Court Opinion

ID: 3629923
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:09:43.467301+00
Date Added: 2024-06-11T12:41:53.605045
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 61 
After the death of Samuel C. Thomson in July, 1940, the present plaintiff called upon the defendant Trust Company to pay over to her as executrix of the decedent's will the cash which he had on deposit and securities which the defendant then held to his credit for safe keeping. Responding to that demand the defendant delivered all cash and securities which then stood to the credit of the decedent upon its books, the total value of which was $731,971.46 less than the amount which the executrix claimed was due from the defendant. Subsequent investigation revealed that over a period of more than ten years the difference between the amount of cash and securities claimed by the executrix to be due from the defendant and the amount standing to the decedent's credit on the defendant's books, had been stolen by the decedent's secretary. The question between the executrix and the trust company as to the legal responsibility for the loss led to the present action.
Upon the trial the plaintiff contended that the defendant breached obligations which it owed as a depositary when it failed to deliver to the plaintiff as executrix the amount which *Page 63 
she claimed to be due the decedent. In defense of such charge the Trust Company contended that it had performed its full legal duty when it paid over to the plaintiff all cash and securities which it held to the credit of the decedent at the time of his death; that the items of cash in the amount of $140,902.04 and securities of the value of $591,069.42 demanded by the executrix in excess of cash and securities delivered to her by the defendant had been paid out and delivered by the Trust Company to the decedent's secretary, Mrs. Mary B. Roberts, on the authority of formal powers of attorney executed by the decedent and delivered by him to the Trust Company; that during all the time while the decedent had one or more accounts with the Trust Company it had sent to him each month, at the address he had designated, written statements showing all debit and credit items and the current condition of each account; that the loss sustained by the decedent and his estate was due to embezzlement by his agent and his own failure to examine the monthly bank statements which showed in detail the condition of his accounts.
The plaintiff did not dispute the proof that over a period of years Mrs. Roberts appropriated to her own use the cash and securities which the decedent's estate is endeavoring by this action to recoup from the defendant bank. It was not contended that any of the officers or employees of the bank had actual knowledge that Mrs. Roberts was stealing the decedent's cash and securities. There is no claim that the bank through its officers or employees was guilty of co-operating in the theft. Nor did the plaintiff assert that the bank acted in bad faith in any instance. It was the plaintiff's position that in a long course of dealing with Mrs. Roberts as the decedent's attorney in fact the bank's officers gained knowledge of facts which in the exercise of reasonable care would have put a banker on notice that her acts were in excess of the authority reposed in her by the decedent. In short the plaintiff's claim upon the trial was that the defendant bank is legally responsible for the loss sustained by the decedent because it negligently failed to heed facts within its notice which should have apprised it that Mrs. Roberts' dealings were irregular.
At the close of the trial, although the jury was not instructed to return a special verdict, the foreman in announcing the *Page 64 
verdict stated — "We find that the defendant is chargeable with notice on November 18, 1936, and we therefore find for the plaintiff in the sum of $271,788.38." The figure last mentioned was the computed sum furnished to the jury as the plaintiff's claim for damages if the jury should find that the bank first had notice of Mrs. Roberts' dishonesty on November 18, 1936. The figure was said to represent the total of Mrs. Roberts' misappropriations after that date. No objection to the form of the verdict was interposed by the plaintiff; no motion was made by the plaintiff to set aside the verdict and the plaintiff took no appeal from the judgment entered thereupon. The defendant appealed to the Appellate Division where the judgment of the Trial Term was reversed on the law and facts and the complaint was dismissed, one justice dissenting.
The decedent, a mining engineer, employed Mrs. Mary B. Roberts as his secretary in 1922. At first she was given charge over minor details of his financial affairs. As years passed he entrusted to her more important transactions involving the disposition of his securities and related matters. In the year 1928 she exercised authority so extensive that, by an order which was signed "S.C. Thomson by M.B. Roberts" she instructed the defendant bank to lend from the decedent's funds $200,000 "on call." The decedent consulted Mrs. Roberts frequently as to the state of the security market and during his long absences from New York City he inquired frequently by correspondence as to details of his financial problems with which she was familiar. It was not until May 16, 1930, after he had opened a "custodian account" with the defendant, that he executed the following formal power of attorney which gave her broad authority to deal with his securities:
"THE NEW YORK TRUST COMPANY, 100 BROADWAY NEW YORK, N, Y.
