272 F. 371 | 3rd Cir. | 1921
The judgment brought here by this writ of error was entered by the District Court for.want of a sufficient
The plaintiffs had for many years been engaged in the business of selling commercial paper. They operated from a main office in ]’os-ion through branch offices in other cities, one of which was in Philadelphia. The Philadelphia office was opened in March, 1910, with M. T. Snyder as their agent.
The course of business was briefly this: The plaintiffs sent Snyder commercial paper to sell to local banking institutions. When Snyder made a sale he was required immediately to report the same by telegraph or telephone to the plaintiffs at Boston and deposit the proceeds —invariably the purchaser’s check-or draft drawn to the plaintiffs’ order — to the credit of their account with the Girard National Bank of Philadelphia. Such deposit was required to be made by two deposit slips, an original and duplicate; the original, giving the name of the maker of the check, the amount thereof, and the total, if the deposit included several checks, to be retained by Ike bank; the duplicate, showing the same entries, to be stamped by the receiving teller and returned to Snyder for transmission to the plaintiffs, thereby showing that the proceeds of the sale previo: isly reported had been deposited. Snyder had no power to draw on this account.
Later in 1910, the plaintiffs opened an account with the Merchants’ National Bank of Philadelphia. A short time afterward this bank merged with the First National Bank of Philadelphia, the defendant in this action, the latter bank at the same time taking over the account. This account, standing always in the name of Weil, Farrell & Co., was a petly cash account opened by the plaintiffs upon a deposit of $1,000 for the use of Snyder in meeting the expenses of the Philadelphia office. Against this account Snyder was authorized to draw checks for limited sums under a power of attorney made by the plaintiffs and lodged with and accepted by the defendant bank as the terms on which it carried the account. The power of attorney, so far as it is pertinent to this case, is as follows:
“Know All Men By These Presents, That we, Weil, Farrell & Co., do make, constitute and appoint M. T. Snyder our true and lawful attorney for us and in our name—
“(1) To draw checks against our account in the Merchants’ National Bank of Philadelphia, Pa., in no event to draw in excess of S1000 at any one time 's ® ® and to have full authority to manage and make settlement of said account.”
“(2) To endorse notes, checks, drafts, or hills of exchange, or other instruments of writing for deposit as cash, or for collection, in the Merchants’ National Bank of Philadelphia, Pa.”
It thus appears that in the conduct of the plaintiffs’ banking business, Snyder, their agent, had authority to deposit without limit to the credit of, but not to draw in any amount upon, their account with the Girard National- Bank; and that he had authority to make deposits in any amount to the credit of their account with the First National Bank,
Snyder’s scheme was this:
When his principals sent him commercial paper, Snyder had to account for it either as unsold 'or sold. If sold, he was required to account for the proceeds by sending to the plaintiffs the stamped duplicate deposit slip of the Girard National Bank, evidencing deposit of such proceeds with that institution. Having no power to draw on this account, Snyder, in order to use the plaintiffs’ money, had to get it before it reached this account. Therefore, instead of depositing the proceeds of sales of negotiable paper to the credit of the plaintiffs’ main account with the Girard National Bank as he should have done, he deposited the same, or much of them, to the credit of the plaintiffs’ petty cash account with the First National Bank, the defendant.' Having authority under the power of attorney to draw against this account by as many checks as he chose, but never at any one time for a sum in excess of $1,000, he could have drawn from the defendant bank by checks within that limit all the money he there deposited to the credit of the plaintiffs. But, as his speculative transactions were large and as his deposits made to meet them were correspondingly large, drafts by a great number of checks for small amounts would inevitably have excited suspicion. He therefore drew against the plaintiffs’ account with the defendant bank (thus augmented) by checks substantially larger in amount than those authorized by the power of attorney. These checks the bank honored.
By this means Snyder drew for his personal use large sums of money from the plaintiffs’ account with the defendant bank. But money thus obtained had to be used quickly and had to be restored or replaced by other money, because in the plaintiffs’ method of doing business the proceeds of negotiable paper which Snyder had reported as sold were required presently to appear by duplicate deposit slip to have been deposited in the Girard National Bank. Such deposit was imperative upon Snyder. To make it he had to have money. He found the money by appropriating the proceeds of later sales, and, depositing them with the Girard National Bank, he reported such deposits as the proceeds of earlier sales. He did this in one of two ways, and, when under the necessity of forcing figures, he did it in both ways. They were these: First, he deposited with the Girard National Bank the check of a purchaser in a later transaction, drawn as always to the order of the plaintiffs, properly noted as to name and amount on the original deposit slip, making the duplicate deposit slip show the same money entries as the original but leaving it blank as to the name of the maker of the check. Such duplicate, showing correctly the amount deposited but being mute as to the, maker of the check deposited, the paying teller of the Girard National Bank stamped in evidence of the deposit
Transactions of this character carried Snyder over for only a few days at a time, but during such short periods he was able to use the plaintiffs’ revolving funds in an amount which remained constant at between $90,000 and $100,000. Obviously he was required to repeat these transactions again and again in order to keep himself in speculative funds and to keep a few days ahead of exposure.
These transactions, running from July, 1915, to M'ay, 1917, grew in bulk to 382 checks, each in excess of .$1,000, honored by the defendant bank in violation of the plaintiffs’ power of attorney, and aggregated the astonishing sum of $3,161,981.74.
