97 N.Y.S. 361 | N.Y. App. Div. | 1906
This action was brought to recover about $6,000 damages for the conversion by the defendant-of a number of checks, and of the pro
Is the bank which received these checks for. collection frpm Horton & Co. and returned to them the proceeds thereof, likewise liable to the plaintiffs as for a conversion ?
Plaintiffs’ counsel states .in liis. brief: “ The bare truth of the- case is that the defendant bank lias taken plaintiffs’ checks on the faith of a forged indorsement, guaranteed by Horton & Co. but that
Section 42 of chapter 612 of the Laws of 1897 (the Negotiable Instruments Law) is as follows: “Where a signature is forged, or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no light to retain the instrument, or to. give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.”
It is clear from the record that Cassidy had the right to indorse the plaintiffs’ name to checks for purposes of collection. and to deposit the same to the credit of plaintiffs in the Fifth Avenue National Bank. It is equally clear that he had no such power to indorse their name and divert said checks to E. II. Norton & Co. for the purpose of carrying on therewith a speculative stock account. Did the diversion, after indorsement, make the original indorsement a forgery ? Is the defendant, who without knowledge of any of the facts known to Norton & Co., in! good faith received the checks for collection, collected the sums due thereon and paid said sums over to Norton & Co., liable as for a conversion ?
We proceed to consider the cases cited and relied upon by the plaintiffs.- (Schmidt v. Garfield National Bank, 64 Hun, 298 ; affd., 138 N. Y. 631.) In this case one Lingard was the bookkeeper of C. A. Schmidt. There was testimony that Schmidt kept his account in the Chemical National Bank and that he had a rubber stamp ‘For deposit in the Chemical National Bank” and that Lingard had
In Robinson v. Chemical National Bank (86 N. Y. 404) one Leonard was the clerk and agent for the collection of rents and fór. other matters of Beare. "Leonard received a check for rent drawn on the Manhattan Company to the order of Beare. Leonard indorsed the check: “ Bay to the order H. ’K. Leonard. Thomas M. Beare, pei-H. K. Leonard, attorney for deposit. Chemical National Bank". H. IP. Leonard.” He deposited the check in the Chemical- Bank, which collected the amount thereof from the Manhattan Company 'and. placed it to the individual credit of Leonard, wlio subsequently-checked out the same for his own use. The court said: “ The authority which Leonard had, as agent, to collect the rent and trail's- - act other business for Beare, gave him no legal authority to indorse this check, and his indorsement thereof was just as ineffectual to pass any .title as if he had forged Beaie’s name. * * *- That-
Here, again, the action was against the bank which dealt with the wrongdoer. In Citizens' National Bank v. Importers & Traders' Bank (119 N. Y. 195), the plaintiff, an Iowa bank, had funds on deposit with defendant sufficient to meet certain bills of exchange-which it drew on defendant in favor-and to the order of Wadsworth & Co. Wadsworth & Go. indorsed these drafts to certain creditors in payment of their accounts, and delivered them to their bookkeeper to be sent off. He erased the indorsements, forged others and used the paper for his own purposes. - It thereby came into other hands, and, through the Fourth National Bank, was presented to and paid by the defendant. After the forgeries were discovered, and upon return to the plaintiff of the drafts from the defendant, Wadsworth & Co. demanded, and obtained them back from plaintiff and indorsed them to one W. for collection. He was refused payment of them by the defendant on their presentation on the ground of 'their previous payment- The plaintiff repaid to Wadsworth & Go. the moneys wherewith the drafts had been purchased by them, and then commenced this action. The court held that the cause of action was for the breach of the contract to pay the drafts of the plaintiff. “We must regard the paperas never having been paid by defendant to the order of the plaintiff, for the rule is well and long established that a forged indorsement does not pa'ss a title to commercial paper,.negotiable only by indorsement, and payment by the drawee, although in good faith, of a draft so affected, is no-payment at all, as to the true owner. * * * It was the defendant’s business to see to it that its depositor’s moneys were expended according to its directions, and every expenditure was at the defendant’s risk of the direction being valid and of the indorsement conveying title to-the holder being genuine. * * * Forgeries may consist, in the legal sense, of any fraudulent alterations of paper by which another may be defrauded. * * * So, we have no payment by the defendant' Of these drafts proved and the question becomes solely one upon its objection to the right of the plaintiff to maintain this action for non-payment by the defendant to third persons of the drafts. * * * If the plaintiff was suing
