Bank of Monongahela Valley v. Weston

• Citation: 159 N.Y. 201,54 N.E. 40
• Parties: BANK OF MONONGAHELA VALLEY v. WESTON et al.
• Decision Date: 06 June 1899
• Court: New York Court of Appeals

159 N.Y. 201

54 N.E. 40

BANK OF MONONGAHELA VALLEY

v.WESTON et al.

Court of Appeals of New York.

June 6, 1899.

Appeal from supreme court, appellate division, Fourth department.

An action by the Bank of Monongahela Valley against Abijah Weston and another, impleaded with William W. Weston and another. A verdict was directed in defendants' favor and exceptions heard by the appellate division, which overruled them, and dismissed the complaint (43 N. Y. Supp. 1150), and plaintiff appeals. Reversed.

C. S. Cary, for appellant.

J. H. Waring, for respondents.

VANN, J.

This action was brought upon two promissory notes, each made by Edwin F. Curtis, payable to the order of Weston Bros. at the Bank of the Monongahela Valley, Morgantown, W. Va., indorsed by Weston Bros. as first indorsers and by William W. Weston as second indorser. The first note, dated at Olean, N. Y., December 15, 1892, was for $6,500, and ran 4 months, while the second, dated at the same place, March 31, 1893, was for $5,000, at 30 days. The defense pleaded by Abijah and Orren Weston, who alone defended, was that the indorsement of the name of their firm was made, after the dissolution thereof, by William W. Weston, the third member of the firm as it was formerly constituted, fraudulently, for the accommodation of the maker, and without the knowledge of the other members, and that the plaintiff took the notes with knowledge of these facts. The note for $6,500 was discounted by the plaintiff on the 22d of December, 1892, and the proceeds were used to pay a note dated April 7, 1892, made by Curtis, and indorsed by Weston Bros., for $1,760.28; also a note for $2,000, made and indorsed the same way, which became due on the 11th of February, 1892; and the balance was paid in cash. The other note in suit was given in renewal of two notes, dated June 4 and November 19, 1891, for $2,500 each, both made and indorsed in the same way, and carried along until they formed a part of the consideration of said note for $5,000. The note of June 4, 1891, for $2,500, was the first of the series discounted by the plaintiff. It was sent to the plaintiff by the cashier of a bank in Olean, and before the same was discounted the cashier of the plaintiff wrote to him, stating that the parties were strangers, and asking if he regarded ‘the note as all O. K.’ The answer of the cashier at Olean was as follows: ‘We consider Weston Brothers good beyond question. They are probably worth from one to two millions of dollars.’ Thereupon the note was discounted by the plaintiff, and the proceeds remitted to the bank at Olean. None of these notes in fact passed through the hands of Weston Bros. in the course of their business, nor did the firm have any benefit from the discount thereof. They were indorsed in the name of the firm by William W. Weston, one of the members, for the accommodation of the maker.

The firm of Weston Bros., composed of Abijah, Orren, and William W. Weston, was organized about 1853, and did a large and prosperous lumbering business at Weston's Mills, three miles from Olean, until it was dissolved, in January, 1892. It was managed by William W. Weston, the resident partner, the residence of Abijah Weston being at Painted Post, about 100 miles distant, and of Orren Weston at Tonawanda, over 80 miles distant. William signed checks, indorsed notes, and used the firm name in the transaction of the business of the firm, and as early as 1882 he began to use the firm name in indorsing for his friends. He did not simply indorse at rare intervals, but made it a practice, and continued it for ten years, until the dissolution of the firm, and even for a year or two after that. The other members knew that William was occasionally using the firm name in this way, although they did not know to what extent. They learned of it in various ways,-sometimes by public report, and at others through the inquiry of some bank or individual to whom an accommodation note thus indorsed had been offered for sale. Their suspicions were aroused from seeing ‘these men around the office’ for whom William was indorsing. They were accustomed to remonstrate with William, and tell him he must not do it any more, and in response to letters of inquiry from four different banks Abijah wrote, stating that William had no right to use the firm name in that way, and that ‘they must not use the paper thinking they could hold me.’ He also wrote to individuals to the same effect, but still William kept on indorsing, and the other members, Abijah being the most prominent and anxious upon the subject, kept hearing of it. He used to go to Weston's Mills several times a year, mainly for the purpose of expostulating with William about this practice. He testified that he ‘advised him [William] to take security for these indorsements, but I do not know whether he did or not.’ The bookkeeper, William's son, swore he told Abijah that he feared the amount was larger than his father would admit, and that every time Abijah came there ‘the talk was on this subject, in 1888, 1889, 1890, and 1891. Abijah would say: ‘You must not do it. You will injure my credit.’' Abijah, who stayed at William's house whenever he came to Weston's Mills, asked him how much paper was out, and who the makers were, etc., but William was reticent upon the subject, and volunteered no information. At one time the partners learned that one bank in Olean held paper of this kind to the amount of $70,000, but, upon confronting William with the fact, he insisted that there was not more than $35,000. They made no inquiry at the bank, or of persons outside of their own office. Abijah threatened periodically to dissolve the firm, or to post William as acting without authority in making these indorsements, unless he would stop; and he always promised to stop, but never kept his promise. About the 1st of April, 1891, he was asked by Abijah how long it would take to get rid of the paper that was then out, about $40,000 in amount, and he said, ‘Six months;’ whereupon Abijah told him that he would give him that period to get rid of it, but in the meantime he must not indorse any more. Orren, in testifying to this conversation, did not state that Abijah told William he must not indorse any more. William, however, kept on indorsing, and Abijah kept learning of it and remonstrating, but no notice was given to the public, and no effective step was taken to restrain William from making these accommodation indorsements right along to the amount of many thousands of dollars. Nothing was done by the other members of the firm except to expostulate with William, and accept his promises not to do so any more, even after they knew he had systematically violated previous promises to the same effect. On the 27th of February, 1890, Abijah wrote to William, and, after stating that he inclosed a letter that he had received, said: ‘I am perfectly astonished to receive such letters. I cannot understand what it means. I had rather a man would steal my money than my credit. I feel proud of my credit, but it appears you do not care. It is so strange you should persist in doing so after I have forbid you doing it, after all I have done for you, and am still willing to do; but I tell you for the last time I won't stand it. I can stop it, and must if you persist in it. How would it look to be posted forbidding you signing paper, and how I would hate to do it, but I must protect myself.’ This had no effect, and nearly a year later, on the 26th of January, 1891, he wrote him again, saying: ‘You do not say you will stop using my name. If you will promise never to put my name on paper outside of our business again, I will take your word once more. If you will not promise, then I must take means to stop it. Now, Wallace, think how it will look for me to have to take any legal means. I can't hardly think of it, but to save myself it must be done, and at the same time save you, and save your son from worrying about it.’ No inquiry was made at any bank, not even at the one in Olean, where the firm did...