Case ID: ad_155/html/0509-01.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

John Morrison, Appellant, v. Elverton R. Chapman and Others, Respondents.
    First Department,
    March 7, 1913.
    Principal and agent — conversion of moneys by managing agent of stockbrokers — forgery of principal’s indorsement by agent — when principal liable to drawer — appeal—final judgment by Appellate Division.
    Where the agent of a firm of stockbrokers managing a branch office under their name, using their letter heads and authorized to receive payments in cash and by check and to transmit the same to his principals, forged bis principals’ indorsement on checks received from a purchaser of stocks and converted the proceeds, the principals are chargeable with the proceeds of the cheek as moneys received from their agent’s cus- , tomer where the bank upon which the checks were drawn paid the same to the agent. Under the circumstances the defendant cannot escape liability upon the ground that the agent had no actual or apparent authority to indorse his principals’ name upon the checks.
    Where there is no dispute as to the facts and no question for the jury, as shown by the fact that both parties asked for the direction of a verdict and it is apparent that the respondents cannot upon a new trial produce relevant evidence which will affect the result, the Appellate Division will render final judgment for the appellant.
    While the delivery of a check for indebtedness is not payment, it becomes payment when the check is paid by the drawee.
    Appeal by the plaintiff, John Morrison, from a judgment of the'Supreme Court in his own favor, entered in the office of the clerk of the county of New York on the 10th day of October, 1911, upon the verdict of a jury rendered by direction of the court after a trial at the New York Trial Term, and also from an order entered in said clerk’s office on the 5th day of April, 1910, denying the plaintiff’s motion for a new trial made upon the minutes.
    
      Charles E. Rushmore, for the appellant.
    
      James M. Gifford, for the respondents.
   Scott, J.:

This is an action against a firm of stockbrokers by a customer for a balance claimed to be due upon account, and the question involved is whether cr not the plaintiff is entitled to be credited as for money paid with the amount of two checks delivered to the manager of defendants’ branch office and collected by him through forged indorsements of defendants’ name. Defendants’ principal office is in lower Broadway in the city of New York. At the time of the transactions out of which this controversy has arisen they maintained several branch offices in the city of New York one of which was situated in a business building at Thirty-fourth street and Fifth avenue. The name of defendants’ firm was displayed upon the door and windows of this office. It had been for several years in charge of one L. A. Cooper as its sole manager, who was in such complete control that the defendants rarely or never even visited the office. The letter heads used by Cooper, which were probably furnished by defendants, and must certainly have been used with their knowledge, bore the defendants’ firm name and the words L. A. Cooper, Manager.” He solicited orders for the purchase and sale of stocks, which orders were transmitted to defendants and executed by them. He collected moneys from customers for stocks ordered purchased, and transmitted such moneys to defendants in checks or cash as the case might be. When Cooper received checks or moneys from customers credit entries were made in defendants’ books at their main office in accordance with advices furnished by Cooper, and when stocks were purchased pursuant to orders given through Cooper defendants not only executed the orders, but sent to the purchaser the customary notices and statements of account. Among other transactions defendants purchased for plaintiff’s account upon orders given to Cooper, certain stocks for which defendants now claim that they were never paid, and the question we have to decide is whether or not payment therefor was made.

All of plaintiff’s transactions with defendants were had through Cooper and were conducted in identically the same manner. From time to time he delivered to Cooper in payment of moneys due to defendants six checks all of which were drawn to defendants’ order, and all of which when they were returned to plaintiff had been certified by the banks upon which they had been drawn. For the sum represented by the first four of these checks plaintiff duly received credit upon his account with defendants, indicating that the checks had been duly received and accepted by defendants from Cooper. Of the other two checks one, for $19,425, was drawn on the Bank of the Metropolis to defendants’ order and given to Cooper in payment of certain stocks which defendants bought, paid for and delivered to plaintiff. The other check, for $2,789.50, drawn to defendants’ order on the Corn Exchange Bank, was likewise given to Cooper in part payment of other stocks purchased by defendants for plaintiff.

