Norton v. City Bank & Trust Co.
| Decision Date | 21 November 1923 |
| Docket Number | 2116. |
| Parties | NORTON et al. v. CITY BANK & TRUST CO. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Edward R. Baird, Jr., of Norfolk, Va., and Ernest E. Baldwin, of New York City (Baldwin, Barns & Weeks, of New York City, Baird White & Lanning, of Norfolk, Va., Richard F. Weeks, of New York City, and R. Clarence Dozier, of Norfolk, Va., on the brief), for plaintiffs in error.
Tazewell Taylor and W. W. Starke, both of Norfolk, Va. (W. R. Ashburn of Norfolk, Va., on the brief), for defendant in error.
Before WOODS, WADDILL, and ROSE, Circuit Judges.
The plaintiffs in error were plaintiffs below and will be so designated here. The individuals, who as partners traded as Norton, Lilly & Co., were citizens of states other than Virginia, of which the defendant is a corporation. They were steamship agents and brokers, having their principal office at New York but maintaining a branch office at Norfolk and at other ports. In 1921 their Norfolk office was in charge of one Odend'hal who was, at the same time, the representative in that city of several other concerns, among them one known as the Cory-Mann-George Corporation, which, for brevity, will hereafter be called the Cory. The various firms and corporations for whom Odend'hal acted shared a common office and severally contributed to his compensation and its maintenance. The record does not disclose that there were any other relations among them.
The plaintiffs kept an account at the defendant bank. The Cory had one with a then existing institution, known as the Commercial Exchange Bank. Odend'hal was authorized to draw checks on its account and also on that of the Cory although in the latter case the checks had to be countersigned by a Mrs. Haverstock, who was cashier and bookkeeper for the Cory, as well as for the plaintiffs. As between himself and his principals, his authority in this respect was limited to making disbursements for their respective accounts. He had no right to use any of the moneys of either of them for any individual purpose of his own. His power to indorse checks payable to either was limited to an indorsement for deposit to its account.
On May 4, 1923, Odend'hal, in plaintiffs' name drew upon the defendant a check for $15,000 and made it payable to the Cory. The plaintiffs owed the Cory nothing, had no reason for paying it anything, and then, and for more than six months thereafter, were altogether unaware that any payment had been made. The Cory was in like ignorance. Odend'hal indorsed the check with the corporate name of the Cory and deposited it to his individual account at the Commercial Exchange Bank already mentioned. He caused Mrs. Haverstock, his bookkeeper, to enter in the cash book of the plaintiffs' the check as a loan to the Cory. At the end of every month, the plaintiffs required Odend'hal to procure from the bank and to forward to it a signed statement showing what balance they then had with it. On the 31st of May, Odend'hal drew a check of the Cory's for $15,000 on the Commercial Exchange Bank and deposited it with the defendant to the plaintiffs' credit. The Cory required him to send a similar statement, but, as he was vice president of the Commercial Exchange Bank, he was able to induce the cashier to believe that the statements that he made up were accurate and to certify to them, without comparison with the bank's books.
For six months, or thereabouts, by kiting checks between the two accounts, Odend'hal concealed from both the plaintiffs and the Cory the fact that he was short in his accounts with each of them. These checks finally became so numerous as to attract the attention of defendant's vice president. He made up his mind to go to New York to tell the plaintiffs what he had noticed. On December 6, 1921, he had an interview with them, in consequence of which they and the Cory united in sending a certified accountant to Norfolk to check up the accounts of each concern. As a result of his investigations, the plaintiffs some time during the month of December, 1921, became aware of what had happened. They, the Cory and two other concerns for whom Odend'hal had acted, filed a bill in equity against the Commercial Exchange Bank, the purpose of which was, among other things, to charge that bank with the $15,000 of plaintiffs' funds which Odend'hal had converted to his own use in the manner already stated.
Insolvency of the Commercial Exchange Bank about this time became manifest, and on the 21st of July, 1922, without any previous demand of the plaintiffs upon the defendant, this suit was brought to recover the $15,000 from it. At the trial below, defendant contended that the particular $15,000 drawn on the check in question had been repaid to the plaintiffs, and that, even if it had not been, plaintiffs could not recover because of laches, and also because they had sued the Commercial Exchange Bank. The learned District Judge told the jury that there had been no repayment, and the action was not barred by the suit against the other bank. The question of laches he left to them, and their verdict was for the plaintiffs, who moved for a judgment upon it. The defendant, seeking to avail itself of section 6251 of the Code of Virginia, countered with a motion to set aside the verdict and to enter a judgment for it. The portion of the statute relied on reads:
'When the verdict of a jury in a civil action is set aside by a trial court on the ground that it is contrary to the evidence or without evidence to support it, a new trial shall not be granted if there is sufficient evidence before the court to enable it to decide the case upon its merits, but such final judgment shall be entered as to the court shall seem right and proper.'
To support the motion, the defendant contended that by the provision of the Uniform Negotiable Instruments Act, codified in Virginia as subsection 3 of section 5571 of its Code, the check in controversy was in legal effect payable to bearer, and that therefore the defendant was justified in paying it, in spite of the fact that it bore an unauthorized or forged indorsement. The pertinent portion of the subsection is that which declares:
An 'instrument is payable to bearer * * * when it is payable to the order of a fictitious or nonexisting person and such fact was known to the person making it so payable.'
The learned judge, being of the opinion that the defendant was right as the evidence stood, asked if, in the event of a new trial, either of the parties would offer any testimony. They said 'No,' and he thereupon set aside the verdict of the jury and gave judgment for the defendant. A note of the revisors of the Code of Virginia informs us that the advantage of section 6251, which is relied on as justifying the order of the court, is--
'to end the action at once and put the losing party to his writ of error, thus avoiding the temptation to perjury and in many cases the unnecessary expense of a second trial.'
It is explained that a further effect of the section is that:
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