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Merchants' National Bank v. State National Bank.

whether the principle of estoppel in pais did not apply, should in this connection also have been left to the jury.

2. As before remarked, the organic law expressly allowed the bank to buy coin and bullion. We have also adverted to the provisions of the by-laws, that the cashier shall be responsible "for the moneys, funds, and all other valuables of the bank;" and that "all contracts, checks, drafts, receipts, etc., shall be signed either by the cashier or president." The power of the bank to certify checks had also been sufficiently examined. The question we are now considering is the authority of the cashier. It is his duty to receive all the funds which come into the bank, and to enter them upon its books. The authority to receive implies and carries with it authority to give certificates of deposit and other proper vouchWhere the money is in the bank he has the same authority to certify a check to be good, and charge the amount, to the drawer, appropriate it to the payment of the check, and make the proper entry in the books of the bank. This he is authorized to do, virtute officii. The power is inherent in the office. Wild v. The Bank of Passamaquoddy, 3 Mason, 506; Burnham v. Webster, 19 Me. 234; Elliot v. Abbott, 12 N. H. 549; Bank of Vergennes v. Warren, 7 Hill, 91; Lloyd v. The West Branch Bank, 15 Penn. St. 172; Badger v. The Bank of Cumberland, 26 Me. 428; Bank of Kentucky v. The Schuylkill Bank, 1 Pars. Select Cases, 182; Fleckner v. Bank of the United States, 8 Wheat. 360.

The cashier is the executive officer, through whom the whole financial operations of the bank are conducted. He receives and pays out its moneys, collects and pays its debts, and receives and transfers its commercial securities. Tellers and other subordinate officers may be appointed, but they are under his direction, and are, as it were, the arms by which designated portions of various functions are discharged. A teller may be clothed with the power to certify checks, but this in itself would not affect the rights of the cashier to do the same thing. The directors may limit his authority as they deem proper, but this would not affect those to whom the limitation was unknown. Commercial Bank of Lake Erie v. Norton et al., 1 Hill, 501; Bank of Vergennes v. Warren, 7 id. 94; Beers v. Phoenix Glass Company, 14 Barb. 358; Farmers and Mechanics' Bank v. Butchers and Drovers' Bank, 14 N. Y. 624 ; North River Bank v. Aymar, 3 Hill, 262, 268; Barnes v. Ontario Bank, 19 N. Y. 156, 166.

Merchants' National Bank v. State National Bank.

The foundation upon which this liability rests was considered in an earlier part of this opinion. Those dealing with a bank in good faith have a right to presume integrity on the part of its officers, when acting within the apparent sphere of their duties, and the bank is bound accordingly.

In Barnes v. The Ontario Bank, 19 N. Y. 156, the cashier had issued a false certificate of deposit. In the Farmers and Mechanics' Bank v. Butchers and Drovers' Bank, 14 N. Y. 624; S. C., 16 N. Y. 133, and in Meads v. The Merchants' Bank of Albany, 25 N. Y. 146, the teller had fraudulently certified a check to be good. In each case the bank was held liable to an innocent holder.

It is objected that the checks were not certified by the cashier at his banking-house. The provisions of the act of Congress as to the place of business of the banks created under it must be construed reasonably. The business of every bank, away from its office frequently large and important- is unavoidably done at the proper place by the cashier in person, or by correspondents or other agents. In the case before us, the gold must necessarily `have been bought, if at all,. at the buying or the selling bank, or at some third locality. The power to pay was vital to the power to buy, and inseparable from it. There is no force in this objection. Bank of Augusta v. Earle, 13 Pet. 519; Pendleton v. Bank of Kentucky, 1 T. B. Monroe, 182.

It is also objected that each of the checks, after being certified, required an additional stamp. The act of Congress relating to the subject directs certified checks to be included in the circulation of the bank for the purpose of taxation. 13 Stat. at Large, 278, ch. 173, § 110. This is a conclusive answer to the objections.

In Brown v. London, 1 Levinz, 298, judgment in a suit upon two accepted bills of exchange was arrested after verdict "entire damages" were given, and the count, upon one of the bills, failed to aver that by the custom of merchants and others trading in England, the acceptor was obliged to pay. This was in 1671. Other decisions in this class of cases, not less remarkable, are familiar to those versed in the learning of the elder reports. The law merchant was not made. It grew. Time and experience, if slower, are wiser law makers than legislative bodies. Customs have sprung from the necessities and the convenience of business, and prevailed in duration and extent until they ac

Merchants' National Bank v State National Bank.

quired the force of law. This mass of our jurisprudence has thus grown, and will continue to grow, by successive accretions.

