Hartford v. Greenwich Bank

Scott, J.:

Plaintiff’s assignor, the Great Atlantic and Pacific Tea Company, was a depositor in the defendant bank during the months of November and December, 1911, and for a considerable time prior thereto. The question in the case is whether or not the bank was justified in paying, and entitled to charge against the account of the tea company, five checks for the aggregate amount of $8,060.50, drawn by said company to the order of James Wilson. 'That the checks bore the genuine signature of the tea company is undisputed, and it conclusively appears that the company was induced to draw them through the fraud of Edward Rypinski, one of its employees, in the belief that it was indebted to one James Wilson for the several amounts represented by the checks. The details of the fraudulent transactions appear without contradiction.

The tea company# conducted a premium department through which it purchased quantities of goods to be given away to custpmers. Edward Rypinski was employed in the auditing department, and had especial charge of receiving, checking up and verifying bills for goods purchased for the premium department. He made very elaborate preparations for defrauding his employer. He procured to be printed billheads bearing the name of James Wilson, and the address, room 1012 Fuller Building, N ew York. He rented a post office box in the name of James Wilson, giving to the postal authorities as reference one Swarz, whom he knew to be absent from the city, and himself under his real name of Rypinski. He opened an account in the defendant bank under the name of James Wilson. He was introduced to the bank by his brother, George Rypinski, passing as George Friedman. This brother was married to a woman who carried on a business under the name of “ Jeannette Company, ” and who had an account in the defendant bank in her maidonname of Jeannette Friedman. ’ Having thus prepared the way, Rypinski proceeded to defraud the-tea company into giving him a check for $1,543.50. He made out a bill upon one of his fictitious billheads purporting to show that James Wilson had sold goods to the value stated to" the tea company. This bill he certified in the usual manner, and such routine steps were taken that in due course a check for the amount ^indicated was made out to James Wilson, signed and mailed^it reached the post office box which Rypinski had hired, whence it was taken by him, indorsed with the name James Wilson, and deposited to the credit of the account opened by Rypinski, under the name of James Wilson, with the defendant bank, and the amount charged against the tea company’s account. J By a similar course of proceeding four other" checks were fraudulently obtained by Rypinski, deposited with the defendant and charged against the tea company. The aggregate amount thus obtained was over $8,000, all of which was subsequently drawn out and spent by Rypinski. The question involved in this appeal is whether the tea company, represented by plaintiff, or the defendant bank should bear the loss.

The relation between a bank and its depositor is well established, and is in a strict sense that of debtor and creditor. “In disbursing the customer’s funds, it [the bank] can pay them only in the usual course of business and in conformity to his directions. In debiting his account it is not entitled to charge any payments except those made at the time when, to the person whom, and for the amount authorized by him.” (Crawford v. West Side Bank, 100 N. Y. 50, 53.) When a claim is made, as is made now, that the bank has paid out its customer’s funds without authority the question generally resolves itself into what was the intention of the drawer when issuing the check. If paid to one other than the payee intended by the drawer the bank is commonly held liable to refund. Thus, if there be two persons of the same name and the drawer meant that the sum represented by the check should be paid to one of them, the bank cannot lawfully pay to the other one and, if it does, must refund. (Graves v. American Exchange Bank, 17 N. Y. 205.) In many cases it has been held that if the name of the payee be forged, or if the amount for which the check was drawn be altered, or if the date of payment be changed, no matter how skillfully the forgery or. alteration may be effected, the bank must refund if it wrongfully pays. In tho present case none of these conditions have been shown. On the contrary the checks were paid to the very person to whom the tea company intended they should be paid, viz., the person from whom it believed that it had purchased goods. . It is true that it had never received any goods from the person in whose favor it drew the checks, and that it had been cheated into believing that it had so bought them, but it is very clear that no liability can attach to the bank for that fraud. Having, however, been cheated into the belief that it had purchased goods from and owed money to one James Wilson, it intended when it uttered the check that it should be paid to the person from whom, as it then believed, it had made the purchase. That person was the identical person to whom the checks were paid. This is not strictly speaking the case of a check drawn to a fictitious or non-existent person. There was an actual person, calling himself James Wilson, although that was not his real name, and it was that person to whom the tea company intended its checks should be paid. It would serve no useful purpose to cite at length the many cases dealing with the liability of banks for wrongfully paying out their customers’ funds. Some of them were reviewed by this court in Sherman v. Corn Exchange Bank (91 App. Div. 84), and the rule that the intention of the drawer must prevail was applied in Mercantile National Bank v. Silverman (148 id. 1). In that case the defendant had drawn checks to the order of two officers in the army, supposing that he was purchasing an assignment of their pay for certain months. He had had negotiations with an impostor ' who personated one of the officers, and he had sent the checks to this impostor believing him to be what he represented himself to be and that he would collect the checks. It was held, however, that the form of the checks indicated the intention of the drawer that they should be paid to the payees named therein, and that payment to the impostor was -unauthorized. That case was far different from this. What we have here is a successful fraud perpetrated upon the tea company by one of its own employees, by which it was induced to believe that it owed that employee certain sums of money. The checks in suit were intended to be paid in satisfaction of this supposed debt and were in fact paid to the person for whom they were intended. No liability attaches to the bank under these circumstances. Attention is now called to the fact that under the pleadings a small balance of $344.77 is admittedly due to plaintiff. This was evidently overlooked upon the trial and no request made for a direction of a verdict for the amount. Under these circumstances we do not feel justified in reversing the judgment and ordering a new trial merely for the purpose of correcting this oversight, but justice requires that defendant as a condition of the affirmance of the judgment, should stipulate that said judgment shall not hereafter be interposed as a bar to the recovery by plaintiff of the sum admittedly due. Upon filing such a stipulation the judgment appealed from will be affirmed, with, costs.

McLaughlin and Clarke, JJ., concurred; Ingraham, P. J., and Laughlin, J., dissented.