DEAR SIRS:
I hereby authorize and request you to follow any and all instructions, whether written or oral, given you by ____ M.B. Roberts ____ of ____ specimen signature of whom appears below, in respect to the sale or exchange of any or all of the securities which you, as Custodian or otherwise, now or in the future may hold for my account, the transfer, delivery *Page 65 
or other disposition of said securities, including delivery of said securities to my attorney himself, the investment of any cash which you, as Custodian or otherwise, may at any time hold for my account, and the purchase or acquisition by exchange or otherwise, of securities in my behalf, granting unto my said attorney full power and authority in the premises, ratifying and confirming all that he shall do or cause to be done by virtue hereof.
                                Very truly yours, SAMUEL C. THOMSON.
Specimen signature of M B Roberts May 16, 1930."
On October 23, 1931, while the first power of attorney was outstanding, the decedent gave to Mrs. Roberts a second power of attorney which covered not only his checking account but authorized her, among other functions, to borrow "in (his) name" from the defendant on promissory notes such sums as she might think proper and to pledge as collateral security therefor "any and all * * * securities held by (him) or by (her)".
By dishonest use of these two powers of attorney from 1930 until 1940 and by other means presently to be considered Mrs. Roberts embezzled more than $700,000 of the decedent's funds and the securities over which he had given her control. This embezzlement was accomplished in the following manner: The decedent kept his personal check book in his own possession. He made out his own checks and followed in detail the written statements — called "white sheets" — which were prepared and delivered to him each month by Mrs. Roberts. He was given to understand by Mrs. Roberts that these "white sheets" reflected the entries which appeared upon statements sent each month to the decedent by the defendant bank. Upon the "white sheets" appeared transactions involving the purchase or sale of securities, the receipts from various sources and the debits caused by checks which had been cashed during the month. The decedent also received from Mrs. Roberts periodically "blue sheets" which purported to contain a list of his stocks and bonds. These statements — "white sheets" and "blue sheets" — were examined with care by the decedent. Indeed, there were *Page 66 
occasions when he detected errors and supervised their correction. But since his death the decedent's complete trust in his agent has been proved misplaced. Upon the trial uncontradicted evidence demonstrated that from the beginning of her thefts in 1930 the statements made by Mrs. Roberts to the decedent and various account books which were under her control were falsified to conceal embezzlement.
We come then to an item of undisputed evidence upon which the defendant lays stress and which, it is said, goes far to absolve the defendant from liability herein. During all the period of years while his agent was appropriating his funds to her own use the decedent did not examine any one of the monthly statements sent to him by the defendant bank. These statements, regularly furnished by the defendant, contained advice to the decedent of all debits and credits and all transactions affecting his bank accounts during the month involved. There is undisputed testimony by a witness called by the plaintiff that if, in connection with Mrs. Roberts' statements, the decedent had examined any one of the monthly bank statements sent to him by the defendant, it would have disclosed her dishonesty. He chose, however, to disregard the information thus made available to him and to rely solely upon statements prepared by Mrs. Roberts.
Our inquiry upon this appeal goes to the question whether there are facts of record before us which afford a legal basis for requiring the defendant bank to make good the loss suffered by the decedent's estate due to his misplaced confidence in his own agent.
As appellant before us the plaintiff answers that inquiry in the affirmative and cites evidence of two transactions which, it is said, served to put the defendant bank on notice that the decedent's agent was acting without authority. The reference is to evidence of the occasion on April 26, 1932, when Mrs. Roberts did not have in her personal account sufficient funds to meet the payment of an outstanding check. To avoid an overdraft she exercised one of the powers of attorney on file with the defendant and gave written instruction to the bank to transfer $2,000 from the decedent's account to her own. Within the following eighteen months she drew a number of checks upon the decedent's account which were payable to her own order and were deposited in her own account with the defendant. During this period Mrs. Roberts also paid from her own account *Page 67 
a number of bills rendered to the decedent and made payments into a joint account maintained by the decedent with an associate. Upon the trial Mrs. Roberts testified that in October or November 1933, an officer of the bank called her by telephone and "said that I was drawing too many checks to my own order on Mr. Thomson's account, that it was unusual and would have to stop. He also said that in the future Mr. Thomson would have to sign all checks that were drawn to my order." Thereafter she drew no more checks upon the decedent's account to her own order. In his charge to the jury the Trial Justice submitted it as a question of fact whether these transactions by Mrs. Roberts in 1932 and 1933 were of such a character as to give notice to the bank that she was going beyond the apparent authority afforded by the powers of attorney in her favor which the decedent had delivered to the bank. The jury's verdict proclaims, as we have seen, a finding that the transactions of 1932 and 1933 did not give notice to the defendant of Mrs. Roberts' wrongdoing. In view of that circumstance and in the absence of an appeal by the plaintiff from the judgment entered upon the jury's verdict, we think that evidence of transactions which antedated November 18, 1936, affords no basis for reversal of the judgment now before us.
