Merchants' Bank v. Rudolf.

N. Y., 27. Gillet v. Phillips, 13 N. Y., 117. Bigelow on Estoppel, 532.

J. R. Webster and L. C. Burr, for defendants in error.

Although Rudolf, one of the sureties, was a director and a member of the committee of discount and finance, the relations of both these defendants were that of sureties only. The same principles of law are applicable as to any other customer or creditor of the bank. The surety, Rudolf, is not proven to have aided or counseled the discount in any manner. Having affixed his name to the paper it was taken to the bank by L. & M., it was discounted for L. & M., the proceeds went to their credit. For all the purposes of this paper, Rudolf conducted himself strictly as any outside customer, as was his duty. Morse on Banking, 99.

This being the case, the evidence of the defendants, Rudolf and Deck, was properly admitted, as were the declarations of Eaton, the cashier, for two purposes: First. Tending to prove that the note had been paid; and, Second. Tending to prove that for some part of the note, $4,337.28 at least, the principals had provided a fund for its payment which, in violation of the rights of the sureties, and without their consent, had been applied to payment of other indebtedness of L. & M., the principals.

The declarations of the cashier, or the president, made in the course of the business of the bank, and pertinent thereto, are admissible against the bank. Morse on Banks, 170 to 180. Sturges v. Bank of Circleville, 11 Ohio State, 154. Harrisburg Bank v. Tyler, 3 Watts & S., 373. Bank of Monroe v. Field, 2 Hill, 445. Cochecho Bank v. Haskell, 12 Am., 72. S. C., 51, N. H., 116. Bank v. Klingensmith, 7 Watts, 523-24. Hickok v. Farm. & Merch, Bank, 35 Vt., 476, 485-6.

Merchants' Bank v. Rudolf.

These defendants claim that the declarations and proofs contain all the elements of an estoppel.

1. The cashier was not the agent of the defendant, Rudolf, in making them. First. Because Rudolf, for the purpose of this paper, was not, and could not be, of the board of directors, as before shown. Second. The cashier is not the agent of the board of directors even. though they choose him, but is the agent of the bank. Bissell v. First National Bank, 69 Penn. State, 415. Bank of Kentucky v. Schuylkill Bank, 1 Pars. Sel. Cases, 180. 2 U. S. Dig., 1st Series, 546, § 757.

To defeat an estoppel it is not enough that the party setting it up had means of knowledge, except possibly where the parties stand in the same relation to the fact. Bigelow on Estoppel, 467. Wannell v. Kem, 57 Mo.,

478.

As applicable to the case claiming an estoppel, defendants cite Merchant's National Bank v. State National Bank, 10 Wall., 604. Bigelow on Estoppel, 412, and cases cited. Cochecho National Bank v. Haskell, 12 Am., 72, and note. If, therefore, the verdict in this case be taken as founded upon an estoppel, and as contrary to the fourth instruction, this court will not therefore set it aside. If the instruction be wrong and the verdict be right, a new trial will not be granted. Tilman v. Stinger, 26 Ga., 171. Vanuxen v. Rose, 7 Ind., 222. Cameron v. Watson, 40 Miss., 191.

LAKE, CH. J.

It is very clear that this judgment is erroneous and should be reversed. According to the most favorable view that could possibly be taken of the case, for the defendants, as made by the pleadings and evidence, the jury should have returned a verdict against the defendants in error for at least the sum of seven hundred dollars.

Merchants' Bank v. Rudolf.

It was not alleged, nor was there any evidence to show, that any payment had been made upon the note; and the jury, as to Lewis & Marsh, the principals, found there was not. If the note as to Lewis & Marsh had not been paid either in whole or in part, the same was true, also, as to the other defendants. The truth is, that the verdict can be accounted for only on the theory advanced by Rudolf and Deck in their answer, that they were released from their obligation to pay the note by the promise of Eaton, the cashier of the bank, that he would look alone to other securities which he held for payment, and that they "need take no further trouble, and feel no apprehension in reference to said note."

