Claflin v. Farmers' & Citizens' Bank of Long Island

An agent cannot, in general, act so as to bind his principal in matters touching his agency, where he has an adverse interest in himself; (Stone agt. Hays, 5 Denio, 575; Bentley agt. The Columbia Ins. Co., 17 N. Y. R., 423.)

' There is an exception in the application of this principle in favor of the holders of negotiable paper acquired in good faith before due, for value, without notice of the misconduct of the agent, or the knowledge of such facts as would amount to a want of good faith in the taker of such paper.

In the case before us, the interest of Houghton is assumed to be at variance with his duty. His interest was an inducement to him to certify his own checks without funds. It was his duty not to do it. The public, however, cannot be apprised, from the face of the checks, of the existence of this conflict between interest and duty. The president of the bank may have money there on deposit as well as another man. The money being in bank, the certification of his own check would not be adverse to the duty of the president. As between the bank and its own officer, it is entirely clear that such a certification would create no liability.

The general authority to certify checks had been conferred by the bank on their president. The identity between the name of the drawer and the president of the bank who certified the check, did not necessarily inform any one, by the mere force of that fact, that the drawer had certified his own checks without funds in the bank. It was possible that he had so done. It was not probable, however ; and the usual presumptions of innocence and fair dealing were against the existence of doubts about the conduct of the president of the bank.

The presumption of bad faith on the part of the plaintiffs does not necessarily arise from the manner of certification. That fact, with other circumstances, might have brought the referee or a jury to the conclusion that here was a want of good faith on the part of the plaintiffs in taking the checks ; but the certification in the manner mentioned was not conclusive, as evidence, to deprive the plaintiffs of the protection afforded to bona fide holders of negotiable paper. (20 How. U. S. R., 345; Story on Bills, § 194; 34 Eng. L. & Eq., 131.)

John M. Martin and Wm. Curtis Noyes, for appel’ts.

John E. Burrill and Charles O’Conor, for resp’ts.

The legal principles respecting the subject of agency as applicable to the certification of checks, their character and negotiability, and the protection to which Iona fide holders thereof are entitled, are fully considered by the court of appeals in the Farmers’ Mechanics’ Bank of Kent County agt. The Butchers’ & Drovers’ Bank, (reported 14 N. Y. R., 634, and 16 id., 125,) and are controlling as far as they are applicable in the case now before the court.

We agree with the referee, that the defendants cannot now urge any reasons against a recovery arising from the delay occurring before the checks were presented for payment, after having by objections at the trial prevented the explanations offered by the plaintiffs in that respect.

The several objections taken during the progress, of the trial to the admission or exclusion of evidence, &c., so far as they were urged at the argument, have been examined, but none'of them are considered well taken, and do not seem to require an extended review.

Judgment is affirmed, with costs.

From this judgment the defendants brought an appeal to this court, and also asked leave of the court to review two intermediate orders of affirmance of the supreme court, which it was claimed necessarily affected the judgment.

By the court, Selden, J.

The only question in this case which seems to me to require serious consideration, is, whether Mr. Houghton could bind the bank by accepting checks or .drafts drawn by himself. It is a well settled rule of the law of agency, to which I apprehend there is no exception, that no person can act as the agent of both parties to a contract, although he may himself have no interest on either side; nor can he act as agent in regard to a contract in which he has any interest, or to which he is a party, on the side opposite to his principal. In the present case, Mr. Houghton, as the drawer of the checks, was the party with whom the contract of accéptance was primarily made, and stood therefore precisely in those opposite relations which the rule referred to forbids. It is not necessary for the principal in such cases to show that the agent has acted unfairly, or that he himself has sustained any injury. The act of the agent is deemed to be unauthorized, and the contract is void.

It is conceded, in the opinion of the supreme court in this case, that as between the bank and Mr. Houghton, the certificate of acceptance of the latter would not be obligatory. But that court supposed that a subsequent bona fide holder could nevertheless avail himself of such certificate. The difficulty in the way of this conclusion, however, is, that the want of authority in Mr. Houghton to bind the bank appeared upon the face of the check. There could be no bona fide holder of such an instrument. An indorser of commercial paper may, it is true, very frequently acquire rights superior to those of the original party; but never, so far as I am aware, when he has notice of the defect. If he knows the facts which would render the paper void in the hands of the party from whom he derives title, he can not recover.

The supreme court seems to have supposed that to prevent the plaintiffs from being considered as bona fide holders, they must have known that the drawer had no funds in the bank to meet the check. This was clearly an error. The acceptance was void in the hands of the drawer, irrespective of the question whether he had or had not such funds. The double relation in which Mr. Houghton stood alone rendered it void, and of this the plaintiffs were apprised by the check. It could not be necessary that they should have had notice of any other fact in order to defeat their recovery, as the same facts which render commercial paper void in the hands of the original party, will equally avoid it in the hands of any subsequent holder having notice of such facts.

It is of no importance that the referee has found as a fact that the plaintiffs were bona fide holders. This finding is opposed by the plain law of the case, and is therefore nugatory. This reasoning applies to two only of the checks upon which the action is brought. I see no obstacle to a recovery upon the check drawn by Green.

The judgment of the supreme court should be reversed, and there should be a new trial ordered, with costs of the two appeals to be paid by the plaintiffs, the residue of the costs to abide the result of the new trial.

Note.—It appears from the case, that after this ruling by the referee, he remarked to the counsel on both sides, that he thought upon rejection, that such ruling was erroneous; but the defendants’ counsel did not withdraw his objection, nor did plaintiffs’ counsel put, or offer further to put the question, and the case proceeded without any change of the referee’s minutes. Now, it is a settled doctrine, that where evidence is ruled out, and the judge afterwards allows counsel an opportunity to introduce it, which he declines, error does not lie for the ruling out. (D’Homergue agt. Morgan, 3 Whart., 26.)