Wheatland v. Pryor — 44 N.Y. St. Rep. 311

Majority

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Philip D. Wheatland, Resp’t, v. S. Morris Pryor and Charles W. Drake, App’lts.^[1]

(Court of Appeals,

Filed April 12, 1892.)

Headnote

1. Appeal—Reference.

In an action by a stock broker against a firm for an amount claimed to "be due for securities purchased and sold for it, moneys laid out by plaintiff, •and moneys received by defendants for liis use, defendants contended that although the drafts were in form those of the firm, they were really made in order to enable the plaintiff to raise money. The evidence was conflicting, and the findings of the referee thereon being affirmed by the general term, are conclusive upon this court.

3. Bills and Notes—Notice.

On May 28 defendant P. drew a draft on plaintiff for $1,700, which the latter paid as a loan to him individually. On the 11th of .Tune plaintiff drew on P. individually a draft for the same amoun', payable to himself, endorsed, and took it to the T. Trust Go., which endorsed and sent it to the Nat. Bank of the Republic, and that bank on presenting it for pavment received a check signed by P. & On., made payable to R., and by R. endorsed to said bank. Held, that the knowledge acquired by the "Bank ■of the Republic when it repeived the firm check in payment of the draft upon P. individually could not be imputed to plaintiff.

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Appeal from j udgment of the supreme court, general term, first department, affirming judgment in favor of plaintiff entered upon report of referee.

George 0. Molt, for app’lts; Michael M. Cardozo, for resp’t.

Between October, 1887, and July, 1889, the plaintiff was a broker in Boston and the defendants were a firm of brokers doing business in the city of New York, and during that time the plaintiff and defendants had numerous and extensive dealings with each other. The plaintiff drew numerous-drafts upon the defendants and they drew numerous drafts upon him. The firm of the defendants was dissolved in the latter part of June, 1889, and the business dealings between the parties then ceased. The plaintiff thereafter, in July, commenced this-action, claiming that upon the dealings between them there was .the sum of $11,000 due to him from the defendants. They in their answer denied that they were indebted to him, but on the contrary claimed that there was a small balance due to them. The action being at issue was referred, and the referee found the sum of $9,537.63,. besides interest, due the plaintiff.

There is no dispute that the sum found by the referee in favor of the plaintiff was due to him, either from the defendants as a firm, or from the defendant Pryor individually. Upon the trial the plaintiff claimed, and gave evidence tending to show, that that sum was due to him from the firm. The defendants on the Contrary, claimed, and gave evidence tending to show, that it was due from Pryor individually. The indebtedness, found by the-referee was created by drafts drawn by the defendants in their firm name upon him and paid by him. It was the contention of the-defendants upon the trial that, although these drafts were in form the' drafts of the firm, they were caused to be drawn by the defendant Pryor in pursuance of an arrangement between him and the plaintiff to effect a loan by the plaintiff to him individually, and that the money obtained upon the drafts was a loan to him individually. The evidence as to these drafts, and the purpose-for which they were drawn was conflicting, and upon the conflicting evidence the referee found that the money was advanced and loaned by means of these drafts to the firm and that the firm became indebted to him.- The findings of the referee having been affirmed at the general term are conclusive upon us.

The counsel for the defendants contends, however, that the-general term did not exercise the jurisdiction which it undoubtedly possessed to review the findings of the referee upon the-evidence, and that it assumed that it was concluded by those-findings, and he reaches this conclusion by reading the opinion pronounced at the general term. We harm frequently said that we cannot look at the opinion read in the court below for the purpose of determining whether it exercised its jurisdiction or not. - To determine that question, we always look at its order or judgment. Looking there, we find nothing upon the subject.

Óur attention is called to several exceptions taken during the progress of the trial in the reception and exclusion of evidence.

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We have given them careful consideration and do not believe that any of them point out error prejudicial to the defendants.

There is one item, however, in controversy between the parties to which we will give particular attention. On the 28th day of May, 1889, the defendant Pryor in his individual name drew a ■draft upon the plaintiff for $1,700, which the plaintiff paid as a loan to him individually. On the 11th day of J*une thereafter, for the purpose of procuring repayment of the loan thus made, the plaintiff drew upon Pryor individually a draft for $1,700, payable on demand to the order of himself. That draft he endorsed and took to the International Trust Company of Boston and there deposited it to his. credit, and the trust company ■endorsed it and sent it for deposit to its credit to the National Bank of the Republic of New York, and the Bank of the Republic on the 12th day of June presented the draft for payment at the. ■defendants’ office, where it was made payable, and there it received a check in the following form:

“ New York, June 12, 1889.

“ Seaboard National Bank pay to the order of George R. Rum-rill, or ourselves, seventeen hundred dollars.

“ $1,700. S. Morris Pryor k Co.”

Endorsed upon the check were these words: Pay to the order of the Bank of the Republic. George B. Rumrill.”

