Opinion
March, 1914.
Henry M. Stevenson, for appellant.
Bowers Sands (John J. Halpin, of counsel), for respondent.
This action is brought to recover the amount of eleven checks aggregating $329.79, drawn to plaintiff's order by various customers, the endorsement of plaintiff's name on each of which is alleged to have been forged. These checks were, after such endorsement, deposited with the defendant bank and collected by it for its depositors.
The answer denies that the endorsements were forgeries, and alleges that plaintiff's employee who endorsed said checks in plaintiff's name was authorized so to do, and that defendant acted in good faith and in due course of business.
It was stipulated that the plaintiff owned the checks in question; that its only officers were Norman C. Brizse, President, and Percy H. Pinder, Secretary and Treasurer; that it employed as a stenographer one Harriet Cohen, who was accustomed to make its deposits in the Greenwich Bank, and who was authorized to endorse its checks with a rubber stamp as follows: "Pay to the order of the Greenwich Bank. The Standard Steam Specialty Co.," and to affix at the end of the stamp endorsement, in her handwriting, the words "Percy H. Pinder, Treasurer," and that "Harriet Cohen was not verbally or in writing instructed or authorized by the officers of the Standard Steam Specialty Company to endorse checks, except in the manner above set forth"; also that Harriet Cohen either took the eleven checks in question from the mail, or they were delivered to her for endorsement for deposit in the Greenwich Bank, and instead of endorsing the checks in question with the rubber stamp "Pay to the order of the Greenwich Bank. The Standard Steam Specialty Company," and adding in her own writing "Percy H. Pinder, Treasurer," as she was alone authorized to do, she endorsed them with the blank endorsement, wholly in her handwriting, "Standard Steam Specialty Company, Percy H. Pinder, Treasurer," "Harriet Cohen" or "H. Cohen"; that she then delivered the eleven checks, nine to one reputable business man and two to another reputable business man, who in good faith paid her the full amount thereof in cash, without knowledge of any wrongdoing.
Where a bank has collected a check upon which the payee's endorsement "is forged or made without authority of the person whose signature it purports to be" (Neg. Inst. Law, § 42), it cannot retain the money, since it had no title to the instrument upon which the money was paid, "unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority." Its endorsement is a warranty of the genuineness of prior endorsements, and, upon the discovery that any endorsement is a forgery, it becomes immediately liable to make good the amount it has received. Seaboard Nat. Bank v. Bank of America, 193 N.Y. 26, 30, 31; Oriental Bank v. Gallo, 112 A.D. 360, 362, affd., 188 N.Y. 610; Stein v. Empire Trust Co., 148 A.D. 850, 853.
Authority to an agent to endorse checks in a specifically restricted manner, in order that they may be deposited to the account of the principal, does not confer upon the agent authority to endorse in any other manner or for any other purpose.
In Schmidt v. Garfield Nat. Bank, 64 Hun, 298, affd. without opinion, 138 N.Y. 631, upon a state of facts practically identical with the case at bar, the learned court said: "Lingard had authority to use the stamp and to sign the plaintiff's name under the stamping upon the checks and drafts, adding his own initials thereto, and thereupon to cause the checks and drafts bearing such restricted endorsement to be deposited in the Chemical National Bank, to the credit of the plaintiff. But such authority gave Lingard no right to endorse the plaintiff's name, except in connection with a restricted endorsement made by stamping the checks and drafts with the stamp provided for that purpose by the plaintiff. * * * Assuming that he had authority to use the stamp and sign the plaintiff's name in connection with the use thereof, and then cause the checks and drafts to be deposited to the plaintiff's account in the Chemical Bank, his action in endorsing the checks with the plaintiff's name without using the stamp, and depositing such checks and drafts to his own account in the Garfield National Bank, was absolutely without any authority or justification whatever. There was, therefore, not only no testimony which would justify the court in holding that Lingard had authority to endorse the checks and drafts in the manner in which he did, but there was no conflict in the testimony which required the court to submit, or would have justified it in submitting, the question to the jury, as to whether Lingard had authority to endorse the checks in the manner in which he did." See, also, Cluett v. Couture, 140 A.D. 830, citing this case with approval.
The case of Salen v. Bank of State of New York, 110 A.D. 636, relied upon by respondent as authority for the proposition that plaintiff is precluded herein from denying the authority of its agent, Harriet Cohen, is not on all fours with the case at bar. In the case cited the agent had general authority to endorse checks for the purpose of depositing them to the credit of his principal; but the exact method of endorsement was not prescribed and restricted as in the case at bar. In this case the sole authority reposed in Harriet Cohen, as to endorsement, was to perform the physical act of affixing the stamp endorsement on the backs of checks "Pay to the order of the Greenwich Bank. The Standard Steam Specialty Company" and adding thereto in her own handwriting the words "Percy H. Pinder, Treasurer." Had she performed this sole act she was authorized to perform in the restricted manner prescribed, defendant bank could not have been misled thereby. The endorsement of the plaintiff's name by her in any other form whatever was an act of forgery and could convey no title either to the persons to whom she transferred the checks or through them to the defendant bank.
It is also to be noted that in the Salen case the agent had general authority to draw checks against deposits which he was authorized to make and to use the proceeds thereof, thus indicating that there was no intent to limit his authority to the performing of a mere carefully restricted physical act.
No act of the plaintiff herein would work as an estoppel under section 42 of the Negotiable Instruments Law.
The fact that a check of a corporation is endorsed by an officer or agent thereof in blank, or to his own order, puts a bank upon receiving such checks on inquiry. Niagara Woolen Co. v. Pacific Bank, 141 A.D. 265, 267-269; Ward v. City Trust Co., 192 N.Y. 61, 69; Squire v. Ordemann, 194 id. 394, 396, 397.
It is urged by the respondent that the defendant bank is in a different position because it did not deal directly with the wrong-doer. We are unable to see that its position is altered in any respect by reason of this fact. The endorsement being a forgery, it could convey no title to the transferee thereof, and the invalidity of the endorsements could not be cured by subsequent transfer to others. Defendant's depositor having no title could convey none to the defendant, and defendant having no title and having wrongfully collected the moneys represented by the checks is liable for the amounts thus wrongfully received.
For this reason the judgment must be reversed, with costs, and judgment directed in favor of the plaintiff for the full amount claimed with costs.
DELANY, J., concurs; SEABURY, J., taking no part.
Judgment reversed, with costs and judgment directed in favor of plaintiff for full amount claimed, with costs.