Bank of New York Nat'l Banking Ass'n v. American Dock & Trust Co.

• Decision Date: 27 November 1894
• Citation: 143 N.Y. 559,38 N.E. 713
• Court: New York Court of Appeals Court of Appeals
• Parties: BANK OF NEW YORK NATIONAL BANKING ASS'N v. AMERICAN DOCK & TRUST CO.

143 N.Y. 559

38 N.E. 713

BANK OF NEW YORK NATIONAL BANKING ASS'N

v.AMERICAN DOCK & TRUST CO.

Court of Appeals of New York.

Nov. 27, 1894.

Appeal from supreme court, general term, first department.

Action by Bank of New York National Banking Association against American Dock & Trust Company for damages for issuing a spurious warehouse receipt. From a judgment of the general term (24 N. Y. Supp. 406) affirming a judgment in favor of defendant, plaintiff appeals. Affirmed.

John B. Whiting, for appellant.

Thaddeus D. Kenneson, for respondent.

PECKHAM, J.

The defendant herein was authorized by its charter to receive goods for storage, and issue warehouse receipts, which were made negotiable and transferable by indorsement and delivery; and any holder thereof was to be taken to be the owner or pledgee of the goods mentioned in the receipt, for any advance or credits on the same, subject, however, to charges for storage. When goods were received it became necessary for some one to sign and deliver the warehouse receipt, and that duty was provided for in a bylaw or resolution of the company, which was introduced in evidence. It provided that after the date of the directors' meeting at which it was adopted (August 1, 1890), the warehouse receipts, until otherwise directed, should be signed by either the president or treasurer. At the time of the transaction in question, M. W. Stone was president of the company, and F. H. Pouch was treasurer. In November, 1890, Mr. Stone went to the plaintiff, and sought and obtained a personal loan, for which he gave his own note; and as collateral security for its payment he gave a warehouse receipt purporting to be issued by the defendant, the material portion of which is as follows: ‘New York, Nov. 4, 1890. Received on storage at the ‘American Docks,’ for account of M. W. Stone, one hundred and sixty-two bales of cotton, marked G B, subject to the order of himself, on payment of the charges accrued thereon, and surrender of this receipt. M. W. Stone, President.' In dorsed upon this receipt was the following: ‘The property mentioned below is hereby released from this receipt for delivery from warehouse. M. W. Stone.’ The officers of the plaintiff with whom the loan was effected knew at the time that the Stone who obtained the loan and the Stone who was president of the defendant were one and the same individual, and they knew that the transaction as to the loan was a personal one with Mr. Stone, and that the defendant had nothing to do with it. The plaintiff made the loan upon the faith of the collateral security furnished by the receipt. The note was not paid at its maturity, and, when demand was subsequently made by plaintiff upon defendant for the cotton mentioned in the receipt, it appeared that there had never been any cotton deposited with the defendant, and that the receipt, in that respect, stated a falsehood. The defendant refused to deliver any cotton, and the plaintiff brought this action, claiming to be a bona fide holder for value of the receipt, and that the defendant was bound to deliver to it the cotton mentioned therein, or else pay its value. The officers of the plaintiff, at the time of the loan, had known Mr. Stone for some years; but there had never been any transactions between plaintiff and Mr. Stone, as representing the defendant, further than that the latter had on some few occasions come to the plaintiff's banking house to mark off cotton which was discharged on certificates held by plaintiff for other parties, but Mr. Stone had never come there to borrow money for defendant. The plaintiff made no inquiries at the time of the loan as to the extent of the power of Mr. Stone to act for defendant and sign receipts.

The question of the liability of the defendant turns upon the construction given to the by-law or resolution above mentioned. Did it give authority to the president to sign receipts in his own case? I think that if the president had issued a receipt similar to the one in question, except that it acknowledged the receipt of cotton from some third person, although such named person had not in fact deposited any cotton, yet in such case the defendant would have been liable, because the president had general authority, under the by-law, to issue receipts for cotton deposited by third parties, and therefore when he issued a receipt where no cotton had been received, although it was a violation of his authority and of his duty, yet the defendant would be held responsible on account of such general authority to give receipts. This is upon the principle decided in Bank of Batavia v. New York, L. E. & W. R. Co., 106 N. Y. 195, 12 N. E. 433, and cases cited. That principle is that where an agent had been clothed by his principal with power to do an act, in case of the existence of some fact peculiarly within the knowledge of the agent, and where the doing of the act is in itself a representation of the existence of that fact, the principal is estopped from denying its existence, as against third parties dealing with the agent in good faith, and in reliance upon the representation. I also think that if the by-law clothed Mr. Stone, the president, with general authority to issue receipts to himself for cotton which he actually deposited, if with such authority he issued a receipt where he had not in fact deposited any cotton, the defendant would be liable to respond to a bona fide holder for value of such receipt. These two propositions I do not understand the defendant to dispute, or at least he does not regard them as antagonistic to his argument.

We come, then, to the consideration of the proper construction of the by-law. In the light of the general rules of law upon the subject of principal and agent, we are of the...