Majority
p. 241William H. Clark v. The Metropolitan Bank. (Before Oaklet, O. J., Campbell and Hoffman, J.J.) March 24; April 15, 1854.
Headnote
When a teller of an incorporated bank or banking association receives in payment a foreign bank note, contrary to the provisions of the act of the Legislature " concerning Foreign Bank Notes, passed 7th May, 1839,” the bank is not liable for the penalty provided by the statute, unless it is proved that the act of the teller was authorized or adopted by its board of directors.A general authority, which may be lawfully executed, is never construed to embrace unlawful acts so as to render the principal answerable in a criminal prosecution or action.
This action was brought to recover a penalty of $1000 for an alleged violation, by the defendants, of the act entitled “ An Act concerning Foreign Bank Notes, passed 'Tth May, 1839.” The first section of the act is as follows:
“ § 1. From and after the passage of this Act, it shall be unlawful for any incorporated banking institution within this State, and for any association, or any individual or individuals,
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authorized to carry on the business of banking by virtue of the Act entitled, ‘An Act to authorize*the business of banking, passed the 18th day of April, 1838,’ to receive, pay out, give, or offer in payment, as money, to circulate or attempt to circulate as money, any bill, note, or other evidence of debt, issued or purporting to have been issued by any corporation, association, or individual, situated or residing without this State, and which bill, note, pr other evidence of debt, shall, upon any part thereof, purport to be payable or redeemable at any place, or by any person, association, or corporation within this State.”
For every offence against these provisions the 4th section imposes a penalty of $1000, to be recovered with costs of suit by any person suing for the same in his own name and for his own use.
The complaint stated that the1 defendants—a banking association only organized under the laws of this State, on the 15th of July, 1851—had received as money in and towards the payment of a certain promissory note then held by them, a bank bill or note issued by a corporation situated without this State, and of which the following is substantially a copy:—■
“M. 1950. A.
“Bank of €harleston.
“ A. Fo. 1150.. Charleston, 8th Feb., 1844.
“ Cashier of the Bank of the State of Few York Pay on xx. demand Twenty Dollars to A. Morss, Junr., or bearer, payable also at this Bank.
“ A. G. Rose, Cashier. H. "W. Conner, Presdt.”
The complaint averred that the Bank of the State of Few York, referred to in the above,, is a Banking Corporation, duly incorporated by the laws of this State, and carrying on business in the City of Few York, and alleged that by means of the premises an action had accrued to'the plaintiff to recover from the defendants the sum of $1000 with costs, and demanded judgment accordingly.
The answer of the defendants denied that the aforesaid bill or note of the Bank of Charleston had been received by them as money, as alleged in the complaint.
p. 243I. The defendants were organized and doing business as an association authorized to carry on the business of banking, under the banking act of April, 1838 ; on the 15th day of July, 1851, they held Byron L. Corss’s note for $320, payable on that day. Their note-teller, on that day, took the $20 Charleston note in question as part payment of the said Corss note. II. The Charleston note was a “ bill” or “ evidence of debt,” “ purporting to have been issued ” by a “ corporation or association,” situated at Charleston, “ without this State,” and, upon its face, purported to be payable by the “ Bank of the State of Hew York,” an “ association or corporation within this State,” and was directly within the words of the statute. (Laws of 1839, chap. 355, § 1.) III. It was “ received” by the Metropolitan Bank “ as money.” V. It was such paper as was contemplated and designed to be prohibited, by the legislature; paper calculated and manifestly designed to pass as a circulating medium.
Upon the trial, which took place before the Chief Justice and a jury in May, 1850, it was proved that on the day mentioned in the complaint, one A. S. James had paid to an officer of the defendants, called the note-teller, the bill of the Bank of Charleston, described in the complaint, and that the same was received by the teller, as cash, in part payment of a promissory note of one B. L. Corss, then held by the Bank for collection ; but it was proved, on the part of the defendants, that the teller had no authority from the directors, president, or cashier of the Bank, to receive the notes of the Bank of Charleston, and that the fact, that they were so received, was unknown to them all.
