126 N.Y.S. 890 | N.Y. App. Div. | 1910
Lead Opinion
This action was tried before a referee, and the facts as found by him are not, as I understand, disputed. The plaintiff was a domestic corporation, of which one Joseph Horowitz was the president down to May 1, 1904, when he was succeeded by Philip Horowitz, who continued as president until October 28, 1904. The plaintiff was organized to act as selling agent fór a corporation known as the American Woolen Company. The capital stock was substantially all issued to Philip Horowitz, and was subsequently deposited with the American Woolen Company under an arrangement between Horowitz" and the two corporations. By the by-laws of the company the president was given the general management of its business, but without power to draw or indorse checks or other
Philip Horowitz' was in business in the city of Hew York, using as a firm name “ Philip Horowitz & Son.” In June, 1904, Philip Horowitz, under the firm name of Philip Horowitz & Son, opened an account in the defendant bank. Commencing on June 22,1904, he began to deposit in this bank to the credit of Philip Horowitz & Son checks drawn to the order of the plaintiff, indorsed in blank in the name of the plaintiff by himself as jnesident, and then indorsed. with the firm name under winch he did business to the defendant' bank. He continued making-such deposits -until October 26, 1904, when the total number of plaintiff’s cheeks so deposited was eighty-nine, amounting in the aggregate to $28,469.37. The office of the plaintiff corporation and the private office of Philip Horowitz were located in the same building. . The method by which this, misappropriation of plaintiff’s money was-accomplished was as follows: Philip Horowitz would receive the .mail directed to the plaintiff each morning and turn over the checks received by mail which he did not intend to misappropriate to -the plaintiff’s bookkeeper, who was also in the employ of the American Woolen Company, and-these checks would be deposited in the State Bank to the credit of the plaintiff. From day to day, however, Philip Horowitz extracted from the mails the checks drawn to the order of the plaintiff that he wished to appropriate to his own use, and no notice of the receipt of . such checks would be given to the plaintiff’s employees so that on its books the accounts represented by the misappropriated checks would appear still- unpaid. The treasurer of the plaintiff was. in the habit of coming to the plaintiff’s office several times a week, usually in the middle of the day. All checks drawn on the plaintiff’s bank account were signed by him, and neither he nor any of the employees of the plaintiff had any knowledge of the defalcation. When Philip Horowitz’s attention was called by the treasurer or bookkeeper to these accounts being still unpaid, he stated that-the accounts were perfectly good but payments were slow and that he did not wish to push the plaintiff’s" customers.
This action was brought to charge the defendant with the amount of these checks which, it had collected, and for the amount thereof the learned referee has awarded the plaintiff judgment. ■
The defendant also had notice of. the fact that Horowitz had an account in the bank which was the account, not of the corporation, but of a firm of which Horowitz was a member, and that the proceeds of these checks were credited to that account and disposed of by checks drawn in the name of the firm of which the president was a member! I assume as the settled law of this State that if Horowitz had presented these checks to the defendant bank and .asked the defendant to receive them as payment of an indebtedness existing in favor of the defendant against either Horowitz individually or the firm of Philip Horowitz & Son, of which he was a member, the defendant would have been put upon inquiry as to the right of Horowitz to use the money of the plaintiff to pay his individual indebtedness. (Ward v. City Trust Co., 192 N. Y. 61; Squire v. Ordemann, 194 id. 394; Havana Central R. R.
In Havana Central R. R. Co. v. Knickerbocker Trust Co. (supra) I stated the reasons which satisfied me that there could be no distinction between a case where the bank received the money .in. payment of a debt to itself and a case where it received the money and paid it- out upon the private direction of the agent or trustee for his own individual purposes, and it is unnecessary that I should réstate them here. But applying the principle which - the Court of Appeals has now definitely stated- to be the law of this State, as illustrated in Ward v. City Trust Co. (supra), namely, that the question is merely one of notice to the bank, it seems to me that it can make no difference whether the bank knew that Horowitz was applying the proceeds of the checks belonging to plaintiff to his own’ debt to the bank or to satisfy his private obligations to others; that in either-case, where inquiry would have at
I think, therefore, that the facts as found by the referee, and which are sustained by the evidence, were sufficient to require the defendant to inquire as to Horowitz’s authority to appropriate the property of the corporation of which he was president; that, having failed to make such inquiry, it is chargeable with the facts which it would have ascertained if such an inquiry had been made, and that if it had had express knowledge of the facts which such an inquiry would have disclosed, it would have been liable to the plaintiff for the misappropriation of its property by Horowitz.
