Case Name: OLINER et al v. GRONICH et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-07-09
Citations: 154 N.Y.S. 612
Docket Number: No. 7600
Parties: OLINER et al v. GRONICH et al.
Judges: 
Reporter: West's New York Supplement
Volume: 154
Pages: 612–619

Head Matter:
OLINER et al v. GRONICH et al.
(No. 7600.)
(Supreme Court, Appellate Division, First Department.
July 9, 1915.)
Bills and Notes <@=>345—Holdeb in Due Course—Cause for Suspicion —Statute.
Under Negotiable Instruments Law (Consol. Laws, c. 38) § 95, providing that, to constitute notice of an infirmity in the instrument or defect in the title of the person negotiating it, the person to whom it was negotiated must have had actual knowledge of the infirmity or defect, or of such facts that his taking the instrument amounted to bad faith, where one G. stole funds from his employers in Austria, and deposited the money with European bankers, whose correspondents in America sent G. at New York a check for the money, which he indorsed and delivered to N., who cashed it at the plaintiffs’ bank, under such circumstances as should have created a suspicion concerning the entire transaction, there being no evidence that the plaintiffs acted in bad faith, nor that if they had inquired of the drawers of the check, or the bank upon which it was drawn, the night on which it was cashed or the next morning, they would have received any notice of any infirmity, or that G. had no right to cash it, the plaintiffs nevertheless became holders in due course, entitled to recover against the drawers of the check in a suit in which the defrauded employers were impleaded, since something more than suspicion is required to prove bad faith.
<£r»For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes
[Ed. Note.—For other cases, see Bills and Notes, Cent. Dig. §§ 849-852; .Dec. Dig. <S^>345.]
Clarke and Dowling, JJ., dissenting.
^s^For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes
Appeal from Supreme Court Appellate Term, First Department.
Action by Saul Oliner and Isidor Oliner against Herman Gronich and others. Judgment for defendants was reversed by the Appellate Term (152 N. Y. Supp. 235), and defendants appeal. Affirmed.
Argued before INGRAHAM, P. J., and CLARKE, SCOTT, DOWLING, and HOTCHKISS, JJ.
Morris Cukor, of New York City, for appellants.
Alexander Pfeiffer, of New York City (Alfred D. Lind, of New York City, on the brief), for respondents.

Opinion:
INGRAHAM, P. J.
The check in question was a negotiable instrument, issued by the bankers, payable to the order of Goldenberg. It represented money stolen by Goldenberg from his employers in Austria, who are the defendants Gronich in this action; Goldenberg having deposited the money with the correspondents of the drawers of the check in Europe, to be transmitted to Goldenberg in the United States. They sent to Goldenberg at New York a check for this money. There is no question but what the bankers acted in good faith when they sent this check to Goldenberg and without notice of the defendants' claim. Goldenberg indorsed the check and delivered it to one Nussbaum. The circumstances under which it was delivered to him would be sufficient to show bad faith on his part. So, as between him and the defendants, the defendants were entitled to the proceeds of the check. Nussbaum, however, took the check to the plaintiffs, who cashed it for him, and, if they received this check in good faith, without notice of any infirmity, they were entitled to recover it against the makers, payment having been subsequently stopped by the bank upon which it was drawn.
The court found that Nussbaum, with full knowledge of all the facts and circumstances, and with a wrongful and fraudulent intent and purpose, cashed said check at the place of the business of the plaintiffs and received in exchange therefor $1,785.62, and further found that the cashing of said check was not had and done in the ordinary, usual, and regular course of their business, but as an extraordinary and unusual transaction for the plaintiffs, as well as defendant Nussbaum. Now, the only fact upon which this finding can be based was that Nussbaum came to the plaintiffs' banking house at 5 o'clock in the afternoon on the day of the date of check and asked plaintiffs to cash it. Nussbaum had been a depositor in the plaintiffs' bank, and defendant, relying upon Nussbaum's indorsement, actually cashed the check and paid the money for it. The court further found that the circumstances and conditions surrounding the presentation to the plaintiffs of said check and the demand for the cashing of same by Nussbaum created or ought to have created a suspicion in the minds of said plaintiffs concerning the entire transaction, and ought to have put them on their guard, before delivering the money to said Nussbaum. But, assuming this Ending, was sustained by the evidence, still I think the plaintiffs are entitled to recover. There is no finding that plaintiffs acted in bad faith or with knowledge of the fact that this check represented money stolen by the defendant. But it is found that the "circumstances and conditions surrounding the presentation to the plaintiffs of said check created or ought to have created a suspicion in the minds of the plaintiffs concerning the entire transaction, and ought to have put them on their guard. " But, as I understand the rule, this is not sufficient. There must be actual proof of bad faith. It is settled in this state that something more than suspicion is required to prove bad faith on the part of a purchaser of a check or promissory note. See Cole v. Harrison, 153 N. Y. Supp. 200, decided by this court May 17, 1915; Cheever v. Pittsburgh, etc., R. R. Co., 150 N. Y. 59, 44 N. E. 701, 34 L. R. A. 69, 55 Am. St. Rep. 646; Second National Bank v. Weston, 161 N. Y. 520, 55 N. E. 1080, 76 Am. St. Rep. 283; section 95, Neg. Inst. Law (Laws 1909, c. 43).
The plaintiffs' cashing the check, without actual notice of the defendant's claim, seems to me to have constituted them bona fide holders for value, and entitled them to recover from the drawers of the check, for the reason, first, that there was no evidence that plaintiffs acted in bad faith; and, second, if plaintiffs were put on inquiry, they could only inquire of the drawers of the check or bank upon which it was drawn, and there is no evidence in the case to show, if they had made such inquiry on the night on which the check was cashed or the next morning, that they would have received any notice of any infirmity in the check, or that Goldenberg had not a right to cash it.
I think, therefore, the determination of the Appellate Term should be affirmed, with costs.
SCOTT and HOTCHKISS, JJ., concur.