A verdict was taken for the plaintiff for the sum demanded, subject to the opinion of the Court at General Term.
A. L. Jordan, for the plaintiff, moved for judgment upon the verdict, and relied upon the following points and authorities.
IV. The receipt of it by the defendants from James, on the Corss note, and the surrender or delivery up of the Corss note thereupon (there being no dispute about facts) was, in law, a receipt of it “ in payment;” and not for collection, as set up by the defendants.
p. 244It was of the size, form, and similitude of a bank bill, “ engraved and illuminated as a bank note, and on bank note paper.” It was, in point of fact, circulated and in circulation as money. It was taken by the Metropolitan Bank as money. VI. The note-teller, in taking the Charleston bill in question, was acting within the general scope of his employment, and no direct or express authority to do the particular act was necessary to make the bank liable. (Story on Agency, § 452, and cases there cited.) VH. The offence consists in the “receiving” such bill “as money.” There is no necessity for any proof of any agreement or previous arrangement to do the prohibited act. I. The bill drawn by the Bank of Charleston upon the Bank of the State of Hew York for $20, was not such paper as the banks of this State are prohibited from receiving by the act of 1839. II. The receipt of this draft by the note clerk of the defendants, under the facts proven in the case, did not constitute a receipt of it as money, but as an instrument by means of which the defendants were to obtain payment of its amount in money. It was a bill of exchange drawn upon a bank in this city ; and it was received by the defendants in the same manner as all other checks and drafts, drawn upon banks, which pay their liabilities in this city, were received. It was accepted as all other uncertified bills and cheeks are taken, upon the faith that the drawee will pay in money upon presentation; and upon that expectation and confidence, and not because the paper was money, or was intended to be received as money, the note-teller received it and gave up the note of Oorss. If this confidence that the drawee will pay the draft proves, as it has often proved, to be unfounded, the bank is limited to a claim upon the substituted paper. Although the paper has been received “ in payment,” its character is not changed, nor the motive, or .purpose, with which it was received, by that fact. It was not received as money.
E. Sandford and D. Lord, for the defendants, insisted that
p. 245EU. Had it been received by the note-teller upon a rebate of any fractional part, and for the same purpose for which it was received and used, we presume it would not have been urged that it was received as money. The price paid or allowed for the paper received in payment does not affect its character. Taking or receiving bills for the sole purpose of making a presentation of them to the parties by whom they are payable, and demanding payment in coin, does not constitute a receiving of them as money, whether they be taken at their nominal value or at a discount; when thus taken they are received as the obligations of parties able and willing to pay them in coin on demand, and with the intention of demanding such payment, and not as the representatives of coin, or with an intention to use them as substitutes for it. The transaction complained of in this action was neither within the letter or spirit of the act of 1839. IV. Ho evidence was given on the part of the plaintiff that the defendants aided or assisted in giving any circulation or currency, or had intended to aid or assist in giving any circulation or currency, in any manner, to the draft in question issued by the Bank of Charleston, or any other drafts of a similar character, nor that the defendants had given any currency or circulation to such drafts. On the contrary the proof established that the note-teller of the defendants received the drafts to arrest such circulation by causing them to be redeemed. The Bank of the State of Hew York, to whom he sent them for that purpose, could not re-issue, nor circulate, nor give currency to them. V. Ho proof was given, on the part of the plaintiff, of any authority from the defendants to the note-teller to receive in payment the bills of the Bank of Charleston. VI. The defendants are a corporation. (The People v. Assessors of Watertown, 1 Hill, 616 ; Willoughby v. Comstock, 3 Hill, 389 ; Leavitt v. Blatchford, 3 Comst. 19; Gillett v. Moody, 3 Comst. 479 ; State of Ohio v. Leavitt, Court of Appeals, 1852.) Vn. To render a corporation liable to'a penalty, under this act, it must be proved that the act was expressly authorized or was ratified by the corporation. 1. An action of trespass cannot be maintained against a corporation, for an act done by
