Court Opinion

ID: 3587262
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:36:53.054117+00
Date Added: 2024-06-11T07:41:54.400337
License: Public Domain

On the 11th day of January, 1929, Isaac Blumberg  Company delivered to the plaintiff, the Glens Falls Indemnity Company, its check dated that day, in the amount of $19,250, drawn on the Bank *Page 447 
of America, New York city, payable to the order of Adnaloy Realty Corporation and/or the Glens Falls Indemnity Company. Thereupon the latter company indorsed said check as follows: "Payment approved Glens Falls Indemnity Co., by Sidney G. Barnett, Attorney," and caused the same to be delivered to one Michael F. Longo, president of the Adnaloy Realty Corporation. That this was a delivery to the Adnaloy Realty Corporation was not only evidenced by the delivery to its principal officer, the president, but is confirmed by the repeated statements in the brief of the appellant that the indorsement and delivery of the check was to the co-payee. The statement is made more than once that this indorsement and delivery of the check was to the Adnaloy Realty Corporation.
The president, to whom the check had been delivered, took it to the Interstate Trust Company (now the Chase National Bank), having indorsed it "Adnaloy Realty Corp. by Michael F. Longo, Pres.," and "Michael F. Longo." The trust company collected the check from the Bank of America and applied the amount to a loan which it had made to Michael F. Longo. This debt, even if antecedent, constituted a valuable consideration for the check. (Neg. Inst. Law, § 51.)
The Glens Falls Indemnity Company has brought this action against the Interstate Trust Company for the conversion of the check, alleging in its complaint the facts heretofore stated, and that Longo, the president of the Adnaloy Realty Corporation, had no authority to use the check for his own indebtedness, all of which was known to the Interstate Trust Company. Do these facts constitute a cause of action in conversion by the Glens Falls Indemnity Company?
The Adnaloy Realty Corporation makes no complaint. It has not claimed that its president has converted its property or that the Interstate Trust Company had no right to pass the amount of the check to his indebtedness. *Page 448 
For all we know, his acts, if unauthorized, were ratified. However this may be, the action is not brought by that corporation for the conversion of its property, and thus WagnerTrading Co. v. Battery Park Nat. Bank (228 N.Y. 37) is not applicable. We there held that "Any person taking checks made payable to a corporation, which can act only by agents, does so at his peril and must abide by the consequences if the agent who indorses the same is without authority, unless the corporation is negligent or is otherwise precluded by its conduct from setting up such lack of authority in the agent" (p. 42). The negligence or authority of the Adnaloy Realty Corporation is not before the courts by this pleading, as that corporation makes no claim to the fund and is not suing for any illegal acts or conversion by its president. This suit rests upon a claim by the Glens Falls Indemnity Company that its property has been converted and that its check has been wrongly applied by the president of another company, a co-payee.
What were the rights of these two payees to this check? A negotiable instrument may be drawn payable to the order of two or more persons jointly; or one or some of several payees. (Neg. Inst. Law, § 27.) Where the instrument is payable to the order of two or more persons who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others. (§ 71.) This applies to joint payees. But where the instrument is made payable to one or some of several payees, one may indorse and pass title. Where a note is made payable "to the order of A or B," the indorsement of either is sufficient to pass title. (Voris v. Schoonover, 91 Kan. 530.) In Union Bank v.Spies (151 Iowa, 178) it was held that a note payable to the "Royal Mutual Life Insurance Company, or Hugh Blackman," is payable to either and negotiable by the indorsement of either. (See, also, Page v. Ford, 65 Or. 450; Williams v.Thornton, 160 Tenn. 229.) *Page 449 
Had the Glens Falls Indemnity Company cashed the check after indorsing its name on the back thereof good title would have passed to the person taking it. Is there anything in the law which prevents its thus passing title by indorsement and delivery to its co-payee? I think not. Even a joint payee of a negotiable instrument may legally assign it to one of the others (Goddard
v. Lyman, 31 Mass. [14 Pick.] 268); and this may be accomplished by indorsement and delivery. (Daniel on Negotiable Instruments [6th ed.], § 701-a; Sneed v. Mitchell'sExecutors, 2 N.C. [1 Hayw.] 289.) This check in question could have been given by the Glens Falls Indemnity Company to the Adnaloy Realty Corporation without indorsement and that company could have collected the entire amount or exercised the same rights and privileges which belonged to its co-payee. All parties, including the defendant, are presumed to have known this law of negotiable paper. If the plaintiff, without indorsing the note, had passed it over to the president of its co-payee, he could have cashed it for his company, and the Adnaloy Realty Corporation could have received and collected the money. What was there, therefore, to put the defendant trust company on notice that this money or check belonged to the Glens Falls Indemnity Company? True, it had notice that the check was the property of the Adnaloy Realty Corporation, but it had no notice, actual or constructive, from the indorsements that the Glens Falls Indemnity Company had not parted with its title.
Not being obliged under the law to indorse the check in order to permit or authorize the Adnaloy Realty Corporation to collect or cash it and take the money, the indorsement must have meant something. Counsel for the appellant concedes, and such must be the fact, that if the president, Longo, had deposited the check in the name of his company, the plaintiff could not maintain this suit for conversion. The indorsement of the check *Page 450 
and the delivery to the corporation through its president authorized that corporation to deposit the check for collection and to collect it. If this be so, how can we say that the trust company had notice of the plaintiff's claim to title? Conceding the plaintiff could not maintain an action for conversion if Longo had put the money in the name of his company, how can we say that putting it in his own name gave notice to the trust company the property did not belong to his company but belonged to a third party? It does not follow logically, because the bank had notice from the form of indorsement that the money belonged to the Adnaloy Realty Corporation, that it also had notice that it was the property of the Glens Falls Indemnity Company. The positions are inconsistent. The plaintiff by its indorsement, "Payment approved, Glens Falls Indemnity Co., by Sidney G. Barnett, Attorney," and by the delivery to President Longo, passed title to the check to the Adnaloy Realty Corporation in so far as third persons were concerned who subsequently took for value and without notice. The trust company to whom Longo owed money took the check for a valuable consideration against all the world except Longo's company. As to it, the trust company had notice through the form of the indorsement that the money should be paid to the realty corporation and not to Longo. It had no notice that the plaintiff still had title to the check. Whatever adjustments were to be made between the plaintiff and the realty corporation, the plaintiff, by its indorsement and delivery, had parted with its title as to third parties cashing or taking the check for value and without notice. What the plaintiff is trying to do here is to make that rule of law stated in Wagner TradingCo. v. Battery Park Nat. Bank (supra), which made the form of Longo's indorsement notice to the trust company that the check belonged to his company, also notice to the trust company that the check belonged to the Glens Falls Indemnity Company. The *Page 451 
duty upon the part of banks to make inquiry or to take notice of the rights or duties of their depositors has not been carried to this extent.
The plaintiff, having parted with its title in the manner heretofore stated, cannot maintain this action in conversion, and the complaint was properly dismissed.
CARDOZO, Ch. J., POUND and KELLOGG, JJ., concur with LEHMAN, J., CRANE, J., concurs in result in separate opinion in which O'BRIEN, J., concurs; HUBBS, J., not sitting.
Judgment affirmed.