Entertaining these views I think the judgment appealed from should be affirmed, with costs.
Dowling, J., concurred; Clarke and Scott, JJ., dissented.
Concurrence Opinion
(concurring):
If the hank, when it credited the amount of the checks in question to the account of Horowitz, and when it permitted him to' withdraw the proceeds of the same, knew that they belonged to the
The real question, therefore, in this case, as it is in all cases of this character, as it seems to me, is whether the defendant knew that the checks were being wrongfully diverted, or was in possession of such facts as should have aroused its suspicion and.caused it.to-make an inquiry. The defendant did not have actual knowledge, but facts were presented which ought to have aroused its suspicion and caused it to make an investigation as to -whether Horowitz had a right to thus use the property of. the plaintiff, and had that "been done the real situation would have been disclosed. Being in possession of certain information, - it was .chargeable with a knowledge of all facts which an inquiry suggested by such.information would have disclosed. (Williamson v. Brown, 15 N. Y. 354.) The language of Judge Vann in Rochester & C. T. R. Co. v. Paviour (164 N. Y. 281) is quite applicable to the facts here proved. “ By accepting them [it] did an act which [it] had reason to believe would affect the rights of a third party, and [it] could hot, in justice to that party, ignore the suspicion which the facts should have aroused. One who suspects, or ought to suspect, is bound to inquire, and the law presumes that he knows whatever proper inquiry would disclose. While the courts are careful to guard the interests of commerce by protecting the negotiation of commercial paper, they are also careful to guard against fraud by defeating titles taken in bad faith, or with- knowledge, actual or imputed, which amounts to bad faith, when regarded from a commercial standpoint.” (See, also, Cohnfeld v. Tanenbaum, 176 N. Y. 126; 52 L. R. A. 790, note.)
Here were some ninety odd checks, all payable to the plaintiff’s order, and prima facie-they belonged to it. (Salen v. Bank of State of New York, 110 App. Div. 636.). They were indorsed in blank by Horowitz, the president of the plaintiff. The defendant had a right to assume that he, as president, had authority to indorse-them or to authorize another person to do it for him, but it had no right ■ to assume, when so large a number of checks, which prima facie belonged to the corporation, was presented, in so short a time, that he had a right to divert the same from the corporation to his
I, therefore, concur in the conclusion reached by Presiding Justice Ingraham that the judgment appealed from should be affirmed.
Dissenting Opinion
(dissenting):
I dissent for the reasons given by me for my dissent in Havana Central R. R. Co. v. Knickerbocker Trust. Co. (135 App. Div. 313, 320). While the reversal of that case in the Court of Appeals proceeded upon a different ground from any which was discussed in this court, yet that fact does not necessarily imply a disagreement with the views that I had expressed. As I then pointed out, in all the cases relied upon to sustain the rule which it is proposed to apply in this case there has been present the important fact, which is absent here, that the bank or individual to whom the diverted money was paid received it in payment of a debt, or in some other way reaped a benefit from the payment, thus becoming, with notice, an active participant in the diversion. Where that fact has been absent, as for instance in a case like the present, where the bank was a mere conduit or collecting agency, asserting no title to or right to retain, the money for its own advantage, a different rule has uniformly been adopted.. (Gray v. Johnston, L. R. 3 H. L. [1868] 1; Coleman v. Bucks and Oxon Union Bank, L. R. 2 Ch. Div. [1897] 243; Shields v. Bank of Ireland, 1 Irish Rep. [1901] 222; Ashton v.
Clarke, J.-, concurred. ,
Judgment affirmed, with costs.'