But, conceding that this assurance was given, it cannot avail these defendants. It is well established law, that the cashier of a bank has no authority by virtue of his office to release a surety upon a promissory note or bill, without payment, unless specially empowered to do £0. Cochecho National Bank v. Haskell, 51 N. H., 116; Bank of United States v. Dunn, 6 Pet., 51. And this authority will not be presumed, but must be established by affirmative proof. Therefore, there being no testimony tending to show that Eaton had any such authority from the board of directors, this pretended release was unavailing.

Another theory advanced in support of the verdict is, that Rudolf and Deck were led to believe by the statements of the cashier that the note was paid, whereby they were induced to part with securities which they would otherwise have held on to for their protection. But, unfortunately for the defendants, this theory is not supported by the facts. All that they claim in their answer on this score is that Lewis & Marsh having requested them to become sureties "upon other notes, which these defendants would not do unless said note here in suit had been paid, and inquired of said Eaton,

Merchants' Bank v. Rudolf.

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then being cashier as aforesaid, relative thereto, said Eaton informed these defendants that all of said note, but about the sum of seven hundred dollars had been paid by said Lewis & Marsh, and that plaintiff had good collateral security for the balance thereof, to which it would look for payment." Thus, it is clearly conceded, that as to at least the sum of seven hundred dollars the note had not been satisfied; therefore, even upon the theory that the bank is liable for the loss occasioned by the deception practiced by its cashier, still they were liable for the amount which they must have known was unpaid. The fact that the bank held other security, in addition to their indorsement, would not release them from liability for this portion of the amount called for by the note.

But, even under the facts established by the testimony, independently of the defendants' answer, there is no reason why they should be released entirely from liability. Although deprived of the testimony of the cashier, as against the defendants, by reason of his impeachment, still there is nothing in the testimony produced on the part of the defendants themselves, as to the declarations made concerning the payment of the note, which, in reason, could have justified the belief that it had been paid in full.

Rudolf, one of the defendants, first took the witness stand and testified that Lewis & Marsh having told him that the note was paid, in order to satisfy himself of the truth of the statement, he went over to the bank and made inquiry of Eaton, who told him "that Lewis & Marsh had paid into his hands, as cashier of the bank, drafts on the Washington County Bank of Iowa, in the neighborhood of $5,000.00 to be placed on the credit of this note which is now in suit."

Again, on cross-examination, he says: "I asked Geo. P. Eaton whether this first note was paid, and he said it

Merchants' Bank v. Rudolf.

was; that Lewis & Marsh had handed into him drafts upon the Washington Bank, Iowa, to be placed to the credit of this note. I asked George P. Eaton in these words: Well, Mr. Eaton, that does not liquidate the whole amount? George P. Eaton answered in these words: I have sufficient collaterals in my hands. I think he said mortgages in my hands, sufficient to cover the whole amount of that note." He further testified in answer to the question as to where Eaton got the money. "He did'nt get the money, he only got the drafts. It was during the time of the great financial panic."

This is the substance of the testimony given by Rudolf, who seems to have been the chief actor in this business on the part of the defendants in error. It is clear from this testimony, that they not only had no reason to believe, but that they did not understand at the time this conversation took place that the note had been satisfied nor, indeed, that any payment had been actually made thereon. Rudolf was at this time the vice president and one of the directors of the bank, and he must have understood from the conversation, simply, that these Washington County Bank certificates had been received for collection merely, and the proceeds when collected to be credited upon the note on which his firm was surety. At all events this was all he had a right to infer from what he swears Eaton told him.

Mr. Deck, the other defendant, testified on this point that, "On or about the 15th of November, 1873, I went to Mr. Eaton's bank and asked of George P. Eaton, about this note, if it was not paid; and that I wanted to make some arrangement for the payment of the note if it was not paid. He told me the note was all paid except $700.00; that he had perfect security for the payment of the note that was given, and for us to have no fears about the payment of it, and that we would not be called upon to pay the note. I asked him for the note