Standard Steam Specialty Co. v. Corn Exchange Bank

Headnote

Banks and banking—liability of bank for payment of checks which have been fraudulently indorsed by agent of depositor.

Where a stenographer and bookkeeper authorized to indorse checks in the name of her employer by means of a rubber stamp and then deposit the same in a certain bank, indorses certain checks in the manner prescribed, but without using the rubber stamp, and affixes thereto her own indorsement and thereafter procures the money thereon from bona fide holders for value, who in due course deposit the checks with a bank which without the knowledge of the fraudulent indorsement after collecting them pays out the proceeds to depositors, the bank is not liable for conversion.

Appeal by the defendant, The Corn Exchange Bank, from an order and determination of the Appellate Term of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 6th day of March, 1914, reversing a judgment of the Municipal Court of

the City of New York in favor of the defendant and directing judgment in plaintiff’s favor.

The facts were stipulated as follows:

“First. That the plaintiff and defendant were at all the times mentioned in the complaint and now are domestic corporations created, organized and existing under and by virtue of the laws of the State of New York.

“ Second. That prior to the dates specified below, the plaintiff was the owner of eleven checks drawn to its order by various parties on different banks, the said checks with their respective dates, drawers, and the banks on which they are drawn, being as follows: [Here follows a list of eleven "checks of different dates and for different amounts drawn on divers banks and aggregating $329.79.]

“ Third. That at all the times mentioned in the preceding paragraph, the officers of the Standard Steam Specialty Company were Norman 0. Brizse, President, and Percy H. Pinder, Secretary and Treasurer. That they were the only officers of the said Company, and had entire charge of its business, which was conducted at No. 542 West Broadway, in the Borough of Manhattan, City of New York.

“Fourth. That at all the times mentioned in paragraph II, and for some time prior and subsequent thereto, one, Harriet Cohen, was employed by the Standard Steam Specialty Company as a stenographer and bookkeeper. That besides her duties as stenographer and bookkeeper, the said Harriet Cohen was accustomed to take to, and deposit in the Greenwich Bank, West Broadway Branch, checks received by the Standard Steam Specialty Company, made out to its order. That the said Harriet Cohen was authorized and instructed by the officers of the Standard Steam Specialty Company to place on the hacks of such checks a stamped endorsement, reading as follows, a rubber stamp being used for the purpose: ‘Pay to the order of the Greenwich Bank. The Standard Steam Specially Co.,’ and to affix to such stamped endorsement, in her own handwriting, the signature of Percy H. Pinder, Treasurer. The checks so endorsed and deposited by her were received from the officers of the Company, when they opened

the mail, and were sometimes taken from the mail when she herself opened it, as she was authorized occasionally to do. The said 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. During the period above mentioned, the said Harriet Cohen endorsed and deposited in the Greenwich Bank to the credit of the Standard Steam Specialty Company, a large number of checks, made out to their order, the endorsement of the Standard Steam Specialty Company by Percy H. Binder, Treasurer, being in the manner set forth above. That the eleven checks described in paragraph H were either taken from the mail opened by the said Harriet Cohen or delivered to her by the officers of the said Standard Steam Specialty Company for endorsement and deposit in the Greenwich Bank, West Broadway Branch, to the credit of the plaintiff in the manner set forth above.

“Fifth. That the eleven checks mentioned in paragraph II herein were endorsed by the said Harriet Cohen in her own handwriting, as follows: ' Standard Steam Specialty Company, Percy H. Pinder, Treasurer,’ there being some unimportant variations of the endorsements on different checks, none of which are material to the issues in ,this case. Each of the said checks were also endorsed 'Harriet Cohen’ or ‘TI. Cohen.’ The first nine of said checks were presented by Harriet Cohen, after such endorsement to one, Ben Goodman, who gave the said Harriet Cohen the face value of said checks in cash, in good faith, and without any knowledge that Harriet Cohen was thereby diverting the proceeds of said checks to her own use. The last two of said checks mentioned in paragraph II of said complaint were presented by Harriet Cohen, after such endorsement, to one B. B. Bobbins, who gave the said Harriet Cohen the face value of said checks in cash, in good faith, and without any knowledge that Harriet Cohen was thereby diverting the proceeds of said checks to her own use. That both the said Ben Goodman and B. B. Bobbins, after receiving the checks so endorsed by the said Harriet Cohen, endorsed the said checks in their own name, and deposited them in the regular course of business, with the defendant, The Com Exchange

Bank, with whom they both had at that time separate accounts. The defendant, The Corn Exchange Bank collected the proceeds of the said checks and applied them to the respective accounts of Ben Goodman and R. B. Robbins, and paid out the proceeds so collected in the regular course of its business upon the order of said depositors. The proceeds of all of the above checks mentioned in the foregoing paragraph No. 2 amounting to $329.79 were appropriated by the said Harriet Cohen and converted to her own use, the plaintiff never having received such proceeds or any portion thereof either from the said Harriet Cohen or from any other source.

“Sixth. Before presenting the said checks for payment to the respective banks on which they were drawn, the defendant The Corn Exchange Bank stamped on the said checks one or the other of the following endorsements:

“•‘Received Payment

Through the New York Clearing House

(Date)

Endorsements Guaranteed The Corn Exchange Bank of New York

Frederick T. Martin, Cashier,

H.

“ ‘ Pay any Bank, Banker or Trust Company Or Order

The Corn Exchange Bank, N. Y.

Endorsements Guaranteed

Harlem.’

“ Seventh. That the defendant at the time it received said checks from Ben Goodman and R. B. Robbins, and at the time of collecting the proceeds thereof and paying out the same upon the order of said depositors, had no notice, knowledge or suspicion tending to impeach the validity of said checks, and took them without notice of any limitation, defect or infirmity in the title thereof, or any limitation or infirmity in the title of Harriet Cohen thereto, or any limitation upon her right to endorse or transfer the same, and that the defendant received

said checks in the regular course of its business, in good faith and has parted with value therefor.

“ Eighth. That the plaintiff has demanded the payment of - the amount of the said checks set forth in paragraph II from the defendant, and the defendant has failed and refused to pay the same. The aforesaid demand on the part of the plaintiff was made after the proceeds of all of the said checks had been collected by the defendant and paid out upon the order of its depositors as hereinabove stated.”