The Am. Nat'l Bank Of Bluefield v. Eitz.
| Decision Date | 27 February 1912 |
| Citation | 70 W.Va. 409 |
| Parties | The American National Bank of Bluefield v. Eitz. |
| Court | West Virginia Supreme Court |
Banks and Banking Functions and Dealing aRepresentation l)y OfficerNotice.
Knowledge by one of the officials of a bank, acquired in a capacity other than as its representative, relating to infirmity in commercial paper offered for discount, is not notice to the bank when that official is also an officer of the corporation seeking the discount and has an interest in the transaction so adverse to the bank that the reasonable presumption is that he would not communicate the knowledge to it.
(Bkaxnox, President, absent.)
Error to Circuit Court, Mercer County.
Harold A. Eitz. From a judgment for defendant, plaintiff
brings error.
° Reversed and New Trial Awarded,
Sanders & Crockett, for plaintiff in error.
A. W. Reynolds, D. E. French, John M. McGralh and Russell S. Ritz, for defendant in error.
By this action in debt, the plaintiff bank seeks to recover from defendant the amount of two negotiable notes which he endorsed. The notes were made by the Southern West Virginia Fuel Company, and were discounted by the plaintiff for the benefit of that company.
Fowler, at whose request defendant endorsed, was president of the fuel company, and also president of the bank a director in both corporations. Defendant also was a director in both corporations.
Defendant filed a special plea in which he avers, substantially, that he was merely an accomodation endorser of the notes at the request of Fowler as president of the fuel company; that F'owler represented to him that the company was sorely in need of funds and money must be raised for its use by discounting notes; that he signed the notes with a distinct agreement between himself and Fowler that the other directors of the company would endorse them before they were discounted; that it was also agreed that the notes should not be used until a writing was signed by all the endorsers stipulating that the directors of the company as endorsers were liable only in proportion to their stock; that such a writing was prepared by defendant and was signed by him, Fowler and Shands; that Fowtler was to obtain the signatures of the other directors to this writing as well as to the notes; that, notwithstanding these agreements, Fowler had the notes discounted at the bank, endorsed only by himself, the defendant and Shands, without the endorsement of the four other directors and without securing these others to sign the writing relating to the extent of liability; and that, at the time the notes were discounted, the bank had notice of these agreements in the premises and was therefore advised of the infirmity of the paper in relation to defendant when it became the holder of the same.
A trial by jury resulted in a verdict and judgment for defendant. Plaintiff, by writ of error, comes seeking a reversal.
Defendant rests his case on the assertion that the bank had notice of the infirmity in the paper through the knowledge of Fowler, its president and managing officer. That knowledge, it will be observed, Fowler obtained as an officer of the fuel company. It did not come to him as an officer of the bank.
An instruction was given on behalf of defendant over the objection of plaintiff. It is as follows: "The court instructs the jury that if they believe from the evidence in this case that William E. Fowler was President of the American National Bank, the plaintiff in this case, and that he agreed with the defendant that the notes sued on in this case, or the notes for which said notes, or either of them, is a renewal, should not be discounted at said bank until they had been endorsed by William E. Fowler, William Shands, J. Lee Harne, S. M. Smith, W. P. Hawley, F. L. Black and the defendant, Directors of the Southern West Virginia Fuel Company, and that said notes should not be discounted at said Bank until the written agreement introduced in evidence in this case had been signed by all of said directors of the Southern West Virginia Fuel Company, and if the jury further believe from the evidence in this case that the said William E. Fowler violated the said agreement with the defendant by causing the said notes to be discounted and the amount thereof placed to the credit of the said Southern West Virginia Fuel Company without the endorsements of all the persons aforesaid and without all of said persons having signed the said contract in accordance with the said agreement, then the jury shall find for the defendant." Plainly, this instruction assumes that the knowledge which Fowler had of the agreement that the notes were not to be delivered until the proposed endorsements and signatures were obtained was notice to the bank of which he was president. Was the trial court justified in thus virtually assuming as matter of law that notice to Fowler was notice to the bank?
It does not appear that the exclusive management of the bank had been committed to Fowler. No resolution of the directors or long existing custom' held out to the public establishes that he had the power to act absolutely in behalf of the bank. It is not shown that he alone was the bank, so that there could be no other channel of notice to it. On the other hand it appears that the bank had a full board of directors. It is not proved that they were so derelict in their duties that those duties necessarily passed to Fowler. We must assume that they were managing the bank as the law required them, to do, since it does not appear that they were not. Besides, the bank had an active cashier, who was also a director. We must assume that he exercised his powers as a director and as the cashier. The identity of Fowler and the bank were not the same. He was not the bank he was merely one of its agents. So there were others entitled to information in the affairs of the bank. There were other officers to whom it was Fowder's duty to communicate knowledge received by him affecting the bank, and to whom it must ordinarily be presumed he would communicate such knowledge. They had the power to disapprove his acts.
The general rule that knowledge or notice on the part of the agent is notice to the principal is based on the duty of the agent to communicate all material information to his principal and the presumption that he has done so. In short,...
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