We have disposed of this case as it is before us.

How far it may be changed in its essential character, if at all, by a full development of the evidence on both sides in the further trial, which will doubtless take place, it is not for us to anticipate.

The judgment below is reversed, and a venire de novo awarded. Mr. Justice MILLER was not present at the arguments of this case, and did not participate in its decision.

Mr. Justice CLIFFORD (with whom concurred Mr. Justice DAVIS) delivered a dissenting opinion.

TION.

NOTE. THE Effect of a CERTIFICA- ing the specification of the amount to -A bank by certifying a check be paid and the name and identity of drawn on it warrants only the genuine- the payees, then obviously there must ness of the drawer's signature and that occur an immediate and complete he has the amount of the check to his change in the modes of doing business, credit. Nat. Bank of Commerce v. Nat. which would defeat and practically Mechanics' Bank, 55 N. Y. 211; S. C., 14 put an end to the use of certified checks. Am. Rep. 232, In that case a check was For no bank under such a rule could "raised" after it had been certified, and safely certify a check without, in the was paid as "raised." It was held that first instance, investigating its origin the bank could recover back the sum so and history by inquiring of the makers paid less the original amount of the and payers. The burden of such incheck. And in Marine Nat. Bank v. quiries could not be borne without Nat. City Bank, 59 N. Y. 67; S. C., 17 interfering with or interrupting the Am. Rep. 305, the doctrine was applied other necessary business of the banks, to a case where a check had been cer- and the practice of certifying checks tified after it had been "raised." There would have to be abandoned, or a staff the check was fraudulently altered as of inquiries instituted in every bank to date, name of payee, and amount, specially charged with these duties. and, so altered, was certified and after- It is plain that banks, in self protection, ward paid by the bank. It was held would be compelled to refuse althat the bank could recover the money together to certify checks, and that this paid beyond the original amount. convenient and useful invention of The court said: "When a check modern business would come to an end. is presented to a bank on which it is The mischief would arise from charg drawn for certification, the purpose is ing the banks with a knowledge that in to ascertain, with certainty, what the the nature of things they cannot posbank alone can know, and this is, sess. With their responsibility limited whether the drawers of the check have to the facts within their knowledge, funds sufficient to meet it; and further, the practice imposes no burden upon to obtain the engagement of the bank banks and subserves the convenience that these funds shall not be withdrawn of commerce. No construction ought from the bank by the drawers of the to be put on facts, in the usual course check. To this extent the knowledge of business, which will impose upon the of the bank must of necessity enable it parties interested the necessity of imsafely to go in the way of assertion; mediately altering it. For, as the and its own power over its own funds question is necessarily, what did the will suffice to protect it as to its obli- parties mean, we cannot without viogation. But if the doctrine contended lent construction attribute to them a for in opposition to this view is correct, meaning so burdensome that it will and the certifying bank is bound to necessitate a change of the usual way warrant,not only the genuineness of the of doing business. Such a meaning drawer's signature and the sufficiency we know they cannot have enterof their credit, but also the genuine- tained. We have been referred to ness of the check in all its parts, includ- various expressions in different cases

62

Merchants' National Bank v. State National Bank.

