35 F. 699 | U.S. Circuit Court for the District of Southern New York | 1888
This action is in substance one of trover to recover moneys of the First National Bank of Albion, alleged to have been wrongfully appropriated by the defendants during the years 1880'and 1881. The case was tried with a jury, and the jury found a verdict for the plaintiff for $108,000 principal, with $44,759 interest. The case is now here upon a motion by the defendants for a new trial.
It appeared by the evidence that in 1880 one Warner was the cashier of the Albion bank, and for some time had been intrusted with the almost exclusive management of its affairs. In November, 1881, he became its president. In August, 1884, the bank failed, Warner absconded, and the plaintiff', who was appointed its receiver, took possession of the assets. An examination of its affairs showed that Warner had misappropriated moneys and securities of the bank to the amount of over $300,-000, and was otherwise indebted to the bank in a considerable sum. It was further shown that Warner had been carrying on stock speculations through the agency of the defendants, who were stock-brokers and bankers of New York city; that he opened a customer’s account with them May 11,1880, and continued to buy andsell stocks and securities upon margins through them, and to deposit with and draw upon them as bankers, during that year and the next; and that from time to time the defendants received large sums of money from him by checks of the Albion bank payable to their order, drawn by Warner, as cashier, upon the Third National Bank of New York city. The defendants collected these checks, and placed the proceeds to Warner’s credit in his account with them. It was also proved that for many years the Albion bank had kept a banking account with the Third National Bank of New York, and had been accustomed to draw upon it at sight, and send it collections and remittances; that after Warner became the cashier of the Albion bank he took personal charge of the correspondence between that bank and the New York bank, and intercepted the letters of advice and monthly statements sent by the
Upon the trial, the court excluded the testimony offered by the defendants to show that it was customary with bankers and brokers of New York city to receive cashiers’ checks and drafts drawn in favor of
In some aspects this is a hard case for the defendants. If the verdict stands, they are'made responsible to pay over a very large sum of money which came to their hands to be invested and handled for another person in consideration of a small commission to be received by them, and
Upon this principle it was held in Claflin v. Bank, 25 N. Y. 293, that a general authority to the president of a hank to certify checks drawn upon it, does not extend to checks drawn by himself; and if the face of the check shows the president’s attempt to use his official character tor his private benefit, every one to whom it comes is put upon inquiry,
The views thus expressed are pertinent in considering whether the instructions given to the jury were correct respecting the title acquired by the defendants to the checks and the moneys the checks represented. If the instructions did not accurately present to the jury the legal principles by which, upon the evidence, the rights of the parties were to be determined they certainly did no injustice to the defendants. The case was put to the jury upon the theory that the defendants, in taking the checks, occupied the position of purchasers of commercial paper, and as though their liability was to be tested by the rule applicable to actions for the wrongful conversion of such paper. If they acquired title to the checks as against the bank, of course they acquired title to the proceeds, and, if they were bona fide purchasers, their title was perfect; otherwise they became liable for the proceeds as for a conversion. Comstock v. Hier, 73 N. Y. 269. The defendants were given the full benefit of the distinction between negligence and malafides in the purchase of-negotiable paper, and the jury were instructed that mere suspicion on the part of the defendants was not sufficient to charge them with notice that Warner was using the checks without authority. The doctrine of Goodman v. Simonds, 20 How. 343, was adopted as applicable to the facts. The facts in evidence certainly justified the submission of the question to the jury whether the defendants did not have notice that Warner was availing himself of fiduciary powers to use the funds of the corporation for unauthorized purposes. As the checks were made payable to the order of the defendants for Warner’s individual use, in legal effect 'they were made payable to Warner’s own order. The defendants knew that he was not acting within the scope of any ordinary agency when he made
