338
. nllElRAL:REPORTER,
vol; 59.'
!nsomenewspaper.Of general circulation, which notice shall state the time and place when and where the property owners along the Hne of the proposed improvement may make objections to the necesflity of the improvem.ent,-I say it is argued that that provision of thelstatute is substantially complied with by the naked publication of t:lJ.e ordinance itself. . The ingenuity of counsel in urging such a claim·. is to be commended, but the argument is one that carried force with the court. To say that the naked publication of an ordinance, with nothing more, is a substantial compliance, or even an attempt to comply, with the statute, is, in my judgment, entirely unfounded. . The notice that is required to be given should show, or attempt to show, that a resolution has been adopted by the'comDion council declaring the necessity for a public improvement, ,abdthat a time and place are fixed where those who are to be affected· by the preposed improvement may appeal', and show whythe:improvement is not necessary. Can it be said, with any show ·of :reason, that the publication of the is any notice to the' citizen that is to be affected by it, of the time and place whenor'where he may appear, and argue, and introduce evidence, and be heard on the question of the necessity of the improvement? My own ·Judgment is :that the common council, in this case, just simply' started out on this scheme of public improvement either in ignorance of the. p!:,ovisions of section 2,01' else with the deliberate purpose wholly to 'disregard them. Entertaining theBe views, it follows that the preliminary injuncWmwill be awarded, to remain in force until the final hearing of the cause. ... NEVADA BANK OF (Circult Jj'RANCISCO v. PORTLAND NAT. BANK et al. D. Oregon. December 23, 1893:) No. 1.006-
}<'alse representations concerning the financial responsibility of another. IDllde,..for the 'purpO$eof procuring him credit, negligently and carelessly. their falsity. without Investigation, when investigation would imply a frlmdulent bitent. and are actionable.
NEVADA.
·.
NAT. BANK.
839
5.
SAME-STATUTE OF FRAUDS-SIGNATURE BY BANK CASHIER.
The signature of a bank cashier, with his official title appended, to a letter bearing the bank's name at its head, is the signature of the bank, within the meaning of a statute providing against liability for representations as to the credit,sklll, or character of another, unless there is a memorandu,m thereof in writing, signed by the "party to be charged." 1 Hill's Code Or. § 786.
At Law. Action by the Nevada Bank of San Francisco against the Portland National Bank and George W. Hazen to recover darnages for false representations. On demurrers to the complaint. OverrUled. Williams & Wood, for plaintiff. R. & E. B. Williams & Carey and U. S. G. Marquam, for defendant bank. .
J. V. Beach, R. G. Morrow, and B. B. Beekman, for defendant Hazen. GILBERT, Circuit Judge. The plaintiff brings an action for damages against the defendants. It is alleged in the complaint that the Portland National Bank had for one of its customers the Ainslie Lumber Company, and that the company was indebted to the bank in the sum of $90,000, and was insolvent. That the de· fendant Hazen, who was the cashier and acting manager of the bank, knew of the financial condition of said CQmpany, as likewise did the bank. That, with intent to defraud the plaintiff, and to induce it to advance money to said company, thereby reducing the said indebtedness to itself, the Portland National Bank, by its said cashier, wrote to the plaintiff as follows: "Portland National Bank. "Portland, Or., 6-9-1892. "Mr. I. W. Hellman, Pres. Nevada Bank, San Francisco-Dear Sir: We take pleasure in mentioning very favorably to you the Ainslie Lumber Company. They are valued customers of ours, and are doing a large business in this section. The company is especially well organized in all its departments, and it is among the prosperous concerns on the coast. We have handled qUite a share of their business, and found all their obligations met promptly. The gentlemen in the management of the Ainslie Lumber Company are energetic, pushing people. "Yours, truly, Geo. W. Hazen, Cashier. I "Your people will remember me as Ass't Cashier of the United States National Bank of Portland."
