Court Opinion

ID: 3578584
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:30:10.87599+00
Date Added: 2024-06-11T13:52:23.925845
License: Public Domain

The plaintiffs are brokers, the defendant is a banking corporation, both doing business in the city of New York. The Commercial National Bank of Chicago drew its check, numbered 73,436, upon the defendant for $254.50, dated January 6, 1879, payable to Wirt Dexter, or order, and by letter advised the defendant thereof. The latter bank entered it in a book kept by its "registrar" for that purpose. On the 15th day of January some unknown person presented the check at the defendant's banking-house, and asked its teller to certify it. He inquired of the "registrar" whether the bank had been advised of the check, and thereupon certified it in the usual manner, and entered it, the name of the drawer, the number and amount of the check so certified, in his official book, and charged up the amount to the account of the drawer.
On the 5th of February the drawer asked to have the check returned, that it might "examine the indorsement." It of course could not be sent, for the defendant did not have it, and on the 10th of February the drawer notified the defendant that the check had not reached the person for whom it was intended; that the payee "Dexter" desired a duplicate, and requested the defendant to "stop payment on the original." It then entered in the "registrar's" book, opposite the former entry of the check, "stop payment, see letter February 10, '79," and on the 12th of February asked, through its correspondent, that "Mr. Dexter, or the owner," furnish "a bond of indemnity, and receive pay for the original." The bond was furnished on the 18th of the same month, and therewith the Chicago bank requested the defendant to credit its "account with the amount of the certified check." The check was afterward, and on the 2d of March, offered to the plaintiffs *Page 428 
at their office in payment for government bonds, which the holder professed a desire to buy. It had then been altered so as to bear date February 27, instead of January 6, read payable to the order of Henry Clews  Co., instead of Wirt Dexter, and called for $2,540, instead of $254.50.
The plaintiffs, before concluding a bargain, sent their messenger with the check to the defendant to inquire concerning it. The teller to whom it was presented took it in his hands, and the messenger then said to him, "Henry Clews  Co. want to know if the certification is good." The teller made such examination of the paper as he chose; the witness says "he ran his fingers over where the figures were, turned it over, threw it down, and said, `yes.'" The messenger returned the check with this answer to the plaintiffs, and they, relying upon it, took it from the holder in payment for $2,500 in government bonds, and gave him the balance, $33.75, in cash. It was then sent through the clearing-house for collection in the usual manner, and on presentation to the defendant payment was refused. Upon these facts the plaintiffs have had judgment, and whether they can retain it or not is the question before us.
It is well settled, first, that by certifying in the usual manner a negotiable check, a bank assumes toward the holder of it the relation and liability of an acceptor of a draft. (Farmersand Mechanics' Bank v. Butchers and Drovers' Bank, 16 N.Y. 125;  Security Bank v. National Bank, 67 id. 458; 23 Am. Rep. 129; Marine National Bank v. National City Bank, 59 N.Y. 67; 17 Am. Rep. 305.) It thereby, as has been said, affirms the genuineness of the signature of the drawer, and that he has funds sufficient to meet it, and engages that they will not be withdrawn to the prejudice of the holder of the check (SecurityBank v. National Bank, supra; Marine National Bank v.National City Bank, supra); or as put by SELDEN, J., in 16 N.Y. 130, the act of certification is "answering the supposed inquiry of one about to take the check whether the bank has funds of the drawer to meet it;" and by making it, the bank becomes principal debtor. (Meads v. Merchants' Bank, 25 N.Y. 147.) *Page 429
Second. The teller is in general the officer who by appointment or usage makes such certificate, and the bank is bound thereby to any person who does in good faith part with value upon the credit of the representation implied in it, whether it is true or false. (F.  M. Bank v. B.  D. Bank, 4 Duer, 219; affirmed, 16 N.Y., supra; Irving Bank v. Wetherald,etc., 36 id. 335; Pope v. Bank of Albion, 59 Barb. 226;Morse v. Mass. Nat'l Bank, 1 Holmes, 209; Willets v.Phœnix Bank, 2 Duer, 121; Grant v. Norway, 10 C.B. 665;Meads, etc., v. Merchants' Bank of Albany, 25 N.Y. 143.) And in this case it appears conclusively that the teller was the proper officer to represent the bank in such a transaction.
Third. But the certificate does not imply an engagement or warranty of the genuineness of the body of the check; if therefore there has been any fraudulent alteration prior to certification, it will not be binding, and payment in pursuance of it before discovering the mistake may be recovered back. (Marine Nat. Bank v. Nat. City Bank, supra; Nat. Park Bank v.Ninth Nat. Bank, 46 N.Y. 77; 7 Am. Rep. 310; Security Bank v.Nat. Bank of the Republic, 67 N.Y. 458.)
