The Central National Bank of the City of New York, Appellant, v. Leonard D. White et al., Respondents

The Central National Bank of the City of New York, Appellant, v. Leonard D. White et al., Respondents. (Argued October 4, 1893; decided October 17, 1893.) Appeal from judgment of the General Term of the Superior Court of the city of New York, entered upon an order made June 15,1892, which affirmed a judgment in favor of defendants entered upon the report of a referee. This action was brought to recover money alleged to have been had and received by defendants for plaintiff’s use. The plaintiff is a national bank doing business in New York, and defendants are bankers and brokers in said city. From June, 1866, to July, 1869, William H. Sanford was plaintiff's cashier. During that period plaintiff made purchases and sales of stocks, securities and gold, through the defendants, Sanford sending all orders and directions to defendants by plaintiff’s clerks or messengers. During these transactions defendants received upwards of 100 checks, drawn by Sanford, as cashier, upon the plaintiff, which aggregated $500,000. These checks were immediately deposited by defendants in their bank and paid by plaintiff through the clearing house without question or objection. Plaintiff was in the habit of receiving securities from its customers, to be kept- subject to their order, which were in charge of said cashier. On July 1,1869, he absconded, having taken all such securities. Plaintiff’s president, after examining defendants’ books, informed them that its cashier had been acting without authority, and defendants shortly after, discovering a balance in favor of Sanford individually with other brokers, attached it for the balance due upon closing the account, and recovered a portion of the claim by default. None of plaintiff’s officers except Sanford had met the defendants until after he absconded. This action was commenced in 1869, and a second amended complaint was, with the defendants’ consent, served in April, 1890, which alleged that defendants had transactions as stockbrokers in which they received from one W. H. Sanford various sums of money as security for services to be rendered, or responsibilities to be incurred, or for stocks to be bought or sold by them; that said Sanford paid moneys to defendants in the course of such transactions by his own individual checks, and at other times by checks drawn by him on plaintiff, as cashier. Plaintiff further alleged that the checks drawn by him as cashier could' not be rightfully drawn or issued or used by him save in plaintiff’s business; that defendants received from Sanford certain cashier’s checks in his individual transactions, and passed the same to his credit. The complaint further alleged that defendants well knew that Sanford was wrongfully abusing his authority and misappropriating plaintiff’s moneys by means of his power and authority as cashier, and demanded judgment for the several sums received by defendants in the causes of action set forth, aggregating $139,000, with interest for twenty-one years; the answer admitted the receipt of the checks set forth in the complaint, and alleged that each was received by defendants in transactions had for and on account of and at the request of plaintiff. It further alleged that defendants never knew or suspected that Sanford was dealing on his individual account until so informed by plaintiff’s president, after he had absconded. The following is the opinion in full: “ The learned counsel for the appellant states the question of fact involved in this ease, and which he claims has become a question of law, in these words, viz.: ‘ Did defendants know that Sanford was using cashier’s checks in his private transactions, or had they a right to believe that the transactions were for the bank ? ’ Of course this inquiry is primarily a question of fact, upon Avhicli the finding of the referee against the plaintiff is beyond our reAdew, unless it proves to have been made Avithout any evidence tending to its support. The appellant, therefore, has undertaken the difficult task of demonstrating that there is no such evidence, so that the finding of the referee is an error of laAV for which we may reverse the judgment rendered. The learned counsel yvho took upon himself this difficult duty did not at all disguise bis consciousness of its character, but has made the effort Avith great care and ability, with a close analysis of the facts, and Avith a confidence that we on our part will examine the whole testimony and patiently consider the argument founded upon it before coming to a final conclusion. We have endeavored to do so, and have carefully studied the confused and somewhat singular accounts of the defendants, upon the form of Avhieh the plaintiff mainly relies. “ The defendants testify positively that they never knevv or • suspected that Sanford was dealing for himself, but always supposed and believed that the Avhole current of. the account Avas with the plaintiff bank, through Sanford as its agent and representative. This evidence tends to raise an issue of fact, but is met by a reference to the admissions of the defendants that they personally conducted none of the dealings ; that they had never examined the accounts until after Sanford absconded, and did not know the form in which they appeared upon their own books, and, therefore, that their clerks who conducted the dealings may have known that Sanford was acting for himself, in which event the defendants Avould be chargeable Avith their knowledge. But it is admitted that in the beginning of the transactions Sanford Avas acting for the bank, and it is not at all certain that the change which gradually marked the character of the account was such as to involve a necessary knowledge, either on the part of defendants or their subordinates, of a change in the principal with whom they were dealing. While it is true that the bank could not lawfully speculate for itself and risk capital and deposits in that sort of stock gambling which ruins so many both in character and fortune, yet it is equally true that its customers could do so if they pleased, and it was possible to believe that they bought upon margins through the agency of the bank, without a disclosure of their names; and that the defendants