Credit Alliance Corp. v. Sheridan Theatre Co.

McLaughlin, J. This action was brought to recover money had and received. There is little or no dispute between the parties as to the material facts involved. The appeal presents a question of law only. At the trial a jury was waived, and the question presented was submitted to the court by the consent of both parties, each agreeing that a verdict might be directed as though a jury were present. The court directed a verdict in favor of the defendant, but on appeal *219 the judgment was reversed and a judgment directed in favor of the plaintiff. The defendant, a .domestic corporation, had as its president one Max Spiegel, as its treasurer William F. Rafferty, and one Coombs as its secretary. Under a resolution passed by the board of directors of the corporation (the three persons named constituted all of the board of directors) it could borrow money only upon notes signed by the president and the treasurer. Spiegel, asserting that he represented the defendant corporation, applied on its behalf to the plaintiff for a loan of $2,500. The plaintiff agreed to make the loan provided it was paid a bonus of $250. This was agreed to, and thereupon Spiegel delivered to the plaintiff corporation what purported to be five promissory notes of $500 each of the defendant corporation and, as collateral security for the payment of the notes, a certificate for 100 shares of the capital stock of the defendant corporation. The notes and stock purported to be executed by Spiegel as president and Rafferty as treasurer. Rafferty never signed the notes or the certificate. His name was forged in each instance. When the first note fell due, the same was not paid, and thereupon the plaintiff corporation brought an action in the Municipal Court of the city of New York against the defendant to recover the amount with interest. Rafferty interposed an answer on behalf of the defendant corporation alleging that his signature to the notes and the certificate was forged. Thereupon the plaintiff discontinued that action and brought this one to recover the total amount loaned, on the theory of money had and received. It appeared that when the notes and stock were delivered, the plaintiff, in exchange therefor, gave either to Spiegel or some one representing him a check for $2,250 payable to the order of the defendant corporation. This check Spiegel had certified and then he deposited it in a bank to the credit of the defendant. *220 Almost immediately thereafter he drew a check of the defendant payable to his own order for the amount deposited, again forging the name of Rafferty. This check he deposited in a bank to his own credit. The trial court, as above indicated, dismissed the complaint holding, as appears from the opinion, that the action could not be maintained for money had and received since the defendant had never had any benefit of the amount deposited or exercised any dominion over it, or ratified Spiegel’s act in making the deposit. The Appellate Division entertained a different view, holding that the defendant was liable because the moment the plaintiff’s check was deposited to the credit of the defendant, that moment the relation of debtor and creditor was created between the defendant and the bank. Obviously, upon the facts, this conclusion does not follow. One cannot be made a debtor any more than he can be made a creditor, except by his consent either expressed or implied. Spiegel, in making the deposit, did not act for the defendant nor did he represent it in any way. When an agent abandons the object of his agency and acts for himself, by committing a fraud for his own exclusive benefit, he ceases to act within the scope of his employment and, to that extent, ceases to act as agent. (Henry v. Allen, 151 N. Y. 1.) Spiegel was never authorized to borrow any money from the plaintiff on behalf of the defendant. Defendant never knew anything about the transaction until long after it had occurred; it never ratified Spiegel’s act; it had no knowledge whatever either of the transaction itself or of the fact that the money was deposited to its account, unless it can be said that Spiegel’s knowledge was the corporation’s knowledge. But as his acts were wholly unauthorized, he was not the defendant’s agent and his knowledge cannot be imputed to it. (Benedict v. Armour, 154 N. Y. 715; Prudential Insurance Co. v. National Bank of Commerce, 227 N. Y. 510, 515; Brooklyn Distilling Co. *221 v. Standard D. & D. Co., 193 N. Y. 551; Jacobus v. Jamestown Mantel Co., 211 N. Y. 154, 155; Fay v. Slaughter, 194 Ill. 157.) The money, having been immediately withdrawn by Spiegel and converted to his own use without the corporation’s knowledge of the transaction or that the funds had ever been placed to its credit, it enjoyed no benefit and exercised no dominion over the same. The judgment of the Appellate Division should, therefore, be reversed and that of the Trial Term affirmed, with costs in this court and in the Appellate Division. Hiscock, Ch. J., Cardozo, Pound, Crane, Andrews and Lehman, JJ., concur. Judgment accordingly.