Court Opinion

ID: 5193105
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:39:15.507271+00
Date Added: 2024-06-11T08:26:58.626602
License: Public Domain

Hiscock, J. (dissenting):
At the time of the occurrences involved in this action the plaintiff was proprietor of a lumber yard in the city of Hew York. The immediate practical management thereof was vested in one Gar-wood as his agent. A quantity of lumber was sold to the defendant, and it is claimed by plaintiff that upwards .of $2,400' of the purchase price thereof has never been paid, and it was for- the recovery of such sum that this action was brought.
The question whether plaintiff’s claim is well founded depends upon the effect which is to be -given to the acts of his agent Gar-wood in receiving from the defendant the latter’s checks payable to the order of the plaintiff, to the amount of such unpaid purchase price, and in thereafter indorsing the same in plaintiff’s name and collecting the proceeds thereof.
The evidence was undisputed upon the trial that without plaintiff’s knowledge or consent his name was indorsed upon the checks by Garwood; that the latter had no express authority to make such indorsement, and that he kept and embezzled the proceeds of the checks so that the money never came into plaintiff’s possession, and he never has received actual payment of his claim against the defendant. The latter has never paid the checks except as they were charged to his account by the bank after having been improperly paid upon the forged indorsements.
Ho express power having been conferred upon Garwood to indorse checks, defendant sought to find evidence of an implied authority in the general relations existing between him and plaintiff, and the jury was permitted to find in that way that such authority *519■did exist. The question presented to us, whether this finding was authorized, leads to a consideration of thé powers which plaintiff •either, expressly or by implication had conferred upon his agent.
It may be broadly stated that plaintiff, who lived away from Hew York, placed Garwood in general charge of the lumber yard with power to sell lumber and settle and collect accounts therefor; that bills were furnished for the latter purpose running to plaintiff and designating Garwood simply as agent; that with the knowledge, of plaintiff the latter did collect claims and remit therefor to plaintiff; that prior to the ones involved in this action Garwood never indorsed in plaintiff’s name any checks, but sent the same to plaintiff.
Garwood was to receive a certain proportion of the profits made in the business, but it was never claimed by the parties or upon the trial that this constituted any partnership or was otherwise than by way of compensation. In fact, the billheads used, as already stated, asserted that plaintiff was the principal and Garwood the agent.
We are, therefore, led to the . inquiry whether a person who employs an agent to transact a specific business for him and in connection therewith to settle and collect accounts and receive money and checks therefor, is, by virtue df such express authority, invested with the further implied authority to indorse in the name of his principal checks or other negotiable instruments payable to the latter’s order. The prevailing opinion holds that this is the law. I am unable and unwilling to concur in that view.
At the outset reference may be made to what seems to. me to be a misapprehension as to the burden of proof which rested upon plaintiff. He testified that he had never authorized Garwood to indorse paper for him. In connection with such testimony it is said that plaintiff was not a disinterested witness and, therefore, it was for the jury to say whether he testified truthfully upon this subject. I do not think that it rested with plaintiff as a matter of affirmative proof to show that he had not authorized Garwood to make the indorsement, but rather that the burden rested upon defendant of. showing that the latter was so authorized. It is too well settled to require any extended discussion that under all ordinary circumstances the drawer of a check or the bank upon which it is drawn must know before honoring it that .the indorsement thereon is genu*520ine. (Graves v. American Exchange Bank, 17 N. Y. 205; Citizens' National Bank v. I. & T. Bank, 119 id. 195, 200.)
■ When it appeared, as it did undisputedly upon the trial, that plaintiff’s indorsement, upon these checks was not made by -himself,, but by somebody else, the burden rested upon the defendant distinctly and unequivocally of showing that the professed agent acted within the limit of his authority in making it. The burden did not rest upon plaintiff of showing that he did not. This is the simple and ordinary rule where one seeks to bind another through the act of a third party claiming to be an agent. (Craighead v. Peterson, 72 N. Y. 279, 283.)
I pass, therefore, to a consideration of the main question as above stated. It is perfectly understood .as a matter of ordinary business observation and experience, that almost the last authority which a man confers upon his agent is the right to bind him by signing or indorsing his name upon negotiable paper. Yery naturally men are reluctant to confer upon others an authority which, if misused,, may be so injurious as this. I think that the courts have respected and followed the general course of conduct of business men in dealing with this subject, for they have always been slow to infer a power to perform such acts unless it was clearly given or fairly to be implied. The general proposition that an agent who is authorized to collect bills is thereby clothed with the power to indorse his principal’s name upon negotiable paper seems to me to be both extreme and dangerous. It may be said that such an agent by making collections in cash has the power to defraud his principal That is true, but the probability of such results is limited and may be assumed by an employer, whereas the other right to take checks, in which large payments are ordinarily made, and indorse them is much more dangerous. If such a rule .is good law, then the ordinary messenger boy of a baiik who is sent out to make collections, almost universally paid in checks to the order of his principal, is invested with the power to misappropriate moneys far beyond any understanding which ordinarily prevails in business life.
