 154

105 N.E. 210

JACOBUS

v.JAMESTOWN MANTEL CO.

Court of Appeals of New York.

April 21, 1914.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by Warren Jacobus against the Jamestown Mantel Company. From a judgment of the Appellate Division (149 App. Div. 356,134 N. Y. Supp. 418), affirming a judgment for defendant, plaintiff appeals. Affirmed.

Yorke Allen, of New York City, for appellant.

August Becker, of Buffalo, for respondent.

CHASE, J.

This action is brought on a promissory note, of which the following is a copy: ‘$2,500.00. New York, Oct. 8, 1909. Six months after date we promise to pay to the order of ourselves, Two thousand five hundred & 00/100 dollars at Newton Trust Co., Newton, N. J., value received. Jamestown Mantel Co. Geo. M. Turner, Treas.’ Said note was indorsed ‘Jamestown Mantel Co., Geo. M. Turner, Treas.,’ and it was thereafter delivered to and discounted by the Newton Trust Company, the assignor of the plaintiff. It is the last one of a series of like notes, the original of which was given in August, 1907. At the times herein mentioned the trust company had an investment committee consisting of Hough, its president, Searing, its vice president, and George, a director. Searing and George were partners doing business in New York City. In August, 1907, Searing was the president of the Delaware & Eastern Railroad Company. One Welch, an attorney at law, had done business as such for said railroad company and for Searing individually. Welch asserted that the railroad company and Searing owed him considerable money for services; he told Searing that he needed money for his immediate use, and Searing said to him that the company was not in a position to pay him at that time, but that if he would borrow a note from somebody for a short time, he, Searing, would have it discounted at one of his trust companies. Welch went to Turner and told him that he wanted to borrow a note of the Jamestown Mantel Company for $2,500 to have it discounted, and that if he, Turner, would furnish him with such a note he would take care of it when it was due. Turner in the name of the mantel company, and in the form shown, made and indorsed a note for $2,500, and gave it to Welch. Welch delivered it to Searing, who sent it to the trust company, and received in return for it a draft of $2,425, being the amount of the note less the discount thereon. Searing retained the proceeds of the draft and told Welch that his trust companies were not in funds to discount the note. Before the note became due, however, Searing told Welch that the note had been actually discounted, and that he had used the money. It was thereafter renewed from time to time until the note now in suit became due, when further renewals were refused by the mantel company, and it also refused to pay the note. The defendant was in no way directly or indirectly interested in the transaction. The note was given in its name wholly without authority. If Searing was acting for and on behalf of the trust company, it is of course chargeable with his knowledge that the note was borrowed for discount to accommodate Welch and Searing, and the defendant is not liable thereon. If he was not acting for and on behalf of the trust company, then he was acting independently of it, and the trust company is in no way chargeable with his knowledge or information.

[1] The first question for consideration on this appeal is whether the knowledge of Searing, under the circumstances disclosed, is attributable to the trust company. We think not. Searing conceived the idea of obtaining money from the trust company on a note to be borrowed for the purpose, and he was the one actively engaged in carrying out the plan. In carrying it out he was reckless of the consequences to the trust company. In all the transaction he acted for himself individually or in his capacity as president of the Delaware & Eastern Railroad Company. There was no meeting of the investment committee of the trust company, and no action thereon by it as a committee. Searing acted at his place of business, and not at the place of business of the trust company, and wholly independent of his official relation to it. His knowledge was intentionally concealed from the trust company with the fraudulent purpose, probably formed at the time the note was first suggested, of retaining the proceeds thereof for himself. If we admit that the evidence is insufficient to justify the conclusion that Searing intended to keep the proceeds of the note for his personal use when he first suggested to Welch that he borrow a note to be discounted, it must at least be conceded that he either intended at that time to obtain the money for his personal use, or to use it for the benefit of the corporation of which he was president. Searing is a lawyer, and he must have known that the note, being entirely apart from the business of the corporation, was not a binding obligation upon it. In any event the concealment of his knowledge from the trust company was necessary to enable him to obtain from it the proceeds of a note which be knew had been executed without authority, and which would at least be of doubtful value in the hands of the trust company. The trust company should not be held cognizant of his knowledge. Brooklyn Distilling Co. v. Standard Dis. & Dist. Co., 193 N. Y. 551, 86 N. E. 564.

[2][3][4][5] There are other objections to the plaintiff's recovery upon the note that are fatal to his contention. The defendant is a domestic manufacturing corporation. A corporation is an artificial entity, having only such powers as are given to it by law, and such implied powers as are necessary to the exercise of the powers expressly given to it. The defendant was organized to ‘munufacture wood mantels, interior finish, bank, office and bar fixtures and generally to carry on any manufacturing business which can conveniently be carried on in conjunction with any of the matters aforesaid.’ The treasurer of the defendant corporation had no express authority by its by-laws or otherwise to sign or indorse a promissory note. The president of the trust company had never had a transaction with the defendant corporation, and did not know its treasurer. He does not remember that Searing said anything to him whatever at the time the note was sent to him for discount. It was taken by him on behalf of the trust company without inquiry...