Bank of Palo Alto v. Pacific Postal Tel. Cable Co.

• Decision Date: 11 July 1900
• Docket Number: 12,760.
• Citation: 103 F. 841
• Parties: BANK OF PALO ALTO v. PACIFIC POSTAL TEL. CABLE CO.
• Court: U.S. District Court — Northern District of California

103 F. 841

BANK OF PALO ALTO v. PACIFIC POSTAL TEL. CABLE CO.

No. 12,760.

United States Circuit Court, N.D. California.

July 11, 1900

Joseph Hutchinson, for plaintiff.

Lloyd &amp Wood, for defendant.

MORROW Circuit Judge.

This is an action at law brought by a California corporation, as plaintiff, to recover from a New York corporation, as defendant, (1) a sum of money paid out by the plaintiff upon a fraudulent telegraphic order sent over the defendant's wires by an employe of the defendant; (2) the amount expended by the plaintiff in counsel fees and sundry expenses incurred in the endeavor to recover the money; and (3) to obtain punitive damages. The suit was first brought in the superior court of the state of California for the county of Santa Clara. Thereafter the cause was removed to this court upon the petition of the defendant, stating the diverse citizenship of the parties and the jurisdictional amount in controversy. The suit was the outgrowth, as disclosed by the pleadings and proofs, of the following circumstances: On December 27, 1898, the plaintiff was carrying on a banking business in the town of Palo Alto, in this state; and the defendant was conducting the business of a telegraph company in California, with offices at Los Angeles, San Francisco and Palo Alto, and other cities and towns. At about noon of the day mentioned, a telegram was received by the plaintiff through the agent of the defendant at Palo Alto, dated at Los Angeles, Cal., December 27, 1898 and reading: 'To Bank of Palo Alto: Please pay Harry L. Cator eight hundred and forty dollars. Waive identification. We remit today. Farmers' and Merchants' Bank. ' Several times during the morning a man giving the name of Harry L. cator had called at the bank and asked if a telegraphic order in his favor had been received; and he had at one time exhibited to the cashier of the defendant bank a telegram, written upon one of the ordinary blanks of the defendant, and in the handwriting of the agent of the defendant at Palo Alto, dated at Los Angeles, Cal., December 27, 1898, in these words: 'To Harry L. Cator: Money sent through bank to-day. J. H. Fisher. ' A few minutes after the receipt by the defendant of the aforesaid telegraphic order, the man representing himself as Cator called at the bank, and was, without further identification, paid the amount specified in the telegram. The evidence shows that Cator, after receiving the $840, went at once to San Francisco, and there acted in such a manner as to attract the attention of the police department, with the result that he was arrested that evening. On the following day his arrest was reported to the plaintiff. The plaintiff then made inquiry of the Farmers' & Merchants' Bank of Los Angeles, and learned that the telegraphic order on which the money had been paid was forged. It then instructed its attorney in San Francisco to take such steps as were necessary to recover the money, if it could be recovered. The attorney, acting with the police department, gave considerable attention to the matter, with the result that a confession was obtained from Cator that the money had been fraudulently secured by him, through a conspiracy between himself and one Minkler, a telegraph operator in the employ of the defendant at San Francisco. Cator then made an assignment of the amount still in his possession, some $788, to the plaintiff. This assignment and the $788 were left in the hands of the chief of police of San Francisco for some five or six months, pending a settlement between the parties. In June, 1899, by agreement, the amount was turned over to the plaintiff. Various other services were rendered by the plaintiff's said attorney in the endeavor to recover the entire $840, for all of which services he was paid by the plaintiff the sum of $250. Plaintiff now seeks to recover the entire sum of $840 paid out upon the fraudulent telegram, with interest; the sum of $250, counsel fees, as aforesaid; and the further sum of $28.34, alleged to have been expended in the pursuit of said money; also, $1,000 by way of punitive damages,-- aggregating $2,118.34.

