New Georgia Nat. Bank of Albany v. Lippmann

• Decision Date: 20 November 1928
• Citation: 164 N.E. 108,249 N.Y. 307
• Parties: NEW GEORGIA NAT. BANK OF ALBANY, GA., v. J. & G. LIPPMANN et al.
• Court: New York Court of Appeals Court of Appeals

249 N.Y. 307

164 N.E. 108

NEW GEORGIA NAT. BANK OF ALBANY, GA.,

v.J. & G. LIPPMANN et al.

Court of Appeals of New York.

Nov. 20, 1928.

Action by the New Georgia National Bank of Albany, Ga., against J. & G. Lippmann, impleaded with L. J. Lippmann, individually. From an order of the Appellate Division, First Department (222 App. Div. 383, 226 N. Y. S. 233), affirming by a divided court an order by the Special Term denying a motion to dismiss the complaint, L. J. Lippmann appeals by permission. The Appellate Division certified the question, ‘Does the complaint herein state facts sufficient to constitute a cause of action against the individual defendant, L. J. Lippmann?’

Order affirmed, and certified question answered.

Appeal from Supreme Court, Appellate Division, First department.

Morris Ebenstein, Stanleigh P. Friedman, David Schenker, and Joseph H. Hazen, all of New York City, for appellant.

N. F. George, H. E. Riddell and John G. McGovern, all of New York City, for respondent.

CARDOZO, C. J.

Plaintiff, a national bank, is the owner through indorsement of a promissory note signed ‘J. & G. Lippmann, L. J. Lippmann, Pres.’ It asks for judgment in the alternative (Civ. Prac. Act, § 213) against the corporation, the maker of the note, or against the president personally if, in signing the note in behalf of the corporation, he acted without authority. We are to determine whether a cause of action is stated against the individual defendant.

At common law, the remedy against an agent signing a note without authority was not upon the note itself, but for breach of an implied warranty. White v. Madison, 26 N. Y. 117. The question is whether the remedy has been enlarged by section 39 of the Negotiable Instruments Law of New York (Consol. Laws, c. 38), section 20 of the Uniform Negotiable Instruments Law, which provides as follows: ‘Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability.’

The draftsman of the statute, Mr. Crawford, holds the view that the effect of this provision is to make an agent liable on the instrument if he has signed without authority. Crawford's Annotated Negotiable Instruments Law (4th Ed.) p. 52. A like view has been expressed by the commissioners on uniform laws, Mr. Eaton, Judge Brewster, and Mr. McKeehan, defending the rule against an assault upon its policy (Brannon's Negotiable Instruments Law [4th Ed.] p. 163; Eaton, The Negotiable Instruments Law, 2 Mich. Law Rev. 260, 265, 272, 273; Brewster, A Defense of the Negotiable Instruments Law, 10 Yale L. J. 84, 90; Brewster, The Negotiable Instr. L., 15 Harv. L. Rev. 26, 27, 28; McKeehan, The Negotiable Instruments Law, 41 Am. Law Reg. [N. S.] 437, 462), and by commentators of great distinction dissenting in some instances as to policy, but concurring as to meaning (Ames, The Negotiable Instruments Law, 14 Harv. L. Rev. 241, 247; 16 Harv. L. Rev. 255, 256; Williston, Contracts, vol. 2, p. 2122; Chafee, Brannon's Neg. Instr. Law, supra). There are decisions and dicta to the same effect, Pain v. Holtcamp (C. C. A.) 10 F. (2d) 443, 444;Ryan v. Hebert, 46 R. I. 47, 124 A. 657;Austin, Nichols & Co. v. Gross, 98 Conn. 782, 120 A. 596;Schwab v. Getty, 145 Wash. 66, 258 P. 1035,34 A. L. R. 1382;Jump v. Sparling, 218 Mass. 324, 326, 105 N. E. 878; though there are others to the contrary, Southern Supply Co. v. Mathias, 147 Md. 256, 128 A. 66;Haupt v. Vint, 68 W. Va. 657, 70 S. E. 702,34 L. R. A. (N. S.) 518. The subject has not before been considered in this court.

