Gale v. Chase Nat. Bank

• Decision Date: 05 July 1900
• Docket Number: 156.
• Citation: 104 F. 214
• Parties: GALE v. CHASE NAT. BANK.
• Court: U.S. Court of Appeals — Second Circuit

104 F. 214

GALE v. CHASE NAT. BANK.

No. 156.

United States Court of Appeals, Second Circuit.

July 5, 1900

E. B Whitney, for plaintiff in error.

George A. Strong, for defendant in error.

Before WALLACE, LACOMBE, and SHIPMAN, Circuit Judges.

SHIPMAN Circuit Judge.

Gale as receiver of the Elmira National Bank, which became insolvent in May, 1893, brought in the circuit court for the Southern district of New York an action at law against the Chase National Bank, a national banking association established in the city of New York, upon the cause hereinafter stated, which action resulted in a verdict of the jury for the defendant. This writ of error was brought by the plaintiff below to review the judgment which was entered upon the verdict. The transaction between the Elmira Bank and the defendant was, as stated in the charge of the presiding judge, as follows:

'Mr J. J. Bush was the cashier of the Elmira National Bank. He had borrowed money of the Chase National Bank, and given his note for $25,000, payable at the Chase National Bank, and secured by the stock of the Elmira National Bank. This note had been reduced by payments to $15,000. On the 4th day of May, 1893, the officers of the Chase National Bank telephoned to Bush that his collateral was unsatisfactory, and asked him to come down and settle the matter up. Mr. Bush came in response to this telephone message on the morning of May 5, 1893, bringing with him $8,000 in money and a draft of the Elmira Bank on the Quaker City Bank of Philadelphia for $7,000, which was originally made either to the order of Bush individually or as cashier. * * * Bush said that with this money and draft he wished to take up his $15,000 note. Mr. Porter, the vice president of the bank, objected to the $7,000 draft on Philadelphia, as there was some considerable delay with collections from Philadelphia, something of a panic in the money market, and some uncertainty about collections from Philadelphia banks. He said that, as they wanted to use funds, and Philadelphia funds were not available to pay this loan, which was payable at the Chase National Bank, and therefore payable in New York funds, a different arrangement should be made. Mr. Porter asked Mr. Bush if he had a personal account with the Elmira National Bank, and he said he had. Porter then suggested to him that he (Bush) should put the money to the credit of the Elmira National Bank, and the $7,000 draft in its collection account, and make a personal draft for $15,012.50, the amount of the note and interest, on the Elmira Bank, payable at the Chase National Bank, so that it would be in New York funds. Mr. Voorhees, one of the clerks in the Chase National Bank, then brought the form which is ordinarily used in making such a draft; and Mr. Porter made it out, and Bush signed it individually as maker, and certified and accepted it as cashier, and left the $7,000 draft and the money.'

Whether the $7,000 draft was originally made to the order of Bush as cashier was a matter in dispute. Bush testified that it was so drawn. Porter testified that, when Bush indorsed the draft as cashier, he called Bush's attention to the fact that it was made payable to him individually, whereupon he added 'Cashier' to his name as payee. The plaintiff is of opinion that the question, whether or not actually decided by the jury, must be regarded as settled by the verdict in favor of the defendant's version of the transaction. The check for $15,012.50 was immediately charged to the Elmira Bank and the currency was credited to it. The $7,000 Quaker City draft was norminally taken for collection, and was collected and credited to the Elmira Bank on May 8th. The note and collateral were left with the defendant. No notice of the transaction was given by Porter to the Elmira Bank, but the charge of $15,012.50 appeared on the defendant's account rendered June 6, 1893, to the receiver, who brought the suit to recover that amount. The $8,000 in currency were embezzled by Bush from the Elmira Bank, and the use of the $7,000 draft was also an embezzlement. His account with the bank on May 4th was overdrawn. If the transaction rested entirely upon the fact that Porter received this certified check for $15,012.50 in payment and discharge of Bush's individual debt, there would be no doubt as to the illegal character of the transaction, and of its invalidity as against the Elmira Bank. Porter took in payment of Bush's debt his individual check upon the Elmira Bank, payable at the Chase Bank, which was certified by Bush as cashier; the certification being in violation of section 5208 of the Revised Statutes. The trial judge charged that there was no evidence tending to show that Bush had any real or apparent authority for the certification, or to make the check payable at the office of the defendant. The certification was invalid because it was the certification of the cashier's individual check, given and received for his individual benefit, with no authority either to certify it, or to make it payable elsewhere than at the office of the Elmira Bank. The validity of the certification by the president or cashier of a bank of his individual check was examined by Chief Justice Selden in Claflin v. Bank, 25 N.Y. 293,-- a well-known case, in which it was held that the acceptance or the certification of the president's individual check by the president was void, irrespective of the question whether he had funds in the bank to meet it; for he could not act in regard to the same check in two capacities,-- both as drawer and as agent to bind the bank to its payment. While this is true, yet, if Bush had, at the time when this unauthorized and therefore void certification was made, deposited with the defendant an equal amount of his own funds to meet the check, the Elmira Bank, having lost nothing by the transaction, could not recover the amount of the deposit from the defendant. In that case Bush would have deposited $15,012.50 of his own funds to the credit of the Elmira Bank, and have drawn the same amount to pay his note to the Chase Bank,-- a transaction which, while it would have been irregular, would not have injured the Elmira Bank. The real defense is not that the certified check created a liability against the Elmira Bank, or that either the money or the $7,000 draft was the property of Bush, but that the transaction was, though in form a payment by certified check, actually a payment of the face of the note with the currency and the Quaker City draft, and that the money could not be recovered, although stolen by Bush from the Elmira Bank, because received by the defendant in good faith, and that the amount of the draft could not be recovered, because Bush had implied authority to use cashier's drafts to his own order in payment of his individual debts. The money was, without question, taken by Bush from the vault of the Elmira Bank without authority, and was its property; but if received by the defendant in due course of business, in good faith, and for the payment of a valid debt, the defendant is not subjected to the risk of repayment to the person from whom it was...