Henry v. Allen

• Decision Date: 01 December 1896
• Citation: 151 N.Y. 1,45 N.E. 355
• Parties: HENRY v. ALLEN et al.
• Court: New York Court of Appeals Court of Appeals

151 N.Y. 1

45 N.E. 355

HENRY

v.ALLEN et al.

Court of Appeals of New York.

Dec. 1, 1896.

Appeal from supreme court, general term, Fifth department.

Action by Hiram F. Henry against Norman M. Allen and Hoyt M. Allen, as co-partners engaged in the banking business under the firm name of Norman M. Allen & Son, on certain checks issued by defendants to F. Monson, who indorsed them to plaintiff. Pending the action, defendant Hoyt M. Allen died. From a judgment of the general term (28 N. Y. Supp. 242) affirming a judgment dismissing the complaint on the merits, plaintiff appeals. Reversed.

This action was founded on 33 written instruments for the payment of money, which, for convenience, are called ‘checks,’ differing in dates and amounts, but in other respects like the following, the first of the series, viz.: ‘$1,010.25. Dayton, March 17, 1886. Norman M. Allen & Son, Bankers: Pay to the order of F. Monson one thousand and ten 25/100 dollars. N. M. Allen & Son.’ They were all signed by the defendants, under their firm name of N. M. Allen & Son, and indorsed by the payee to the order of the plaintiff. In the aggregate, they amounted to the sum of $27,999. Each check is the basis of a separate count in the complaint, and there is a final count for money had and received. The defendants, by their answer, deny that the checks were delivered by them to the payee, or by him to the plaintiff, for a valuable consideration, and they allege that they had no legal inception or consideration, but were made and delivered to the payee, at his request and for his convenience, simply as memoranda ‘showing the time of the receipt by him of certain items' of money deposited with them, upon his representation ‘that he would not part with the possession of them, but that he would, in a short time, return the same.’ They further allege that he obtained them from the defendants, upon such representations, with intent to defraud, and that the plaintiff knew the facts aforesaid when he received the checks.

Upon the trial it appeared that during the period covered by the complaint the plaintiff resided at Gowanda, in this state, and had no acquaintance with the defendants, who resided four miles distant, where they carried on business as private bankers. Norman M. Allen, the senior member of the firm, had been a practicing lawyer since 1864, and a banker for eight or ten years. The plaintiff was the proprietor of a traveling minstrel troupe, and his business called him from home continuously, except during the summer months. Forbes Monson, the payee of said checks, had resided in Gowanda for several years prior to March 17, 1886, the date of the first check, and was regarded by the people in that vicinity ‘as a man of strict integrity, good financial standing, and extraordinary business experience and ability.’ The relations between him and the plaintiff were of an ‘intimate and confidential character,-so much so that the plaintiff sought counsel and advice of said Monson upon substantially all of his business affairs, and particularly upon the subject of saving money and making investments.’ For some time prior to March, 1886, the plaintiff owned three certificates of deposit, issued to him by the Bank of Gowanda,-one for $1,163.54, and the other two for $1,000 each. After many conversations, and much misrepresentation by Monson as to the financial condition of the Gowanda Bank, they ‘entered into an agreement by which the plaintiff was to deliver to said Monson said three certificates, and all other moneys which he might be able to save from his said business from time to time, said certificates to be converted into money, and such money, together with such as the plaintiff might thereafter send to said Monson from time to time, should be deposited in the defendants' bank, at Dayton, N. Y., by the said Monson, acting for and on behalf of the plaintiff, and the same should be kept there until such time as the amount so deposited should aggregate $5,000, when it was to be loaned by said Monson, for the plaintiff, to the defendant Norman M. Allen, on a bond secured by a mortgage upon real estate; and, as a part of said agreement, the said Monson did undertake, promise, and agree with the plaintiff to pay him * * * 6 per cent. interest per annum on all moneys which the plaintiff should send to him for deposit with the defendants, while the same should remain on deposit in said bank, and that such interest should be paid quarterly, at the expiration of each and every three months. It was further agreed between plaintiff and said Monson that for the moneys so deposited the said Monson should either send the plaintiff his individual check, or the check of the defendants, indorsed by himself, for the amount of each deposit that should thereafter be made, * * * and * * * that the money should be drawn from the Bank of Gowanda on one of said certificates at a time, and in such manner as would be likely to create no suspicion of where the same was to be placed, or of the arrangements or agreement between them.’ The defendants knew nothing of this arrangement, and the plaintiff supposed that Monson was interested in the defendants' banking business.

