The sun., 1910-05-23

particularly lfUo q an 1aco9peoa- T ostt,s
nsd" check. suoh 20 two Of The checks a.
present. rScleed were. where . check n %
presented for deposit there may b and no
guently h no opportunity On IRE part of the
bank 70 make inquiry a. 70 the circumstances
under which the check Was Issued OF re-
ceived. To refuse 10 receive tho check until
Inquiry should develop the facts - 10 lts
execution and delivery might result In an
OveFdran Of the depOsltog and in kls hnan-
oial shiDwreck even IN q case where The
tranaactions we're above criticism. To stis-
tain The ApDsllats Division declsiOa would
probably result In the Institution Of a rule
by which all such cheoks must be rejected.
whatever the lnoOnvenlence 10 the public
Council argued further that upon tho
principles Of equitable estOppal the plain
tin could not maintain lts claim, because Il
had given 70 Van vOOrhis alone The authority
70 drew checks. whereas it Il customary for
corporations 70 provide that their checks shall
BE- signed By two oflceru. which Il natural
and simple safeguard against dishonegty.'
II The plaintiff emitted the customary pre-
cautions. how could lt reasonably charge the
dsfsndant with neglect for not regarding its
chosen agents acts with susDicloni
The DOint Was also made that since the
Central Trust Company had accepted the
first and third chooks. IN leRRl eject a new
Instrument Was created 70 which the plain
tia Was not party and accordingly Il could
maintain no claim. Counsel declared finally
that where aduciAry draws q check 10 his
individual order and deposits Il elsewhere
IN hs individual account. and subsequently,
'nsea the procseds in breach of M trust, the
bank receiving such deposit h not liable for
the proceeds IN the absence Of actual knOwl-
edge Of tho nduciarys misconduct Or Of
circumstances suficisnt 10 put Il On inquiry.
Counsel for the American Bankers Aasocla-
tion Rrgusd along similar lines, and counsel
for the New York State Bankers Association
declared that the decision Of the learned
court below carries the doctrine of nOtioe
a. applied 10 those receiving nsgOtiahle IN
struments far beyond the limit which has
heretofore been set BY the courts or BY stat
utory enactment
Justice Willard Rartlstt, Who wrote the
Court Of Appeals decision, aaid that the
aveSment by the plaintiff that lie treasurer
had no right TO use IL funds except for the
purposes Of the plaintiffs business does
not negative the idea that the purposes Of
the plaintiffs business may have required
lie treasurer on Occasion 10 draw cheeks upon
the corporation account payable 10 himself
individually. The case really turns upon
I discrimination ~ 70 what were tho rights
Of the defendant and Ia duties toward the
plaintiff upon the presentation Of the checks
for deposit In tho individual account Of the
treasurer
The court says the defendant could prop
erly regard the checks 60 the property Of
Vas VoOrhis because 'the possession Of
4 hank check payable 20 the order Of the
holder h pTesumptlvs evidence Of owner
ship. n the offer of one Of the checks in
question TO the defendant for deposit
imposed upon Il a duty 10 make some in
lulry as 10 is validity and a. 20 the author
ny Of the Ofilcer in the premises. ! am Of
ihe opinion that the Knickerbocker Trust
Company In the present case did all the
law demanda.' When Il caused the three
checks 70 be presented 10 the Central Trust
Company for payment h made a tWofold
inquiry "a whether the checks bore the
genuine signature Of an ofiicer authorized
10 sign checks for the defendant. and t7l
whether Van VOOrhis had authority 10 draw
'hecks on the account Ofths corporation pay
lble 20 his individual account. The accept
ance Of the checks by the Central Trust
Company was acknowledgment By the cor
DoFatiOns deposit bank that Van Voorhis
had authority 10 draw checks In such form.
Judge Bartlett writes:
The Havana Central Railroad Company bv
lpening he deposit account with the Central Trust
Company constituted the latter corporatinn ne
,gen, - 20 Ell third parties who mighi receive
'hechs drawn upOn ha aocount 10 determine
EhetheF such cheCks were genuine and drawn
within the scope Of the treasugsr'a agency a.
b. the eontTact between the Central
rrasi Company and the railroad corporation.
When The CsntrAi Trust Company BY paying
Ihsas oharks declared 20 the KnickerbocksF Truss
Company that they were genuine obligations Of
he railroad corporation which ita trsasurrr had
auihority 70 drAu. the KnickerbOcksr Truss Com.
pany Vas not obligated by law 70 make any fur
her Inquiry but Waa authorized 70 deal Wiih the
JrOceeds of the checks a. the individual property
0f the pAyee. and amer h has turned over such
proceeds 70 him Il cannot Be compelled 70 restore
hem 20 the Havana Central Railroad Company
merely because the Central Trusi Company oughs
10 have Withheld payment 1.-THE checks
Judge Bartlett does not agree with the
that the inquiry Of the plain
MS deposit bank was not enough, and saws
that when a corporation opens an account
with a banking institution Il cOnfers upon
that institution the power 20 determine
whether any check drawn upon the account
conforms 20 the contract between the depos-
tor and the depOsitary When Il makes
4 mistake In th" determination Of such a
question the depositary may he liable 20
The depositOr but the depOsitor cannot
recover back the money paid on such checks
10 a third person who has received Il In good
faith relying on tho representation Of the
deposit bank that the check was al right
and has subsequently parted with the
money"
The court says that the view, stated
In the feWest possible words. is that the
Central Trust Company Was the agent
of the Havana Central Railroad Company
10 determine whether the checks In con-
Iroversy wefs properly payable OF not.
and when Il decided that they were and
paid them TO the KnickeFbOcker Trust
Company. which received the proceeds
In good faith. no right remains In the rail
road corporation 10 recover such proceeds
after the KnickerbOcker Trust Company has
paid them away
Chief Justice Cullen and Judges GRAY.
ilaisht. yann and Chase concurred.