Bernheimer v. Herman — 7 N.Y. St. Rep. 490

Majority

p. 490

Jerome Bernheimer et al., Resp’ts, v. Henry S. Herman et al., App’lts.

(Supreme Court, General Term, First Department,

Filed March 31, 1887.)

Headnote

1. Bills and notes—Check—Receipt of by agent of creditor—Does NOT EXTINGUISH DEBT.

The receipt of a check by an agent of a creditor authorized to receive the same, does not operate as an extinguishment or payment of the debt. In order that it may so operate, the check must in due course be actually paid.

2. Agent—Authority of must be proved to bind principal.

Where a party claims to bind a principal by the act of an agent, the authority of the agent must be proved.

3. Check—Payment by—What must be proved.

Where parties claim that payment of a debt has been made by check, the burden' is on them to show that it has been duly indorsed and paid, and the creditors are not bound by the production on the trial of a check purporting to have been indorsed by them, unless such indorsement is admitted or proved.

4. Same—Party receiving may return and bring action on debt.

A creditor may return a check offered in payment of a debt and bring action upon the debt, but where the check has wrongfully come into the hands of the debtor, the creditor is freed from the obligation to return it.

This action was brought to recover for goods, sold and delivered by the respondents to the appellants.

The answer was—payment.

The alleged payment was made by handing a check drawn on the Chemical Bank, payable to the order of the National Suspender Company, the name under which the respondents did business to plaintiffs’ bookkeeper, W. R. Morse, who was in the habit of receiving cash and checks paid at the office, and who receipted the bills for the said check as in payment of bills for goods due from the appellants to the respondents.

The check was appropriated by Morse to his own use, endorsed by him in the name of the National Suspender Company, “W. R. Morse, attorney,” which endorsement he had no authority to make, and the check was passed by Morse to one Cochrane, who deposited it in the North River Bank, by which it was collected of the Chemical Bank, which latter bank charged the amount to the account of the appellants,' and returned the check to the appellants with their other vouchers.

The appellants’ account was marked paid in the ledger by Morse, and although the dealings between the parties continued, none of the statements subsequently sent to appellants, according to the usual custom of merchants, contained any reference to the goods mentioned in the complaint.

Mr. Morse was the bookkeeper and made the entries in

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the books, but made no entry of this check in the cash book, as cash received, nor upon the check book as a check for deposit, as his duties required him to do.

In order to balance his books, personal accounts were falsified, and on rendering trial balances, false additions were resorted to, and thus the frauds were not discovered until seven months had elapsed.

Upon the close of the respondent’s case, the appellants moved to dismiss the complaint, upon the grounds that the claim in suit had been paid, and that the title to the check having passed to the plaintiffs immediately on .its receipt by their agent, their proper remedy was an action for conversion against either Cochrane, the North Biver National Bank or the Chemical Bank, or against all three combined; and at the close of the case the appellants’ attorney asked to go to the jury as to whether the bill was paid, and also as to whom the check was paid to, which motions were denied and a judgment directed from plaintiffs, and from such judgment this appeal is taken.

Samson Lachman, for app’lts; Francis C. Feed, for resp’ts.

The appellants claim, amongst other things, that the only evidence on the question of authority of Morse to endorse checks being that of one of the plaintiffs, it was error to refuse to submit the case to the jury.

It is true, that where it is necessary to prove a material fact in a case, and the only evidence having a tendency to establish such fact is that of a party interested, that the opposing party has the right to have the question submitted to a jury, but this rule has no application to the case at bar.

The appellants claim payment by a check payable to the order of the Suspender Company, and the burden is upon the appellants to show that the check has been duly endorsed and paid; and the respondents are not bound by the production of a check purporting to have been endorsed by them unless such endorsement is admitted or proved. It is also a familiar rule of law that where a party claims to bind a principal by the act of an agent, that the authority of the agent must be proved; therefore; in the case at bar, the check in question purporting to have been endorsed by Morse, as attorney for the plaintiffs, the burden was upon the defendants to show his authority.

The next questions to be considered are those raised upon the motion to dismiss the complaint: First, that the claim in suit has been paid; and, second, that the plaintiff’s proper remedy was an action for conversion against either Coch

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rane, the North River National Bank or the Chemical Bank, or against all three combined, the title to the check having passed to the plaintiffs immediately on its receipt by their agent.

It is somewhat difficult to see why the appellant’s counsel has omitted the defendants from the last proposition.

If Cochrane converted the check, and the North River Bank converted the check, and the Chemical National Bank converted the check, the defendants are equally guilty of conversion in now retaining the check.

If the check was the plaintiffs’ while Cochrane or the North River Bank or the Chemical National Bank held it, it is equally so now, while the defendants hold the same; and the plaintiffs have no greater rights against the first three named than exist in their favor against the defendants.

If no title to the check was conferred upon Cochrane and the banks by the unauthorized endorsement, certainly they could transfer no title to the check to the defendants.

The claim that the plaintiff’s demand has been paid, does, not seem to have any better foundation.

The giving of a promissory-note or a check does not extinguish the debt, but an action may be brought for the recovery of the original debt, the party suing being only required to surrender the check or note upon the trial. Parrott v. Colby, 6 Hun, 55 ; affirmed, 71 N. Y. 597 .

Therefore, the receipt of the check in question by an agent authorized to receive the same, did not operate as an extinguishment or payment of defendant’s debt. Even if the check had been received by the plaintiffs, they had a right to return the check and sue upon the original debt.

The defendants having unlawfully become in possession of the check, the plaintiffs are not required to return the same.

The appellant seems to claim that as if this bill had been paid in cash, Morse would have had the right to receive the same; and although Morse might have converted the money to his own use, the plaintiffs could not have recoveredfrom the defendant. The same result follows, although the bills in question were attempted to be paid by a check drawn to the order of the plaintiffs and paid to the holder of the check, which was un-indorsed by the payee, and to which check the defendants themselves claim the holder had no title.

In support of this proposition is cited the case of Hunter v. Wetsell ( 84 N. Y., 549 ), in which case it is distinctly stated that a check in and of itself is not payment, but it may become so when accepted as such ana in due course actually paid; that is, in order that a check may operate as

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payment, two things must concur, the check must be accepted as payment, and in due course actually paid.

In the case at bar only one of these necessary elements exists. The check in question was accepted as payment, but it has not in due course been paid. The payment of a check drawn payable to oi'der and un-indorsed to a party who has received the same from a person who has stolen the check, cannot be held to be payment in due course.

The case last cited simply recognizes a rule which has been in existence since the origin of commercial paper, and which is fatal to the defendant’s contention in the case at bar.

The judgment appealed from must be affirmed, with costs.

Bartlett and Lawrence, JJ., concur.