Savings-Bank v. St. Louis Stoneware Co.

• Decision Date: 26 June 1877
• Citation: 4 Mo.App. 276
• Parties: LAFAYETTE SAVINGS-BANK, Appellant, v. ST. LOUIS STONEWARE COMPANY, Respondent.
• Court: Missouri Court of Appeals

4 Mo.App. 276

LAFAYETTE SAVINGS-BANK, Appellant,

v.ST. LOUIS STONEWARE COMPANY, Respondent.

St. Louis Court of Appeals, Missouri.

Jun. 26, 1877.

1. The title to negotiable paper cannot be defeated by proof of negligence or want of diligence in enquiring into the title or the equities between the parties thereto. Nothing but fraud will defeat the title thereto.

2. The legal presumption as to an endorsement on negotiable paper is that it was for value, and for a proper purpose; and where such endorsement purports to be the act of a corporation, through its proper officer, one taking negotiable paper so endorsed, for value, before maturity, is not bound to enquire whether the endorsement was made in the regular course of the business of the corporation, or was for the accommodation of the officer, or was without consideration.

3. The purchaser for value, before maturity, of negotiable paper endorsed by a corporation, cannot be charged with such notice as will defeat his title, by showing circumstances which might excite strong suspicions in the mind of a prudent man that the paper was endorsed for the accommodation of another, and not in the regular course of the business of the corporation, but positive knowledge must be shown.

APPEAL from St. Louis Circuit Court.

Reversed and remanded.

DRYDEN & DRYDEN, for appellant: Corporations, where not restrained by their charters, may adopt all reasonable modes in the execution of their business that a natural person may adopt in the doing of like business. Hence they may adopt, as a mode of borrowing money for their own use, the practice of endorsing and discounting negotiable paper made by some one else for accommodation. The limit on their power is in the endorsing of paper for the accommodation of others.-- Hening v. United States Ins. Co., 47 Mo. 432; Ang. & Ames on Corp., sec. 257; Hart v. Missouri Mual Ins. Co., 21 Mo. 91; Blunt v. Walker, 11 Wis. 334. Although it may be beyond the power of a corporation to make negotiable paper for the accommodation of others, yet it will be bound by the acts of its agent assuming to make such paper for accommodation, when the paper, on its face, is such as the corporation and the agent has the power to make, and its only defect consists in an extrinsic fact, such as the purpose for which it is made, and when the holder takes it for value without notice of such purpose.--1 Pars. on Notes & Bills, 1st ed., 165; Ang. & Ames on Corp., 10th ed., 268, 257, and note a; Farmers and Mechanics' Bank v. Butchers and Drovers' Bank, 14 N. Y. 623; s. c., 16 N. Y. 128; Wilmuth v. Crawford, 10 Wend. 343; McIntyre v. Preston, 10 Ill. 62; Allegheny City v. McClurken, 14 Pa. St. 83: Bird v. Daggett, 97 Mass. 496; Mon. National Bank v. Globe Works, 101 Mass. 57; North River Bank v. Aymar, 3 Hill, 202; Genesee Bank v. Patchin Bank, 13 N. Y. 309; s. c., 19 N. Y. 312; Griswold v. Haven, 25 N. Y. 595; New York & New Haven R. Co. v. Schuyler et al., 34 N. Y. 30; Westfield Bank v. Cowen, 37 N. Y. 320; Smith v. Clark County, 54 Mo. 77; Lexington v. Butler, 14 Wall. 292. It is not enough, to charge the purchaser of negotiable paper before maturity, endorsed by a corporation, with notice that the endorsement was for accommodation, to show circumstances sufficient to put him on enquiry.-- Hamilton v. Marks, 63 Mo. 167; Lafayette Savings-Bank v. St. Louis Stoneware Co., 2 Mo. App. 299; Franklin Savings-Institution v. Heinsman, 1 Mo. App. 336.

GEORGE DENISON, for respondent: To charge the plaintiff with notice that the note was endorsed for accommodation, it was enough that circumstances sufficient to put it on enquiry existed.-- Hamilton v. Marks, 52 Mo. 78; Claflin v. Farmers' Bank, 25 N. Y. 293. An accommodation endorsement cannot be made by a corporation, the officers having no authority to bind the corporation for the benefit of a third party.-- Morford v. Farmers' Bank, 26 Barb. 568; Hall v. Auburn Turnpike Co., 27 Cal. 257; Bank of Genesee v. Patchin Bank, 13 N. Y. 309.

BAKEWELL, J., delivered the opinion of the court.

This is an action against respondent as endorser of a negotiable promissory note for $1,300, dated September 18, 1873, at sixty days, payable to the order of respondent. The note is endorsed, “E. T. Merrick, Treas., Merrick & Stickney.” The plaintiff dismissed as to Thompson & Co., the makers of the note, and there was a default as to Merrick & Stickney, the last endorsers. The answer of defendant, the St. Louis Stoneware Company, was verified by their secretary, and denied all the allegations of the petition, which were those usual in a suit by the holder before maturity of negotiable paper, for value, against the maker and endorsers; and specially set up that the note was made by Thompson & Co. for the sole accommodation of Merrick & Stickney, in a matter outside of respondent's business; that Merrick & Stickney presented it for discount on their own account, and that it was discounted by appellant for the sole account of Merrick & Stickney, and the proceeds placed by appellant to their credit; that respondent had no benefit from the note, and no interest in the proceeds of the discount, and that appellant knew this at the time. This new matter was denied by the reply.

It appeared from the evidence that respondent was incorporated, under the general law of this State, as a business corporation, and to carry on the manufacture and sale of stoneware and pottery, with a capital stock of $100,000, owned, at the time the note sued on was made, by Merrick & Stickney, as to most of the shares; one hundredth part of the shares being owned by Blackmer, the secretary of the company and also its book-keeper. Merrick was treasurer and Stickney president of the corporation, and they acted in these capacities when the note was made, and for years before that. Merrick & Stickney were also partners as brokers and dealers in land-warrants, and had the chief management of the affairs of respondent, and were the custodians of all its money, notes, and bills. The company kept no bank account, but, for convenience sake, turned over its notes, bills, and cash to Merrick & Stickney, who kept a running account with it, and deposited all cash of the company, whether received from notes or other sources, with different St. Louis banks, in their own name. Merrick & Stickney thus became recognized in business circles and by the banks as the financial agents of respondent, and were looked upon, in money matters, as being, in effect, the St. Louis Stoneware Company. For several years before the date of this note, with the knowledge and consent of the directors of respondent, Merrick, as its treasurer, had been in the habit of endorsing notes and bills made to the corporation, either for goods sold, or as accommodation paper. These endorsements were in the same form as the endorsement in the present case; and on notes so endorsed, both business and accommodation paper, Merrick & Stickney constantly raised money by discounts in the banks with which their accounts were kept; and, placing the money to their credit in such banks, drew upon these funds alike for their own needs and those of the corporation. Of all these facts appellant, which is a banking corporation, had notice for years before discounting the note in suit. Merrick & Stickney kept an account with appellant for a considerable period of time.

Thompson & Co., the makers of the note sued on, were in the same business with respondent, and many notes passed between them, of which several to respondent's order, made by Thompson & Co., and endorsed as in the present case, had been discounted, both by appellant and by other banks, for the account of Merrick & Stickney, before the transaction in controversy. These notes were paid at maturity without question. The note in suit was made to renew a note precisely similar, except that it was dated in July; and...