Sedgwick v. National Bank , 295 Mo. 230 ( 1922 )

Plaintiff testified he said to Walker, "I will expect you people to furnish me paper out of your files if it is good and all right. Something you folks can stand back of and gilt edge." He said they thought they could.

Plaintiff later purchased several notes, some of which were indorsed by the bank, the others by Walker who was indorsee thereof. There was no request for the bank's indorsement. Walker told him at the time they had done business for the party for years and handled his notes, and that he had gone down there personally and had seen the cattle described in the mortgage. The inevitable conclusion from plaintiff's evidence and his conduct is that he relied upon the several indorsements; they constituted the contracts. If he understood he was getting notes the bank was "standing back of," the most natural thing would have been to have required the bank's indorsement. Some of the notes were indorsed by the bank. Why did not plaintiff ask its indorsements also on the other notes? He had the clear right to have them so indorsed if he was purchasing them from the bank, but he did not even ask for its indorsement. I do not find any substantial evidence that plaintiff bought or understood he was buying these last-mentioned notes from the bank. On the contrary, plaintiff's own evidence shows they were Walker's notes and he bought them from Walker.

Nor is there any evidence tending to prove fraud on Walker's part in this transaction; none tending to prove that he did not believe the notes were well secured at the time he acquired and negotiated them to plaintiff. The strong probability is that the loss resulted from general decline in values. In an action for damages for fraud and deceit the rule is there can be no recovery without proof that the representations were false and fraudulent. [Stonemets v. Head, 248 Mo. 243, 268; Bragg v. Packing Co.,205 Mo. App. 600, 608.]

It is true that plaintiff and Walker were not on an equal footing. Williams and the mortgaged cattle were in a distant state. In such case representations as to value are not regarded as expressions of opinion but of fact. But this is not an action for breach of warranty; hence this phase of the matter is not involved in this action.

What is said in paragraph 3 of the learned Commissioner's opinion is predicated upon the previous conclusion that Walker, and not the bank, sold the notes found to have been Walker's notes. If, however, the bank, through its president, had sold the notes, and plaintiff had been induced to buy them by false and fraudulent representations as to the credit and financial standing of Williams, then I do not understand the opinion to hold that the case would fall within Section 2172, Revised Statutes 1919. [Knight v. Rawlings, 205 Mo. 412, 104 S.W. 38; McKee v. Rudd, 222 Mo. 344, 367, 121 S.W. 312.]

But I do not agree that Walker could obligate the bank for the payment of these notes by any mere representations as to the credit or financial standing of Williams.

Our statute has limited the power of the officers of a bank to assume or impose obligations upon the bank in connection with the sale or transfer of its paper.

In Taylor v. Fuqua, 203 Mo. App. 581, the St. Louis Court of Appeals considered the power of the cashier of a bank to sell its paper without previous authorization by the board of directors. The opinion refers to the amendment of Section 1112, Revised Statutes 1909, by the Act of 1915, striking out the words "sell" and "selling," so that said section, now Section 11762, Revised Statutes 1919, in that respect now reads:

"The cashier or any other officer or employee shall have no power to indorse, pledge or hypothecate any notes, bonds or other obligations received by said corporation for money loaned until such power and authority shall have been given such cashier or other officer or employee by the board of directors. . . . And all acts of indorsing, pledging and hypothecating done by said cashier, or other officer or employee of said bank, without authority from the board of directors, shall be null and void."

At page 587, the learned court said:

"This section, therefore, as it now stands, deprives a cashier merely of the power to indorse, pledge or hypothecate notes, etc., received by the bank for money loaned, without antecedent authority conferred by the board of directors; making any such act void. It does not purport to deprive the cashier of all power to sell notes or other obligations of which the bank may have title, in the ordinary course of business."

The statute having thus restricted the power of a cashier or president or other employee of a bank to indorse, pledge or hypothecate the bank's paper, it would seem that by necessary implication the statute also denies him authority to bind the bank for the payment of paper he may sell by mere representations of the character in question, and so, indirectly, evade the statute. This would seem to fall clearly within the mischief to be remedied by the statute.

Walker's powers as president and agent of the bank were limited and circumscribed by the statute. All persons dealing with him as such must take notice of these limitations. He could obligate the bank for the payment of the notes in question only by the bank's indorsement subject to the conditions of the statute.

The demurrer to the evidence should have been sustained. I accordingly concur in the opinion of the learned Commissioner reversing the judgment. All concur.