Court Opinion

ID: 3594210
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:42:05.485067+00
Date Added: 2024-06-11T13:43:28.490510
License: Public Domain

As a minority of the court are unable to agree with the disposition to be made of this case, it is deemed proper to state, briefly, the position of the dissenting judges, as the rule of law about to be established is of far-reaching importance in the business world.
The precise question presented by this appeal has not been decided by this court, as stated by counsel on the argument. The great commercial interests of this state require a rule calculated to protect the public in their dealings with banks through their officers, and the decisions of courts in jurisdictions where the point now presented is of minor importance are not entitled to controlling weight.
The sole question is whether Pond, the cashier of the defendant, was acting officially and in the line of his authority, as representing the bank, when he made the representations to the plaintiff concerning the financial responsibility of Lighthouse and Acker.
There is no difference of opinion in the court concerning the following proposition: If A, being a depositor in a bank and desiring B to give him credit, sends him to the bank for information as to his financial responsibility, and the cashier represents A to be worthy of credit, the cashier must be deemed to have acted in his individual capacity, and his action would in no way bind the bank; that is to say, the relation of A to the bank, being solely that of depositor, would not justify the cashier in speaking officially.
It is for the reason that the facts in this case disclose a very different relation between the bank and the depositor that we are unable to agree with the majority of the court.
The controlling and undisputed facts are as follows: The representations of the cashier, which induced the plaintiff to *Page 193 
extend credit to Lighthouse, were made in April, 1893. For some years prior to that date Lighthouse had been engaged in the business of manufacturing mail bags from leather and canvas under contract with the United States government. The plaintiff was a dealer in leather, and prior to 1893 had sold several bills to Lighthouse without making inquiry as to his financial standing, and they were regularly paid. In the month of January, 1893, the factory of Lighthouse was partially destroyed by fire, ruining all his stock of leather and damaging his machinery and other plant to a considerable extent. In the following April, when Lighthouse solicited plaintiff to sell him an invoice of leather, valued at about five thousand dollars, the latter asked for a reference as to his financial responsibility, and was directed to call upon the Commercial Bank of Rochester. The plaintiff did so, and, relying upon the representations made by the bank's cashier, delivered the leather to Lighthouse.
Swanton, at the time of the trial the cashier of the defendant, and in April, 1893, its teller, testified as defendant's witness, under cross-examination, that in the years 1891 and 1892 Lighthouse was indebted to the bank in the sum of twenty-five thousand dollars; that shortly prior to January, 1893, the amount was twenty-two thousand dollars, and at the time of the representations made by Pond, the cashier, to the plaintiff, was between seventeen and eighteen thousand dollars. It also appears that Lighthouse had no financial responsibility except such profits as he might realize in the performance of his contract with the government.
Acker, the surety on Lighthouse's contract with the government, and the indorser on plaintiff's note, testified that while he owned real estate, which, according to the statement made to the bank showed an equity of some fourteen thousand dollars, it was incumbered by mortgages, which were subsequently foreclosed by the bank and resulted in a judgment against him in every case for a deficiency. The sequel proved that Acker was absolutely without financial responsibility. *Page 194 
Lighthouse, during all the transactions involved in this case, was a depositor of the defendant bank.
The plaintiff, when he made the sale based on the representations of the defendant's cashier, took Lighthouse's note for five thousand dollars, indorsed by Acker, dated May 4th, 1893, and falling due the following August, when it was protested and no part thereof paid except the sum of one thousand dollars. It is also to be borne in mind that Acker was an indorser on all of Lighthouse's paper in the hands of the bank.
In view of these facts, it would seem as if honesty and fair dealing required the bank, when called upon by the plaintiff at the instance of Lighthouse, to either refuse to make any statement in regard to the latter's financial responsibility or to disclose to the plaintiff the fact that it had been for a long time discounting Lighthouse's paper, with Acker as an indorser, held a large amount of it at the time when the question was asked, and that Lighthouse had been heavily indebted to the bank for several years.
It is said that, while this course of conduct might be required in fair dealing between two individuals, the rule would not apply if the reference as to the financial responsibility was made to a banking corporation.
We are unable to see any difference between the two cases. A bank, in our modern business life, comes into daily contact with the citizen in numberless ways, and, as an intangible legal entity can only act through its officers, there would seem to be no reason why it and the individual should not be held, under the circumstances disclosed in this case, to the same measure of good faith and business integrity.
It was greatly to the interest of the bank that the credit of Lighthouse should be maintained, and yet it seems very certain that if the plaintiff had been advised as to the true relations existing between the bank and Lighthouse and his indorser Acker, also of the business embarrassment under which Lighthouse was laboring, that no credit would have been extended to him. *Page 195 
The real situation existing at the time these representations were made is rendered apparent by the fact that the note for five thousand dollars, given in reliance upon the representations made in April, went to protest the following August.
In the view we take of this case, the facts, to which reference has been made, control the disposition of the question before the court, but it adds greater emphasis to them when the remaining facts, which need not be discussed in detail, show that the protest of plaintiff's note in August, 1893, was the beginning of the end and both maker and indorser thereof passed on into hopeless bankruptcy, their creditors losing, substantially, everything.
The prevailing opinion suggests doubt as to the sufficiency of the false representations as matter of law and assumes, but does not decide, that they would render the cashier liable.
It is a significant fact that appellant's counsel did not make this point.
We regard the representations, taken as a whole, as amply sufficient to charge the defendant.
At the close of all the evidence the learned trial judge granted defendant's motion for a nonsuit.
In writing this dissenting memorandum, we have spoken positively as to the effect of what we deem to be the controlling facts in this case, but the point really presented for our consideration is, was there sufficient evidence to submit to the jury the question whether these facts showed that the cashier was acting for the bank when he made the representations upon which the plaintiff relied? The learned Appellate Division was of the opinion that there were such facts and granted a new trial.
A very instructive case, having a direct bearing upon the situation here presented, is Barwick v. English Joint StockBank (L.R. [2 Exch.] 259). In that case the cashier of the bank delivered a written guaranty to the plaintiff to the effect that J.D.'s check on the bank in plaintiff's favor, in payment of goods supplied, should be paid on receipt of the government money, in priority to any other payment, except *Page 196 to the bank, and made false statements as to the credit of J.D. It appears that J.D. was indebted to the bank at the time in the amount of twelve thousand pounds; that this fact was not disclosed to the plaintiff, who, relying upon the representations, extended credit to J.D. and accepted his check on the bank, which the latter refused to honor, but applied the government money upon the indebtedness due it from J.D. The plaintiff sued the bank for fraudulent representations and it was held liable.
In Swift v. Jewsbury (L.R. [9 Q.B.] 301) Chief Justice COLERIDGE (at page 312) comments favorably upon the Barwick
case.
The case of American National Bank of Denver v. Hammond
(55 Pac. Rep. 1090) is also very much in point.
We are of opinion that the judgment of the Appellate Division should be affirmed.
PARKER, Ch. J., CULLEN and WERNER, JJ., concur with MARTIN, J.; O'BRIEN and VANN, JJ., concur with BARTLETT, J.
Judgment reversed, etc.