Taylor v. Commercial Bank

• Decision Date: 17 March 1903
• Citation: 174 N.Y. 181,66 N.E. 726
• Parties: TAYLOR v. COMMERCIAL BANK.
• Court: New York Court of Appeals Court of Appeals

174 N.Y. 181

66 N.E. 726

TAYLOR

v.COMMERCIAL BANK.

Court of Appeals of New York.

March 17. 1903.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by William Taylor against the Commercial Bank. From a judgment of the Appellate Division (73 N. Y. Supp. 924) reversing a judgment in favor of defendant, entered on dismissal of the complaint, and granting a new trial, defendant appeals. Reversed.

Bartlett, O'Brien, and Vann, JJ., dissenting.

Walter S. Hubbell, for appellant.

Charles J. Bissell, for respondent.

MARTIN, J.

The defendant is a domestic corporation organized under the laws of this state, and the purpose of this action was to recover damages alleged to have been sustained by the plaintiff on account of false and fraudulent representations by which he was induced to sell goods on credit to one Lighthouse, who was financially irresponsible.

Upon the trial, at the close of the evidence, a motion for a nonsuit was made by the defendant upon the grounds that the representations made were not the representations of the bank; that the bank received nothing from the transaction, and consequently it was not liable for any representations made by its cashier. This motion was granted. The plaintiff appealed to the Appellate Division, where, by a divided court, the judgment was reversed and a new trial granted.

The only question involved is whether there was evidence to justify the submission to the jury of the question of the defendant's liability. At the time of the alleged representations, Lighthouse was engaged in the manufacture of mail bags under a contract with the United States government. He was, and for several years had been, a customer of the defendant, and was then its debtor to the amount of about $15,000, secured by notes made by him and indorsed by John L. Acker. Lighthouse had been recently burned out, and the jury would have been justified in finding that he was practically insolvent, although his business had been very profitable, netting him annually from six to ten thousand dollars. As appears from a statement in the possession of the defendant's cashier, Acker was the owner of real estate to the value of about $31,700, which was incumbered for $17,450, leaving an equity of about $14,250, and was an indorser upon the paper of Lighthouse to the amount of about $15,000. All of these facts were known to the cashier of the defendant. Lighthouse applied to the plaintiff to purchase a quantity of merchandise, of the walue of about $5,000, in payment for which he proposed to give a note made by himself and indorsed by Acker, and referred the plaintiff to the defendant for information as to their responsibility. The plaintiff subsequently called at the office of the defendant, saw its cashier, and stated that he had been referred to him to ascertain the responsibility of Lighthouse and Acker; and the cashier thereupon told him that the contract which Lighthouse had with the government was all right; to take the note-it would be good, and he would get his pay. The plaintiff testified that upon these representations he sold the merchandise, and took in payment therefor a note made by Lighthouse and indorsed by Acker. There is no pretense that the statement as to the contract which Lighthouse had with the government was untrue, and the statement that he would get his pay was not a statement of an existing fact, but at most, of something in the future, and hence not actionable. Lexow v. Julian, 21 Hun, 577, affirmed 86 N. Y. 638;Gallager v. Brunel, 6 Cow. 347;Farrington v. Bullard, 40 Barb. 512, 516;Treacy v. Hecker, 51 How. Prac. 69, 70;Sawyer v. Prickett, 19 Wall. 146, 163, 22 L. Ed. 105. Therefore the only ground upon which a recovery could be had, even against the cashier, is that the statement that the note would be good was material; that it was made with a knowledge of its falsity, and with intent that it should be acted upon, and was not a mere expression of opinion. In other words, the plaintiff was bound to prove, as to this statement, representation, falsity, scienter, deception, and resultant injury to the plaintiff. Arthur v. Griswold, 55 N. Y. 400;Brackett v. Griswold, 112 N. Y. 454, 20 N. E. 376.

If we assume (which we do not decide) that the representations were sufficient to render the cashier personally liable, still the serious question in this case is whether the bank is liable for the statements made by its cashier. Obviously, when the representations were made, the cashier was not engaged in the transaction of the business of the bank. It is equally clear, as we shall see later, that it is no part of the duty of a bank cashier to make representations as to the responsibility of its customers or others. In this case Lighthouse referred the plaintiff to the bank to inquire as to his responsibility. The plaintiff called upon the cashier, made the inquiry, and was told by him the business in which Lighthouse was engaged; that he had a contract with the government, which was all right and had been renewed; that the note would be good, and he would get his pay.