-That on the 10th day of June, 1892, in answer to a letter from the plaintiff to the Portland National Bank, addressed to its cashier, George W. Hazen, requesting information as to the standing and responsibility of said Ainslie Lumber Company, the said Portland National Bank, by its said cashier, addressed the following letter to the plaintiff's vice president: "Portland NatIonal Bank. "Portland, Or., 6-10-1892. "J. F. BIgelow, VIce Pres. Nevada Bank, San Francisco, Cal.-Dear Sir: Your favor of the 8th Inst. is before me. At the request of ;\fr. Wall, the secretary and treasurer of the Ainslie Lumber Company, I took the liberty
840
FEDERAL
vol. 59.
a brief letter 10 yo:ur'president in reference, tQ the AInslie Lumber Co:mpany, and I presume will show you the ,said, letter. The'vice president of our bank, together wltl1., myself, made a tho:rough investigation of the business and relilPonsibiIity oHhis lumber firm, and, upon our. report to our board of directors, they extended a line of credit, which, in our estimation, the firm would have to be solid to obtain. Last December, Mr. Wall gave me a copy of their annual statement, which I herewith inclose. Would be glad to havefou return it to me. I do not know what this lumber company asks of your bank, but feel safe in saying that t thoroughly believe they can. and will do whatever they might promise you. ":{lespectfully, YO.urs, [Signed] Geo. W. Hazen,
-That the annual statement referred to in said letter showed assets amounting to $268,881.22 over and above all liabilities and debts of the said corporaticm. Than: at the time of sending said letter neither the vice president of the Portland National Bank nor the defendant Hazen had made any investigation as to the business or responsibility of said Ainslie Lumber Company, and said letter was writrten and sent to the plaintiff with intent to cheat and defraud the plaIntiff; andtha-t said arinuttl statement was false and fraudulent,and was so known to be by the defendants; and tb,at both of said1etters were written and sent' for the purpose of, inducing the plaintfffto extend to said Ainsl'ieLumber Company a credit. That the plain.tiff, relying upon said representations and upon that account, extended to said Ainslie Lumber Company a credit amounting to $21;905.82, all Of' which is lost to the plaintiff, and for which 8umplaintiff demands judgment. For al1lecond cause of action, the pla.iIJJtiff sets up the same facts that are ,contained in the first cause of action, but, instead of alleging the fraudulent knowledge and purpose of the defendants in writing said letters, it.is alleged that the defendants made no investigation as to said Ainslie Lumber Company, and that the representationsin said letters contained were carelessly and negligently made. Each count of the complaint is demurred to upon the grounds: First, that nei,ther the defendant bank nor its cashier had power to make such representations concerning the standing or credit of the Ainslie Lumber Company; second, the representations contain no definite statement of facts touching the credH of the Ainslie Lumber Company upon which an action could be brought; third, no action can be brought upon said representations under the stwtute of frauds. The defendalllts contend that the defendant bank, which is a national bank, had not the power to assume a liability for its own error or mistake in certifying to the financial standing of a cnstomel' seeking credit at anotherbank. It must be conceded that it had not the power to assume such liability ex contractu, but in the case' of a tort committed by the bank or its officers a different principle is applied. In such a case it is the rule that the corporation is liable for the, negligence or other tort of its agents and servants, even when performing acts that are ultra vires. In the case of Merchants' Bank v. State Bank, 10 Wall. 604, the court said: "Corporations are liable for every wrong of which they are guilty, and in suCllcase the doctrine of ultra vires has no application. Corporations are
NEVADA BANK
v.
PORTLAND NAT. BANK.
841
liable for the acts of their servants while engaged in the business of their employment in the same manner and to the same extent that individuals are liable under like circumstances."
In Bank v. Graham, 100 U. S. 699, 702, the
COUN
sa[d:
"An action may be maintained against a corporation for its malicious or negligent torts, however foreign they may be to the object of its creation, or beyond its granted powers. It may be sued for assault and battery, for fraud and deceit, for false imprisonment, for malicious prosecution, for nuisance, and for libel."
