Phillips v. Mercantile Nat. Bank of City of New York

• Decision Date: 16 January 1894
• Citation: 35 N.E. 982,140 N.Y. 556
• Parties: PHILLIPS v. MERCANTILE NAT. BANK OF CITY OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

140 N.Y. 556

35 N.E. 982

PHILLIPS

v.MERCANTILE NAT. BANK OF CITY OF NEW YORK.

Court of Appeals of New York.

Jan. 16, 1894.

Appeal from supreme court, general term, first department.

Action by John E. Phillips, as receiver of the National Bank of Sumter, S. C., against the Mercantile National Bank of the City of New York. From a judgment of the general term (22 N. Y. Supp. 254) affirming a judgment at circuit dismissing the complaint, plaintiff appeals. Affirmed.

Wingate & Cullen,(Geo. W. Wingate, of counsel,) for appellant.

Chas. A. Davison, (John M. Bowers, of counsel,) for respondent.

GRAY, J.

The plaintiff is the receiver of the National Bank of Sumter, in South Carolina, and through this action seeks to recover a balance alleged to be due on a deposit account with the defendant bank. The question presented by the record is whether certain 12 checks, drawn by the cashier of the Sumter bank, which were paid by the defendant bank, could properly be debited in account to the Sumter bank. Bartlett, its cashier, had drawn them upon the defendant for various amounts, some to the order of A. S. Brown, and some to the order of C. E. Stubbs. In the check book he would enter sometimes the real amount of the checks, and sometimes an amount much less than the checks actually were drawn for. The names of these payees were those of persons who actually resided in Sumter, and were dealers with the bank, but they knew nothing of these checks, and had no connection whatever with the transactions of the cashier in issuing these checks. Bartlett, after having drawn the checks, indorsed them in the name of the payee, making them payable to the order of some firm of stock brokers in New York, who collected them from the defendant. By subsequent manipulations of the books in his bank, Bartlett was able to prevent a discovery of his dishonest acts until after he had absconded, and the insolvency of the bank was disclosed. The learned trial judge, in dismissing the complaint, discussed the question of what the act of the cashier of the Sumter bank amounted to in law. In his judgment, the cashier's indorsement of the checks in the name of the payee which he had written in the body of the check was not, in a legal sense, forgery. He said that act did not defraud the persons whose names were used as payees, nor the bank of New York, nor his own bank, but that the fraud consisted in the unlawful drawing of the check for his own purposes, with the intent to convert his own bank's funds. Regarding the transaction in that light, and the indorsement as a part of one continuous act of preparing a check so that the New York bank should pay the funds drawn upon to the indorsees, he very properly reached the conclusion that, so far as the New York bank was concerned, the cashier's intent was the intent of his bank, and hence the payment of the checks was conclusive upon it. At the general term, the opinion of the court again carefully reviews the legal questions, and sustains the judgment below. Upon the question of the effect upon the transaction of the use by Bartlett of names, as payees, of persons who were customers of the bank, it is said in the opinion that that fact did not prevent the application of the principle which would govern if fictitious names had been selected and used for payees. They held, in substance, that the bank, through its authorized officer, had put it circulation paper with knowledge, chargeable to it, that the names of the payees did not represent real persons, and with the intention to indorse thereon the names of the payees, who, for all intents and purposes, were fictitious payees, and whose names were adopted and resorted to as a device to avoid suspicion. We think the judgments below were right. Whether indorsing the check in the name of the payee therein was a forgery in the legal sense or not is not the important question. In a general sense, of course, the cashier did forge the payee's name, but that fact did not affect the title or rights of the defendant. Coggill v. Bank, 1 N. Y. 113. In the case cited, a bill was drawn upon the plaintiff to the order of one Truman Billings, and was discounted at a bank. The drawer had indorsed it with the name of the payee, Truman Billings, a person who in fact had no...