We think the proviso that the agent or representative shall not be liable on the instrument ‘if he was duly authorized’ to sign, carries with it a fair implication that he shall be so liable if not authorized. The proviso does not appear in the corresponding section of the British Bills of Exchange Act. It was inserted after debate and reflection (Eaton, Brewster, McKeehan, supra), and was meant to accomplish something. We think the end in view was nothing less than we have stated. Before the statute was adopted, all manner of subtle distinctions had to be drawn before one could say where liability would rest (Brannon, supra; Mechem, Agency, vol. 1, §§ 1122, 1123). Many forms of signature indicating an intention to sign as agent for a designated principal were held to charge the agent personally. The hardship was mitigated by resort to extrinsic evidence when the controversy was one between the original parties to the paper, but not when the paper was in the hands of a holder in due course. Thus, a note bearing the name of a corporation in the margin, but signed by the president and treasurer in their own names with the addition of their official titles, and thereafter discounted by a bank without notice dehors the instrument, was in law their individual promise. Casco Nat. Bank of Portland v. Clark, 139 N. Y. 307, 34 N. E. 908,36 Am. St. Rep. 705;Merchants' Nat. Bank of Gardner v. Clark, 139 N. Y. 314, 34 N. E. 910,36 Am. St. Rep. 710;First Nat. Bank of Brooklyn v. Wallis, 150 N. Y. 455, 44 N. E. 1038. Many decisions to the like effect are collated in the text-books, see, e. g., Brannon's Negot. Instr. Law [4th Ed.] by Prof. Chafee, note to section 20, Mechem, supra. Slight variations of form led to variant conclusions. See, e. g., Barker v. Mechanic Fire Ins. Co., 3 Wend. 94, 20 Am. Dec. 664;Miller v. Roach, 150 Mass. 140, 22 N. E. 634,6 L. R. A. 71; Mechem, § 1124. The refinement of distinction was mystifying even to the courts. It must have been more mystifying to business men in the quick transactions of the market.

The statute, as we read it, sweeps these subtleties away. Whenever the form of the paper is such as fairly to indicate to the eye of common sense that the maker signs as agent or in a representative capacity, he is relieved of personal liability if duly authorized. Jump v. Sparling, 218 Mass. 324, 326, 105 N. E. 878;Consumers' Twine & Machinery Co. v. Mt. Pleasant Thermo Tank Co., 196 Iowa, 64, 194 N. W. 290;Austin, Nichols & Co. v. Gross, 98 Conn. 782, 120 A. 596. But along with this relief there goes a new burden, the corrective of an exemption too broad if unrestrained. By hypothesis the signer has not meant to contract as an individual. Accordingly, there was need to make provision for the case where the agent or representative, though indicating an intention to contract otherwise than personally, had acted without authority. For this the proviso was inserted. As the price, so to speak, of relief from liability when authority exists, there is to be liability on the instrument when authority fails. Unless this was meant, the interjection of the proviso becomes an irrelevant futility. It will not do to say with the defendant that the agent is to be liable on the instrument in those cases and those only where the indication of his intention is so ambiguous that he would have been personally bound if the law had not been changed. The statute does not distinguish between cases where he has indicated his intention unmistakably and those where he has done so more obscurely, if only what he has done is sufficient to disclose his meaning fairly. Some courts were able to discover ambiguity in a form of signature as unequivocal as the one before us here. McCandless v. Belle Plaine Canning Co., 78 Iowa, 161, 42 N. W. 635,4 L. R. A. 396, 16 Am. St. Rep. 429;Palmer v. Stephens, 1 Denio, 471. To make the rule dependent upon mere degrees of emphasis would be to keep alive the old distinctions with all their mystifying subtleties. The instrument has the same meaning whether there is authority or none. In form it is still by hypothesis the promise of the principal. Liability is imposed upon the agent, not in aid of his intention, for by hypothesis intention to the contrary has been adequately revealed. Liability exists as a duty imposed by law.

An able argument has been made to us for a narrower reading of the statute. We do not underrate its force. A choice is...