The same doctrine is applied in the cases of Railroad Co. v. Derby, 14: How. 468; Railroad Co. v. Quigley, 21 How. 202; Etting v. Bank, 11 Wheat. 59; Bissell v. Railroad Co., 22 N. Y. 258. It is argued that the defendant bank cannot be held liable to an action for the unauthorized or fraul:lulent representations of its agents; and tbia,t the cashier of that bank is not, from his mere posi· tion as such officer, authorized to make statements of the bank; and that, although the employment and official position of such officer may have given him the opportunity to make such statement. he may nevertheless have made the same as well when absent as when present at the bank. Authorities are cited which sustain this view. The language of the complaint, however, excludes this question from the discussion. It is alleged in the complaint (and for the purpose of this demurrer the complaint musu be taken to be true) that the defendant bank itself made the representations, by its cashier, and that the letters were written and sent by the defendant bank. It is alleged that it was the purpose of the bank by the representations to secure an advantage to itself, and that one of the letters was written in direct response to a letter directed to the defendant bank. There is nothing in the language of the letters themselves which would tend to contradict these allegations. On the other hand, there may be found in the letters numerous expressions corroborative of the theory that they were written and sent by and on behalf of the bank, and as the act of the bank. It is further objected that the language of the letters contains no statement of fact upon which an action can be brought, and that there is no definite information conveyed as to the property or means of the Ainslie Lumber Company, and no amount is stated for which its credit is said to be good. The general rule in regard to such representations is that they must be statements of fact, and not of opinion, and that the representations must be definite and certain in order to charge the defendant with liability. These letters contain the information that the Ainslie Lumber Company "is prosperous," "well organized," "doing a large business," that "they are valued customers of ours." The second letter contains as part of the representation the fact that the writer and the vice president ·of the defendant bank had made a thorough investigation of the business and responsibility of the company, and there is inclosed a copy of the company's annual statement, which shows assets of $308,057.75, and liabilities of less than $40,000. It is alleged in the complaint that this annual statement was known to be false when :80 furnished by the defendants. These representations so expressed
';jFEDERAL- REPORTER,
,vol. 59.:,
'and 80 complY,with the mle of law concerning such C3Jses;,·· ,, , The cases of Hopkins v. Cooper, 28 Ga. 392, and Glover v. Townin supporfbf the pr0positionthat the repsend, 30 Ga. 92, resenta1JiQDS .are not actionable indicate to a reasonable ceDtainty the amount for which it will be safe to extend credit. As applied to the tams declared upon, the conclusion reached by the court in the first of those cases is undoubtedly correct, but the princi:(>lellnnounced in both cases is notin harmony with the current of In Boyd's Ex'rs v. Browne, 6 Pa. St. 310, the representation wa'S th'at the j)a1"tyseeking credit was ''a sober, industrious man, worthy ,of credit, and able to pay," and was held suffie:ient to sustain theactiJll.. In Addingion Allen, 11 Wend. 374, the defendant waslield'liable upon a letter which stated in general terms that the person who sought credit was a merchant of some years' standing, ttiidtliWt 'any assistance Idven him iIi the way of buying goods would be thankfully acknowledged by the writer. In Tatton v. Wade, 86 E. representation was made concerning one who wished to rent;apartmenis, and its purport was that the plaintiff "need be underno,'apprehension of his honesty," and that he ''held a very reo Bponsible'situaJtion." In Kimballv. Comstock, 14 Gray, 508, the de· fendantWas charged with having falsely and fraudulently representedbf another that 'lhe was possessed of a large amount of propert:tlUl:d ,ettitied to credit." It iscbniended that action upon these representations is barred by the statute. of frauds.' Section 786, p. 594, 1 Hill's Code, provides as follows: 'INc>' e'Viilknce is admissible to charge a person upon representation as to the, 'credit, skill or character of a third party unless such representation or aWllllloralilqum thereof be in writing and either subscribed by or in the handwriting ,of the party to 00 charged,"
This provision of the statute is, in substance, a reproduction of Lord Tenterden's act, (9 Geo. IV. c. 14, § 6.) 'The same or a similar statute has been adopted in several of the staJtes, but it is believed that the provision therein expressed that thel'epresentation muS't be 'Subscribed by the "party to be charged" is found only in the law of Virginia, West Virginia, Kentucky, Alabama, and Oregon. In England, Lord Tentel'den's llct has been cooistrued to mean that the representation must be signed by the party himself, and may not be signed by an agent. Hyde v. Johnson, 3 Scott, 289; Clark v. Alex· ander, 8.Scott, N. R. 147; Williams v. MaS'O'Il, 28 Law T. (N. S.) 232. The same construction is doubtless applicable to the Oregon statute. It is, argued that the signature of the cashier of the defendant bank,l;ltilached to the letters, is not the signature of the bank. The English 'case of Swift v. J ewshury, L. R. 9 Q. B. 301, decided in 1874, is relied upon as giving that interpretation to the statute. In that a letter had been written to the manager of a bank, requesting his), opinion of the standing- of one who was seeking credit. The an . swer was si/i{ned, "J. 'B. Goddard, Manager." The banking comj pany had no knowled/i{ethat such letter had been written, and the manager no !lXpressaqthority to write the same. The oompany t
NEVADA BANK V. PORTLAND NAT. BANK.
