Cooke v. The State National Bank of Boston.

only as is capable of entertaining and expressing a belief, and that the affidavit can in no case be made by any other than the party himself.

There is a difference of opinion among the members of the court upon the point; and upon consultation we have concluded, as probably the most conducive to the interests of both parties in facilitating the final disposition of the case, to sustain the objection and hold that it was not removed.

This brings us to the exceptions at the trial upon the merits. The views expressed by the Supreme Court of the United States in the recent case of Merchants' Bank v. This Same Defendant, 10 Wall. 604 (ante, p. 47), and which accord with repeated decisions of this court, render an elaborate discussion unnecessary.

The certification of a check, if written out, would contain a statement that the drawer had funds sufficient to meet it in the bank applicable to its payment, and an agreement on behalf of the bank that these funds should be retained and paid upon the check whenever it was presented. The cashier has a right, by virtue of his office, to make this certificate when the drawer has funds. He is the custodian of the funds of the bank and of the books; he receives money and gives vouchers therefor; and whether upon receiving a check he pays it in money or gives the holder a certificate of deposit or draft, or a certificate that he will retain sufficient of the money standing to the drawer's credit to pay it when presented, he is, in either case, acting within the line of his duty and within the scope of the authority which necessarily attaches to his office.

Whether the bank might not restrict this authority, so as to affect the rights of persons having notice, is not material. It is sufficient that the public have a right to regard his authority as co-extensive with these duties, and that such authority is inherent in the office. This is substantially conceded by the learned counsel for the appellants, but they insist that the cashier has no power to make the certificate when the drawer has no funds. I agree that he has not, as between him and the bank, and the liability of the bank is not based upon his power to bind them by such a contract without funds, but upon the ground that the bank cannot dispute the fact that there are funds, and hence the contract is enforced as though there were funds to meet it. It follows that a bona fide holder only can enforce the liability against the bank, where the certificate is given in the absence of funds.

Cooke v. The State National Bank of Boston.

The bank having placed the cashier in the position which implies this inherent authority, those who deal with the bank have a right to infer that he possesses it, and although the exercise of it in a given case may not be warranted on account of the existence or non-existence of some extrinsic fact peculiarly within its official knowledge, yet the bank is responsible instead of an innocent party, upon every principle of reason and morality. This principle applies to the ordinary relation of principal and agent, and, a fortiori, when the employment concerns the general public involving extensive commercial transactions. Farmers', etc., Bank v. Butchers', etc., Bank, 16 N. Y. 125; Schuyler's Case, 34 id. 30. Ultra vires cannot be alleged for telling the truth, even by bank officers, nor can they insist upon a falsehood to the injury of one who has confided in their veracity.

The import of a certification and the liability of the bank upon the principle here indicated legally result from the nature of the agreement and the application of well-settled rules of law, and do not depend upon usage or custom. Whether it is competent for banks, by usage or express agreement, to extend their liabilities so as to include cases where certificates are issued without funds, to the knowledge of the holder, it is unnecessary to determine. SELDEN, J., in 16 N. Y. 128, expressed the opinion that banks have no power to loan their credit in that form. It is clear, however, that where such a certificate is made without funds, by a cashier in fraud of the rights of the bank, no one but a bona fide holder can enforce it.

It is claimed by the counsel for the appellants that the refusal of the bank defendant to unite with other banks in Boston in the adoption of a custom to receive from each other certified checks in payment for balances and collections, of which the Second National Bank, the agent of the plaintiff's assignors, and who received the check in question, had notice operated to charge such agent with notice that the cashier had no authority to certify this particular check, and that the principals, Jay Cooke & Co., are chargeable with the knowledge of their agent; and hence that the plaintiff, having only their title, is not a bona fide holder. Without inquiring whether all these consequences would follow, I am of opinion that the principal proposition is untenable, viz. that notice of the refusal to co-operate with the other banks by the bank defendant operated as a notice of a want of authority by the cashier to certify

Cooke v. The State National Bank of Boston.

this check. The proposed custom of settling balances at the clearing house by certified checks was a clearing house arrangement for the convenience of the banks themselves, and was subject to such restrictions and regulations as they saw fit to impose or adopt; but the refusal of any particular bank to enter into the arrangement would not affect the power of its cashier to certify checks in the ordinary manner when the drawer had funds, nor the liability of the bank to a bona fide holder when he had not.

The most that can be claimed is that the Second National Bank had constructive notice that the defendant refused to approve of the new custom, which was not only confined to a special purpose, but, for that purpose, contemplated an unqualified contract on the part of the banks consenting to it to be bound by certifications, without regard to the presence of funds, which, if valid, could be enforced as a binding contract in cases where an ordinary certificate could not. The case in 9 Metc. 601, was evidently based upon the idea that the liability of banks upon certified checks depended. upon usage or custom, and that a teller did not possess the power of a cashier in this respect. The decision was made over twenty years ago, and has not, as I am aware, been repeated by the courts of Massachusetts, although the practice of using certified checks must have prevailed there as elsewhere. It has been repudiated in this and other States, and should not at this day be regarded as the law in Massachusetts, to override a general rule of construction based upon painciples of the common law, of universal application. It is also urged that the court erred in not submitting the bona fides of the plaintiff's title to the jury. Ordinarily the question of good faith is a question of fact for the jury. Perhaps if a specific request to that effect had been made at the trial, it would have been the duty of the court to submit it, although, with the notice relative to the clearing house arrangement out of the way, I am unable to discern a single fact in the case tending to impeach the good faith of the Second National Bank in receiving this check. It was received in part payment for a draft of $150,000 on Mellen, Ward & Co., and $100,000 gold certificates which were parted with and delivered at the time; and no fact is disclosed throwing suspicion upon the transaction. But the answer to the position is that no such request was made, nor was the attention of the court called to it.

