Robbins v. Passaic Nat. Bank & Trust Co.

• Decision Date: 16 May 1932
• Docket Number: Nos. 92, 119.,s. 92, 119.
• Citation: 160 A. 418
• Parties: ROBBINS et al. v. PASSAIC NAT. BANK & TRUST CO. PASSAIC NAT. BANK & TRUST CO. v. ROBBINS et al.
• Court: New Jersey Supreme Court

160 A. 418

ROBBINS et al.

v. PASSAIC NAT. BANK & TRUST CO.

PASSAIC NAT. BANK & TRUST CO.

v. ROBBINS et al.

Nos. 92, 119.

Court of Errors and Appeals of New Jersey.

May 16, 1932.

Appeal from Supreme Court.

Action by Charles D. Robbins and others, partners trading as C. D. Robbins & Co., against the Passaic National Bank & Trust Company. From a judgment for plaintiffs, both parties appeal.

Judgment affirmed on each appeal.

Arthur T. Vanderbilt, of Newark, for Charles D. Robbins & Co.

Corbin & Harty, of Passaic, for Passaic National Bank & Trust Co.

LLOYD, J.

The plaintiffs constituted a firm of stockbrokers in the city of New York, and had in their employ as manager one George Bedell who, in addition to his relation as manager, carried an individual trading account with the firm. He later became a member of the partnership.

In March, 1928, Bedell established banking relations with the defendant bank through its vice president, opened accounts therein, and received financial accommodation. Upon various statements to the plaintiffs to the effect that the firm was indebted to the defendant bank, a series of checks were drawn by Robbins & Co. to the order of the bank and delivered to the bank, as a rule by Bedell personally. The proceeds of the checks so drawn were at Bedell's direction credited to the account of Bedell or to the accounts of his nominees in the bank and later drawn out by him.

The plaintiffs, on discovering what was taking place, demanded repayment of these funds by the bank, and, failing to receive the same, brought this action to recover them. The trial resulted in a verdict and judgment in favor of the plaintiffs in the sum of $82,877.37. From the judgment so rendered both parties appeal.

The claim of the plaintiffs was for a much larger sum, and it is for the refusal Of the trial court to direct a verdict in their favor for that larger sum that their appeal is taken.

The grounds relied on for reversal in the bank's appeal are that the trial court should have controlled the case by nonsuit or by direction of a verdict in its favor; also that there was' error in the rulings during the progress of the trial. Deeming that it will conduce to clearness to first consider the defendant's appeal, that branch of the case will be here taken up.

There can be no doubt that the checks drawn to the order of the bank were by it indorsed and the proceeds diverted to the personal use of Bedell, and thus became a misappropriation of funds belonging to the plaintiffs. The bank's contention on the trial and here is that there was an express, implied, and apparent authority in Bedell to authorize the bank to make this application of the moneys so received, and that for this reason a nonsuit or direction of a verdict in its favor should have been granted.

The learned trial judge, deeming that there was no proof of such agency exhibited by the testimony, denied the application for nonsuit or direction, and later refused to submit this question to the jury.

Our examination of the record convinces us that these rulings were correct. There can be no doubt that as a fundamental proposition of law a check drawn to the order of a bank precludes the diversion of the proceeds of such check to a use other than that of the drawer, and such diversion can only be justified by the proof of authority from the drawer to so divert. Sims v. U. S. Trust Co., 103 N. Y. 472, 9 N. E. COS; Graham v. Southington Bank & Trust Co., 99 Conn. 494, 121 A., 812. Part of the misapplication of the funds occurred during the period that Bedell was plaintiffs' manager and part after he became a partner. But it is equally well settled that a partner may not use partnership funds for his private uses without the sanction of his copartners. 3 Kent's Commentaries, 42; Dennis Metal Manufacturing Co. v. Fidelity Union Trust Co., 99 N. J. Law, 365, 123 A. 614, and the numerous cases cited in the brief of the plaintiff appellant establish this principle beyond cavil or question.

Though the motions made in the court below for nonsuit and direction on the part of the defendant were partial only and did not present the case in the best form for consideration, we have treated them as effective for the purpose, and have concluded that under the facts as proven the court could not direct the jury to render a verdict in favor of the defendant, either for the reasons above given or for the additional reasons not urged that the case was controlled by chapter 30 of the Laws of 1927 concerning the liability of those participating in breaches of fiduciary obligations or that the bank was a holder for value. No request was submitted to the trial court dealing with the effect of the...