The Bank of the Republic then surrendered the draft drawn by the plaintiff and subsequently obtained payment of the check. The claim of the defendants is that the Bank of the Republic, in presenting the draft and receiving payment thereof, acted as the -agent of the plaintiff ; that when it took the firm check and drew the money thereon it had notice that, the firm property was appropriated to pay the individual debt of Pryor; that that notice was imputable to the plaintiff, and, therefore, that the funds of the firm were appropriated to the knowledge of the plaintiff to pay the individual debt of Pryor to himself; that he thus became obligated to refund that money to the firm, and that the defendants ¡should, therefore, have had credit for that amount. To sustain his contention the defendant’s counsel cites the following among other authorities: Dob v. Halsey, 16 Johns., 38 ; Elliott v. Dudley, 19 Barb., 329 ; Atlantic State Bank v. Savery, 82 N. Y., 299 ; Union Bank v. Underhill, 102 N. Y., 336 ; 2 St. Rep., 48 ; Rogers v. Batchelor, 12 Peters, 229; Moriarty v. Bailey, 46 Conn., 592 ; Kendal v. Wood, L. R., 6 Ex., 243. We do not think any of these authorities are applicable to this case. As we understand the evidence the Boston bank took this draft from the plaintiff and gave him credit therefor in its account with him, and thus it became the owner of the draft, and thereafter it dealt with it as the owner thereof upon its own account. The plaintiff received the amount of the draft drawn by himself upon Pryor, individually, not from the firm, but from the trust company to which he delivered it, and thus he came under no obligation whatever to the

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defendants on account of the transaction. For this conclusion, if any authority were needed, the case of Moriarty v. Bailey, supra, is precisely in point. In that case there was the firm of Moriarty & Bailey, and Moriarty made his individual note payable to A. or order, and A. had it discounted upon his endorsement at a bank and Moriarty paid it to the bank when due out of partnership funds; and it was held that A. was not chargeable with the-partnership funds thus used, although he was an endorser of the" note and interested in the payment, the money having been received by the bank and not by him. Here after the plaintiff transferred this draft to the Boston Trust Co., he could be made-liable thereon only by such proceedings as would charge him as a. drawer and endorser thereof.

But, further, if we assume that the plaintiff employed the Boston Trust Company to collect the draft on Pryor, and that the Trust Company thus became his agent for that purpose, then the Bank of the Republic became the agent of the Trust Company and not of the plaintiff. Allen v. Merchants’ Bank of New York, 22 Wend., 215 ; Commercial Bank of Penn. v. Union Bank of New York, 11 N. Y., 203 ; Ayrault v. Pacific Bank, 47 id., 570. The Bank of the Republic did not become responsible to the-plaintiff, and the plaintiff could not in any way control or direct-its conduct in the discharge of the duty which it had assumed to the Trust Company. Therefore, if upon the facts assumed it knew that the draft drawn by Pryor individually was paid with-firm funds, while that knowledge could be attributed to its principal, the Trust Company, it could not be attributed to the plaintiff, who was not its principal. The reason for the rule which imputes knowledge of an agent to his principal is thus stated in Story on Agency, § 100: “ Upon general principles of public-policy it is presumed that the agent has communicated such facts-to the principal, and if he has not, still the principal having entrusted the agent with the particular business, the other party has-a right to deem his knowledge and acts obligatory upon the principal, otherwise the neglect of the agent, whether designed or undesigned, might operate most injuriously to the rights of such party.” How, within the reason of this rule, could the constructive or imputed notice of the Boston Trust Company, it having no-actual notice, be imputed to the plaintiff ? There can be no presumption that it communicated to the plaintiff knowledge which it did not have; and in omitting to communicate to the plaintiff knowledge which it did not have it was guilty of no wrong and no neglect of duty. The rule of constructive notice to a princi-pal can have no operation whatever in a case where the agent himself has not received actual notice. There are undoubtedly cases where an agent is authorized by his principal to em: ploy sub-agents, and where the nature of the business entrusted’ to the agent is such that it must be assumed he was authorized to employ sub-agents for the principal, and in such cases it is frequently true that both the agents and the sub-agents are the representatives of the principal, and the knowledge which either oí them acquired in the business may be imputed to the principal.

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But here it is settled upon abundant authority that the agent employed by the Boston Trust Company to collect this draft had no relation whatever to the plaintiff, and owed a duty, not to the plaintiff, but solely to the Trust Company. So in any view of this case the knowledge acquired by the Bank of the Republic when it received the firm check in payment of the draft upon Pryor individually cannot be imputed to the plaintiff. The plaintiff in the end, in some form, received his money from the Boston 'Trust Company in good faith, without notice, and he cannot be made to account for it to the defendants. Stephens v. Board of Education, 79 N. Y., 183 .

The judgment should be affirmed, with costs.

All concur.