■ I think the cases which have’ been called to our attention establish no such proposition as is stated in the prevailing opinion in this case. It may be conceded that some of them suggest a. distinction which might arise in those cases where an agent to settle and col*521lect, taking a check payable to the order of his principal, indorsed it. solely and exclusively for collection. Some of them have refrained, from stating what might be held in such an instance. It is sufficient, to say that in this case it does not appear that Garwood indorsed the checks which he received from defendant for collection in any ordinary course of business, or that he acted within any apparent, scope of his master’s business and interest in securing the money upon the checks. Therefore, the cases to which I have referred,'as well as others, are authorities against the rule that plaintiff is to-be bound by his indorsement. (Robinson v. Chemical Nat. Bank, 86 N. Y. 404; Holtsinger v. Nat. Corn Exchange Bank, 6 Abb. Pr. [N. S.] 292; Jacoby & Co. v. Payson, 91 Hun, 480; Bernheimer v. Herrman, 44 id. 110; Graham v. United States Sav. Institution, 46 Mo. 186; Thomson v. Bank of British North America, 82 N. Y. 1, 10.)
It seems to me that the facts appearing in the case of Robinson v. Chemical Nat. Bank (supra) are so far similar to those existing-in this case that the decision of the court thereupon must be controlling here.
One Leonard: was a clerk and agent for the collection of rente- and other matters. As such he received a check for rent payable - to the order of one of his principals. Without authority he indorsed the same in the name of said principal by himself as attorney “ for deposit,” and also in his own name individually and the check was thereupon deposited and collected. He procured the proceeds to be placed to his individual credit and subsequently abstracted them. The court, through Judge Eabl, say: “ The-authority which Leonard had as.agent to collect the rent and transact other business for Beare gave him no legal authority to indorse, this check, and his indorsement thereof was just as ineffectual to-pass any title as if he had forged Beare’s name. * * * The rule-as derived from these authorities is well expressed by Prof. Parsons* as follows: An agent’s acts in making or transferring negotiable paper (especially if by indorsement) are much restrained. It seems, that they can be authorized only by express and direct authority or-by some express power which necessarily implies these acts, because the power cannot be executed without them.’ ” ■
*522Our attention, however, is especially called to the case of Sage v. Burton (84 Hun, 267) and of Allen v. Tarrant & Co. (7 App. Div. 172) as requiring a different conclusion.
The former case, like the one at bar, was brought by- plaintiffs to recover an alleged balance of indebtedness due from defendant, and the question was as to the effect of a check given by the latter to a ■constituted agent of plaintiffs, who the jury had a right to find was ■duly and fully authorized to receive the same in payment of the indebtedness, and who, after he had so received it, improperly indorsed the same and collected the money thereon» A careful ■examination of this case will disclose that the opinion is largely taken up with the discussion of the question whether the delivery by defendant of his check to plaintiffs’ duly authorized agent did not •operate as a payment so far as the defendant was concerned and make it immaterial to him what thereafter became of the check. ‘This discussion did not involve a consideration of the question whether the authority to receive a check in payment of an account implied the right, to indorse the principal’s name thereon. The •court distinctly refrained from passing on this question, saying: If it be held that Abbott (the' agent) in this transaction was not the alter ego of the plaintiffs and had no authority to indorse this ■check, yet, if he was authorized by the plaintiffs to receive this check from the defendant, any misappropriation of its proceeds by him is at the risk of the party who set him in motion and put it in his power to perpetrate the wrong; such party must suffer rather than the party who is in nowise accountable for, and has no control -of the perpetration of the wrong.”
In the case last cited there was manifestly evidence in the proceedings by the plaintiff against his agent who had improperly indorsed the check, and in his silence for two years after learning •of his act, which permitted a jury to find that he had authorized or ratified the conduct of his agent.
It is, however, further urged in substance, and as another theory hy which the judgment appealed from may be affirmed, that Gar-wood was plaintiff’s agent to settle and collect bills; that at the time ■defendant gave the checks in question he had the money in bank to ■meet them; that their delivery to plaintiff’s authorized agent operated as a payment pro tanto of defendant’s indebtedness, or at least *523to that extent discharged him from further liability upon his debt and is'a bar to this action upon the original claim.
This doctrine apparently must rest upon one of two propositions. Either the checks were so received as actual payment of the indebtedness that the latter became canceled and discharged and cannot serve as a basis for this action, or plaintiff, having authorized his agent to receive the checks, must follow him and them and cannot further vex by this litigation or otherwise the defendant who gave them.
I think there are various objections to an affirmance upon this line.
