Case Name: BISCHOFF v. YORKVILLE BANK
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-12-30
Citations: 156 N.Y.S. 563
Docket Number: 
Parties: BISCHOFF v. YORKVILLE BANK.
Judges: 
Reporter: West's New York Supplement
Volume: 156
Pages: 563–568

Head Matter:
BISCHOFF v. YORKVILLE BANK.
(Supreme Court, Appellate Division, First Department.
December 30, 1915.)
Banks and Banking @=>130—Checks—Notice to Bank of Authority to Make.
The executor of an estate, who deposited moneys of the estate in another bank in an account in Ills name as executor, drew checks thereon, which he deposited to Ms personal account in the defendant bank. These checks were drawn directly to the order of defendant, indorsed by it, and placed to the credit of the personal account of the executor. Part of the proceeds of such checks were used to discharge the executor’s personal obligations to the bank, while part was used in paying personal obligations to other parties. Held, that the bank was charged with knowledge that the executor had no authority to use the funds of the estate for his personal benefit by reason of the form of the checks, for they put the bank on notice and such matters could have been discovered by reasonable inquiry so the defendant bank is liable to the estate for the amount of the proceeds of checks deposited with it.
[Ed. Note.-—For other cases, see Banks and Banking, Gent. Dig. §§ 319-825, 327; Dec. Dig. @=>180.]
Scott, J., dissenting in part.
©3^>For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes
Appeal from Special Term, New York County.
Action by Josephine Bischoff, as administratrix, against the Yorlcville Bank. From a judgment for plaintiff, defendant appeals.
Affirmed.
Argued before INGRAHAM, P. J., and McLAUGHLIN, LAUGH-LIN, SCOTT, and DOWLING, JJ.
Phelan Beale, of New York City, for appellant.
James A. Poley, of New York City, for respondent.

Opinion:
McLAUGHLIN, J.
I concur in the opinion of Mr. Justice SCOTT in so far as he holds that the defendant is liable for $2,765, the amount received by it in payment of loans made to Poggenburg, but I dissent from his conclusion in so -far as he holds that the defendant is not liable for any further sum. I think the trial court was right in holding the defendant liable for the aggregate amount of all the checks, and for that reason tire judgment should be affirmed. Poggenburg, for a long time prior to the time he was appointed executor of the Schneider estate, had had a deposit account with the defendant. He was appointed executor on the 9th of March, 1908, and shortly thereafter opened an account as such in the Bowery Bank. On April 24, 1908, ten days after opening tire account, he drew the first check thereon, which was for $500, made payable to the order of the defendant, which indorsed and placed the same to his personal account. The form of the check was notice to' the defendant bank that Poggenburg-was depositing in his personal account funds of the Schneider estate; that he was using money intrusted to him as an executor for his personal advantage (Ward v. City Trust Co., 192 N. Y. 61, 84 N. E. 585; Hathaway v. County of Delaware, 185 N. Y. 368, 78 N. E. 153, 13 L. R. A. [N. S.] 273, 113 Am. St. Rep. 909; Niagara Woolen Co. v. Pacific Bank, 141 App. Div. 265, 126 N. Y. Supp. 890); and, had the bank then made an investigation, the real situation 'would have been disclosed, and the loss sustained by the estate prevented. The bank, being in possession of certain information, was chargeable with a knowledge of all facts which an inquiry suggested by such information would have disclosed. Rochester & C. T. R. Co. v. Paviour, 164 N. Y. 281, 58 N. E. 114, 52 L. R. A. 790.
All of the checks in question save one were in the same form, viz., drawn directly to the order of the defendant, indorsed by it, and then placed to the credit of the personal account of Poggenburg. That the defendant knew, or ought to have known, that Poggenburg had no right to use-the funds of the Schneider estate in the manner in which he was using them, is accentuated by the fact that almost from the first he commenced using such funds, or some part of them, to discharge a personal indebtedness to the defendant itself.
Stress seems to be laid in the opinion of Mr. Justice SCOTT on the fact that, while the bank was bound to take notice from the form of the checks that the defendant was using trust funds to pay his personal obligation to the bank, it was not bound to take notice that he was using the funds when paying a personal obligation to other parties. I am unable to see the difference between the two cases. There is no difference in principle, as it seems to me, whether the bank knew Poggenburg was applying trust property to pay his own indebtedness to it or to others, because tire liability must be predicated in either case upon the fact that the bank knew, or had it made an inquiry, which it ought to have made, would have known, that the Schneider estate was being wrongfully deprived of its property. As I read the opinion in Havana Central R. R. Co. v. Knickerbocker Trust Co., 198 N. Y. 422, 92 N. E. 12, L. R. A. 1915B, 720, a different rule has not been laid down. I cannot believe the court in that case intended to hold that where a bank knows, or from information which it has could easily ascertain, a depositor is mingling trust funds with his own, by having them credited to his personal account and thereafter using them to discharge personal obligations other than to- the bank itself, no liability attaches.
I think the judgment is right, and should be affirmed, with costs. Order filed.
INGRAHAM, P. J-., and LAUGHLIN and DOWLING, JJ., concur.