New York Iron Mine v. Citizens' Bank
| Decision Date | 13 October 1880 |
| Citation | 6 N.W. 823,44 Mich. 344 |
| Parties | NEW YORK IRON MINE v. CITIZENS' BANK. |
| Court | Michigan Supreme Court |
An authority in an agent to draw sight or time drafts in the name of his principal does not include an authority to draw post-dated drafts. A general agent and stockholder in charge of a mine in Michigan had general authority to draw sight and time drafts in the name of the company upon its treasurer in New York. He drew a post-dated draft, and discounted the same, giving at the same time a collateral draft for the same amount, to be used only in case he should die before the post-dated one came due. There was then no occasion for post-dating drafts for the business of the mine, though drafts of that kind had been drawn, used, and assented to some eight years previous, when the mine was in a less prosperous condition. Held, that post-dating, under the circumstances, was a circumstance sufficient to put the bank discounting the paper on special inquiry as to authority to so draw the same.
Error to Marquette.
W.P. Healy and A.B. Maynard, for plaintiff in error.
Dan H Ball and Ashley Pond, for defendant in error.
The Citizens' Bank is a corporation doing business at Marquette, Michigan, and was organized for that purpose in May, 1871. The New York Iron Mine is a corporation, organized under the Laws of Michigan in or about the year 1865, for carrying on mining operations near Marquette, but having the business office of its president secretary and treasurer in the city of New York. In the circuit court the bank sued the mine to recover the amount of the following bill:
The defendant pleaded the general issue, and filed an affidavit denying the execution of the bill. This plea and denial imposed on the plaintiff the necessity of proving that the draft was drawn by Wetmore with competent authority. The evidence which was given for this purpose is set forth in the bill of exceptions. It appears from this that at the organization of the defendant corporation Samuel J. Tilden and William L. Wetmore were the principal stockholders, and after a time, perhaps, the sole stockholders; that Tilden was president and also acted as treasurer, and Wetmore was general agent and manager at the mine; that the directors, besides Tilden, were men in his employ, and the board met but seldom, and the management of financial matters at New York was left exclusively to Mr. Tilden; that Wetmore while acting as general agent for the mine, was also operating on his own account in company with a brother under the firm name of Wetmore & Bro., and also as a proprietor in the Bay and Munising Furnace Companies. As the sales of products of the New York Iron Mine were made under Mr. Tilden's direction, and the moneys received went into his hands at New York, the means of carrying on mining operations were obtained by Wetmore by means of drafts drawn by himself on Mr. Tilden, which were either discounted at Marquette or Negaunee or sent forward for collection. At first these seem to have been principally time drafts, but the mine proved to be very profitable, and after 1872 the drafts were generally at sight. In 1869 four post-dated drafts were drawn by Wetmore, the first of which was drawn seven days before its date, the second four days, the third five days, and the fourth nine days. In each instance Mr. Tilden was advised of the drawing by letter on the day the drafts were made, and it does not appear that any objection was made by him, to their being post-dated. The first and fourth were drawn in January and December.