Commercial Bank v. Norstating in quite positive and general those to whom the limitation was terms the obligation of banks upon unknown." Farmers' Bank v. ton, 1 Hill, 501; Bank of Vergennes v. certified checks: Butchers Bank, 16 N. Y. 125; First Nat. Warren, 7 id. 91; Beers v. Phoenix Bank v. Leach, 52 id. 350; Cooke v. State Glass Co., 14 Barb. 358; Farmers and Nat. Bank, id. 115. (See last two cases Mechanics' Bank v. Butchers & Drocited hereafter in this volume.) These vers' Bank, 14 N. Y. 624; Barnes v. Onare to be construed with reference to tario Bank, 19 id. 156; Wild v. Bank In of Passamaquoddy, 3 Mason, 505; the facts disclosed in the cases. such cases the question has been, in Franklin Bank v. Steward, 37 Me. 519; various forms, whether the bank certi- Meads v. Merchants' Bank, 25 N. Y. In Bank of Vergennes v. Warren, fying a check could defend itself upon 146. the ground of want of authority in the certifying officer, or that the drawer supra, a creditor, in order to redeem of These being facts a bank lands sold under judgment, to the banking-house during had no funds. within the knowledge of the certifying went was necessarily precluded business hours and paid the money to bank, it But the cashier, who accepted it and gave a from disputing its certificate. there is no ground of reason or au- receipt. On the question of the cashthority for extending the rule to mat- ier's authority the opinion was as folters not being especially within the lows: "It is said that the cashier of knowledge of the certifying bank, such as to those which form the ground in this case on which the bank's claim of immunity rests."

See, also, City Bank of Houston v. First Nat. Bank, 45 Texas, 203.

The Supreme Court of Louisiana, however, in Louisiana National Bank v. Citizens' Bank, 1 La. Law Jour. 80, disapproved of the foregoing decision and held that "By certifying a check the bank bound itself to pay the amount which it said was good."

THE POWERS OF CASHIERS.-SEC. 5136 of the Revised Statutes of the United States provides that National banking associations shall have power among other things:

"Fifth, To elect or appoint direct-
ors, and by its board of directors to
appoint a president, vice-president,
cashier and other officers, define their
duties, require bonds of them and fix
the penalty thereof, dismiss such offi-
cers or any of them at pleasure, and
appoint officers to fill their places.'

A bank will be bound by the acts of
a cashier de facto-that is, one who has
not been appointed, or lawfully ap-
office, but who is
pointed to the
act in
permitted by the bank to
that capacity. Bank of the U. S. v.
Dandridge, 12 Wheat. 61; Minor v.
Mechanics' Bank, 1 Pet. 46.

the Farmers' Bank had no authority to
transact such business; that the plain-
directors. But it is enough that the
tiff should have gone to the board of
business hours and there made the
plaintiff went to the banking-house in
payment to one of the principal agents
of the corporation, who, by accepting
the money, professed to have author-
ity to receive it. His authority will be
presumed until the contrary expressly
defeat the purchase if it could be
appears. Indeed, I think it would not
shown that the cashier had been for-
A creditor having the
bidden by his principals to transact
such business.
right to purchase from a corporation
must of necessity have the right to
deal with the principal officer or agent
of the company, who may be found at
his place of business. To hold that the
creditor must go to the board of direc-
tors would be to put it in their power
by refusing or neglecting to meet, to
deprive him of a right secured to him
by law."

In Wild v. Bank of Passamaquoddy,
supra, it was said that any bank choos
ing to restrict the ordinary scope of
its cashier's authority is at perfect
liberty to do so; but that in such case
it is incumbent on the bank to show,
restriction, but further, that the impo-
not only that it has imposed a certain
While directors may define the duties sition of such restriction is known to
of a cashier they cannot, so far as af- those with whom it is in the habit of
fects third persons, deprive him of the doing business. In Franklin Bank v.
powers usually appertaining to the of- Steward, supra, it is said: "His (the
fice. One dealing with a cashier of a cashier's) true position appears to be
bank within the ordinary scope of such that of a general agent for the perform
While acting within the scope
an officer's authority, has a right to ance of his official and accustomed du-
assume, as against the bank, that the ties.
officer is invested with his customary of his authority he would bind the
powers. In the language of the opin- bank, although he might violate his
ion in the foregoing case, "the direc- private instructions."
tors may limit his authority as they

In Cook v. The State National Bank, deem proper, but this would not affect 52 N. Y. 96; 11 Am. Rep. 667, report

Merchants' National Bank v. State National Bank.