Upon both of these checks Cooper forged defendants’ indorsement, and having done so deposited them to his individual accounts in the Knickerbocker Trust Company and the Astor Trust Company respectively. He then drew out the money from these trust companies, and absconded with it. Plaintiff’s checks were certified by the respective banks upon which they were drawn, and, in due course, were paid upon presentation. The question is whether upon these facts the plaintiff is entitled to a credit upon his account with defendants for the amount represented by the checks delivered to Cooper and fraudulently diverted by him. The general authority of Cooper to receive money from customers, either in check or cash, for transmission to defendants cannot be seriously disputed. He was put in open management of the branch office, orders given through him were habitually executed by defendants, and payments made to him were habitually received and credited by defendants. So far as concerns the business transacted through his office he was held out to the world as the accredited agent and representative of the defendants. The plaintiff was fully justified, therefore, in paying his indebtedness to defendants by means of a payment to Cooper. (Schultheis v. Caughey, 146 App. Div. 102; Fuller v. Municipal Telegraph & Stock Co., 117 id. 352; affd., 192 N. Y. 546.) In taking plaintiff’s checks Cooper was, therefore, acting within the apparent scope of his authority, and it is immaterial what secret instructions, to the contrary, not known to plaintiff, he may have had. (Newman v. Lee, 87 App. Div. 116.)

The defendants, however, rely upon the general rule that delivery of a check for an indebtedness does not constitute payment of the debt. This, of course, is true enough, but when a check is given in payment and the check is paid, the debt is paid. It is not disputed that plaintiff’s checks were good when given, and were duly paid upon presentation, and the real question, therefore, is who shall suffer by reason of Cooper’s rascality.

The question is not a new one. In Sage v. Burton (84 Hun, 267) the defendant owing plaintiffs for goods gave a check to one Abbott, a salesman for plaintiffs, who, as the case states 1 £ at times collected accounts for them and received checks of customers for accounts due the plaintiffs.” Abbott forged plaintiffs’ name upon the check and collected the cash. It was held that ££so long as the defendant was authorized to make settlements with, and payments to, Abbott of all claims in favor of plaintiffs against him, the giving of the check and the subsequent payment of the same by the bank out of the funds of the defendant was payment by the defendant so as to discharge him from liability to the plaintiffs.”

And again: ££If it be held that Abbott in this transaction was not the alter ego of the plaintiffs, and had no authority to indorse this check, yet, if he was authorized by the plaintiffs to receive this check from the defendant, any misappropriation of its proceeds by him is at the risk of the party who set bim in motion and put it in his power to perpetrate the wrong; such party must suffer rather than the party who is in no wise accountable for, and has no control of the perpetration of the wrong.” (Id. 270.)

That case was followed by Allen v. Tarrant & Co. (7 App. Div. 172). Defendant owing plaintiff for goods gave a check to a salesman employed by plaintiff. This check was turned in to plaintiff, indorsed and paid. A few days later the same thing occurred. Still later another check was given to the same salesman, who indorsed it in plaintiff’s name, and then drew the money which he stole. This court said: “It is true that delivery of a check is not payment c unless in some very special case, if such a case can be supposed, where the check was taken in absolute payment and extinguishment of the debt.’ (Thomson v. Bank of B. N. A., 82 N. Y. 8.) The delivery of a check to the principal or his authorized agent, and the subsequent payment of the same operates to discharge an indebtedness for which it is given.”

On the question of the agent’s apparent authority to receive payment the court said: “Upon the questions as to whether Cook was authorized to receive or indorse them [the checks] the evidence is that prior to the giving of the checks in dispute the plaintiff, through Cook, received a check of the defendant’s which was deposited in the plaintiff’s account in bank and paid by the defendant. If the plaintiff had desired to disavow Cook’s action in receiving checks in settlement of accounts, then seemingly was the time to have notified defendant.”

To the same effect is Morris v. Hofferberth (81 App. Div. 512), where the facts were very similar.

