Burstein v. Sullivan

Miller, J.:

This suit is brought to recover for repairing an automobile. The defense is payment. The plaintiffs, copartners, did business under the name “ Peerless Garage.” It is conceded that the business was conducted' by one “ Max Melle ” as general manager. The plaintiffs’ names did not appear on their billheads or stationery, but the manager’s name was stamped thereon over the word “ Manager.” He had authority to render bills and receive payments. The plaintiffs furnished him a rubber stamp with the words “ Peerless Garage, By....... Mgr.,” which he was authorized to use in signing letters and receipts, but the plaintiffs’ evidence is that he had no express authority to sign checks. He presented a bill to the defendant, who drew a check for the amount of the bill, payable to the order of “ Peerless Garage,” and delivered it to him. He indorsed it “Peerless Garage, By Max Melle, Mgr.,” using the rubber stamp aforesaid, drew the money on it and appropriated it to his own use.

The respondents seek to support the judgment in their favor by the following authorities: Bernheimer v. Herman (44 Hun, 110); Dowdall v. Borgfeldt & Co. (113 N. Y. Supp. 1069); Thomson v. Bank of British North America (82 N. Y. 1); Robinson v. Chemical Nat. Bank (86 id. 404). In respect to the first two cases cited it is sufficient to say that in neither was the agent who made the indorsement on the check a general manager, having the sole charge of the business, and the others do not decide the point involved here. In the Thomson case the check was drawn to the order of a third person, who never received it because it was misappropriated by the attorney for the plaintiff and such third per-eon, who, however, had no authority, real or apparent, to indorse the check. It is plain that the decision in that case was put upon the ground that the plaintiff could not recover from the bank upon whom the loss should ultimately fall. Wherefore the court allowed the accounts between the plaintiff and the defendant to be opened to charge the loss to the latter, who could recover from the bank at fault. In the Robinson, case the payee of the check or, to be accurate, his successor, was allowed to recover from the bank upon which it was drawn on the ground that the check was indorsed by one having no authority. That case makes for the defendant, as it establishes the proposition that the plaintiffs in this case could recover from the bank paying the check, provided such payment was wrongful.

A payment to Melle in cash would have been a payment to the plaintiffs though he had stolen the money, and the defendant should not be compelled to pay twice or subjected to the hazard of a lawsuit with the bank for having taken the precaution to protect the plaintiffs by making a check payable to their order. It is true that the delivery of a check or of a note does not of itself discharge the indebtedness. If the check or the note is not paid the creditor may sue on the original indebtedness. But the cases dealing with that subject have no application whatever to the question in hand. If this check had not been paid by the funds of the defendant on deposit in the bank upon which it was drawn the plaintiffs could sue either upon the check or the original indebtedness; and, of course, the defense of payment could not successfully be pleaded to a suit on the original indebtedness. But where a debtor delivers his check to the creditor or his agent duly authorized to receive it, and has funds in the bank to meet the check, the transaction as between the debtor and the creditor should be treated as a payment precisely as though cash had been paid, even though the agent forges an indorsement and steals the money. Ho doubt the rule is that express authority, or power involving such authority, must be conferred upon an agent to sign negotiable paper, and-that authority merely to collect a debt does not involve authority to indorse checks given in payment of it, but those propositions and the authorities in support of them are aside from the point now involved. Upon the delivery of the check to Melle, in payment of the bill rendered by him, it became the plaintiffs’ property; and if their agent, by a forged indorsement or one made without sufficient authority obtained the cash and appropriated it to his own use, they should settle the question with the bank. (See Sage v. Burton, 84 Hun, 267; Allen v. Tarrant & Co., 7 App. Div. 172.)

While we do not decide the point, it may at least be suggested that the plaintiffs’ riglit to recover even from the bank is by no means plain. Melle was not a mere bookkeeper or clerk or agent to collect; he was a general manager having the sole charge of the business, and the only one whom the public knew. He made the indorsement on the check by using a stamp furnished him by the plaintiffs for the purpose at least of signing the firm name to certain papers. I think that any bank knowing that he was in fact the plaintiffs’ manager, having sole charge of their business, conducted in the method disclosed, would have cashed this check upon the indorsement as made without inquiring further into his authority. It is by no means certain that the court would compel the bank to make good the loss, but it is enough for this case to hold that the defendant could not he subjected to the trouble or hazard of undertaking it.

The judgment should be reversed and a new trial ordered, costs to abide the ex-ent.

Woodward, Jems, Burr and Rich, JJ., concurred.

Judgment of the Municipal Court reversed and a new trial ordered, costs to abide the event.