Court Opinion

ID: 5506368
Source: CourtListenerOpinion
Date Created: 2022-01-10 03:15:28.475665+00
Date Added: 2024-06-11T08:34:03.462133
License: Public Domain

BRADLEY, J. (dissenting).
The plaintiff handed his certificates and money to Monson to deposit in the bank of N. M. Allen & Son. ° This was to be done for the-plaintiff, and such was the authority and direction given by him to Monson. The purpose of the plaintiff was to have the responsibility and liability of those bankers for his money. And by their checks or bills, drawn by them on themselves, which came to the plaintiff, he was advised that the deposits were made; that the amounts thus represented would be paid on presentation of such checks; and that until then a balance would remain in their bank to pay them. This was the import of the instruments, and the situation represented by them to the plaintiff. While the plaintiff may, in the outset, have intended that the money should be deposited to his own credit, he was at liberty, when the bankers’ negotiable checks came to him, indorsed by Monson, to treat the object as practically accomplished. The purpose of Mon-son’s authority was apparently fulfilled when he had furnished to the plaintiff such evidence of the liability of the bankers to pay the respective amounts so deposited; and the plaintiff had no reason to apprehend that those instruments were intended by the drawers to have another or different legal effect than they, by their terms, purported to give to them. But it seems that the bankers had an understanding with Monson that the checks were not to be treated as effectual for any purpose, and that he should be permitted to draw the money from the bank without the production or presentation of them. When the plaintiff afterwards presented those checks for payment to the bank, payment was refused. The question, therefore, is whether or not the plaintiff was affected by such understanding between the bankers and Monson.
It is urged on the part of the defense that the plaintiff was chargeable with knowledge of the purpose for wdiich the instruments were issued to Monson, because the latter was his agent in the transaction of depositing the money. The fact is that Monson had authority to deposit the money in the defendants’ bank for the plaintiff, and not elsewhere; and when he did that, and thus secured the liability of the bankers to the plaintiff, he had accomplished all that his authority from the plaintiff permitted. He, however, assumed to deposit the money as his own, and in that manner induced the *250bankers to treat Mm as owner, and by reason of the .confidence reposed by them in him, and upon the pretense of a purpose suggested by Monson, they delivered to him their checks in form' negotiable. The purpose for wMch they were issued to him, if effectual, would be a fraud upon the plaintiff. It would seem that when Monson departed from the purpose for which he was commissioned by the plaintiff to act for him, and acted for himself, he got beyond the scope of his authority derived from the plaintiff; that in making the arrangement in respect to the character the bankers' checks should have he was engaged in the commission of an independent fraudulent act on Ms own account; and that notice of it was not imputable to the plaintiff, as to whom and Ms interest he was thus, and for his fraudulent purpose, acting adversely. Innerarity v. Bank, 139 Mass. 332, 1 N. E. 282; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268-278, 17 N. E. 496; Allen v. Railroad Co., 150 Mass. 200-206, 22 N. E. 917. The defendant, however, having no knowledge of the relation of the plaintiff to the transaction of the deposit of the money, would not have been liable to the latter if the checks or drafts of his banking firm had not been made and issued to Monson. They, as their import represented, were the negotiable undertakings to pay the amount of the deposits, and they were, as they seemed to the plaintiff, the products of the deposit of his money in the bank. They were so received and treated by him in good faith. The trouble which has occasioned this controversy arises from the unusual and probably unprecedented action of the bankers in issuing their negotiable checks or bills to Monson in reliance upon his promise to retain and return them. If they.had riot been furnished to the plaintiff for the respective deposits of,his money, his remittances to Monson for that purpose would have ceased. For the bankers to say that they supposed their checks would be held by Monson is not a very satisfactory answer in a legal sense, as there was no restriction other than his worthless promise that he would not let them pass from him. The proposition that the plaintiff was chargeable with notice that the bankers made and delivered the drafts to Monson pursuant to an arrangement which destroyed their validity, or rendered them in effect other than that which was plainly their purport, has, as viewed by me, neither reason nor principle for its support.
The case of Bank v. Davis, 2 Hill, 451, much relied upon, does not seem to aid the defense. There Williams was one of a board of directors of a branch bank of the plaintiff at Erie, Pa., and to him the bills in question were sent by the drawer for discount at that branch. He indorsed his name upon them, and procured them to be discounted for himself, and appropriated the proceeds. His associates in the board had no notice of the fraudulent" use of the bills, and supposed the discount was made in good faith for himself. The court held that the bank was chargeable with notice of the fraudulent conduct of the director Williams, for the reason that the bills were transmitted to the director Williams for the purpose of having them discounted by the bank for the drawer, and that he was acting *251in behalf of the bank at the time of the transaction in question. And Chief Justice Nelson, in delivering the opinion of the court,, said:
“But one answer has been made to the conclusion at which we have arrived, and that is that Williams should not be regarded as a director in the discount of the bills in question. If that could be maintained, then I admit the argument fails; but * * * that is not true, either in fact or in contemplation of law.”
It was in the scope of the power of the directors to discount paper,, and the court said:
“It is not to be denied that if 1lie principal employs several agents to transact jointly a particular piece of business, he is equally responsible for the conduct of each and all of them while acting within the limit and scope of their power.”
