Court Opinion

ID: 5223484
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:39:24.714872+00
Date Added: 2024-06-11T08:27:33.161506
License: Public Domain

McLennan, P. J. (dissenting):
Many of the facts in this case are not in dispute. The plaintiff is the assignee of a trust company, organized under the laws of the State of New Jersey, and he brings this action to recover upon a promissory note which was held by such trust company and transferred to him, which, in form, was made by the Jamestown Mantel Company, a domestic corporation, signed and executed by its treasurer, a Mr. George M. Turner. The action is brought to recover upon a renewal note, but the validity of such note and the right of the plaintiff to recover thereon depend entirely upon the original note and the circumstances under which it was given.
It appears that one Mr. Hough was president of the Newton Trust Company, plaintiff’s assignor, and that a Mr. Searing, who was an attorney and counselor at law and also a member of a brokerage firm in the city of New York, was vice-presi dent of the Newton Trust Company, and that his partner in such brokerage firm was also a director of the Newton Trust Company. Searing was also president of a railroad corporation, and one Welch was in the employ of said railroad corporation and had also rendered personal services for Searing. It appears that their relations were close and confidential. At a certain time Welch demanded of Searing, as president of the railroad corporation, payment for services rendered by him to such corporation. Searing said, in substance, “We are short of money; you procure a note [nothing said about the character of the note] for $2,500, and I will procure it to be discounted.” Thereupon Welch went to Turner, the treasurer of the defendant corporation, and procured from him a note of such corporation, signed and executed by him as treasurer and delivered to Welch. Welch took such note, delivered it to Sear - ing, and Searing, knowing that no consideration had passed to the Jamestown Mantel Company for such note, sent it to the *365president of the Newton Trust Company, plaintiff’s assignor, and asked that it be discounted. The president of the trust company, fully believing that Searing was sending to him a valid instrument, discounted the same and sent the proceeds to Searing, who was one of the committee on investments, and a lawyer, who would be presumed to know the law in such regard. Searing received the proceeds and stole or appropriated the money to his own use. When Welch came to demand the results of the note which he had procured, Searing suggested that he had been hard pressed, that it was absolutely necessary that he should have some money, and that he had in fact used the proceeds of such note for his personal use or benefit. By promises made by Searing to Welch that he would eventually be taken care of in the transaction, nothing further developed for a time. The note thus originally given was renewed from time to time, first at the instance of Searing; then, through the instrumentality of Welch, the treasurer of the Jamestown Mantel Company executed a renewal of the note, and in that manner the giving of a renewal note was continued until the action was brought to recover upon the note involved in this lawsuit.
Under the circumstances disclosed by the evidence in this . case I think it conclusively appears that Searing entered upon the perpetration of his fraud upon his trust company when he received the note of the Jamestown Mantel Company from Welch, then knowing- full well that the Jamestown Mantel Company was not indebted to Welch for services or otherwise, because he, Welch, had been employed serving the railroad corporation of which Searing was president, and serving Searing. So that my conclusion is that the Newton Trust Company took the note without knowledge of its infirmity; that it was not charged with knowledge such as was obtained by Searing, although an officer and director of the trust company, when engaged in an attempt to perpetrate a fraud upon such trust company, the essential of its success being that the trust company should not know his design in the premises. The authorities pro and con are cited in the opinion of Justice Bobson.
The question remains whether in any event the defendant is liable, because it is said that the treasurer had no authority to *366sign an accommodation note, He had authority, as appears by the uncontradicted evidence, to sign notes, and I fail to understand how a purchaser in good faith is called upon to determine whether one note signed by the treasurer represents an equivalent to the corporation, or whether another signed in the same manner may be regarded as an accommodation note, when either of the notes comes into the hands of an honest purchaser for value. If I am right in my first conclusion that the Newton Trust Company took this note in good faith, believing it to be the valid obligation of the defendant corporation, then it follows, as it seems to me, that it was entitled to recover upon such note.
I think the holding is contrary to the evidence, that the Newton Trust Company knew, or under the circumstances was chargeable with knowledge, that the note in question was an illegal or' invalid instrument. I think that the knowledge of Searing, although one of the investment committee, who was, as the evidence conclusively shows, engaged in a scheme to foist upon the trust company for his own purposes paper which he knew was invalid, was not chargeable or imputable to the trust company, and, therefore, that the trust company took such note and all the renewals thereof in good faith, and that the defendant, through its treasurer having put such note upon the mai’ket, which could not be distinguished from other notes which clearly he was authorized to execute, viz., those necessary in the ordinary transaction of its business, is liable to the Newton Trust Company, or its assignee, upon the note executed and delivered by its treasurer.
In any event the purpose of Searing was fraudulent, in that his intent was to procure the note to be discounted to pay the obligations of himself or his company to Welch, which was equally as fraudulent as against his bank as if he had determined in advance of receiving the proceeds of the note to apply such proceeds to his own use.
I conclude that the judgment and order appealed from should be reversed and a new trial granted, with costs to the appellant to abide the event.
Kruse, J., concurred.
Judgment and order affirmed, with costs.