343
was not a corporation. It was a copartnership, with certain privileges conferred by statute. It could sue and be sued only in the name of one of its public officers, and its members could not be made liable in respect to transactions with the company until a judgment had first been obtained against the company through one ortts public officers. The decision of the court of Queen's bench was that the signature of Goddard, the manager, was in fact and law the signature C'f the banking company; but, upon appeal to the court of exchequer, I,ord Coleridge was of the opinion that the signature to the document upon which the bank was sought to be held liable was not signed by the party to be charged, and did not come within the terms of the statute. Instead of basing the decision upon that view of the law, however. he held that the decision of the Queen's bench should be reversed upon the ground that, upon the language of the correspondence, there was no intention to consnlt the bank, but rather the manager thereof; and that the representation was made by Goddard himself of matters as to which he was pledging his personal knowledge only. Upon this ground the decision was concurred in by the remainder of the court. No American case is found which covers the point in question, but the tendency of the decisions in the states in which Lord Tenterden's act has been adopted has been to modify the protection which the statute affords to fraud by enforcing a strict construction of its provisions. Bush v. Sprague, 51 Mich. 41, 16 N. W. 222; Hodgin v. Bryant, 114 Ind. 401, 16 N. E. 815. I do not consider the opinion of Lord Coleridge in Swift v. Jewisbury in harmony with this tendency of the American courts, or with the theory of the American law. in regard to corporations, and the general course of the transactions of banking business. A corporation can sign instruments in writing only by an officer or officers empowered so to do. In the usual course of the corporation's business the aot of signing is not the aot of an agent, but the act of the -corporation itself. While' formal documents are usually signed by the president and secretary, and further authenticated by the cor.porate seal, the corporation may nevertheless empower any officer to execute deeds or other instruments in writing. In banking corporations, most instruments in writing issued or indorsed by the bank are signed by the cashier. The letters of the bank, in its usual correspondence about business. are often, if not generally, signed by him. In Morse on Banks and Banking (section 162) it is said that it is the special duty of the cashier to conduct the correspondence of the bank. The name of the defendant bank stands at the head of both letters referred to in the complaint, and both are signed by the cashier. and his official title is appended. The question is not free from doubt, burt I am inclined to the view that in a document of this kind. written under the circumstances detailed in the complaint, the signature of the cashier is the signature of the bank. It may be conceded that the bank would have the power to sign the letters in a different way. It can only append its signature, however, by some officer or agent, and the usual agent or officer to sign a written' instrument is the cashier. The cashier, -in this instance, D.O't only had the usual powers incident to his office,
344
FEDERAL REPORTER,
but it is' alleged in the complaint that the issuance of and the signa. ture to these letters were expressly authQrized by the bank, and intended to express its own deliberate action. In the second count of the complaint there is no allegation of frl1.udor fraudulent intent upon the part of the defendants in making the representations concerning the credit of the Ainslie Lumber Company, the question arises whether the averment that the repl'esentations were made negligently andc,arelessly sufficiently states a cause of aetion. It is held in Kentucky that the statute of that state; which is substantially the same as the law of Oregon a.bove'quoted, embraces every case of false representation concerning the credit of ,another, except cases where a fraudulent intent exists; but that, in case the representations are fraudulent, the statute lias no application, and an action may be brought, irrespective of its provisions. Warren v. Barker, 2 Duv. 156; Dent v. McGrath, 3 Bush, 176. The same doctrine is held inA1abama. Clark v. Lumber Co., 86 Ala. 220; 5 South. 560. I am unable to agree with the reasoning upouwhich those decisions are based. The decision in Pasley v.Freeman,3 Term R. 51, is generally understood to have prtimpted the enactment of Lord Tenterden's act It was held in that case that a fal·seaffirmation made by the defendant concerning the credit of another with the intent to deceive and defI'aud the plaintiff is, the ground of an action on the case in the nature of deceit, and that it is not necessal'Ythat the defendant's purpose should have been to benefit himself. This was supposed by some to be an evasion of the statute of frauds,' in that it permitted actions upon' verbal representations while prohibiting actions upon verbal promises to pay another's debt By Lord Tenterden's act it was declared'that representations concerning the credit of another should not be actionable unless :in writing, and signed by the party making the same. What was the nature of the representations that were placed under the protection of the statute? They were obviously such as, prior to the statute, were actionable. There is no warrent for holding thnt the statute was intended to create a new cause of action, or to render representations actionable which before were not The essence of the action after· as well as before the statute was thefraud1l1ent intent. In Allen v. Addington, 7 Wend. 10, reviewed on appeal to the court of error in 11 Wend. 374, it was held, after a careful review of all the authorities, that in an action to recover d,amages for false repN..'Sentations as to the credit ofa:.Dother the, declaration must contain' the 'allegations that the representations were made with an intention to deceive and defraud.' In Russell v.' Clark's Ex'rs,7 Cranch, 69, Chief Justice MarshaU' said: "Thatlifraudulent recommendatiGn (and a recommendation known at the time to be ,untrue would be traudulent) would subject the person giving it to dawa,ges svstained by the PEfson trusting to it seems now to be generally adI)1itted." .