The latest case, and one very similar to the present, is Burstein v. Sullivan (134 App. Div. 623), wherein the gist of the opinion is contained in the following sentences: “But where a debtor delivers his check to the creditor or his agent duly authorized to receive it, and has funds in the bank to meet the check, the transaction as between the debtor and the creditor should be treated as a payment precisely as though cash had been paid, even though the agent forges an indorsement and steals the money. Upon the delivery of the check to Melle, in payment of the bill rendered by him, it became the plaintiffs’ property; and if their agent, by a forged indorsement or one made without sufficient authority obtained the cash and appropriated it to his own use, they should settle the question with the bank.”

It was clearly proven and it is in effect conceded that Cooper was defendants’ agent, and that he had authority to receive money and checks for plaintiff’s account. If he had received money, or a check drawn to bearer, there can I think he no doubt that payment to him would have been payment to defendants, and if he had stolen the money the loss would have fallen on defendants. As was said in Burstein v. Sullivan (supra): “A payment to Melle in cash would have been a payment to the plaintiffs, though he had stolen the money, and the defendant should not he compelled to pay twice or subjected to the hazard of a law suit with the bank for having taken the precaution to protect the plaintiffs by making a check payable to their order.”

It is no answer to plaintiff’s claim to say that Cooper had no authority to indorse defendants’ name upon the checks and that his act in doing so was without his actual or apparent authority. If money had been paid to him and he had stolen the money that act would still have been without the scope of his authority, and still the loss would have fallen upon defendants and not upon the plaintiff. “ The principal cannot so easily evade liability for the misdeeds of its agent. ” (Birkett v. Postal Telegraph-Cable Co., 107 App. Div. 115, 117; affd., 186 N. Y. 591.)

The underlying principle, which is well settled, is that, having put Cooper in a position to perpetrate the wrong, the defendants, and not plaintiff, must suffer the loss. (Wilmerding v. Postal Telegraph-Cable Co., 118 App. Div. 685; affd., 192 N. Y. 580; Birkett v. Postal Telegraph-Cable Co., supra.) As was saidin Wolff v. Lockwood (70 App. Div. 569, 571): “Thedefendants put Ranger [Cooper] in the position which enabled him to deceive them, and as his agency was solely for them it is apparent that if no other element is introduced in the case, those who were invited by the defendants to deal with him on their account should not be made to suffer for his transgressions.” Finally the defendants fall back upon the contention that plaintiff has suffered no loss on account of Cooper’s fraud because he has a right of action over against the banks upon whom his checks were drawn for having paid upon a forged indorsement, and this seems to have been the view of the trial court. In the first place, as was said in Burstein v. Sullivan (supra), there is no reason why plaintiff should be subjected to the expense and hazard of a law suit to rectify the fraud committed by defendants’ agent, and in the second place it is not entirely clear that such a suit would be successful. It was not clearly shown when the checks were certified, except that they were not certified when delivered to Cooper, and were certified before they were paid by the banks upon which they were drawn. If, as is probable, Cooper caused them to be certified before he indorsed them and deposited them to his own individual accounts, it might well be considered that, having authority to receive checks for transmission to defendants, he had also authority to cause them to be certified before transmission, and hence that in presenting these particular checks for certification he was acting within the scope of his authority, and that the certification had been made at the request of one authorized to request it. On the other hand, defendants apparently have a good cause of action over against the trust companies who accepted the checks and paid the amounts over to Cooper. (Burstein v. People’s Trust Co., 143 App. Div. 165.)

We are, therefore, unable to discern any principle upon which the judgment appealed from can be affirmed.

There was no dispute as to the facts, and no question to go to the jury, as was recognized by both parties in asking for a direction of a verdict, and it is apparent that the case is not one in which the defendants could, upon a new trial, produce any relevant evidence to affect the result. A proper case is, therefore, presented for making a final disposition of the controversy.

The judgment appealed from will, therefore, be modified in increasing the amount of the recovery by the sums in dispute, with interest, and as so modified affirmed, with costs to the appellant.

Ingraham, P. J., McLaughlin, Laughlin and Clarke, JJ., concurred.

Judgment modified as stated in opinion, and as modified affirmed, with costs to appellant. Order to be settled on notice.