Case ID: misc_50/html/0169-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Simon Silverman, Appellant, v. The National Butchers and Drovers’ Bank, Respondent.
    (Supreme Court, Appellate Term,
    March, 1906.)
    Negotiable instruments — Bona fide holders — What constitutes — Notice of equities generally — Particular facts as giving notice of equities.
    Where a member of a firm acting on its behalf borrowed money from a third party and took the latter’s check therefor and assigned to him accounts as security and then, after the cheek had been certified, had it cashed and it was in due course charged up to the drawer and marked with two stars by the bank on which it was drawn to show that it was paid; and where the bank afterwards credited back the amount of the check to the drawer on the erroneous statement that the original borrower was not a member of the firm and was without authority to act for it and the check having subsequently been returned to such borrower he took it up and repaid the money he had received upon it and, after holding it fourteen months, transferred it to the plaintiff for value; held that, under the circumstances, the plaintiff was put on notice; that, when the member of the firm first parted with the check, he transferred a good title thereto but when be voluntarily took it back it became part of the assets of the partnership; and, a receiver of the copartnership having been appointed, the title thereto vested in him and the subsequent transfer to the plaintiff was unauthorized and passed no title and an action against the drawer could not be maintained by him thereon.
    Appeal by the plaintiff from a judgment of the Gifv Court of the city of New York, entered in favor of the defendant by direction of the court.
    leventritt & Brennan (Alfred Holbrook, of counsel), for appellant.
    Steuer & Hoffman (¡Max D. Steuer, of counsel), for respondent.
   Scott, J.

The plaintiff sues upon a certified check. In February, 1903, there existed a firm known as Hayman & Co., the members of which were Julius Hayman and Frederick Heyman. On February 9, 1903, Frederick Heyman applied to one Charles ¡Rosenberg for an advance of money, asking for it in the name of Hayman & Co. Certain contracts were entered into between Rosenberg and Heyman, acting for and in the name of Hayman & Co., which resulted in the assignment to Rosenberg of certain outstanding accounts due to Hayman & Co., and the delivery by Rosenberg to Heyman of a check on defendant for $875 to the order of Hayman & Co. Heyman had the check certified by defendant and then passed it to one Gernsheimer, who paid the amount in cash. Gernsheimer deposited the check in the Mechanics & Traders’ Bank, receiving credit for it upon his account. It passed through the clearing-house and came back to defendant and was stamped with two stars, the mark commonly used by defendant to indicate that a check had been paid. At some time, the record does not clearly show when, upon a statement by Julius Hayman that Frederick Heyman was not a member of the firm and that hie indorsement of the firm’s name upon the check was a forgery, the defendant bank reeredited Rosenberg, the drawer, with the amount of the check and made demand upon the Mechanics & Traders’ Bank for a refund. The latter bank did refund the money and received back the check. In turn, Gernsheimer reimbursed his bank and received back the check and, later, Frederick Heyman repaid .Gernsheimer and became repossessed of the check. After holding it about fourteen months, Frederick Heyman transferred the check to the plaintiff for value. Without going into all the particulars, we may say that, under the circumstances attending the transfer of the check to plaintiff, we think he was put on his notice that there might be defenses and that his position is no stronger than would be that of Frederick Heyman. Cowing v. Altman, 71 N. Y. 440. Although Julius Hayman claimed that Frederick Heyman was not a' member of the firm of Hayman & Co. at the time the check was given, it has since been conclusively established, by a judgment of the Supreme Court, that Frederick Heyman was, in fact, at that time a member of the firm. As between the firm and third parties, therefore, he had authority to transfer firm assets, to receive payment therefor and to indorse the check drawn to the order of the firm. If, therefore, Rosenberg and the defendant bank had elected to stand and rely upon his assignment of the accounts and his indorsement of the check, their position' would have been impregnable as the event turned out. But, in all that Heyman did in the matter, he acted, not as an individual, but as a member of, and in the name and behalf of, the firm. Hayman also was a member of the firm, had at least the same right to act for it and represent it that Heyman had and had precisely the same right to rescind contracts made by the firm that Heyman had to make them. He elected to rescind them. While no formal rescission of the assignment of the accounts to Rosenberg was shown, there was ample evidence of a practical rescission under which Heyman collected the accounts. The certification of the check, after the Mechanics & Traders’ Bank and Gemsheimer had heen eliminated by repayment, constituted, if it remained effective at all, an obligation on the part of the bank to Hayman & Go., and not to Frederick Heyman, individually, Julius Hayman had been the effective cause of the return of the check by the defendant' bank and its reerediting the account of Rosenberg with the amount. This, certainly, estopped him and the firm of Hayman & Go., in whose behalf he acted, from asserting any claim against the hank upon its certification, Fhrther than this, the check, and whatever right against the bank it represented, when it came back into Frederick Hayman’s hands, remained, as it had been when he received it, the property of the firm of Hayman & Co. On February 19, 1904, Julius Hayman was appointed receiver pendente lite of the copartnership ; and, on April fourth, the. firm was judicially dissolved and Julius Hayman appointed receiver of its assets. Both of these events long antedated the transfer of the check to the plaintiff and, after the dissolution, Frederick Hey-man had no right to deal with the firm assets, except to turn them over to the receiver, and had no authority to assert any claim based upon the cheek or the .certification, or to invest any one else with such a claim. Since the circumstances surrounding the transaction were sufficient to put plaintiff on his inquiry, he can no more succeed than could Frederick Heyman.

O’Gobman and Newbubuhb, JJ„, concur»

Judgment affirmed, with coste.