p. 246one of its agents, unless the act has been directed or ratified with full knowledge of all the facts by the corporation. (Vanderbilt v. The Richmond Turnpike Co., 2 Comst. 479; The Eastern Counties R. W. Co. v. Broire, 6 Excheq. R. 314, 325 ; Angell & Ames on Corp. 4 ed. § 388 ; Ib. §§ 385, 311; Gordon v. Rolt, 4 Excheq. R. 365-67.) 2. To maintain an indictment against a corporation for a misfeasance it must be proved that the corporation, acting by its majority, committed it. (The Queen v. The Great North of England R. W. Co., 9 Q. B. 315, 327.) 3. No proof was given of any authority from the corporation to Halsey, the note-teller, to receive the draft in question. It was proved to have been without the knowledge of the Board of Directors, President, Cashier, and Assistant-Cashier. (Fleckners v. The Bank of W. S., 8 Wheat. 338 ; Hazleton Coal Co. v. Megargel, 4 Barr. 324, 329; Bank of Pa. v. Reed, 1 Watts & Serg. 101 , 106.) 4. The note-teller was not authorized to receive this draft, drawn by the Bank of Charleston, by virtue of the general authority under which he acted, if receiving it, in payment of notes held by the defendants, was an illegal act. In such case it is not embraced within any general authority conferred by the defendants to receive payment of notes, because such general authority extends only to receiving in payment coin, or representatives of coin, or bills, or checks, as the defendants had lawful authority to receive. A corporation is not responsible for the unauthorized and unlawful acts of its own officers, although done colore officii. (Roe v. The Birkenhead, &c., R. W. Co., 7 Eng. L. & Eq. R. 546, 549; Fox v. Northern Liberties, 3 Watts & Sergt. 103 ; Hazleton Coal Co. v. Megargel, 4 Barr. 324, 29; Lyons v. Martin, 8 Ad. & El. 512, 14, 15.) 5. It is only where the act ordered to be done, or authorized to be executed, necessarily produces injury or violation of law, that the principal can be made liable under an authority to act in relation to a general subject matter, and without having given authority to do the particular act complained of. All the general authority given by the defendants to the note-teller could have been executed without any violation of law. (Peachey v. Rowland, per Maule, J., Eng. L. & Eq. 442, 43, 44; Thayer v. City of Boston, 19 Pick. 511 , 515,15,16 ; Ellis v. The Sheffield Gas Co., 18 Lond.
p. 247Jur. 146, 47.) 6. If it shall be urged that it is the presumption of law that the note-teller did his duty in receiving this bill, it is also legal presumption that the defendants are innocent of any offence against the law, and that the defendants did not instruct the note-teller to violate the law. These presumptions being equal and antagonistical, there is no evidence in the case, except the naked receipt of the bill by the note-teller to send it to the State Bank for, redemption, and in sending it, and causing it to be redeemed accordingly, without any knowledge, or information of either act, on the part of the directors or any other agents of defendants. No legal presumption of the guilt of the defendants arises from these acts of the note-teller. (4 Barr. 329, per Gibson, C. J.; Clayton v. Wardell, 4 Comst. 230, 237; Rex v. Twyning, 2 B. & A. 386; Greensborough v. Underhill, 12 Verm. 604 , 606.) 7. The defendants, through the Board of Directors and officers, intrusted with the direction and supervision of its business, being wholly ignorant of the act of the note-teller in receiving this draft of the Bank of Charleston, and causing it to be redeemed, are not chargeable with the commission of any offence by reason of their having received money from, or a credit with, the Bank of the State of New York, for the amount of the bill, in ignorance of such acts of the note-teller. (Church v. Mansfield, 20 Conn. R. 284-87; Freeman v. Rosher, 13 Q. B. 780, 788; Lewis v. Read, 13 M. & W. 834-37.)
