Wagner Trading Co. v. Battery Park Nat. Bank

• Decision Date: 20 January 1920
• Parties: WAGNER TRADING CO. v. BATTERY PARK NAT. BANK.
• Court: New York Court of Appeals Court of Appeals

228 N.Y. 37

126 N.E. 347

WAGNER TRADING CO.

v.BATTERY PARK NAT. BANK.

Court of Appeals of New York.

Jan. 20, 1920.

Action by the Wagner Trading Company against the Battery Park National Bank. From a judgment of the Appellate Division, First Department, 184 App. Div. 885,170 N. Y. Supp. 1117, unanimously affirming a judgment of the Trial Term upon a verdict directed by court in favor of plaintiff, defendant appeals by permission.

Affirmed.

Appeal from Supreme Court, Appellate Division, First department.

Francis E. Neagle, of New York City, for asppellant.

Neil P. Cullom, of New York City, for respondent.

ELKUS, J.

The plaintiff is a New York corporation. It was incorporated in April, 1910, at which time it acquired all the assets and business formerly conducted by one Christopher J. Wagner, who became its president, which office he held during the time of all the transactions here in question. Wagner also acquired 180 shares of the total 400 shares of the capital stock of the Wagner Trading Company at the time of its incorporation.

Section 4 of article 3 of plaintiff's by-laws provides:

‘The treasurer shall have the care and custody of all the funds and securities of the corporation and shall deposit the same in the name of the corporation in such bank, banks, or trust companies as the directors may elect. He may sign checks, drafts or orders for the payment of money, but all checks and notes of the corporation signed by him shall be countersigned by such persons as may be designated for that purpose by the board of directors.’

By article 3, section 2, of the by-laws the president was authorized to sign and execute contracts in the name of the company when authorized to do so by the board of directors, and also to sign checks, drafts and orders for the payment of money, but all checks and notes of the corporation, signed by him, shall also be countersigned by persons designated for the purpose by the board of directors.

In pursuance of this by-law, on April 7, 1910, the board of directors adopted a resolution, providing that checks might be signed by the president, vice president, secretary, or treasurer, but that such checks shall be countersigned by one Leggett or one Sloane, or by any officer of the corporation.

The plaintiff had its bank account with the Chatham & Phoenix Bank, but had no account with the defendant or any other bank.

A portion of the plaintiff's business was exporting merchandise to South America. Drafts were drawn by the plaintiff on the South American customer, and sent to the Bank of New York for collection, and in some cases advances were made by the Bank of New York upon these drafts while in process of collection. The proceeds of these drafts were paid and some advances thereon were made by cashier's checks of the Bank of New York to the order of Wagner Trading Company. These checks, to the number of 15, were indorsed, ‘Wagner Trading Company, C. J. Wagner, Pres.,’ the signature of ‘C. J. Wagner’ being in the handwriting of C. J. Wagner, the president of the plaintiff corporation, the remainder of the indorsement being a rubber stamp impression. The first of these checks was dated May 17, 1915, and indorsed May 25, 1915. The last check was dated October 30, 1916, and indorsed October 31, 1916.

It is stipulated that no part of the ‘proceeds of said checks, to wit, $14,117.29, has been received by the plaintiff except the sum of $85.37.’

C. J. Wagner had a personal account with the defendant. In this account he deposited, among others, 36 checks, representing salary paid to him by the plaintiff between February 2, 1914, and April 3, 1916. These checks were drawn on the Chatham & Phoenix National Bank to the order of ‘C. J. Wagner,’ signed ‘Wagner Trading Company, C. J. Wagner, Pres.’ On the left margin of the check appears in print ‘Wagner Trading Company ..... Countersigned,’ with the signature in ink of W. H. Leggett, Jr., above the word ‘Countersigned.’ These checks were indorsed by C. J. Wagner, and collected through the New York Clearing House in the usual course of banking business. This statement shows the relation of the parties.

Wagner, having indorsed the 15 checks made payable by the Bank of New York to to the Wagner Trading Company, in the manner described, deposited them to the credit of his personal account with the defendant, which collected the proceeds in the usual course of banking, and held same for Wagner, and as his agent ‘paid out the proceeds thereof on the personal checks of Christopher J. Wagner,’ to use the exact words of the stipulation of the parties. The action is for conversion.

[1][2] The facts showing the conversion are complete. Wagner had authority to indorse the checks, although no by-law or resolution is in evidence to that effect, but only for the purpose of the corporation's business, and not to transfer the checks to himself personally or for his personal use. The defendant endeavored to prove estoppel and negligence of the plaintiff. The trial court rightly excluded all such evidence. The plaintiff had no relations with and owed no special duty to the defendant. It was not a depositor of the defendant. When the defendant accepted the deposit of Wagner and became his banking agent, the defendant was in complete control of its relations with Wagner. It could, to safely protect itself in its dealing with Wagner, inquire as to his relations with the plaintiff, the authority he possessed, and could insist upon an examination of the plaintiff's by-laws and minutes if it thought that necessary to protect itself. When it accepted the checks payable to the plaintiff and indorsed by Wagner as president of the plaintiff for deposit to the account of Wagner himself, it did so at its peril to ascertain whether Wagner had authority to indorse them and by his indorsement transfer the money to be paid thereon to his personal account. Cheever v. Pittsburgh, S. & L. E. R. R. Co., 150 N. Y. 59, 44 N. E. 701, 34 L. R. A. 69, 55 Am. St. Rep. 646; Ward v. City Trust Co. of N. Y., 192 N. Y. 61, 71,84 N. E. 585. If Wagner had no such authority, title to the money in questionnever passed to the defendant, and, if it received it, it did so without authority, and must account and make payment to the owner. Schmidt v. Garfield National Bank, 64 Hun, 298, 19 N. Y. Supp. 252, affirmed 138 N. Y. 631, 33 N. E. 1084;Sims v. U. S. Trust Co. of N. Y., 103 N. Y. 472, 9 N. E. 605;Fidelity & Deposit Co. of Maryland v. Queens County Trust Co., 226 N. Y. 225, 233,123 N. E. 370.

The transaction and decision are not affected by the fact that, relying upon the funds it supposed were deposited by Wagner, the defendant paid out funds upon Wagner's personal check drawn upon it. To do so would be to charge the plaintiff because of transactions with which it had no connection.

The rule governing this case is well stated is Standard S. S. Co. v. Corn Exchange Bank, 220 N. Y. 478, 481,116 N. E. 386, 387 (L. R. A. 1918B, 575), where Pound, J., says:

‘Any person taking checks made payable to a corporation which can act only by agents does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority, unless the corporation is negligent * * * or is otherwise precluded by its conduct from setting up such lack of authority in the agent. * * *

‘If the original indorsement was authorized, the diversion of the funds after indorsement would not make it a forgery; but, if the original indorsement was...