In that case, while representing the bank as its director, the bills-were transmitted to and received by Williams as such director, to-be discounted for the drawer, and by causing it to be done he secured an advantage to himself; and it was held that his relation to the bank was such in the matter of discounting the bills that notice of the purpose for which they were received by him was imputed to the bank, as the bills" were discounted by it through the action of the directors. The principle of the case, in view of the facts presented by it, is referred to and somewhat exemplified by Judge Gray in Bank v. Clark, 139 N. Y. 307, 34 N. E. 908. It may be observed that in the U. S. Bank Case Williams was not the adverse contracting party. He was acting as its director in procuring the discount of the paper, although he may have had the purpose of realizing an advantage to himself from it. In the present case the plaintiff was chargeable with knowledge that the money was deposited to the credit.of Monson. Further than that, the drafts of the bankers transmitted to the plaintiff advised him that the amount remained with them, subject to call, on presentation of those instruments, according to the usual custom and course of banking business in such cases. The promise of Monson to retain and return the checks was made to procure them for the purpose of defrauding somebody, and the issuing them with permission to draw the money from the bank without their production and surrender enabled him to do so. He evidently did not care which—the bankers or the plaintiff—suffered the consequences. He knew it was only through the means afforded by the irregular and inexcusable method which the bankers consented to adopt that he could consummate his fraudulent purpose. It certainly would be a most remarkable presumption that would impute to the plaintiff notice that the bankers did not intend that their checks should have the character of their import.
In Allen v. Railroad Co., 150 Mass. 206, 22 N. E. 917, after stating the general rule of constructive notice to the principal of facts within the knowledge of the agent affecting the character of the transaction while acting for him, the court added:
“There is an exception to this rule when the agent is engaged in committing an independent fraudulent act on his own account, and the facts to be *252imputed relate to this fraudulent act. * * * It has been suggested that the true reason for the exception is that an independent fraud, committed by an agent on his own account, is beyond the scope of his employment, and therefore knowledge of it, as matter of law, cannot be imputed to the principal, and the principal cannot be held responsible. Whatever the reason may be, the exception is. well established.”
And in Innerarity v. Bank, 139 Mass. 332, 1 N. E. 282, upon the subject of the reason for the exception to the general rule, the court observed:
‘•AVhile the knowledge of an agent is ordinarily to be imputed to the principal, it would appear now to be well established that there is an exception to the construction or imputation of notice from the agent to the principal in case of such conduct by the agent as raises a clear presumption that he would not communicate the fact in controversy; as, where the communication of such a fact would necessarily prevent the consummation of a fraudulent scheme which the agent was engaged in perpetrating.”
It may be stated as a theory or ground upon which notice is imputed to the principal of facts which come within the knowledge of the agent while acting in the scope of his authority, that the duty of the agent is to communicate such facts to his principal, and the presumption is that he has done so. Bank v. Clark, 139 N. Y. 307-313, 34 N. E. 908. When the agent is attempting to do that which, if effectual, would be a fraud upon his principal, the presumption that he has communicated to or will advise him of the facts of the transaction certainly cannot be presumed, nor can it be assumed by the person with whom the agent is dealing that such purpose or conduct of the agent is within the scope of his authority. It is quite evident that if ZtsT. M. Allen & Son had been advised that Monson was acting for the plaintiff in depositing the money, it would have been apparent to them that an arrangement to the effect that the checks should be nugatory as such, and for that reason Monson might draw out the money without the presentation of them, would be in fraud of the plaintiff, and therefore not within ■ the scope of his authority to Monson.
The proposition upon which the defendant seeks to charge the plaintiff with constructive notice, being that of agency and his relation of principal, is, for the purpose of the question, not other than it would be if the bankers had then known that Monson was acting for the plaintiff in depositing the money for the latter. And it seems quite clear that no support for the defense can be founded upon imputation of notice to the plaintiff arising out of the relation of agency, because the very nature of the understanding to the effect" that the checks or drafts were to be deemed nullities was such as to advise the bankers that it was not within' the scope of the agency of Monson to fraudulently defeat the purpose of the authority given him by the plaintiff. So far, therefore, as the defendant seeks to defend upon the ground of constructive notice to the plaintiff arising out of agency of Monson, he must assume the consequences which would have resulted from his knowledge of that relation as of the time of the transactions in question.
It seems to follow that the defense has no support in the position that notice was imputed to the plaintiff that the bankers’ checks *253were made pursuant to an understanding, fraudulent on the part of Monson, which would defeat their apparent purpose and effect as such. The plaintiff received those instruments for value, and is a holder of them in good faith. They, in fact, were the product, when made, of his money deposited, and were transmitted to him as such. By them was expressed the liability and undertaking of the makers to pay the respective and equivalent amounts so deposited with the bankers who made them. The plaintiff was at liberty to assume that the liability to pay them would continue until they were presented for payment. This, as between them and. the plaintiff, the bankers were, in view of the usual methods and course of business, required to understand. iSTo reason appears for apprehension on the part of the plaintiff to the contrary. aSTor is it seen that the indiscreet and remarkable confidence of the bankers in Monson’s promise to return the drafts can legitimately be available to prejudice the plaintiff’s claim, founded upon them. For these reasons, being unable to concur in the opinion adopted by a majority of the court, I think the judgment should be reversed, and a new trial granted, costs to abide the event.