ed hereafter in this volume, which was superintendence of the banks and of the an action growing out of transactions payments and receipts of the bank. between some of the parties in the Sturges v. Bank of Circleville, 11 Ohio St. above principal case, the Court of Ap- 153 The charge of the notes, securities peals of New York said: "The bank and other funds of the bank, and of the having placed the cashier in the posi- business of negotiating, managing and tion which implies this inherent au- disposing of them. Wild v. Bank of thority (to certify checks), those who Passamaquoddy, 3 Mason, 505. The sudeal with the bank have a right to in- perintendence of the collection of protesfer that he possesses it, and although ted notes, Bank of Pennsylvania v. Reed, the exercise of it in a given case may 1 W. & S. 101; the receipt of all moneys not be warranted on account of the and notes of the bank, the giving up existence or non-existence of some ex- of discounted notes and securities when trinsic fact peculiarly within his official paid, the drawing of checks to withknowledge, yet the bank is responsi- draw funds of the bank on deposit elseble instead of an innocent party, upon where, and as executive officer the every principle of reason and moral- transaction of most of the business of ity." To the same effect also are Cald- the bank, United States v. City Bank well v. National Mohawk Valley Bank, of Columbus, 21 How. 356; the charge 64 Barb. 333. of moveable property of the bank, But it is to be observed that to bind Franklin Bank v. Steward, 37 Me. 519; the bank the act of the cashier must be the transfer of the negotiable paper one within the corporate powers of the belonging to the bank, City Bank of bank, for if the directors could not law- New Haren v. Perkin, 29 N. Y. 554; fully do the act the cashier cannot bind Bank of New York v. Bank of Ohio, id. them or the bank by doing it. Weck-618; to borrow money on behalf of the ler v. The First National Bank, 42 Md. 581, post; Wiley v. First National Bank, 47 Vt. 546, post.

bank, Barnes v. Ontario Bank, 19 N. Y. 152; Ballston Spa Bank v. Marine Bank, 16 Wis. 120; to discharge a mortgage securing a note due to the bank, Ryan v. Dunlap, 17 Ill 40.

So to bind a bank, the act of the cashler must be within the scope of his inherent authority, or within the estab- But a cashier cannot, without exlished custom or usage of the particular press authority from the directors, or bank, or the banks in that locality. in pursuance of the usage or custom, The officers of the banks are held out transfer non-negotiable paper belongto the public as having authority to ing to the bank; State v. Davis, 50 How. act according to the general usage, Pr. (N. Y.) 447; Barrick v. Austin, 21 practice and course of business of such Barb. 241; nor bind the bank to indemInstitutions, and their acts, within the nify an officer for levying on property scope of such usage, practice and under an execution in favor of the course of business, bind the bank in bank; Watson v. Bennett, 12 Barb: 196; favor of third persons having no knowl- nor bind the bank by a discharge of edge to the contrary, Story on Agency, its debtors without judgment; Hodge § 114; Minor v. Mechanics' Bank, 1 Pet. v. Nat. Bank, 22 Gratt. (Va.) 51; nor 46; Fleckner v. Bank, 8 Wheat. 339: release a surety by an agreement that Frankford Bank v. Johnson, 24 Me. 490; he should not be called upon to pay a Cook v. State Nat. Bank, 52 N. Y. 96, note that he was liable on in ordinary post; Ryan v. Dunlop, 17 Ill. 40. In cases. Cochecho Nat. Bank v. Haskell, United States v. City Bank of Columbus, 51 N. H. 116; S.C., 12 Am. Rep. 67, Olney 21 How. 356, Mr. Justice WAYNE said v. Chudsey, 7 R. I. 224; but it was fur"That, though the directors had power, ther held in the same case that if a under the act of incorporation, to fix cashier deceives a surety into the belief the duties of the cashier, and though that the note is paid, and thereby leads whether they had done so or not did the surety to change his position as to not appear, yet the acts of the cashier the principal to the surety's injury, the done in the ordinary course of the busi- bank will be estopped- -so far as the ness actually confided to such an officer surety is concerned - from denying may well be deemed prima facie evi- that the note was paid. So a cashier dence that they fell within the scope of cannot bind the bank by representing his duty." And in Fleckner v. Bank, 8 to one about to indorse a note that Wheat. 339, it was held that the acts of sufficient bank stock to secure paya cashier done in the ordinary course of ment of the note has been pledged by business of the bank are prima facie the maker, and that the indorser's liaevidence that they fell within the scope bility will be merely nominal; Bank of of his duties. See also State v. Commer- the United States v. Dunn, 6 Pet. 1; cial Bank, 14 Miss. 218. Bank of the Metropolis v. Jones, id. Among the ordinary and inherent 12; nor by a promise to pay a forged duties of a cashier are the following. The note purporting to be issued by the

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