
    William Preston v. Northwestern Cereal Company, William A. De Bord, Receiver, appellee, Impleaded with Fourth National Bank of Cadiz, Ohio, appellant.
    Filed January 8, 1903.
    No. 11,048.
    
    Commissioner’s opinion,
    Department No. 1.
    1. Accommodation Indorsement: Coiípoiíation: Ultba Vibes. An accommodation indorsement by a manufacturing’ and trading corporation is ultra vires.
    
    
      2. -: -: -: Evidence: Finding. Evidence examined, and held to sustain finding’ that loan was made to the signer and first indorser of note, and the indorsement of the corporation, of which he was president, appearing on the note, was made and accepted as an accommodation indorsement, and created no liability.
    
      Syllabus by court; catch-words by editor.
    
      Appeal from tbe district court for Douglas county by tbe Fourth National Bank of Cadiz, Ohio, from an order made by said court on tbe 11th day of May, 1899, disallowing a claim (based on a promissory note) against the appellees. Heard below before Dickinson, J.
    
      Affirmed.
    
    
      Edward J. Cornish-} for appellant.
    
      Howard H. Baldrige and William A. De Bord, contra.
    
   Hastings, O.

This cáse presents an appeal from the disallowance of a claim of the appellant, the Fourth National Bank of Cadiz, Ohio, against the Northwestern Cereal Company and its receiver on a promissory note. The note is as follows:

“5,000 no-100. “Omaha, Jan. 29th, 1896.
“Four months after date we promise to pay to the order of Wm. Preston five thousand & no-100 dollars at National Bank of Commerce, Omaha, Neb. Yalue received with interest at the rate of eight per cent, per annum, from maturity until paid. Wm. Pbeston & Co.”

Indorsed on back: “Wm. Preston. Northwestern Cereal Co., Wm. Preston, Pres’t. For collection and remittance to the Fourth -Nat’l Bank of Cadiz, Ohio, J. M. Schreiber, Cashier.”

Written across face: “Protested for non-payment. Omaha, Neb., June 1-96. Lee W. Spratlen, Notary Public.”

It was a renewal of another note of the same form dated in October, 1895, which was in turn a renewal of a like one of April 24, 1895. By the terms of the paper and its in-dorsements it would be a note made to Wm. Preston, sold by him to the cereal company, and by it sold and indorsed for value to the claimant. It is, however, conceded that the transaction was in fact a loan by the claimant, and the receiver resisted on the grounds: First, that there was no consideration for the cereal company’s indorsement; second, that the company’s name was indorsed without authority from the corporation; third, that the indorsement was ultra vires of the corporation. At the argument it was conceded that if the cereal company’s indorsement was not for value but merely for the accommodation of Wm. Preston, there was no liability. It is claimed, however : First, that the loan was in reality made to the company, and that it got the money, and if it did not retain it the loss was by its own fault; second, that it fully ratified the transaction; and third, that under the circumstances of this loan the company is estopped to deny its liability.

There seems to be very little question as to the facts. On April 10, 1895, William Preston, Walter G. Preston and one August S. Knabe organized the Northwestern Cereal Company “for the manufacture, purchase and sale of all kinds of cereals and cereal products.” Its place of business was Omaha, Nebr. Its capital stock was to be $800,000, $150,000 of which was to be delivered to Wm. Preston for the cereal plant and business he then owned and was conducting under the name of Wm. Preston & Co., at Omaha. April 23, 1895, Bostwick & Nixon, loan brokers, who had previously made loans to Wm. Preston for the Cadiz bank, which had been- paid, received from the bank a telegram saying it would loan him $5,000 for six months at 8 per cent, per annum, on same collateral as before. On inquiry the brokers learned that the loan was desired. This note was drawn and delivered to Bost-wick & Nixon, and their check issued on April 24 to Wm. Preston or order for $4,766.11, proceeds of the loan. The check was indorsed to the cereal company by “W. G-. Preston, attorney in fact,” and was paid through the clearinghouse April 25, 1895. Mr. Bostwick says that his conversation in regard to the loan soon developed that the cereal company had been organized and had absorbed the business of Wm. Preston & Co., and lie then told Mr. Walter Preston that the negotiations could not go forward unless the financial strength of that business was represented in the new paper by indorsements or otherwise. Walter replied that his father’s authority, as president, must be obtained, and in some way the matter was arranged, and Walter represented that he had authority to indorse the cereal company’s name on the note. Walter Preston says that the check was given him by Wm. Preston, and deposited by him with other money to the credit of the cereal company at the First National Bank of Omaha, on April 24; that about an hour later Mr. Bostwick telephoned to the office for Wm. Preston, who shortly after came in and went to Mr. Bostwick’s office, where at Bost-wick’s request, lie indorsed the cereal company’s name on the note. Waller Preston gave Wm. Preston credit for the cash proceeds of the note, and on May 4, checked the amount, with a little additional, to the Council Bluffs Savings Bank to pay a private indebtedness of Wm. Preston, as Walter states. He also states that he knew at the time of the conversation over the telephone, and knew that night that the company’s name was indorsed on the note. As above stated, it is conceded that no authority existed for an accommodation indorsement of the company’s name on this paper. It seems clear from the statement of this evidence that it is ample to warrant the trial court in finding, as it did, that the transaction was, by the bank and its agents, understood to be a loan to Wm. Preston. In that case nothing short of an actual beneficial receipt and retention of money would seem to warrant any claim of estoppel against the cereal company or its representative. Sturdevant v. Farmers & Merchants’ Bank, 62 Nebr., 472. It is claimed that the fact that the money was in the hands of the treasurer of the cereal company from April 24 to May 4, with knowledge that the indorsement had been made, amounts to a ratification of the act. Probably this is true. Under such circumstances, it is difficult to see how the company or its representative could object that it had not authorized the indorsement. If it was intended to deny that the act was authorized, it should have returned the money. But this does not do away with the admitted difficulty that there Avas no authority anywhere to pledge the credit of the company for Preston’s accommodation. An act which could not he authorized could not be ratified. The claim that the company at one time got this money, and, if it did not retain it, should have done so, and therefore can not be permitted to say that it Avas a few days later paid out for Preston’s benefit, seems to ignore the finding that the loan Avas made by the bank to Preston. There is no shoAving that the lender or its agents knew that the check Avas deposited to the cereal company’s credit, or, if they did, that they considered such deposit as anything more than an authorized disposition of the check by the borroAver to AAdiom it Avas made payable, Wm. Preston. Hoav can the lender complain, if the cereal company pays it out for the benefit of the person to AAdiom it had been loaned, to whose order the check Avas draAvn a feAv hours before any indorsement by the company Avas contemplated? Counsel dwells upon the fact that the check was not paid until May 25, and payment could have been stopped on the check, then in the cereal company’s possession, or placed to its credit in its OAvn bank, if the in-dorsement had not been made. But it does not appear that any such fact was knoivn Avhen the indorsement Avas asked for, and if it had been, the leaving the transaction to stand as money paid to Wm. Preston on his obligation Avould seem to only establish more strongly that the loan Avas to him, and the indorsement a pledge of the company’s credit for his benefit. If the lender was willing to have it so, and trust Wm. Preston on the strength of the indorsement alone, how can it complain that the cereal company did not retain the money?

It is recommended that the judgment of the trial court be affirmed.

Day and Kirkpatrick, CO., concur.

By the Court:

For tbe reasons stated in tbe foregoing opinion, tbe judgment of tbe trial court is

Affirmed.  