It was shown by Wetmore and not questioned by any one that the draft in suit together with a large amount of other papers was drawn by Wetmore for his own purposes without the knowledge of Mr. Tilden. The circumstances under which it was taken by the bank are shown by the testimony of Mr. Steele, the cashier of the bank. It appears by his evidence that the following post-dated drafts purporting to be sight drafts, were drawn by Mr. Wetmore and discounted at the bank: One for $5,000, dated May 6, 1876, discounted April 29th; one for same amount dated August 5, 1876, discounted July 15th; one for same amount dated November 2, 1876, discounted October 23d; one for same amount dated December 4, 1876, discounted November 8th; one for same amount dated February 8, 1877, discounted January 6th; one for same amount dated March 3, 1877, discounted February 9th; one for same amount dated May 12, 1877, discounted April 9th. All these when their respective dates arrived were forwarded to New York and were paid. There is no evidence that Mr. Tilden knew before paying them that any one of them was a post-dated draft, and he testified that he never did. Wetmore also drew and the bank discounted for him May 23, 1877, a draft post-dated June 3d. This was not forwarded, but was taken up by Wetmore June 7th, by another draft post-dated July 3d, which the cashier was requested not to forward. The reason assigned by Wetmore for thus taking it up was that he had had a fire at the Bay Furnace location, which demanded all his attention for the time, and he could not then make up his New York accounts. The draft in suit was discounted by the bank June 16, 1877, post-dated July 5th. With this was given a draft dated June 16, 1877, payable July 8th, for a like amount, which was considered as collateral. The giving of the collateral draft appears to have been at Wetmore's suggestion, on a supposition, as he explains it, that if he were to die before the date of the principal draft arrived, it would become invalid. Similar collateral time drafts had been given in other cases where post-dated drafts had been discounted.
In all cases but one in which Wetmore obtained discounts at the bank, on paper purporting to be that of the New York Iron Mine, the money was paid or credited by the bank to him. The exception was of the draft in suit the proceeds of which, by Wetmore's direction, were credited to the mine, but were almost immediately drawn out on his checks. It was shown that a portion of the proceeds was paid out on the pay roll of the mine, but Wetmore, who was a witness for the plaintiff, admitted that this was in place of money belonging to the mine which he had used for his own purposes. The mine never had any other account with this bank.
The cashier of the bank testified that while discounting post-dated paper he did not regard it as suspicious: that discounting such paper was common with the banks in that part of the country. He was asked how it was elsewhere, but was not permitted to answer. He also testified that he did not look upon it as suspicious that he was requested not to forward the post-dated paper.
Immediately on the bill in suit being discounted Wetmore started for New York, where he had an interview with the secretary of the mine and with Mr. Tilden. To them he presented a statement of paper issued improperly by him in the name of the New York Iron Mine, and which he endeavored to induce them to assume for the corporation. The amount was $63,932.84, of which he had charged to himself $49,005.14 on the corporate books. Previous to going there he had counselled with a leading lawyer at Marquette, and been assured that he was not liable criminally for these issues, but he did not in New York attempt to justify or excuse his conduct. Mr. Tilden refused to recognize the paper in any way, and denied the liability of the corporation upon it. Included in the statement was the draft in suit, and the one dated July 3d, and also two notes of $5,000 each discounted by the same bank.
The foregoing is a very brief and much condensed statement of the principal facts upon which the legal questions depend. The evidence leaves upon our minds no doubt upon the following points. Mr. Wetmore from the first had ample authority to draw bills in the name of the New York Iron Mine on Mr. Tilden, who acted as its treasurer, either at sight or on time, as the wants or convenience of the corporation should dictate, or as its circumstances should appear to render most desirable. But he had no express authority to execute for the corporation negotiable paper of any other description for the purposes of discount. If Wetmore had implied authority to give post-dated bills, it must be either because he had drawn several such bills in 1869 which had been paid without protest with full knowledge, or because, as it was contended on behalf of defendant in error, a post-dated bill purporting to be payable at sight, is the same in legal effect with a bill dated when drawn and payable at a future day, so that authority to draw the one includes authority to draw the other also.
Of the fact that the bills which Wetmore drew in 1876 and 1877 were post-dated, Mr. Tilden and the other corporate officers in New York had no knowledge, and it was not intended by Wetmore that they should have. There was no corporate necessity or corporate reason for drawing them in that form, and it was done improperly for the benefit of Wetmore, and with the intent that when the bill reached New York it should be supposed they were just drawn. None of the bills were sent forward by the bank for acceptance, and the circumstances suggest the inference that there was at least an implied understanding between the bank and Wetmore that the parties in New York would not be notified that the paper was post-dated. Both the cashier and Wetmore testify to the request of the latter that the draft of July 3d should be...
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