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Shattuck v. Guardian Trust Co. of New York

Supreme Court of New York, Appellate Division

July 7, 1911


Page 735

APPEAL by the plaintiff, Edwin P. Shattuck, as receiver, etc., from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 22d day of March, 1911, upon the decision of the court rendered after a trial at the New York Trial Term (both parties having moved for a direction of a verdict) for sixty-nine dollars and four cents, being the amount for which an offer of judgment had been made.


Herbert Barry of counsel [Julien T. Davies with him on the brief], Charles E. Hotchkiss, attorney, for the appellant.

Henry D. Hotchkiss, for the respondent.



The complaint alleges that on or about December 16, 1905, the New York Investment and Improvement Company deposited with the defendant $75,000 which the defendant received and agreed to hold for the use of the New York Investment and Improvement Company, and to pay the same on demand or upon its order, with interest at the rate of two and one-half per cent per annum; that the plaintiff has been appointed receiver of the New York Investment and Improvement Company in an action; that he demanded from the defendant said sum with interest, but that it has neglected and refused to pay said sum or any part thereof, except $69.04. The answer avers that the defendant had paid $70,000 on the check of plaintiff's company on December 29, 1905, and $5,000 on January 2, 1906.

It appears that on December 11, 1905, a resolution was duly passed by the directors of the New York Investment and Improvement Company directing the president and treasurer to deposit certain moneys with the Guardian Trust Company, and providing 'that all checks, drafts or other orders for the

Page 736

payment of money shall be signed by the president and countersigned by the treasurer of the Company, unless the board of directors shall, by resolution, authorize other or additional officers to sign or countersign the same.' On December 16 1905, the company, by its president, Charles L. Spier, duly deposited $75,000 with the defendant. At the time of the deposit there was delivered to the defendant a certified copy of the resolution passed by the directors and a card containing the authorized signatures of the president and treasurer.

The court found that on or about December 29, 1905, said Spier drew on said account a check for $70,000 in form as prescribed by said resolution, but in fact genuine as to his signature, and forged as to that of Lauterbach, treasurer of the company, and then known by said Spier to be so forged, with a similar finding as to a check for $5,000, the date of payment being stated as prior to May 5, 1906; that upon the faith of said checks in due course of business, without knowledge of the forgery of the signature of the treasurer, and without notice to put it upon inquiry, defendant paid said Spier said checks; that on May 5, 1906, said Spier requested defendant to balance said pass book, which it did, showing the debit of said $75,000, together with $69.04 interest to December thirtieth, less the two checks for $75,000, leaving a balance of $69.04 as of May 5, 1906, and defendant then and there delivered to said Spier the pass book, together with the said two vouchers, and he gave a receipt for the same as follows: 'Received pass book balanced to May 5th, 1906, and two vouchers as per list. New York Investment & Improvement Company, by Charles L. Spier, President. Dated May 5th, 1906; ' that said pass book so balanced came into the possession of the treasurer of the company, said Lauterbach, on or about May 7, 1906, but without the two said vouchers; that the evidence discloses no trace of said two vouchers subsequent to their delivery to said Spier on May 5, 1906; that on May 17, 1907, said plaintiff demanded of defendant payment of said deposit with interest thereon; that the defendant was not notified of the forgery by the depositor or its receiver within one year after its return of the vouchers. And as a conclusion of law, that on May 5, 1906, the account between the defendant and the said company was stated and

Page 737

the balance struck, whereby it became indebted to said company in the sum of $69.04; that plaintiff can only open said account for fraud or mistake, which it has not done; that 'according to the allegations and proofs' the two forged checks were returned to the depositor on May 5, 1906, and the depositor failed to notify the defendant of the forgeries within one year thereafter, and directed judgment for $69.04, the admitted interest due.

The appellant claims that section 326 of the Negotiable Instruments Law is in effect a statute of limitations, and to be available must be pleaded. Not having been specifically pleaded, it is not available here. To which the answer is made that the facts are pleaded which make the statute apply and that there was no necessity of pleading it specifically; that it is not a statute of limitations but a condition.

The complaint states a full and complete common-law cause of action, the deposit of a sum of money with a trust company, organized under the Banking Law of the State of New York, under an agreement to pay said amount on demand to or upon the order of the depositor with interest at the stipulated rate; that plaintiff demanded the said sum with accrued interest, which defendant refused to pay except for the sum of sixty-nine dollars and four cents.

Defendant upon the trial, and now, relies for its defense upon section 326 of the Negotiable Instruments Law: 'No bank shall be liable to a depositor for the payment by it of a forged or raised check, unless within one year after the return to the depositor of the voucher of such payment, such depositor shall notify the bank that the check so paid was forged or raised.' (Gen. Laws, chap. 50 [Laws of 1897, chap. 612], § 326, added by Laws of 1904, chap. 287; now Consol. Laws, chap. 38 [Laws of 1909, chap. 43], § 326.) In my opinion no such defense was alleged in the answer.

The third separate defense alleges that the check of $70,000 drawn on this defendant on December 29, 1905, bore what purported to be the signatures of Charles L. Spier and Alfred Lauterbach; that 'long subsequent' to the occurrences hereinbefore alleged claim was made upon defendant by or in

Page 738

plaintiff's behalf that the signature of said Alfred Lauterbach was forged by the said Spier, and that the latter took and converted to his own use the proceeds of said check and that because of such forgery and conversion defendant was still indebted to said New York Investment and Improvement Company, or to this plaintiff; that on information and belief it denies that the facts are as set forth in said claim, but that Spier on behalf of said company agreed on its behalf to loan $70,000 to a business firm; that he indorsed and paid over said check to said firm in pursuance of said agreement of loan; that said firm executed and delivered their promissory note or other agreement to repay said sum and that on January 29, 1906, said firm paid their said note or obligation to said company.

It will be noted it is not alleged how 'long subsequent' this claim was made. The defense that Spier loaned the said sum to a business firm which gave a note therefor to the said company which on January 29, 1906, paid said note, certainly does not suggest that defendant intended to rely on section 326.

The fourth separate defense alleges that the check for $70,000 drawn on December 29, 1905, bore what purported to be, and what with due care defendant believed to be, the signatures of Spier and Lauterbach; that on receipt of said balanced pass book and vouchers, the New York Investment and Improvement Company made no examination of said account or vouchers, or any effort whatsoever to discover the validity of said vouchers, nor did it make any such examination or effort within a reasonable time thereafter, but wholly failed so to do and failed to notify defendant that the name of its said treasurer to said check for $70,000 was a forgery, until on or about May 17, 1907, when this plaintiff claimed payment as in the complaint set forth; that if said company had examined its said pass book and vouchers within a reasonable time, by the exercise of the slightest care the said alleged forgery would have been discovered; that had such forgery been made known to defendant within a reasonable time after the discovery thereof defendant would have been able to recoup itself for the full amount thereof from moneys then in the hands of the said Spier, or to which he was entitled. In short, what is set

Page 739

up is a plea of estoppel in pais due to the negligence of the company in not examining the vouchers with due diligence and consequent detriment to the defendant in that it was thereby prevented from recouping itself.

The proof wholly failed to establish this defense. I do not think it possible to transform this defense clearly pleaded in estoppel, based upon the doctrine of Critten v. Chemical National Bank (171 N.Y. 219), into a defense based upon the statute now relied upon. These are the only parts of the answer which give any color to the claim that the ...

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