So far as concerns the first proposition involved, it is the well-established rule that an indebtedness is not ordinarily paid or satisfied by the debtor’s check unless the latter itself is paid in due course. If plaintiff himself had received upon his bill for lumber the defendant’s checks in question, the presumption would be that' they did not operate as a payment unless they were in fact actually paid. (Bradford v. Fox, 38 N. Y. 289; Carroll v. Sweet, 128 id. 19.)
Even if plaintiff had himself received the checks and had given a receipt in payment of his indebtedness to the amount thereof, it would thereafter have been permissible for him to show that the pui’ported payment was by the debtor’s own checks and that the same were not paid and did not operate as a satisfaction of the indebtedness. (Bradford v. Fox, supra.)
The fact that Garwood by forgery procured the avails of the checks and appropriated them to his own use does not amount to that actual payment of the debtor’s own obligation to his creditor which operates as a discharge of the original indebtedness. It is no more than as if the checks had been stolen from plaintiff’s possession after delivery to him and the proceeds thereof obtained by fraud, and in which case I apprehend it could not be successfully -contended that there was such a payment of the debtor’s obligations in due course as would amount to a discharge of his original indebtedness for which they were given.
The cases of Sage v. Burton and of Allen v. Tarrant & Co. (supra), which are also referred to as sustaining the contention made in behalf of defendant, that having delivered his checks to plaintiff’s agent with money to meet them, he was unconcerned in *524what might thereafter occur with the same, do not seem to be applicable to the facts in this action. Both of the cases ref erred, to, so far as they bear upon this point, were disposed of in part, at. least, upon the theory that there was evidence showing that the agent who received the checks in settlement was authorized to indorse and collect them as he did, and that, therefore, the checks, of the debtor received to apply upon an indebtedness having been actually paid in due course operated as a discharge of the same. There is, of course, no doubt about this rule. In the Tarrant case, as I liave already remarked, there was evidence which manifestly entitled a jury to find that the agent who received the checks was. authorized to colléc't and indorse the same, and the Sage case assumed the same condition to exist.
A chance expression used by plaintiff in the criminal proceedings instituted by him against his agent, in which he refers to defendant’s checks as having been given in payment, is urged as proof that, they were thus received by the agent with due authority in satisfaction of the claim. The general presumption is the other way, and the most that could be said for the supposed evidence upon tins point would be that it created a question of fact to be submitted to' the jury. As hereafter suggested that was not done. The evidence certainly does not warrant us in affirming the judgment upon the ground that as a matter of law the checks were delivered to Garwood for and operated as a payment and. satisfaction of the indebtedness sued upon.
I, therefore, pass to the other consideration, which is suggested rather than urged, that defendant having delivered to plaintiff’s agent the checks which were good if presented to the bank, should not be sued even though plaintiff never received the checks, blit the latter should either follow up his agent or proceed against the bank. This argument must rest upon the idea that a principal must be charged with the wrongdoing of his agent, and that an innocent person who has dealt with him must not be allowed to suffer. The facts, however, are not present here which upon such principles constitute a defense to this action. If I am right in my reasoning, plaintiff’s indebtedness was not paid by the mere delivery of the checks to his agent, and he has. never collected or received the money thereupon, As a matter of fact, the checks have been *525passed over to the defendant by the bank which paid them upon forged indorsements. They are not outstanding against the defendant, and the bank has no right to charge them up in his account. The defendant, in the eyes of the law, has never paid or authorized the payment of the checks, and will not be subjected now to any double liability if he ¡lays plaintiff’s indebtedness. Agaiii, it is as though the checks had been stolen from or lost by plaintiff after delivery to him, and in which case they would not operate as a cancellation and satisfaction of the indebtedness.
The principles laid down upon the facts appearing in the cases of Bernheimer v. Herrman (44 Hun, 110) and Thomson v. Bank of British North America (82 N. Y. 1, 8, 9) are applicable here and are thoroughly opposed to an affirmance of the judgment upon the theory just discussed.
There is still another reason why the judgment should not be affirmed upon such ground. The case was not submitted to the jury or disposed of by the trial court upon any such theory. The question submitted to the jury was whether Garwood was authorized to indorse plaintiff’s name upon the checks. As I read the requests of plaintiff’s- counsel- and the .rulings of the court as found at folios 124, 127 of the record, the court absolutely and distinctly refused to submit the case upon the theory now urged for sustaining' the judgment. 1 think that it is absolutely essential to the affirmance of the judgment upon this ground that the defendant’s ■checks should have been received by the agent in payment, and that, in the view most favorable to the former, it was a question of fact which plaintiff was entitled to have submitted to the jury whether they were so received. This was not done, and it would be unjust to defeat plaintiff by sustaining a judgment upon principles entirely different from those upon which it was originally obtained.
I think the judgment and order appealed from should be reversed.
Judgment and order affirmed, with costs.

 1 Pars. Cont. (6th ed.) *62.— [Rep.