Boyle v. Lewiston Trust Co.

• Decision Date: 21 February 1927
• Citation: 136 A. 292
• Parties: BOYLE v. LEWISTON TRUST CO.
• Court: Maine Supreme Court

136 A. 292

BOYLE

v. LEWISTON TRUST CO.

Supreme Judicial Court of Maine.

Feb. 21, 1927.

Report from Superior Court, Kennebec County, at Law.

Action for money had and received, by James L. Boyle, trustee in bankruptcy of the Belgrade Silver Black Fox Company, against the Lewiston Trust Company. On report from the superior court. Judgment for plaintiff.

Argued before WILSON, C. J., and PHILBROOK, DUNN, BARNES, BASSETT, and PATTANGALL, JJ.

Maurice E. Rosen, of Portland, for plaintiff.

Frank A. Morey, of Lewiston, for defendant.

PATTANGALL, J. On report. Action for money had and received by trustee in bankruptcy of Belgrade Silver Black Fox Ranch Company, who seeks to recover certain moneys paid to defendant by Charles J. Clukey, treasurer and manager of the bankrupt corporation.

The Belgrade Silver Black Fox Ranch Company was organized as a corporation on January 23, 1925; Charles Clukey was its treasurer, business manager and one of three directors. The corporation engaged in active business until July 6, 1925, and in November of the same year was adjudicated bankrupt.

At the time of the organization of the corporation defendant held certain overdue notes of Clukey's. On various dates, beginning January 30, 1925, and up to and including July 3, 1925, defendant received from Clukey checks of the corporation signed by Clukey as treasurer, payable to the defendant's order, the proceeds of which, in accordance with Clukey's instructions, it credited on his personal notes. The checks so used were eight in number and aggregated $1,635.40 in amount. Defendant had no business relations whatsoever with the bankrupt corporation at any time.

There is no evidence that the corporation ever authorized Clukey to issue its checks for the purpose of paying his personal debts or that defendant ever made any inquiry as to his authority to do so. The principal questions arising in this case were decided and fully discussed in Gilman v. Carriage Co., 125 Me. 108, 131 A. 138.

On the authority of that case and cases there cited, it may be unhesitatingly stated that when it is found as a fact that the check of a corporation, signed by one of its officers, is used by that officer in payment of his personal debt, the proceeds of the check received may be recovered back unless the party receiving it proves that the officer in question was authorized to issue the corporate check for that purpose. A defendant admitting that he received a corporate check, drawn by an officer, in payment of his private obligation, has the burden of proving the officer's authority to use corporate funds. No attempt is made, in the present case, to sustain that burden.

Defendant is not in the position of an innocent holder. Each check on its face bore warning of its irregular and illegal character. They were, themselves, danger signals which a discounter or a purchaser could not safely disregard. In legal contemplation no such thing exists as a bona fide holder of negotiable paper executed by an officer in the name of a corporation and payable to his personal creditor. The payment by Clukey to the defendant of his personal debt with corporate funds constituted a plain misappropriation of such funds, and the form and manner of payment sufficed to put the defendant on its inquiry and to notify it that it accepted the payments at its peril. Gilman v. Carriage Co., 125 Me. 108, 131 A. 138, and cases cited. Johnson & Kettell Co. v. Longley Luncheon Co., 207 Mass. 52, 92 N. E. 1035; Back Bay National Bank v. Brickley et al. (Mass.) 150 N. E. 11; McCullam v. Hotel Co., 198 Mo. App. 107, 199 S. W. 417.

No principle of estoppel operates against this plaintiff. A trustee in bankruptcy is not estopped from recovering corporate funds diverted to paying private debts of officers even though such payments were acquiesced in or consented to by directors or stockholders. The trustee represents the creditors of the corporation. They are not estopped. McCullam v. Hotel Co., supra.

It was argued by defendant that the money paid to...