The effect of these propositions is to make the bank liable for the act of the teller while engaged in the business of his employment, and the plaintiffs' case is sustained by the principle upon which they rest. The plaintiffs can indeed claim nothing under the simple certification of the check, for they have never become its lawful owner. It was not indorsed by the payee. And although the paper transferred to them had upon it the formal certificate of the bank, it was nevertheless a forged instrument by reason of the several alterations, and therefore invalid. But while in this condition it was, as we have seen, presented to the teller, and by him declared "good." The plaintiffs had a right to understand from this that the check bore the genuine signature of the drawer, that it had already been presented to the bank, and being satisfied that the funds of the drawer were sufficient to meet the sum called for, it had so certified, and furthermore that the certificate then written upon the paper was the *Page 430 
genuine certificate of the bank; and that the funds of the drawer in possession of the defendant were applicable to its payment. The teller has power to give such assurance. Certifying a check, and declaring a certificate already made to be "good," were acts of the same nature made in the exercise of the same authority. The object of the plaintiffs' inquiry was to ascertain the genuineness of the certificate, and the answer of the teller should charge the bank with the same obligation which would bind a natural person, if, in response to the inquiry, he had made the same reply. That obligation would require him to pay the acceptance notwithstanding the alteration.
The question was not "is that your signature," but is the "certification good." As to an individual, the question would have been "is the acceptance yours," or "is it good." And in either case the inquiry goes beyond the handwriting. It relates to the obligation of one who appears liable, and to the sufficiency of means for payment. "I warrant this note good," is a guaranty of its collectibility. (Curtis v. Smallman, 14 Wend. 231); so the words "Sold A.B. this note, and agree that it is good." (Cooke v. Nathan, 16 Barb. 342); also "I guaranty this note good." (Sanford v. Allen, 1 Cush. 473). If an individual had to answer the plaintiff upon this question, no ingenuity could work out a reason why he should not be held. If A., being asked to buy a note purporting to be made by B., should first ask him is this your note? and he should answer as the teller did "Yes," then whether forged in the signature or body of it would make no difference. B. would be required to pay the note. So if B. was the apparent acceptor of the check. The position of the bank is not different. The plaintiffs took the check upon its assurance that the certification was "good," and innocently parted with property to its full amount. If in view of that fact the plaintiffs cannot recover, it must be owing to some technical rule of law which overrides substantial justice and compels the court to shut its eyes and give its judgment against the common sense of the case.
Upon what does the defendant rely? That "the draft was stolen, altered and forged, and then sold to the plaintiffs." It *Page 431 
is evident that these things are true. But the plaintiffs did not rely on the title thus acquired from the vendor, nor upon the representation made by the face of the draft; they sent to the defendant for information and relied on the answer given by it. "The check was altered after certification;" this also is true, but it was not altered after the defendant represented that the certification was "good." The defendant had knowledge of each one of these facts when the question was put to it, and is bound as to the plaintiffs as an individual would be to make its representation true. Nothing else is material.
In the Irving Bank v. Weatherald (supra), the plaintiff's teller had certified the note of one Wilson "good," and charged it to his account. It turned out that he had no funds in the bank, but the certifying bank paid the note, then protested it and afterward sued the indorsers and recovered. In discussing the transaction the court say when the note is presented the teller of the paying bank informs the presenter that the note is "good," in other words, continues the learned judge, informs him "that the maker has the funds in the bank to meet it." "This information," he adds, "may be communicated verbally, by letter, or by a memorandum on the note, ordinarily called a certificate." "The correctness of this certificate is a matter which the certifying bank has the means of knowing and is bound to state correctly."
In Continental Bank v. National Bank of Commonwealth(supra), we have a case which, in principle, is quite decisive of the question before us. The check of John Ross upon the plaintiff bank, when put in circulation, purported to be certified by the plaintiff's teller in the usual way. Ross offered it in payment for gold to one Cronise, a broker, and he sent it by his clerks to the plaintiff to see if it was "all right," in the mean time letting the gold go. The clerk put that question to the teller, and the reply was "yes." The broker was informed of this reply, and omitted, therefore, to make any effort to regain the gold, as he then might have done. He deposited the check in the defendant's bank. It was sent in through the clearing-house, and charged to the plaintiff in favor of the defendant *Page 432 
the next day. It turned out that the certification was a forgery, and the plaintiff sued to recover back the amount of it. It was conceded that the defendant stood in the place of Cronise, and after judgment in its favor the plaintiff appealed to this court, where the judgment was affirmed, and the rule established that "where a forged certification of a check is presented to the bank upon which the check is drawn, to the teller whose certificate it purports to be, and he pronounces it genuine, he adopts the certification and the bank is bound by it the same as if it was genuine." This is put upon the doctrine of estoppel, which prevents a party, by whose mistaken act or declaration another has been influenced, from setting up the truth in opposition thereto. It is discussed in that case at such length, with such variety of learning and such copious illustrations, by the late chief judge of this court, as to relieve us from further labor in regard to it, except to show its application to the case in hand.
This will be easy if we look at the substance of the transaction between the parties, the common and well-understood language used by the defendant and accepted by the plaintiff. But we are here met by the assertion of the learned counsel for the appellant, "that the statement of the teller, made after the alteration, that the certification was good, can have no other effect than if the check had been then presented and certified." It has already been conceded by the third proposition, above stated, that in such a case the bank would not be bound. The reason of that exemption is stated in the cases there cited.
