A. made his promissory note to his own order, duly endorsed it
to the order of B., and delivered it to a national bank. The latter
negotiated it to B. and applied the proceeds thereof to the
cancellation of a prior debt of A. With the knowledge and consent
of the president and cashier, who were also directors, but without
any notice to or authority from the board, C., one of the directors
and vice-president of the bank, guaranteed, at the time of the
transaction, the payment of the note at maturity by an endorsement
thereon to that effect in the name and on behalf of the bank. The
note was duly protested for nonpayment, and the bank notified
thereof. B. brought this action against the bank.
1. That the bank was not prohibited by law from guaranteeing the
payment of the note.
2. That it is to be presumed that C. had rightfully the power he
assumed to exercise, and the bank is estopped to deny it.
3. That the bank, by its retention and enjoyment of the proceeds
of the note, rendered the act of C. as binding as if it had been
The facts are stated in the opinion of the Court.
MR. JUSTICE SWAYNE delivered the opinion of the Court.
This case was submitted to the court without the intervention of
a jury. The court found the facts and gave judgment for the
defendant. The plaintiff thereupon sued out this writ of error and
brought the case here for review. The act of Congress regulating
the procedure adopted seems to have been carefully complied
The People's Bank of Belleville, plaintiff, and the
Manufacturers' National Bank of Chicago, defendant, in the court
below, are respectively the plaintiff and the defendant in error
Page 101 U. S. 182
For convenience, we shall speak of them in this opinion by their
The facts lie within a narrow compass, and there is no
controversy about any of them.
On the 8th of August, 1873, Henry E. Picket made his ten
promissory notes of that date, each for $5,000, all payable one
year from date to his own order, endorsed by him, and bearing
interest at the rate of ten percent, payable semiannually. Eight of
these notes are described in the plaintiff's declaration. Picket
delivered the notes to the defendant to be negotiated to the
plaintiff pursuant to a prior agreement between him and the
defendant that the latter should so negotiate the notes and apply
the proceeds to the cancellation of other indebtedness then due
from him to the defendant. On the 8th of August, 1873, M. D.
Buchanan, vice-president, and one of the directors of the
defendant, with the knowledge and consent of the president and
cashier of the defendant, who were also directors, but without any
authority from the board of directors as a board or of a majority
of them individually or any notification to the board of directors
as a board, transmitted the notes to the plaintiff with a letter,
in which occurs the following language:
"In accordance with your telegram, I herewith hand you ten notes
of $5,000 each, &c. . . . We debit your account $50,000. . . .
This bank hereby guarantees the payment of the principal sum and
interest of said notes."
This letter was written below one of defendant's letterheads and
signed "M. D. Buchanan, vice-president." The notes were also
endorsed "Pay to the order of the People's Bank of Belleville.
Henry E. Picket," and below,
"This bank hereby guarantees the payment of this note, principal
and interest, at maturity. M. D. Buchanan, Vice-President
Manufacturers' National Bank of Chicago."
The defendant was the plaintiff's correspondent at Chicago, and
the plaintiff's account with the defendant was debited with $50,000
on account of the notes. At the same time, Picket's paper in the
defendant's hands was cancelled to the same amount. All the notes
were protested at maturity for nonpayment, and due notice was given
to the defendant. Nothing has been paid on either of the notes.
Besides a special count in the declaration upon the guaranty of
Page 101 U. S. 183
the eight notes involved in this suit, there was a common count
for money had and received.
The case was submitted in this Court without an oral argument.
The opinion of the learned judge who decided the case in the
circuit court is not in the record, and no brief has been submitted
on behalf of the defendant. A few remarks will suffice to give our
view of the law touching the rights of the parties.
The National Banking Act, Rev.Stat. 999, sec. 5136, gives to
every bank created under it the right
"to exercise by its board of directors, or duly authorized
agents, all such incidental powers as shall be necessary to carry
on the business of banking, by discounting and negotiating
promissory notes, drafts, bills of exchange, and other evidences of
by receiving deposits,"
&c. Nothing in the act explains or qualifies the terms
italicized. To hand over with an endorsement and guaranty is one of
the commonest modes of transferring the securities named.
Undoubtedly a bank might endorse, "waiving demand and notice," and
would be bound accordingly. A guaranty is a less onerous and
stringent contract that that created by such an endorsement. We see
no reason to doubt that, under the circumstances of this case, it
was competent for the defendant to give the guaranty here in
question. It is to be presumed the vice-president had rightfully
the power he assumed to exercise, and the defendant is estopped to
deny it. Where one of two innocent parties must suffer by the
wrongful act of a third, he who gave the power to do the wrong must
bear the burden of the consequences.
The doctrine of ultra vires
has no application in cases
like this. Merchants' Bank v. State
10 Wall. 604.
All the parties engaged in the transaction and the privies were
agents of the defendant. If there were any defect of authority on
their part, the retention and enjoyment of the proceeds of the
transaction by their principal constituted an acquiescence as
effectual as would have been the most formal authorization in
advance, or the most formal ratification afterwards. These facts
conclude the defendant from resisting the demand of the plaintiff.
Wharton, Agency, sec. 89; Bigelow, Estoppel 423; Railroad
Page 101 U. S. 184
392; Kelsey v. The National Bank of Crawford County,
Pa.St. 426; Steamboat Company v. McCutchen & Collins,
A different result would be a reproach to our jurisprudence.
Whether, if the guaranty were void, the fund received by the
defendant as its consideration moving from the plaintiff could be
recovered back in this action upon the common count is a point
which we do not find it necessary to consider. See United
States v. State Bank, 96 U. S. 33
The judgment of the circuit court will be reversed, and the case
will be remanded with directions to enter a judgment in favor of
the plaintiff in error, and it is