The first six requests are substantially that, as a matter of law,

Cooke v. The State National Bank of Boston.

the cashier had no authority, and that there was no evidence authorizing the jury to infer it. The seventh request relates to the effect of the notice as to the clearing house arrangement, which has been already referred to. The eighth and ninth are that Jay Cooke & Co. and the plaintiff are chargeable with the knowledge of their agent; and the tenth, that the law in New York is not controlling. These requests, and the additional one asking the court to direct a verdict for the defendants, show that the defendants expected and desired the court to dispose of the case as a question of law; and, as they did not ask that any question of fact should be submitted to the jury, the general exception to the direction to find for the plaintiff is not available, upon appeal, to raise the question.

The result involves, evidently, a considerable loss from the wrongful act of the cashier; but in ethics, as well as law, the party who employed him, and clothed him with the power, should suffer the loss rather than the party who parted with his property upon the faith of the proper exercise of the power. Whenever one of two innocent parties must suffer by the acts of the third, he who has enabled such third person to occasion the loss must sustain it. 2 T. R. 70.

The judgment must be affirmed.

All concur, except ALLEN, J., not voting.

NOTE.-The present statute as to actions against National banks is substantially the same as when the above decision was made. Sec. 5198 of the Revised Statutes, as amended in 1875, reads: "That suits, actions, and proceedings against any association under this title may be had in any circuit, district or territorial court of the United States, held within the district in which such association may be established, or in any State, county or municipal court in the county or city in which said association is located, having jurisdiction in similar cases.'

In Crocker v. The Marine National Bank, ante, p. 575, the Supreme Court of Massachusetts held that the language of Congress was restrictive rather than permissive, and that, therefore, an action lay against such bank, only in the city or county in which the bank was located. The above case of Cooke v. The National State Bank, and the case of Crocker v. The Marine National Bank, are, therefore, on this point directly at variance; but the Court of

Judgment affirmed.

Appeals went further and denied the power of Congress to deprive State courts of jurisdiction of actions against such banks.

In Bank of Bethel v. Pahquioque Bank, ante, p. 77 it was only held that the State courts in the city or county where the bank is located has jurisdiction of actions against such banks, and the question considered in the principal case did not arise.

In Manufacturers' National Bank v. Baack, ante, p. 161, the question was as to the jurisdiction of the Circuit Court of the United States.

In Cadle v. Tracy, ante, p. 230, it was held by the United States Circuit Court that the Supreme Court of New York had no jurisdiction of an action against a National bank located in Alabama.

In Adams v. Daunis, ante, p. 510, the Supreme Court of Louisiana ruled substantially in accordance with the principal case of Cooke v. The State National Bank, and decided that au action would lie against the receiver

National Bank of Chemung v. Elmira.

of a National bank (and semble against the bank) in a parish other than that in which the bank was located and in which the receiver had his domicile.

Again on the other haud the Court of Appeals of Maryland, in The Chespeake Bank v. First National Bank, ante, p. 531, held that the provision that mesne process from State courts should not be issued against National banks, was valid and constitutional and the arguments used apply as well, and were in fact applied by the court, to the provision with regard to suits against National banks in State courts. It thus appears that on the one side

are the Supreme Court of Massachusetts, the Court of Appeals of Maryland and the Circuit Court of the United States for the Southern District of New York, holding that actions in State courts against a National bank will lie only in the city or county where the bank is located, while on the other side the Court of Appeals of New York and the Supreme Court of Louisiana hold a contrary doctrine.

See also as to actions against National banks, Main v. Second National Bank, ante, p.200; Missouri River Telegraph Co. v. First National Bank, ante, p. 401.-REP.

NATIONAL BANK OF CHEMUNG V. ELMIRA.

(53 New York, 49.)

Taxation of National banks - When assessment void Recovery back of taxes

paid.

Assessors of taxes possess no authority except such as is conferred upon them by statute, and they must see to it that they are within the authority committed to them.

Assessors assessed a tax on the capital stock of a National bank, which was expressly prohibited by statute. The property of the bank was seized by the collector of taxes and sold to pay such tax and the proceeds paid over to the municipal treasurer. Held, that the assessment was void and that an action lay on behalf of the bank against the municipal corporation to recover the money. (See note, p. 722.)

A

CTION by the National bank of Chemung against the city of Elmira to recover money alleged to have been wrongfully taken from plaintiff and paid into defendant's treasury. The plaintiff was located in the said city of Elmira, and had a capital stock of $100,000 invested in United States government bonds.

The assessors of defendant's city in the year 1868 assessed the bank on $95,000 so invested and $50,000 on real estate, and the common council of said city imposed a tax on such assessment of $2,000.

The collector of taxes levied upon the personal property of the bank and sold it to pay such tax and also a county tax which had likewise been assessed on said bank, and paid the amount of the city tax to the city treasurer.