Quincy Mut. Fire Ins. Co. v. International Trust Co.

• Decision Date: 31 March 1914
• Parties: QUINCY MUT. FIRE INS. CO. v. INTERNATIONAL TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

217 Mass. 370

104 N.E. 845

QUINCY MUT. FIRE INS. CO. v. INTERNATIONAL TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

March 31, 1914

COUNSEL

R. G Dodge, of Boston, for plaintiff.

Robert M. Morse and Wm. M. Richardson, both of Boston, for defendant.

OPINION

CROSBY J.

This action grows out of the dishonest conduct of John B. Lombard formerly treasurer of the town of Framingham, acting in collusion with one Charles S. Cummings.

The check received from the plaintiff, being payable to the order of 'Treas. of Town of Framingham,' in legal effect stands upon the same footing as if payable to the town, and the money which it represented belonged to the town, who was the real payee of the check. Commercial Bank v French, 21 Pick. 486, 32 Am. Dec. 280; Eastern Railroad v. Benedict, 5 Gray, 561, 66 Am. Dec. 384; Colburn v. Phillips, 13 Gray, 64; R. L. c. 73, § 59. Of course the defendant cannot successfully plead ignorance of the law relating to negotiable instruments as a defense to this action.

The check then being the property of the town, the power of the treasurer, Lombard, to negotiate it was limited to such authority as was given him by law. He had no legal authority to indorse the check for circulation, and knowledge of such want of authority was chargeable to the defendant, which, as the record shows and the defendant admits, dealt with the American Banking Company as owner of the check and not merely as agent to collect it for the town. The town treasurer, Lombard, had limited powers as such to indorse the check. He could have indorsed it for deposit and collection to the account of the town, or for the purpose of providing an agent of the town with funds to pay a note or other obligation of the town then due and outstanding, but it was wholly beyond his power as treasurer to indorse it for circulation.

The record shows that the defendant collected the check and credited the proceeds to the account of its depositor, the American Banking Company. The defendant was charged with knowledge that the check was the property of the town, because that fact was apparent on its face and the indorsement thereon. The defendant dealt with it as the property of the banking company, and thereby became in law liable to the plaintiff for the proceeds thereof. Franklin Savings Bank v. International Trust Co., 215 Mass. 231, 102 N.E. 363; Brown v. First National Bank of Boston, 216 Mass. 298, 103 N.E. 780; Newburyport v. First National Bank of Boston, 216 Mass. 304, 103 N.E. 782.

The defendant contends that this case is to be distinguished from Franklin Savings Bank v. International Trust Co., ubi supra, but we are unable to perceive such distinction. See also Smith v. Cheshire, 13 Gray, 318; Railroad National Bank v. Lowell, 109 Mass. 214; Abbott v. North Andover, 145 Mass. 484, 14 N.E. 754.

The defendant relies upon the doctrine that where one of two innocent parties must suffer by the fraud of a third person the loss must rest where it falls, especially if it falls upon the party whose negligence causes the loss. The case of Gloucester Bank v. Salem Bank, 17 Mass. 33, is cited to sustain this principle of law. In that case the defendant bank bought certain notes purporting to have been issued by the plaintiff bank, but upon which the name of the president had been forged. These notes were paid by the plaintiff, and fifteen days afterward the plaintiff, having discovered the forgeries, returned the notes to the defendant and later brought an action against the defendant to recover the amount so paid. Both the plaintiff and the defendant in that case were equally innocent and ignorant of the invalidity of the notes. It was held that as the plaintiff kept the notes for fifteen days after they were received, it was guilty of that degree of negligence which precluded it from calling upon the defendant to make good the notes, and that the circumstances showed an adoption of them by the plaintiff as its own notes, and that as the notes purported to have been issued by the plaintiff, who had the best means of detecting their invalidity, nothing short of immediate notice and demand for payment could authorize the plaintiff to maintain an action for the money paid.

The principle is well established that in such cases, where no fault or negligence is imputable to either party, generally the loss will remain where the transaction has placed it. Mackintosh v....