The appellant also contends, and the jury found, that on November 18, 1936, the defendant was given notice that Mrs. Roberts was acting beyond the authority given to her by the decedent. On that date she borrowed $75,000 from the defendant. The loan was made upon a promissory note which bore the decedent's name. As a part of the transaction the proceeds of the note were credited by the defendant directly to the decedent's personal account and thereafter they were withdrawn on checks signed by the decedent personally. It follows that neither the decedent nor his estate suffered loss from the transaction. But we are told that the signature of the decedent, which concededly was traced upon the note by Mrs. Roberts, was a "clumsy forgery" and that the defendant was negligent in its failure to detect the simulation. This contention, we think, disregards the fact that when the loan was the subject of preliminary discussion, and when later it was consummated, there was in the defendant's files a power of attorney whereby the decedent constituted Mrs. Roberts as "his true and lawful *Page 68 
attorney" to borrow from the bank in his name such sums as she thought proper and to pledge his or her securities for such loans. It is statute law of this state that "The signature of any party may be made by a duly authorized agent." (Negotiable Instruments Law, § 38.) Mrs. Roberts was the decedent's duly authorized agent. She signed his name to a promissory note as she was expressly authorized to do by the power of attorney then lodged with the bank. (See Oquendo v. Federal Reserve Bank ofNew York, 98 F.2d 708, cert. denied 305 U.S. 656; Cluett v.Couture, 140 App. Div. 830, 832, affd. 206 N.Y. 668; 96 A.L.R. 1251.) That note so signed was productive of $75,000, all of which the defendant bank was directed to credit and did credit to the personal account of the decedent. We find no evidence upon which could rest a finding of lack of due care by the defendant's officers in accepting from Mrs. Roberts the note of November 18, 1936, nor is the evidence relating to that transaction sufficient to support a finding that the conduct of Mrs. Roberts was such as to arouse suspicion and to put the bank's officers on notice of her perfidy.
We think the Appellate Division was correct in its ruling that the decedent was under a legal duty to examine the monthly statements showing the condition of his accounts, and that, in the circumstances disclosed by this record his failure to do so barred recovery in this action. The following testimony given by one of the plaintiff's witnesses stands uncontradicted: "* * * It is a fair statement of fact that when there was a discrepancy between Mr. Thomson's actual balance and the balance that appeared on these white sheets that he would have detected that discrepancy if he had examined his bank statements." In Potts Co. v. Lafayette Nat. Bank (269 N.Y. 181) this court had occasion to review a record of evidence with features similar to the case at bar. In ruling upon the question now before us the court said (per LEHMAN, J.) pp. 186-187: "* * * an examination by the plaintiff of the monthly statement of its account with the bank would have disclosed that the plaintiff had not received credit for checks which it had endorsed to the order of the bank. A depositor of a bank is under a duty to examine such statements of account, and to give notice of errors therein." (See, also,Critten v. Chemical Nat. Bank, 171 N.Y. 219, 227-230; *Page 69 Prudential Ins. Co. v. Nat. Bank of Commerce, 227 N.Y. 510,521; National Surety Co. v. Manhattan Co., 252 N.Y. 247, 256;Morgan v. U.S. Mortgage  Trust Co., 208 N.Y. 218, 223-228;Empire Trust Co. v. Cahan, 274 U.S. 473, 479, 480.) When in the present case the decedent chose to delegate that duty to another and entrusted to Mrs. Roberts the examination of monthly statements of his accounts, which were concededly furnished regularly by the bank, his estate may not now charge the bank with the loss which ensued and which was due to his misplaced confidence in his agent.
Finally, the appellant argues that the Appellate Division erred in dismissing the complaint because, in any event, the defendant bank was not entitled to deduct from the decedent's balances the sum of $75,000 on account of the note which was negotiated by Mrs. Roberts on November 18, 1936. At Trial Term this question was not submitted to the jury and counsel for the plaintiff did not ask for such submission. As the question now sought to be raised by the appellant was not preserved by exception it is not open for consideration by this court. (Pangburn v. Buick MotorCo., 211 N.Y. 228, 235; Hecla Powder Co. v. Sigua Iron Co.,157 N.Y. 437, 441.)
The judgment should be affirmed, with costs.