After discovery the plaintiffs brought this action against the bank to recover a book balance of $751.96 admittedly due, and the sum of $92,750, the amount which they claimed should have remained to their credit had the defendant bank observed their power of attorney and had not honored checks in excess of the authority there conferred and limited; first, however, giving the defendant bank credit for all moneys paid on checks unlawfully honored in excess of $1,000 which had ultimately reached them through redeposit with the Girard National Bank. On these items with interest, less a small credit not in issue, the trial judge, sitting without a jury, entered judgment for $94,445.26. 263 Fed. 778. To this judgment the instant writ is directed.
Of the several questions involved the first arises out of a defense made to the whole action. By the power of attorney under which the plaintiff depositors opened and the defendant bank carried, the account, Snyder, the plaintiffs’ agent, in addition to the power to draw checks in limited amounts, was given r‘full authority to manage and make settlement of said account.” Pursuant thereto the bank rendered monthly statements to Snyder, who, under the authority thus conferred, examined and approved the same without submitting them to the plaintiffs. Had they been received and examined by the plaintiffs they would have disclosed deposits grossly disproportionate to the purpose for which the account was kept, and also heavy withdrawals by checks drawn by Snyder and honored by the bank beyond the authority which the plaintiffs had conferred upon them.
As the plaintiffs had delegated to an agent the duty of examining the monthly statemehts, the defendant bank claimed at the trial that the plaintiff depositors were chargeable with knowledge of all that its agent knew and all that the statements and cancelled checks disclosed, and that, in consequence, the bank, on the plaintiffs’ failure to inform it of Snyder’s unlawful conduct, was not liable to the plaintiffs for unlawful withdrawals following the period when they should have found it out.
We are of opinion that the learned trial judge made no mistake of law in holding the bank liable for honoring checks beyond the authority which the plaintiff depositors had conferred upon it.
The third question — which is both difficult and elusive — has to do not with a question of law but with a question of fact — a question of fact which should have been submitted on an accounting.
In our endeavor to perform the task of accountants, our first'difficulty has been in determining whether the facts of the controversy — coining into the case not by evidence but by pleadings and stipulations — are such as admit of an accounting. If the facts are in the case, manifestly they are not in a form that will permit us to place them in debit and credit columns and deduce a result, for they appear entirely by totals- — and by grand totals — of hundreds of transactions in figures. After much labor in a field which is not ours, we have, however, evolv
The transactions out of which the difficulty arose were these: After withdrawing from the plaintiffs’ account by unlawful checks (a term we shall use for convenience in referring to checks in excess of $1,-000) various sums of money aggregating $35,385.06, Snyder, finding himself pinched in time within which to cover his withdrawals, deposited to the credit of the plaintiffs’ account in the defendant bank moneys of his own, aggregating the sum of $35,385.06 previously drawn out. After he had deposited, or had added to the plaintiffs’ money in the account, or had “restored” (as it has been termed) this latter sum, Snyder went on as before making large deposits in and drawing unlawful checks against his principals’ account for the dual purpose of meeting his sales transactions through the Girard National Bank and of taking his employers’ money for his own speculative purposes. We assume as a fact in the case that the total deposits made to the credit of the plaintiffs’ account in the defendant bank included not only deposits of the plaintiffs’ own money but also of Snyder’s money to the extent named. This is the crux of the difficulty arising from the record as framed. We find this fact from our reading of the record (paragraph eighteen of the affidavit of defense) where it is said that—
“All of the said $39,385.06 of deposits are included with $36,767.10 of deposits set forth in Paragraph Seven of the amended statement.”
But in the plaintiffs’ statement of claim there arises this situation: The transactions of this complex business were not limited to the deposits and to the withdrawals we have endeavored to describe but extended also to loans of money by the bank to Snyder on options of negotiable paper for $191,938.38, which was refunded and for which no claim was made; an item of $51,741.18 of unlawful checks on which no claim was made; an item of $34,304.20 of unlawful checks on which no claim was made; an item of $5,000 on which no claim was made; an item of a demand loan for $30,023.68 claim for which it is contended was precluded by stipulation; leaving as sums specifically claimed the item of $751.96, balance admittedly due by the bank at the time of the discovery of Snyder’s transaction, and an item of $92,750 paid out on thirty-five unlawful checks and kept by Snyder, together aggregating $93,501.96. This is the net sum demanded by the plaintiffs and awarded by the judgment of the court, plus interest. We are not clear whether included in the thirty-five checks aggregating $92,750 were some of the unlawful checks by which Snyder first drew out the
As a last answer the plaintiffs say: But immediately after Snyder’s restoration of $35,385.06, $22,942.53 thereof was transferred by unlawful checks from the defendant hank to the Girard National Bank and as it reached us through that channel we have given the defendant credit for that much of the $35,385.06 in the item of $2,847,594.79. But this does not answer the question, because this credit was on only one deposit of $35,385.06, while in the grand total named there are two deposits of this sum.
The remaining dispute relates to three unlawful checks bearing dates June 6, 9 and 16, 1916, for $2,700, $2,600 and S3,000 respectively, disallowed by the trial judge as deductions. We affirm this action if separately considered, for the three checks in question were included in the $35,385.06 of checks unlawfully honored by the bank and therefore are included in the deduction we shall direct.
We affirm the findings of the District Court on all questions, except one, and with reference to that one we direct that the judgment be modified, by deducting $35,385.06 and appropriate interest from the amount thereof.