Steckel v. First National Bank

Mr. Justice Paxson

delivered the opinion of the court, May 3d 1880.

The principal cause of complaint in this case is that the learned judge of the court below withdrew from the jury the consideration of the question of fraud, upon the ground that there was not sufficient evidence to submit it. The plaintiffs kept an account with the corporation defendant, and were in the habit of making deposits and drawing checks in the usual manner. William H. Blumer was the president of the b,ank ; his son, Jacob Blumer, was the cashier. Three of the directors, including the said William H. Blumer, composed the banking-house of William H. Blumer & Co., which carried on business but a few hundred feet distant from the First National Bank of Allentown. The plaintiffs having money on deposit with the bank, and being desirous of obtaining interest-bearing certificates therefor, called at the bank for that purpose. Dr. A. P. Steckel, one of the plaintiffs, testifies as to what occurred substantially as follows: “ I went to the bank every week or two to make my deposits; sometime in August, when I made deposit, I asked the teller, George Straub, Does the First National Bank take any money on certificates ? He said, Yes, sir; do you want to leave us some ? I said No ; not to-day. I asked him whether the First National Bank issues certificates of deposit, and, as a matter of course, pay interest ? and he said, Yes. Then I came there again in September 1876, and made my ordinary deposit in the bank; and after we were through, I said to the teller that I would take the First National Bank certificates for $700; I filled out a check, and he handed me a certificate; I looked at the certificate for $700 ; it was to be made on demand, and asked him, Is this the First National Bank certificate ? The answer was, Yes, sir, it is. I then said, this reads Blumer & Co.; I want this distinctly understood, I want nothing but the First National Bank certificate. He assured me that this was one and the same thing; that it should pass to the credit of the company the same as it was before. With this assurance, I took that certificate. This was in the presence of the cashier of the hank, Jacob A. Blumer.” Two other certificates, aggregating, with the one above mentioned, the sum of §3000, were obtained under circumstances not essentially different. There was evidence that the president of the bank recognised them as binding upon the bank, and offered to reinstate the plaintiffs as they were before, when the bank examiner was through with his examination. That examination, however, resulted in the closing of the bank.

We must assume that the jury would have found the facts as testified to by the plaintiff Steckel. The facts established, we have a ease of palpable fraud. It is not an answer to say the plaintiffs ought not to have been deceived, and, with ordinary care, would not have been. The fact that the Blumers were respectively president and cashier of the National Bank, as well as loading members of the banking-house of Blumer & Co., was calculated to mislead and deceive; and when told in positive terms that the certificates, although signed by Blumer & Co., were the certificates of the bank, the plaintiffs may readily have believed it was all right.

It was urged, however, that, even if there was a fraud, it does not affect the bank; that an agent can only act within the scope of his authority, and that a bank is not bound by the fraudulent representations of one or more of its officers.

There is no doubt as to the general rule that an agent can only bind his principal so long as he acts within the scope of his authority ; but we do not think the principle applies in this case. A bank is responsible for the safe keeping of the money of a depositor, and it cannot set up the fraud of its own officers as an answer to a demand for repayment. Public policy forbids it.

The plaintiffs, after ascertaining the fraudulent character of the transaction, tendered the certificate to the bank, and demanded the payment of their original deposit. In other words, they rescinded the contract on the ground of fraud. If their allegations are true, they had a right to do so, and proceed upon the original cause of action.

The question of fraud should have been submitted to the jury. What has been said sufficiently covers the points involved.

Judgment reversed, and a venire facias de novo awarded.