assumed and believed such to be the fact, is an inference more or less supported by two considerations. If they believed or suspected that Sanford was-using the money of the bank upon his own personal ventures, they knew him to be morally if not legally a thief, and consciously aided and abetted him in his deliberate and persistent robbery of those who trusted him, and we should not charge upon the defendants so grave a wrong unless xxpon evidence not capable of any other reasonable explanation. And, again, there is an item of proof which quite plainly indicates what the understanding of the brokers Avas. It is the letter of June 26th, 1869, addressed to Sanford Avithout adding his official title, a circumstance in other instances used to-strengthen an inference that defendants were consciously dealing -with Sanford personally. That letter tends to rebut such an inference. It reads : ‘ Please send us a check for $10,000. We should like to keep a margin of 2fo at least on your sales, as this seems to be the figure Avhich your customers calculate to lose on their operations. We hope they -will do bettor on this lot.’ The letter assumes as a fact well understood that the bank, through Sanford, was acting for its customers, and that the losses, if any, would fall upon them, and is all the more significant because addressed in form to Sanford personally. “ But the appellant contends that any such explanation is, precluded by the form of the accounts as they appear upon defendants’ books, and that these show conclusively the guilty knoAvledge charged. They certainly tend in that direction, but the natural inference to which they point is made more or less doubtful and uncertain by an examination of their items. The first account Avas headed ‘ W. H. Sanford, Cashier,’ but, after oxxe or more pages had been filled, the heading changed by the omission of the Avord ‘cashier.’ Then there came accounts headed ‘ W. H. Sanford stock %,’ ‘ W. H. Sanford, gold accoxmt,’ and ‘ Central National Bank.’' Why these sepai’ate accoxxnts Avere kept, if all the dealings were with the bank, we cannot accxirately knoAv, since Austin; the bookkeeper, who made the separation, for some reason influencing him, is dead, and we are left to inference and supposition. It is very forcibly argued on behalf of the plaintiff that the necessary and inevitable inference must be that, while some of the dealings were with the bank, and substantially those which represented cash purchases and sales, and so respected investments made or ended, yet those, which were of a speculative character and were dealings on margins are significantly posted to Satiford personally, or in the stock or gold account. If that was invariably true, the inference asserted would be quite difficult to avoid, but the details of the account so unsettle and weaken the inference as to leave it doubtful whether it should be drawn at all. “ The facts are, and the referee has so found, that purchases and sales which appear upon the book of original entry, and were entered at the moment of the transaction as for and on account of Sanford, cashier, are quite commonly posted in the seemingly personal account of W. II. Sanford. The referee says in his tenth requested finding: 6 In these various accounts were entered and posted items which, on the books of original entry, stood to the credit of or charged against W. H. Sanford, or W. H. Sanford, Cashier, or the Central National Bank, such names being used interchangeably and as of identical meaning and representing one and the same account.’ Perhaps a better view of the situation will follow a few actual instances taken from the books. Thus, in the account headed ‘ Central National Bank,’ very many of the debits and credits appear on the purchase and sales book as being purchases and sales by W. H. Sanford. In the account headed 6 W. Tl. Sanford, Cashier,’ appear credits which stood on the purchase and sales book, and even on the cash book, in the name of W. II. Sanford. And in the account of W. H. Sanford, items, which on the purchase and sales book, and sometimes on the cash book, appeared as transactions of Sanford, cashier, are quite numerous. Many specific examples of this sort of confusion are given in the testimony of one of the defendants, A single one will suffice. On the cash book, under date of April 17, 1868, is a debit to William II. Sanford of over $27,000, made up of several specific items, and there appears on the purchase and. sales hook an entry corresponding, and identical both in description and amount, showing the transaction to have heen with William II. Sanford, cashier. While these things are true of the accounts to which I have referred, they do not seem to characterize the W. II. Sanford stock account. An abstract of that ivas put in evidence, and all the original as well as posted entries appear in the name of Sanford, without an official title. That fact weighs heavily in favor of the plaintiff, hut is to some extent weakened and rendered ambiguous by the further fact that the first item in it is the exact footing of the preceding account, which was at first Sanford, cashier, and then simply Sanford. No certain and necessary inference, sufficient to support a conclusion of law, can be based upon such ambiguous and indecisive facts. ■ “ How, I do not say what my own judgment would have been as a referee on these facts; but I am convinced that we are not at all justified in reversing the finding made and its affirmance by the General Term. “ There is very much more about the case, any adequate discussion of -which would unduly prolong an opinion busy with facts only — such as the rendition of accounts to Sanford in his personal name, which might happen without special intention, and the suit for a balance against Sanford personally, which, however, was after lie had absconded and the bank officers had notified the defendants of the real nature of Sanford’s action—but enough has been said to indicate in a general way the reasons why we deem the question debated essentially one of fact which we are not at liberty to review. “ The judgment should be affirmed, with costs.” George A. Strong for appellant. Walter Edwards for respondents. [MAJORITY — Finch, J.,] Finch, J., reads for affirmance. All concur. . Judgment affirmed.