The duties of a cashier are strictly executive. He is properly the executive agent of the board of directors, as such to carry out what it devises as to the management of the business of the bank. There was certain functions which by long and universal usage have come to be recognized as belonging to the office of cashier. They are declared to be inherent in the office or position as a matter of law, and, unless restricted or enlarged, they, and they only, can be performed by him by virtue of his appointment. Under the circumstances of this case, it is plain that it could not be properly held that the defendant's cashier was acting within the scope of his employment in making the representations complained of. Crawford v. Boston Store Mercantile Co., 67 Mo. App. 39;Horrigan v. First Nat. Bk., 56 Tenn. 137;First Nat. Bk. v. Marshall & Ilsley Bk., 28 C. C. A. 42, 83 Fed. 725;American Surety Co. v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977;First Nat. Bk. v. Ocean Nat. Bk., 60 N. Y. 278, 19 Am. Rep. 181;Mapes v. Second Nat. Bk., 80 Pa. 163.

In the Crawford Case it was held that a cashier has no apparent or implied authority, by virtue of the position he holds, to make any representation on behalf of the bank as to the solvency of one of its debtors, and therefore that the bank will not, in the absence of evidence of authorization, be bound or estopped by such representation made by him in reply to an inquiry on the subject.

In the Horrigan Case it is held that answering questions as to the solvency of parties is no part of the business of a cashier of a bank, nor fairly included within the scope of such business, but may be, and probably is, an incident of such position, but not an incident to it, and in such a case no liability attaches to the bank.

In First Nat. Bank v. Marshall & Ilsley Bank it was held that the cashier of a bank does not act as its agent or representative in answering an inquiry addressed to him by another bank as to the business standing of a third person, and the bank is not bound or estopped by statements so made by him-his act being one not relating to the business of the bank, but simply one of customary courtesy, rendered without consideration-and that the failure of the officers of the bank, in answering a general inquiry from another bank as to the character and standing of a customer, to disclose the fact that the customer was indebted to their bank, and that it held liens on certain of his property, will not estop it to assert such liens as against a mortgage subsequently taken by the inquiring bank.

In the American Surety Case it was held that the making of a statement as to the honesty and fidelity of an employé of a bank, for the benefit of the employé, and to enable the latter to obtain a bond insuring his fidelity, was no part of the ordinary business of a bank president.

In First Nat. Bk. v. Ocean Nat. Bk. it was held that in the absence of proof that special authority had been delegated by its board of directors, or had been exercised with their sanction or knowledge, or evidence that it had been the habit and practice of the corporation to receive property for safekeeping, it was not responsible for property so received by its cashier.

In the Mapes Case a suit by the bank against indorsers of a note discounted for the accommodation of the drawer, where the affidavit of defense was that, at and before the time that defendants indorsed the note, they had inquired of the cashier and one of the directors of the bank whether it would be safe for them to indorse, and that these officers informed them that they considered the drawer perfectly good, and they would be safe in indorsing; that the officers knew the representations to be false; and that they made them to deceive the defendants, who would not have indorsed but for the representations-it was held to be insufficient, and that such declarations, although willfully false, made by the officers, not in the course of their duties as officers or agents of the bank, could not affect the bank.

Whether any particular act does or does not fall within the general power of a cashier is said to be a question of law, for the court, and not of fact, for the jury, although a question of fact may arise when it is claimed that the acts or conduct of the board of directors have amounted to a public holding out of the cashier as its agent to perform other and unusual acts for the bank. Farmers' & Mechanics' Bk. v. Troy City Bk., 1 Doug. 457;Peninsular Bk. v. Hanmer, 14 Mich. 208;Merchants' Bk. v. State Bk., 10 Wall. 604, 19 L. Ed. 1008; 1 Morse on Banks & Banking [4th Ed.] § 153, note; Huffcut on Agency, 156. It is true, a bank may, by the adoption of a method of transacting its business which includes other than the ordinary powers vested in a cashier, confer upon him such additional powers as are necessary...