Campbell v. The Manufacturers National Bank

• Decision Date: 03 March 1902
• Citation: Campbell v. The Manufacturers National Bank, 51 A. 497, 67 N.J.L. 301 (N.J. 1902)
• Court: New Jersey Supreme Court
• Parties: EDWARD S. CAMPBELL, RECEIVER, &c., DEFENDANT IN ERROR, v. THE MANUFACTURERS NATIONAL BANK, PLAINTIFF IN ERROR

51 A. 497

67 N.J.L. 301

CAMPBELL

v. MANUFACTURERS' NAT. BANK.

Court of Errors and Appeals of New Jersey.

March 3, 1902.

(Syllabus by the Court.)

Error to supreme court.

Action by Edward S. Campbell, receiver, against the Manufacturers' National Bank.Judgment for plaintiff, and defendant brings error.Affirmed.

Joseph Coult, Francis Child, and John A. Miller, for plaintiff in error.

Richard V. Lindabury and Sherrard Depue, for defendant in error.

FORT, J.This is an action by the receiver of the Middlesex County Bank to recover back money paid to the plaintiff in error by George M. Valentine, who was, at the time of the payment, cashier of said bank.The payment was made by Valentine in satisfaction of his individual debt.The method of payment was by a draft of the Middlesex County Bank drawn on the National Park Bank of New York, its correspondent, and signed, "George M. Valentine, Cashier."The draft thus issued was drawn to the order of John A. Miller, attorney, and delivered to him, for the plaintiff in error.The transaction out of which the indebtedness of Valentine to the plaintiff in error, the Manufacturers' National Bank, arose, was the discounting of a note, made by a firm of which Valentine was a member, and indorsed by Valentine individually and others.This note thus discounted fell due and was protested, and afterward judgment was obtained thereon against the makers thereof and Valentine individually.The Middlesex County Bank had no interest, directly or indirectly, in the note or its proceeds.All these facts were known to the plaintiff in error both before and after the judgment.The judgment was entered March 4, 1899.Mr. Miller, the attorney of the plaintiff in error, after several attempts, found Valentine at the bank in Perth Amboy on March 13, 1899.Payment of the judgment was demanded, and, after some talk, Valentine, in the presence of Miller, took the draft book of the Middlesex County Bank, containing blank drafts of that bank on the National Park Bank of New York, and filled out a draft of the Middlesex County Bank upon the National Park Bank of New York for the sum of $7,500, to the order of J. A. Miller, attorney as aforesaid, and signed it, "Geo. M. Valentine, Cashier," and handed this draft to Miller.The draft thus delivered to Miller was not, and did not pretend to be, anything other than the draft of the Middlesex County Bank, made by its cashier, in his official capacity, against the funds of the Middlesex County Bank deposited in the National Park Bank of New York, and was intended by Valentine, and known by Miller, to be issued for the payment of the debt of George M. Valentine as an individual.With all of these factsthe plaintiff in error, by its officers and its attorney, was familiar.

There is no reason which is founded on principle that can be given for not applying the same rule of agency to a cashier as to other persons occupying fiduciary relations.No person can act as an agent in a transaction in which he has an interest, or to which he is a party, on the side opposite to his principal.This must be so where the person dealing with the agent has knowledge of the facts.A person cannot deal with a cashier of a bank as an individual, in securing a draft, and claim, after the draft is delivered, it has become the transaction of the bank.To make the acts of the cashier valid, the transaction in which the draft is delivered must be a bank transaction, made by the cashier, within his express or implied authority, in the conduct of the business of the bank.So long as a person deals with the cashier in a matter wherein, as between himself and the cashier, he is dealing with, or has a right to believe he is dealing with, the bank, the transaction is obligatory upon the bank.The cashier is presumed to have all the authority he exercises in dealing with executive functions legally within the powers of the bank itself, or which are usually or customarily done, or held out to be done, by such an officer.But the test of the transaction is whether it is with the bank and its business, or with the cashier personally and in his business.Claflinv. Bank 25 N. T. 293;Moores v. Bank, 111 U. S. 164, 4 Sup. Ct, 345, 28 L. Ed. 385.As to the former, all presumptions are in favor of its regularity and binding force.In the latter, no such presumption arises.In fact, upon proof that it was known to the claimant to be an individual transaction, and not one for the bank, the burthen is cast upon the claimant to establish by proof that the act of the cashier thus done for his own individual benefit was authorized or ratified.These are fundamental principles applicable to principal and agent in every transaction arising out of that relation.Bank of New York National Banking Ass'n v. American Dock & Trust Co., 143 N. Y. 559, 564, 38 N. E. 713;Manhattan Life Ins. Co. v. Forty-Second & G. St. Ferry Co., 139 N. Y. 146, 151. 34 N. E. 776;Shaw v. Spencer, 100 Mass. 382, 390, 394, 97 Am. Dec. 107, 1 Am. Rep. 115;Petrie v. Clark, 11 Serg. & R. 377, 14 Am. Dec. 636(Gibson, C. J.);Road Co. v. Paviour, 164 N. Y. 281. 286, 58 N. E. 114, 52 L. R. A. 790;Huff. Ag. (2d Ed.)p. 110.

Little contention was made in this case, even by the counsel of the plaintiff in error, against the rule above stated, although some effort was made to distinguish between the rule applicable to principal and agent as applied to a cashier, as contradistinguished from other agency relations; but we are unable to accept such a theory, or to hold the rule to be any broader in the case of a cashier than as above declared.

Strong contention was made by the plaintiff in error for the right to retain the fund received for Valentine's individual debt from the proceeds of the draft of the Middlesex County Bank, upon the grounds (1) that Valentine was authorized to issue such drafts; and (2) that, if he were not so authorized, his act in this case would be deemed ratified, through the knowledge of the bank's officers, obtainable from the draft itself, or the records of the bank, from which they actually knew, or were chargeable, in the exercise of ordinary care, with knowing, the transaction.The case is utterly devoid of proof that Valentine was ever authorized by any one to draw drafts of this character for his individual account against the funds of the bank with its New York correspondent.It does appear that he had overdrawn his account and borrowed money on questionable securities, but those transactions are stated by the letters to the banking department to be ones with which the directors were familiar, and about which the directors knew, and for which they held securities, and in which the directors only differed with the banking department as to the sufficiency of the security they had required Valentine to pledge for those loans.There is no proof that those loans were not made in the usual course, nor that the directors authorized or acquiesced in the use of the...