The first question to be determined is whether, under the facts of the case, the telegraph company is responsible for the wrongful act of its employe in sending the false telegram. It appears that the defendant was holding itself out to the public as a telegraph company, and that the plaintiff bank had dealt with it in that capacity; that a part of its transactions with the defendant consisted in the paying out by the bank of money upon telegraphic money orders to duties, he was authorized to transmit the telegraphic money orders to operators employed by the defendant in other towns, including the one at Palo Alto; these operators having no knowledge of the origin of the telegrams, other than that received from the operators in the San Francisco office. To the mind of Minkler, an opportunity was thus presented for fraudulently obtaining money. He concocted the message with which this suit is concerned, in simulation of those often passing through his hands, and transmitted it to the operator at Palo Alto as a genuine telegram from the Farmers' & Merchants' Bank of Los Angeles. There was nothing in the message or in the manner of its transmission to indicate to the operator there that it was not genuine, and it was therefore delivered to the plaintiff in the customary manner. Minkler's accomplice, a man representing himself as the payee mentioned in the telegram, presented himself at the bank to receive the money, exhibiting to the bank officials another telegram, purporting to come from Los Angeles over the defendant's wires, saying that the money had been sent that day. Although the telegraphic order particularly waived identification of the payee, the cashier of the bank took the precaution to make inquiries of the telegraph operator at Palo Alto as to whether the telegram was all right, and received a reply in the affirmative. He then paid the money to the supposed payee mentioned in the telegram. Plaintiff contends that the defendant is responsible for these acts of Minkler, under the law as contained in section 2338 of the Civil Code of California. This section provides that:

'Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business.'

In support of this principle, plaintiff cites the cases of Bank of California v. W.U. Tel. Co., 52 Cal. 280; McCord v. Telegraph Co., 39 Minn. 181, 39 N.W. 315, 1 L.R.A. 143; and Elwood v. Telegraph Co., 45 N.Y. 549, 6 Am.Rep. 140. The first of these cases presents a state of facts very similar to those involved in the case at bar. The regularly appointed agent of the telegraph company at Colusa, Cal., employed a man by the name of Crowell to assist him in his duties. Crowell frequently received and transmitted dispatches over the wires of the company in the place of the regular agent. During the absence of the agent he sent a false telegram to the Bank of California, in San Francisco, to pay Charles H. Crowley $1,200 in gold, signing the telegram, 'W. P. Harrington, Cashier.' Harrington was then cashier of the Colusa County Bank, and frequently sent similar messages to the Bank of California. Crowell then went to San Francisco, procured a resident of San Francisco, who had made his acquaintance in Colusa, to go with him to the bank and identify him, and secured the money; the friend identifying him not noticing the difference between the names Crowley and Crowell. The court held that, if the fraudulent acts committed by Crowell had been done by the regularly appointed agent of the company, the company would have been liable, and that the principal was equally responsible, whether the placing of Crowell in charge by the agent was a wrongful act committed as a part of the transaction of the business, or was mere negligence, under the requirements of public policy.

The next case (McCord v. Telegraph Co., 39 Minn. 181, 39 N.W. 315, 1 L.R.A. 143) follows the same rule. There the regularly appointed telegraph operator himself forged the telegram and secured the money. The court held the telegraph company responsible, under the rule that:

'Where the business with which the agent is intrusted involves a duty owed by the master to the public or third persons, if the agent, while so employed, by his own wrongful act occasions a violation of that duty, or an injury to the person interested in its faithful performance by or on behalf of the master, the master is liable for the breach of it, whether it be founded in contract, or be a common-law duty growing out of the relations of the parties. 1 Shear. & R. Neg. (4th Ed.) Secs. 149, 150, 154; Tayl. Corp. (2d Ed.) Sec. 145. And it is immaterial in such case that the wrongful act of the servant is in itself willful, malicious, or fraudulent.'

The third case (Elwood v. Telegraph Co., 45 N.Y. 549) was a suit brought to recover damages against the telegraph company for having paid $10,000 on the faith of a fraudulent message transmitted to the plaintiffs. It was not determined as a fact that the operator of the defendant company was a party unknown to the agent, and the fraud thus accomplished. But the court held that:

'The act was done in the direct course of the employment of the agent. The agent was placed in the office, and in the control of the instruments, to use them in transmitting messages for a compensation. If the agent performed that duty in a negligent manner, whereby the plaintiff was injured, the principal is clearly liable.

...