Johnson v. Donnell — 47 N.Y. Super. Ct. 187

Majority

p. 187

ALVIN J. JOHNSON, et al., Appellants, v. ROBERT N. DONNELL, et al., Respondents.

Headnote

Agency.—Special indorsement upon draft—■when constructive notice that payment to agent must be made by check.

P., an employé of plaintiffs, whose duty it was to indorse drafts received by plaintiffs, and present the same for payment or acceptance, through a messenger bound to obey his instructions, his (P.’s) authority to receive payments not being limited to payments by check to plaintiffs’ order, sent to defendants for payment or acceptance certain sight drafts, with instructions to the messenger to take money if he could get it,—Held, that a payment in currency to such messenger was a good payment, notwithstanding a special indorsement placed by P. upon the back of the drafts, as follows: “ for deposit in National Broadway Bank,” &c., intended to secure the deposit thereof in a certain bank, in case they should be accepted merely, and not paid; and, therefore, that defendants cannot be held for a conversion of the drafts because P. failed to pay the money to his principal.

Before Speib and Fbeedman, JJ.

Decided February 7, 1881.

Appeal by plaintiffs from a judgment in favor of the defendants, entered upon the report of a referee.

The facts appear in the opinion of the referee, as follows :

“ J. S. Boswobth, Referee. This action is brought to recover of the defendants for the conversion by them of six several drafts, amounting to the principal sum

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ef $1,366.29, being the property of the plaintiffs at the time of the alleged conversion.

“ Each of these drafts was drawn by persons residing out of this State, and was drawn on the defendants, who were private bankers in the city, and was drawn to the order of the plaintiffs by the -description of A. J. Johnson & Son ; except that one of them was drawn to the order of A. J. Johnson, and except, also, that some of them were drawn payable to the order of a third person, and were by such third person indorsed, making the same payable to the order of the plaintiffs.

“These drafts were mailed at the place where they were drawn, by the persons procuring them, and were mailed to the plaintiffs as payments of like amounts owing to the plaintiffs by the person who so procured and mailed them. They were received by the plaintiffs by due course of mail, and, when thus received, became their property. At the time these drafts were re - ceived by the plaintiffs they had a bookkeeper and confidential clerk by the name of J. D. Payne.

“It was a part of Payne’s regular duties to open all letters directed to and received by the plaintiffs at their place of business, and take out any drafts contained in them, and indorse them. Each of these drafts, upon so being received by the plaintiffs, was indorsed by Payne in this form, viz.: ‘ For deposit in the National Broadway Bank for acc. of A. J. Johnson & Son. A. J. Johnson, per J. D. Payne.’

“The firm, as such, kept no bank account, but the bank account on which the funds of the firm were deposited was kept in the name of J. A. Johnson.

“The plaintiff had another clerk at this time by the name of Herman Heilbut; when he was employed by the firm Mr. A. J. Johnson told him that he had to obey Payne. Mr. Johnson said, “ John (Payne) is the head man, obey all his orders.” It was a part of Heiltmt’s regular duty to take the pass-book to the bank

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and deposit what was at the time to be deposited, and to take out drafts received by the firm, which were drawn on private bankers, and obtain the acceptance by the latter, or payment thereof. ■ Payne, after he had indorsed these drafts in the form before stated, handed them to Heilbut, with instructions to take them to defendants and get them certified, or if, instead of certifying them, they paid the amount in money, to bring the money to him. Each of these drafts was paid by the defendants to Heilbut under these circumstances, and he paid over to Payne the money he received, and Payne withheld it from the plaintiffs. This was probably done, in each case, on a Saturday, on which day Mr. A. J. Johnson was not at his store. Mr. A. J. Johnson knew that Heilbut was intrusted with drafts, to be presented to the drawees for accepts nee or payment, for in speaking of Payne and Heilbut he testifies thus:

“ ‘Q. Payne had the general management of the labor and drudgery of making up the bank deposits ?

“ ‘A. Yes, sir; he opened all my letters and took out the drafts and indorsed them, and then this boy was sent down ; the same as I do now.’

“ Whatever may be the legal import of an indorsement in the form in which these drafts were indorsed, or whatever of restriction it may impose upon their negotiability from hand to hand, it is quite clear that it was not designed or intended to be a notice to the drawees not to pay the drafts either to Payne or to any other employee of the plaintiffs whom they might instruct to present them.

“Mr. A. J. Johnson, in his testimony, testifies thus:

“ ‘ Q. You may tell me what Mr. Payne’s general instructions were in regard to drafts received by your firm?

i “‘A. The instructions were that these drafts were

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to be deposited in the Broadway Bank. If they were drawn upon a broker, not upon a bank, the drafts were to be taken to the broker for a draft on a National Bank, or for certification.