On the 15th of March, 1886, Monson deposited $900, being part of the proceeds of one of the certificates of deposit, with the defendants, to his own credit, and thus opened a general account with them, which continued until the month of February, 1891, and aggregated nearly $60,000, including all of the moneys sent to him by the plaintiff under the agreement between them. He took pains to see that the various sums so deposited were credited to him personally on the defendants' books, and he also received a pass book in the usual form, upon which were entered from time to time all such credits to him, as well as all his checks paid by the bank, and charged to his account. On March 16, 1886, he sent to the plaintiff his personal check for the proceeds of the first certificate of deposit, and the plaintiff retained it until in August following, when it was paid by Monson without presentation at defendants' bank. On March 17, 1886, Monson deposited the proceeds of the second certificate with the defendants, and at the time represented to them that the money belonged to him, that no other person had any interest therein, that he was in partnership with the plaintiff, that the sum so deposited was his share of the profits of their business, and that he wished to keep special memoranda of the moneys received from that source until he could have a settlement. The defendants offered to give him a duplicate deposit slip, but he said that would not answer his purpose. Thereupon, under the express agreement that it was without consideration or validity as commercial paper, or as an obligation against the defendants, and that it should be returned to them without delivery to any other person, and without being charged to him on the books of the bank or otherwise, the defendants, relying upon said representations and agreement, gave him the paper dated March 17, 1886, signed by their firm name, a copy of which has already been set forth. At the same time they gave him credit for the amount so deposited upon their books, and authorized him to check it out whenever he wished. Monson thus procured said instrument with the fraudulent intent of thereafter transferring the same, and he immediately indorsed it to the order of, and mailed it to, the plaintiff, who received it believing that it had been given by the defendants upon the deposit of the proceeds of one of his certificates.

On the 20th of March, 1886, the said Monson, under the same agreement, and upon substantially the same representations, deposited the proceeds of the third certificate with the defendants, and received therefor both credit in his personal account upon the books of the bank, and a written instrument in the same form as that last described, which he promptly indorsed in the same way, and mailed to the plaintiff, who received it as evidence of the investment that he supposed he had made. Thenceforward, until March 4, 1889, the plaintiff on divers occasions delivered and sent to Monson drafts and currency to the amount of $25,793.14, under the agreement previously made between them, except that the loan of $5,000 to Norman M. Allen was abandoned. Monson deposited the various sums, as they were received, with the defendants, to his own credit, under the circumstances and upon the representations and agreement already mentioned. Credit was given to him for each sum upon the books of the bank, and a check for the same amount, and in the form previously adopted, was delivered to him, and by him at once indorsed and mailed to the plaintiff, who received it, believing that the defendants had delivered it to Monson as the property of the plaintiff, and for his exclusive benefit. During all this time the defendants had no knowledge that the plaintiff, or any person other than Monson, had any interest in the deposits thus made. From time to time, Monson also deposited moneys of his own in the same account, and those sums were credited to him in the usual way, but no check was given to him in addition. Before the defendants learned that Monson had transferred said instruments in writing to the plaintiff, they had paid out the entire amount of the deposits, including all that came from the plaintiff, upon Monson's checks, given apparently in the ordinary course of his business. None of said written instruments were charged to Monson, and no record was kept of them in the defendants' bank. Pursuant to the agreement between them, and down to January, 1891, Monson paid to the plaintiff interest upon all sums received for deposit with the defendants, and was duly credited therefor upon the books of the plaintiff, which contained an account, in the form of debit and credit, of each remittance by the plaintiff to Monson, and by Monson to...