In The Marine National Bank v. The National City Bank
(59 N.Y. 67; 17 Am. Rep. 305), the plaintiff certified a check which had been altered, on the strength of which the defendant received it on deposit, and the plaintiff paid the amount to it. On discovering the forgery the plaintiff sued and recovered from the defendant. The recovery was upheld, the court saying the responsibility growing out of certification is limited to facts within the knowledge of the bank certifying, that is, "whether the drawers of the check have funds sufficient to meet it; and further, to obtain the engagement of the *Page 433 
bank that those funds shall not be withdrawn from the bank by the drawers of the check," and no ground or reason was perceived "for extending the rule to matters not lying especially within the knowledge of the certifying bank."
Security Bank v. National Bank (supra) followed the preceding case in upholding the plaintiff's right to recover back moneys paid upon a check, the amount of which had been raised before certification, and holds that the declaration of the teller, made at the time of certifying, that the check "was correct in every particular," he then referring to the body of the check, and intending to be understood as saying that it was genuine, "was inadmissible to enlarge or vary the legal import of his act."
These cases are not to be questioned. They charged the bank with the consequences of facts within the knowledge of the teller, or which may be presumed to be within his knowledge. To that extent he represents the bank, and it is treated as an individual would be under similar circumstances. The plaintiffs may invoke the rule applied as far back as Mansfield's time, inPrice v. Neal (3 Burr, 1355). It was then held that the drawee of a forged bill of exchange could not, after acceptance and payment, recover back from the indorsee the sum paid. It was then argued for the plaintiff that he paid the money by mistake, "on the supposition that they were genuine bills." On the other hand it was insisted that the payment was not by mistake, but rather owing to the negligence of the plaintiff, who should have inquired and satisfied himself whether the bill was really drawn upon him or not. Lord MANSFIELD said: "It was one of those cases which could never be made plainer by argument." That remark and the principle upon which the case was decided apply here. Indeed, if the defendant in the case before us had paid to the plaintiffs the amount of the check, and then sued to recover back the money, the two cases would have been on all fours.
The position of the defendant, when answering the inquiry addressed to its teller, is unlike the situation it occupied when it certified the check. Then it only knew the signature of the drawer, and the amount of the drawer's money in its hands. *Page 434 
Its certificate was by construction limited to those facts. Whether the body of the check was genuine or a forgery was a fact as well known to the check-holder as to the bank. But by certifying the check it substituted its own liability for that of the drawer. Indeed, the holder by taking the certificate released the drawer, for the check called for money, and the holder accepted a promise. When, therefore, a third party called upon the bank and asked whether the certification was good, another fact was called for also within the especial knowledge of the bank, and altogether unknown to the enquirer, whose ignorance indeed led to the question, viz.: whether the certification on the paper was that of the bank; not its signature merely, but whether it had certified to the truth of the facts then appearing on the paper: viz., the signature of the drawer, and that the drawer had in its, the bank's, custody the money called for by the face of the check, and that the money was applicable to its payment. In view of the then relation of the parties, this was the vital fact to know whether the defendant was in fact the acceptor, and had assumed the payment of that check, and was liable to respond to a demand for $2,540. This is implied in the question, and so it must have been understood by the teller.
The check was negotiable. The defendant appeared upon it as "acceptor," or principal debtor. It was presented in the name of a firm of well-known brokers, with an inquiry indicating an interest which the teller alone could satisfy. He could not be ignorant that checks might be, and sometimes were, altered after certification. I have referred above to the means provided to guard the bank from error in its certificates. There is evidence from the teller showing that he had the means at hand for guarding against the very fraud which this case exhibits. If called upon to pay a certified check, he says he "never did so without referring to the book to see if it agrees with the amount it has been certified for." This was now the very question he undertook to answer. His book contained positive information, not only that the check did not agree with the certification, therefore that it was not good, but *Page 435 
also it contained direction not to pay even the amount certified, and that the amount had already been paid back to the drawer. In these respects then he misinformed the plaintiff. The bank had not certified for the amount called for, and no funds were retained to meet the check. What the fact was, whether the certification was good, could only be ascertained by asking the teller. (16 N.Y. 125; In re Land Credit Co., L.R., 4 Ch. App. 460.) It was not only his duty, therefore, to know these facts, he did know them, and acquired his information while exercising the ordinary powers and functions of his office. The act of communication with the plaintiff in regard thereto was an official act, also within the limit of the power delegated to him, and by its exercise the bank was bound. (Fleckner v. Bankof U.S., 8 Wheat, 338; E.R. Nat. Bank v. Gove, 57 N.Y. 597;Bank of Monroe v. Field, 2 Hill, 445; Farmers  Mechanics'Bank v. B.  D. Bank, 14 N.Y. 623.) It was the declaration of the teller or his negligence which put the paper in circulation, and public policy, and a due regard to the integrity of commercial transactions, required that the defendant, whose officer he was, should redeem it.
The judgment should, therefore, be affirmed, with costs.
All concur for reversal, except DANFORTH and TRACY, JJ., dissenting.
Judgment reversed.