The opinion of the court was delivered by: KAUFMAN
This action, as I see it, is one to recover funds which the plaintiff claims the defendant, The Chase National Bank, illegally paid out of his account. The funds were paid out on the basis of a check, which is now marked Exhibit 1, and the litigation revolves about that check.
This check was drawn by the plaintiff on his funds in The Chase National Bank in the amount of $ 50,000. The check was dated March 14, 1946, and it named the Snowden Oil & gAs cOmpany, lTd., as payee. Shortly thereafter it was paid by The Chase National Bank and the plaintiff's account debited accordingly.
It is agreed for the record that on or about April 1, 1946, the check was returned to the plaintiff in cancelled form, together with his March bank statement. Not until more than two years later did the plaintiff protest, as he says, orally to an official of the bank that the check had been improperly paid and, as he says, demanded the return of $ 50,000. The action however, upon the alleged improper endorsement and payment which resulted from it, was not instituted until May, 1951.
The Snowden Oil& Gas Company, Ltd., was a limited partnership organized under the laws of Texas and was engaged in drilling operations in Oklahoma. The plaintiff, before this transaction, had invested $ 10,000 in one of its enterprises through the investment firm of A. W. Smith & Company of Boston, and I think Mr. Gilbert on the stand so testified. This firm was represented by A. W. Smith, and I believe Mr. Gilbert added, by Mr. Carr as well. Thereafter discussions arose between the plaintiff and Smith concerning additional investment, as a result of which the plaintiff invested $ 50,000 in this new enterprise, which he calls deal No. 2. The plaintiff, thereupon, sent the check in suit to A. W. Smith & Company in payment for his share of the venture. One J. Dudley Clark, a limited partner in Snowden Oil & Gas Company, Ltd., and F. C. Hernberg, of the investment firm of Augustine & Company, whose company was also interested in Snowden Oil & Gas Company, Ltd., signed their own names to the back of this check, and the check was then turned over to The First National Bank of Boston. A representative of The First National Bank of Boston then wrote on the back of the check 'Wired to Fredonia,' and caused the check to be stamped 'Credited Account of the Within Named Absence of Endorsement Guaranteed by First National Bank of Boston.' The proceeds of the check were ultimately credited by wire and telephoned to Snowden's account in the Fredonia Valley Bank.
It is clear, therefore, that with these inscriptions on the check there were absent the words 'Snowden Oil & Gas Company, Ltd.' by way of endorsement. Although there has been no concession with respect to this fact, I find without reservation that the proceeds of this check were credited to the Snowden account in the Fredonia Valley Bank as above indicated. I am led to this conclusion by reason of the following facts:
(1) There is not any indication in this case that Snowden ever complained that he or his company had not received the funds.
(2) The plaintiff had received a receipt from A. W. Smith & Company, which is in evidence.
(3) Plaintiff received various drilling contracts and oil leases from Snowden.
(4) Between March 1946 and approximately May 1950 he received by way of return over $ 10,000 in cash, which the plaintiff said he credited to deal No. 2.
(5) In May or June 1950 he assigned his interest in deal No. 2 to the Texmass Oil Company, later known as the Consolidated Texas Oil Company, and in exchange for this assignment he received a check which he included in the total sum which he stated he received from Snowden and the following securities of Texmass:
Common stock (Voting Trust
Certificate) 4.4289 shs.
Senior 4 1/2% Debentures $ 7,560.
Junior 5% Debentures $ 5,985.
Class B Preferred Stock 161.7 shs.
He did not recall whether he had received Class A common stock.
We must not, therefore, overlook the fact that the plaintiff between the years of 1946 and 1950 took advantage of liberal deductions allowed oil investors in his income tax returns. Furthermore, while the cancelled check was in the possession of the plaintiff from on or about April 1, 1946, no oral complaint was made until the latter part of 1948, and no suit was begun until May 1951. In short, this seems like a case in which the plaintiff, being unhappy over his investment, as an afterthought decided that because of the absence of the words 'Snowden Oil & Gas Company, Ltd.' on the reverse side of the check, he would press this suit against the drawee bank.
The plaintiff contends that this is not a case of an authorized endorsement or an unauthorized endorsement, but that this is a case of no endorsement. We will accept for the purposes of this case plaintiff's contention, particularly in view of the concession by the defendants that the element of authorized endorsement has been taken out of the case by virtue of their decision not to present any proof with respect to the authority of Clark and Hernberg and the First National Bank of Boston concerning the endorsements.
Now, on this theory the question remains whether the bank is in some way liable to the plaintiff for its failure to obtain endorsement of the payee because the plaintiff might have asserted certain defenses against the payee. From the evidence it quite clearly appears that the asserted defenses were never raised by the plaintiff at or about the time the check was paid in regular order into the account of the Snowden Oil & Gas Company, Ltd. and a cancelled check returned to the plaintiff.
The plaintiff's offer of proof indicates that it is his contention that there were material representations made by Smith which were fraudulent and were relied upon by the plaintiff in the purchase of the securities involved in deal No. 2. No such charge is made with respect ...