“It is clear that a banking corporation may be represented by its cashier—at least where its charier does not otherwise provide—in transactions outside of his ordinary duties without his authority to do so being in writing, or appearing upon the record of the proceedings of the directors. His authority may be by parol and collected from circumstances. It may be inferred from the general manner in which, for a period sufficiently long to establish a settled course of business, he has been allowed without interference to conduct the affairs of the bank. It may be implied from tho conduct or acquiescence of the corporation, as represented by the board of directors. When, during a series of years, or in numerous business transactions, he has been permitted, without objection, and in lus official capacity, to pursue a particular course of conduct, it may be presumed, as between the bank and those who in good faith deal with it upon the basis of his authority to represent tho corporation, that he has acted in conformity with instructions received from those who have the right to control its operations. Directors cannot, in justice to those who deal with the,bank, shut their eyes to what is going on around them ft is their duty to use ordinary diligence in ascertaining the condition of its business, and to exercise reasonable control and supervision of its officers. * * * That which they ought by proper diligence to have known as to the general course of business in the,bank, they may be presumed to have known in any contest between Hie corporation and those who are justified by the circumstances in dealing with its officers upon the basis of that course of business. ”
It is insisted for the defendants that, inasmuch as the checks were paid by the New York bank out of funds in part contributed by Warner himself, the Albion bank was not a loser of the face amount of the checks, and the plaintiff ought not to recover beyond the extent that the cheeks were paid out of Hie moneys of the Albion bank. The evidence did not indicate that the New York bank had any notice that the checks were not put out by Warner in the course of the ordinary business of the bank: consequently, when they were presented to and collected of the New York bank, the latter became a bona fide holder for value, and the Albion bank became liable to it for the face amount of the checks. Several of the adjudications which decide that the maker of commercial paper can maintain an action for conversion against the person who, with notice that it has been put fraudulently into circulation, negotiates it to a bona fide holder for value, also decide that he can recover the amount of the paper without averring or proving that he has paid it to the holder, and that it is enough, prima facie, that he has become liable to pay it, to entitle him to recover the face amount. Decker v. Mathews, 12 N. Y. 313; Evans v. Kymer, 1 Barn. & Adol. 528; Paine v. Pritchard, 2 Car. & p. 558. It has been held that the defendant may prove the insolvency of the maker, and thereby lessen the damages; but, in the absence of evidence of any want of ability of the maker to pay, the presumption is that ho is able to pay the paper, and will be obliged to do so. Potter v. Bank, 28 N. Y. 641. It is enough for him to show that he has incurred a liability to pay the amount by the wrongful act of the defendant; but, if the facts are such that this liability will not result in actual loss, he will only bo entitled to recover nominal damages. The law presumes that loss will follow liability; consequently, it is for the defendant to overcome the presumption by evidence which will take the case out of the ordinary category.
A cheek is not only a bill of exchange, upon which an action can be maintained against the drawer by the drawee who has paid it, but is a bill which is presumed to be drawn on actual funds, and appropriates the funds to the drawee upon payment. Undoubtedly, in an action for the wrongful conversion of such paper, if the defendant proves that payment of the check was refused by the drawee, that it has never reached the hands of a 'bona fide holder, and that he is ready to surrender it to the maker upon the trial, these facts would go in mitigation of damages, and the recovery of the plaintiff would be limited to his actual loss. If, in the present, case, the action was merely for the conversion of the checks, the plaintiff would be entitled to recover their face upon proof that they ivere paid by the New York bank, without more; but the action is for the money of the Albion bank, obtained upon its checks “ paid by the New York bank out of and from the moneys and accounts of the Albion bank.” If the evidence established that the cheeks were not paid by the Now York bank out of the moneys or funds of the Al
The defendants have no interest in the question whether the Albion bank paid the checks out of the moneys for which it is accountable to third persons, or even out of the money for which it may be accountable to Warner. It suffices that the checks were paid out of funds to which it had the legal title. Nor is it material that the defendants paid to Warner various sums of money which were ultimately received by the bank of Albion. It was open to the defendants to show upon the trial that the Albion bank did not eventually sustain any loss by Warner’s misappropriation of its checks or moneys, and thus reduce the plaintiff’s recovery to nominal damages. This they did not attempt otherwise than by showing that Warner deposited various sums of money to the credit of the Albion bank, which were not charged by that bank to the New York bank. The presumption is as cogent that these deposits, secretly made by Warner, represented the moneys which he knew belonged to the Albion bank, as that they were his own money. The
Several points discussed upon the motion for a new trial, among them the point that the jury should have been instructed not to include interest in their verdict accruing before the commencement of the suit, do not seem to merit consideration. The views expressed cover all the controlling questions in the case, and lead to a denial of the motion.