C. O'Conor was heard in reply.
We are all of opinion that upon the facts 'proved upon the trial, the defendants are not chargeable with a violation of the provisions of the Act of 1839, and are, therefore, not liable for the penalty demanded.
It may be admitted that the bill or note of the Bank of Charleston was, in its term and purport, exactly such, as the Act describes, and its reception by the teller an offence against the provisions of the statute; still, unless his offence must, in judgment of law, be imputed to the defendants, this action cannot be maintained; and we are satisfied that such an imputation, in a case like the present, is not warranted by any law
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that we are bound to administer. We are satisfied upon principle, and upon the authorities, that in order to charge the defendants, as an association, with a violation of the statute, subjecting them to the penalty it imposes, it was necessary to be shown that the teller, in receiving the bill of the Bank of Charleston, acted under an authority from the board of directors, or that his act was subsequently made known to and adopted by the board ; and not only was no such evidence given, but it was clearly proved, that there was neither a prior authority, nor a subsequent assent. The counsel for the plaintiff have indeed urged—and upon this argument rested their case—that no such authority or assent was necessary to be proved, since it clearly appears that the teller, in receiving the bill of the Bank of Charleston as a payment, acted within the general scope of his employment and duties. But we think that the argument of the learned counsel was a novel and unwarranted application of the rule, and of the decisions, upon which they relied. It is undoubtedly true, that in many cases a principal is responsible for the act of his agent, which, although an abuse or excess of the authority of the agent, was within the general scope of the business he was employed to transact; but this is only true between the principal and a third person who, believing, and having a right to believe, that the agent was acting within, and not exceeding or abusing, his authority, would sustain a loss, if the act were not considered as that of the principal. It is only true, where the sole question is, by which of two innocent parties a loss resulting from the fraud or misconduct of an agent ought to be borne ? It is plain, however, that no such question arises here. Here, the person who paid the bank bill in question knew that the teller violated his duty in receiving it; for we are just as much bound to impute to him a knowledge of the provisions of the statute as to the teller himself. And the person on whose behalf the bill was presented to the teller, so far from sustaining a loss, derived a benefit from its reception. The case before us, therefore, is not that of an innocent person, not chargeable with notice, actual or constructive, claiming an indemnity for an actual loss, and we repeat that it is to such cases only that the rule, holding the principal to be liable for the misconduct of his agent, has ever
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been applied, or, in our judgment, can reasonably or justly be applied.
Ñor is this all. The reception, by the teller, of the bank bill, which seems to have been used to entrap the defendants into a violation of the statute, and render them liable to its penalties, was not an act within the general scope of his employment, or which those who dealt with him had any right so to consider. His employment and his duty was to receive payment, in money, of the bills and notes placed in his hands as teller. In the discharge of his duty he had no right to receive any thing but money, in the legal sense of the term, and á fortiori, no right to receive that which the Legislature had declared should in no case be considered as money. There is no room, therefore, for a presumption that he had any authority from the defendants to perform an unlawful act, and we hold it to be quite certain that the authority of an agent, however general, if capable of being executed in a lawful manner, is never to be extended by construction to acts prohibited by law, so as to render his innocent principal liable in a criminal action or prosecution, and it is needless to cite authorities to prove that an action for the recovery of a penalty is, in its, nature, a criminal action. It is, emphatically, an action in which, in order to establish the guilt of a defendant, his knowledge and approval of the commission of the act prohibited are necessary to be proved.
The verdict for the plaintiff must be set aside, and a verdict and judgment thereon be entered for the defendants.[1]
* The above was one of sixty suits brought by the same plaintiff against the Metropolitan Bank, for similar causes of action, and which seemed, from the evidence upon the trial, to be the result of a conspiracy to break down the institution.