Rochester & C. Tpk. Rd. Co. v. Paviour

• Decision Date: 02 October 1900
• Citation: 58 N.E. 114,164 N.Y. 281
• Parties: ROCHESTER & C. TURNPIKE ROAD CO. v. PAVIOUR.
• Court: New York Court of Appeals Court of Appeals

164 N.Y. 281

58 N.E. 114

ROCHESTER & C. TURNPIKE ROAD CO.

v.PAVIOUR.

Court of Appeals of New York.

Oct. 2, 1900.

Appeal from supreme court, appellate division, Fourth department.

Action by the Rochester & Charlotte Turnpike Road Company against Robert S. Paviour. From a judgment of the appellate division (51 N. Y. Supp. 1149) affirming a judgment in favor of plaintiff, defendant appeals. Affirmed.

In 1896 the plaintiff, a domestic turnpike corporation, operated a turnpike which extended from the city of Rochester to the village of Charlotte, and one Marsenus H. Briggs was, and for several years had been, its treasurer. In June, 1896, the defendant, who resided at Rochester, received a letter from Mrs. O. S. Warren, of Silver City, N. M., inclosing four fire insurance policies, and requesting him to collect the premiums upon the same. Said policies were issued by various companies, through Mrs. Warren as their agent, to Walter B. Duffy, a prominent business man of Rochester, upon buildings situated in Pyramid, N. M. For several years Mrs. Warren had forwarded similar policies on this property to the defendant, who had collected the premiums for her, and remitted the same, after deducting the amount agreed upon for his compensation. It was his habit to deliver the policies to Mr. Briggs, who paid him the premiums thereon, sometimes in cash and sometimes by the check of Mr. Duffy or of George C. Buell, another prominent business man of Rochester, but never with the check of the plaintiff. The defendant did not know who was liable for the premiums except as he learned it from the policies, and it did not expressly appear what relation Mr. Briggs sustained to the owner of the property insured. Upon the receipt of said letter in June, 1896, the defendant, according to his custom, delivered the policies to Mr. Briggs, and in July two other policies upon the same property were received from Mrs. Warren, which he also delivered to Mr. Briggs, who was a man of repute and a member of a prominent law firm in Rochester. The premiums were not paid at the time either set of policies was delivered; but, after payment had been demanded several times by the defendant, Briggs gave him a check on account, dated June 17, 1896, drawn upon the Central Bank of Rochester, payable to the order of the defendant, for $150, signed, ‘Rochester & Charlotte Turnpike Road Co. M. H. Briggs, Treas.’ On the 24th of July following, Briggs gave the defendant a check, similar in all respects, except that it was for the sum of $300, and subsequently he paid the balance of the premiums from his own funds. The defendant deposited these checks in the Traders' Bank of Rochester, where he did his banking business, procured drafts for the amount going to Mrs. Warren, and sent them to her. The checks were paid upon presentation in the ordinary course of business from moneys belonging to the plaintiff on deposit in the Central Bank. This action was brought to recover the amount paid by means of these checks as money of the plaintiff received by the defendant to its use. The plaintiff had no interest in the policies, and no business relations with the defendant, and was indebted neither to him nor to Briggs, who used the checks without authority, and thus embezzled the money drawn thereby. At the close of the evidence the court directed a verdict for the plaintiff, but ordered the defendant's exceptions to be heard in the first instance by the appellate division, which after hearing the parties, overruled the exceptions, and directed judgment upon the verdict in favor of the plaintiff. From said order, as well as from the judgment entered accordingly, the defendant brings this appeal.

Walter S. Hubbell, for appellant.

James Breck Perkins, for respondent.

VANN, J. (after stating the facts).

By delivering the policies to Briggs without collecting the premiums at the time, the defendant apparently gave credit for the same, and thus made the debt his own. At all events, he subsequently treated it as a debt owing by Briggs to himself, the same as he had similar claims under like circumstances in previous years. Briggs had no authority, either actual or apparent, to give the checks of the plaintiff in payment of his own debt or that of a third person. If the defendant knew or believed, or had good reason to believe, that, in giving the checks, Briggs was appropriating the money of the plaintiff to the payment of his own debt, or one that he treated as his own, he had no right to accept them without inquiry. While he was not bound to be on the watch for facts which would put a very cautious man on his guard, he was bound to act in good faith. Bank v. Weston, 161 N. Y. 520, 526,55 N. E. 1080;Cheever v. Railroad Co., 150 N. Y. 59, 66,44 N. E. 701,34 L. R. A. 69. Even if his actual good faith is not questioned, if the facts known to him should have led him to inquire, and by inquiry he would have discovered the real situation, in a commercial sense he acted in bad faith, and the law will withhold from him the protection that it would otherwise extend.

The checks themselves gave notice of a suspicious fact, and invited inquiry in relation thereto. They showed upon their face that Briggs was apparently using the money of the plaintiff for his own purposes, since they were not his checks, but the checks of a corporation issued by him as its treasurer. In the absence of express authority, or of that which may be implied from past conduct known to the corporation, he could not lawfully use the checks, which stood as its money, for such a purpose, as the defendant is presumed to have known. There was no express authority and nothing to indicate that Briggs was impliedly authorized to thus use the money of the plaintiff, and the presumption was the other way. The plaintiff, as its name indicated, was not a trading corporation, but a local plank-road company, with no authority to own buildings situated out of the state. It would be extraordinary for a concern which merely operated a short plank road in this state to have any interest in buildings in New Mexico, or to be indebted for premiums upon policies issued thereon, and the admitted facts compel us to assume that the defendant so regarded it. Moreover, the policies themselves, as the defendant knew, were not issued in the name of the plaintiff as the owner of the buildings, and there was no connection, apparent or otherwise, between it and the policies. Without inquiry he accepted checks drawn by Briggs as treasurer of the plaintiff in payment of a debt which he had no reason to believe was for it to pay, and which he had strong reason to believe had become the debt of Briggs himself. He called for no explanation from him, made no inquiry at the office of the plaintiff, or of any one representing it, which would naturally have disclosed the fraud, but accepted the checks without question, drew the money, and thereby ran the risk of being called upon to restore it. The facts known to the defendant should have aroused his suspicion, and led him, as an honest man, to make some investigation, before he accepted the money of a corporation, which owed him nothing,...