“ ‘ Q. When you say if the drafts were on brokers, you. mean private bankers or brokers %

“ ‘A. I mean anything but National Banks ; some we get on dry-goods men.’

“ This shows that it was no part of the purpose of this form of indorsement to make it necessary that the drafts should be deposited in the Broadway National Bank. If Heilbut had received the check of Donnell, Lawson & Co. for the amount of the draft, and had then left the draft with them, there would have been, no departure from Payne’s delegated authority, as Mr. Johnson understood it.

“The testimony of Turner, the defendants’ cashier, imports that they at times paid cash when it was more convenient at the time to do so than to draw a check. Turner testified thus : ‘ I remember that on one or two occasions, late in the day, when I was very busy and about preparing to make up my cash, drafts were presented from Johnson’s, and to save time of drawing a check I paid cash for them.’ He paid them to a boy that he recognized as coming from Johnson’s. He does not remember that he paid him money prior to these one or two occasions.

“ ‘ Q. Do you say that you had seen him at your window with drafts for Mr. Johnson, seeking payment of them ? A. 1 am confident that I did.’

“Under these circumstances it is a very significant fact that Heilbut, who had been instructed by Mr.Johnson to obey the orders of Payne, went to the defendants with these drafts or some of them, instructed by Payne that if the defendants offered payments in cash, instead of certifying the draft, to take the money and bring it to him. It is unavailing to

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urge that the plaintiffs did not thereby intend to enlarge any authority previously conferred on Payne ; the fact remains that Heilbut’s receipt of the money for the drafts was in strict conformity to the plaintiffs’ instructions to him. He obeyed Payne’s orders in receiving it, and was under instructions to obey Payne’s orders.

“It will also be borne in mind that when a draft thus indorsed was sent to the drawees, it was sent with the expectation or understanding that it might be paid and retained by the drawees, instead of being certified by them, and returned thus certified to the plaintiffs’ messenger. The messenger was, therefore, authorized to receive payment. He was not instructed, nor was Payne instructed, to see to it that payments, if made,should be made by checks, not in currency.

“The form of the indorsement was used only for the purpose of securing the deposit of the draft in the Broadway Bank, if it should be merely accepted, instead of being paid on presentation. The course of business between the plaintiffs and the defendants was notice from the plaintiffs to the defendants that they need not regard the special indorsement either as an objection to or as an excuse for not actually paying the draft on presentation. On all the evidence I think it a just conclusion as between the plaintiffs and the defendants, that the defendants paid these drafts to an agent of the plaintiffs authorized to receive payment thereof, and that, therefore, they paid them to the plaintiffs.

“I agree with plaintiffs’ counsel that an action of trover and conversion would lie if it had appeared the defendants came to the possession of the drafts wrongfully, and paid them to a person having no actual or apparent .authority to receive payment. The drafts have, in effect, been paid by the drawers thereof to the defendants- in the settlement of accounts had between

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them since the drafts came to the defendants’ possession. These facts would amount to a wrongful possession, if the drafts, while in the defendants’ possession, continued to be the property of the plaintiffs.

“A cause of action would be complete upon the conversion being made, and it would not be necessary to demand a return.of the drafts before suit brought (People ex rel. v. Bank of North America, 75 N. Y. 547 -564).”

Payson Merrill, for appellants.

Arthur, Phelps, Knevals & Ransom, attorneys, and Rasius 8. Ransom, of counsel, for respondents.

The testimony clearly shows that it was part of the regular duties of Payne, as an employee of the plaintiffs, to open all letters directed 'to and received by the plaintiffs at their place of business, to take out any drafts contained in them and indorse them, and to present said drafts through a messenger bound to obey his instructions to the drawees for acceptance or- payment. Iiis authority to receive payment was not limited to payments made by checks drawn to the order of the plaintiffs.

When, therefore, the defendants paid to the messenger, who had been sent by Payne to present the drafts in suit which were payable at sight, for acceptance or payment, and who had been expressly instructed to take the money, if he could get it, the amount of the said drafts in currency, it was a good payment, notwithstanding the special indorsement placed by Payne upon the back of the drafts, which was intended to secure the deposit of the drafts in a particular bank for collection in case the defendants should only accept and not pay. This being so, the

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defendants cannot be held for a conyersion of the drafts, because Payne failed to hand the money over to his principals.

The judgment should be affirmed, with costs.

Speib, J., concurred.

Cases cited

People v. Bank of North America 75 N. Y. 547 N.Y. 1879-01-21 p. 192