In People v. Bank of North America (75 N. Y. 547) one Phelps was, a clerk in the State Treasurer’s office. Ten drafts payable to the order of the Treasurer had been delivered at his office. It was no part of Phelps’ duty to indorse drafts: He had no authority to do so express or implied. He did'indorse eight of these drafts and diverted''them from their proper use.' The defendant took these drafts with the forged indorsements from persons in the wrongful possession of them-, collécted.fhe money upon them and surrendered them up to the drawees. Judge Earl said : “ That, under such circumstances, it can be sued for a conversion of them is well settled in this State.” Two other of the drafts were indorsed in blank by the Deputy Treasurer, who had authority to indorse them, and delivered to Phelps for deposit in one of the legally designated deposit banks in Albany. Phelps filled up the blanks in the indorsements with-the name of. Hudson, the cashier of a firm of private bankers in Hew York, and delivered the drafts to that firm, and from it the, defendant took them. “ The general principle that when- an agent is intrusted with negotiable paper for a particular purpose 'and fraudulently diverts it to another purpose, a person faking, such paper or dealing in it in good faith'will be protected, is not disputed by the plaintiffs. * *• * To conclude the whole discussion, in the final' analysis of this case, the claim qf the defendant to the eight drafts may be answered by the application of the elementary principle that one. who. takes property (not negotiable instruments) from or under a thief or other person who has wrongfully converted the same, can have no better title than the' wrongdoer had ;. and the claim of the plaintiffs to recover for the two drafts may be answered by the application-of the principles which protect
Considering these authorities together and applying them to the case at bar, I reach these conclusions: Cassidy was in lawful possession of the checks as the agent of the plaintiffs. He had a clear right to indorse them in the name of the plaintiffs. After he indorsed them, he diverted them unlawfully to his own use by delivering them to E. H. Horton & Co. to be credited to his own speculative, stock account. Horton & Co. are chargeable with responsibility for their participation in this wrongful act. Upon the evidence as it appears, there is not a suggestion in the case that defendant had notice, knowledge or suspicion tending to impeach the checks. Horton & Co. in the regular course of business transmitted the checks to defendant for collection, defendant collected the proceeds thereof, and long before any demand from plaintiff, and without notice, paid over said proceeds to Horton & Co. As to the defendant bank these checks were negotiable instruments. Having been received without notice, in good faith and for value, the bank not owing any duty to the plaintiffs as depositors, not being in possession of the proceeds at the time of demand, and having had no dealings with Cassidy, the wrongdoer, this action for conversion will not lie. As said by Mr. Justice Hatch in Bank of America v. Waydell (103 App. Div. 25) : “ In the main they were general indorsements carrying perfect title, and no knowledge of the limited title of- the person making the transfer was brought home to the party or bank receiving it. The transactions thus assumed the form of dealing with instruments payable upon presentation, without notice of any limitation or defect in the title. Under such circumstances, the courts have supported the transaction in favor of the party dealing upon the faith of the instrument, mainly upon the grosnd that it
The exceptions to the direction of a verdict for the plaintiff and to the refusal to direct one for the defendant are sustained ; the order denying the motion to set aside the verdict and for a new' trial is reversed and a "new trial granted, with costs to the appellant to abide the event. "
O’Brien, P. J., Ingraham, McLaughlin and Laughlin, JJ. concurred.
Order reversed^ new trial ordered, costs to appellant to abide event.