In Ewins v. Calhoun, 7 Yt. 79, and Weeks v. BUl'ton, Id. 67, it is held that, where one acts upon false representations of another's eolvency, and is damaged thereby, h.e has a cause ofaction against
MURRAY tI. AMERICAN SURETY CO.
345
the· person making the same, if the latter knew them to be false. The same doctrine has been held in some' of the states where Lord Tenterden's act has been adopted. Kimball v. Comstock, 14 Gray, 508; Mann v. Blanchard, 2 Allen, 386; McKinney v. Whiting, 8 Allen, 207; Whitten v. Wright, 34 Mich. 92. These decisions, and others in general harmony with them, while all declaring that there must h,ave beell a fraudulent intent, are not uniform in their definition of that intent. In Allen v. Addington it is held that the fraudulent intent may consist either in an interested design on defendant's part to benefit himself, or a malicious design to injure the plaintiff. In other cases it is held that any representation known at the time to be untrue is deemed fraudulent. InLord v. Goddard, 13 How. 211, it is said fraud means "an intention to deceive. If there was no intention; if the party honestly stated his own opinion, believing at the same time that he stated the truth,he is not liable in this form of action, although the representation turned out entirely untrue." But by the weight of modern authority it is held that the law imputes an intention to deceive in every case where one recklessly asserts that to be true which is untrue, and concerning which he pretends to have a knowledge which he has nat. 1 Cooley, Torts, 501; Brooks v. Hamilton, 15 Minn. 31, (Gil. 10;) Lynch v. Trust Co., 18 Fed. 486; Caldwell v. Henry, 76 Mo. 254; Cooper v. Schlesinger, 111 U. S. 148, 4 Sup. Ct. 360. Of this class is the cause of action contained in the second count of the complaint. It is there alleged that the representations were false; that they were made for the purpose of gaining credit for the Ainslie Lumber Company; that they were negligently and carelessly made, without examination or investig,ation; that, if investigation had been made, the untruth of the facts represented would have been made apparent. These allegations sufficiently state a cause of action, and both the demurrers are overruled. MURRAY v. AMERICAN SURETY CO. OF NEW YORK. (Circuit Court, S. D. California. January 2, 1894.) No. 557.
1.
BANKS-RECEiVERS-AuTHORITY TO ApPOINT-STATE STATliTES.
The California statute authorizing the attorney general, on the recommendation of the bank commissioners, to institute suit to enjoin any bank guilty of violating the banking laws from doing further business, and, if it is found insolvent, to cause its business to be wound up under the direction of such commissioners, (Stat. 1877-78, p. 740, as amended by Stat. 1887, p. 90,) does not authorize the court to appoint a receiver for the bank; and a receiver thus appointed without authority cannot maintain a suit to collect claims of the bank.
2. SAME.
A statute providing that upon the "dissolution of any corporation" a receiver may be appointed on the application of creditors or stockholders, (Code Civil Proc. Cal. § 565,) does not apply' to the case of an insolvent bank which the state is proceeding against for violating its charter.
At Law. Action by Eli H. Murray, as receiver of the California "Savings Bank of San Diego, a corporation, against the American