Pope v. Bank of Albion , 59 Barb. 226 ( 1871 )

By the Court, Geo. G. Barnard, J.

I think the judgment should he reversed.- This case is clearly distinguishable -from The Clarke National Bank v. Bank of Albion, (52 Barb. 592.) In that case the plaintiff was not a hona fide holder for full value of the check, as is the plaintiff in this case. - The learned referee finds that the plaintiff paid full value for the check, and had no actual notice of any fact impeaching its validity. I think, within the principles established by the case cited, that the plaintiff' is entitled to recover. In that case the court say: “ Chester, as cashier, was one of the the financial officers of the hank, in its daily and ordinary business transactions; and had ample and unquestioned authority to certify checks drawn on the bank, by its customers, in all cases where any officer could do the same and hind the bank. This authority is regarded as general, growing out of the officer’s position in the hank, and persons dealing with the bank are not in any way affected or bound by the special restriction's and limitations imposed upon him by the corporation, whose agent he is. In this case the defendant’s liability is sought to be established upon this general and conceded power. There is no claim made by the defendant, or if there is, it is wholly unsupported by the evidence, that Ward & Bro. had.any notice of the special restrictions given to the cashier by the chief stockholder and president of the bank. * * * To enable the plaintiff ■ ' to recover upon this paper, it must appear that he became the owner and holder in good faith, for a full and fair consideration, in the usual course of business, and without notice of the cashier’s want of power to make the certification. (Hall v. Wilson, 16 Barb. 550.) This rule is elementary; and does not. need to be supported by the citation of authorities which are so' full and abundant.

Applying this test, it is at once apparent that the plaintiff cannot recover; for he did not pay anything for, this paper until after the check was returned to him by the defendant, dishonored. That the holder must have parted with something of value upon the strength and in consideration of the transfer of the paper, is well settled. A party taking negotiable securities upon a precedent debt, relinquishing nothing of value at the time, or without any consideration, is not a purchaser for a valuable consideration. 0

I regard this, doctrine as demonstrating the plaintiff’s right to recover, upon the facts found by the referee and indisputably proven. Suppose that the plaintiff had, in company with Burns, the drawer of the check, gone to the bank, and producing the check, inquired whether it would be paid, and had been answered by Chester in the affirmative, and had" thereupon cashed the check, as he did in New York, would anybody, doubt the plaintiff’s right to recover? I think not. In principle, Chester, made the same representations when he wrote the word “ accepted.” This expression is equivalent to saying “ that check is goodthat the drawer had funds in the bank which would be applied in payment of the check when presented for that purpose. ¥e must regard the substance of things, and not mere form. Any language, whether verbal or written, employed by an officer of a banking institution, whose duty it is to know the financial standing and credit of its customers, representing that a check dr'awn upon it is good, and will be paid, estops the bank' from thereafter denying, as against a bona fide holder of the check, the want of funds to pay the same. This doctrine should be most rigidly applied as against the banks. They clothe their officers with powers necessary to operate them successfully, and experience has shown the necessity of relying upon the representations of the proper officers of the banks as to the existence of funds to the credit of those drawing checks upon them. When these representations are made, sound policy requires that the banks shall be held responsible for their truth, and not be at liberty to show their falsity, as against bona fide holders of the checks, who have purchased the same upon the strength of such representations.

[First Department, .General Term, at New York, April 4, 1871.

These great moneyed corporations carry on their business operations only through their officers. If they violate their duties by representing that the drawer of a check has funds, when the contrary is the fact, it*is the misfortune of the bank, as it is the misfortune of every principal employing agents who exceed their authority. In such a case, I am of the opinion that when a loss must be sustained by either the bank or the person relying on such representations, it must fall upon the former. The law of 1840, as amended in 1850, has no application to this case, that I can discover.

.The judgment should be reversed, and a new trial ordered, costs to abide the event.

Hew trial granted.

Ingraham, P. J., and Cardozo and Geo. G. Barnard, Justices.]