Claflin v. Farmers & Citizens' Bank

By the Court, Leonard, J. 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 v. Hayes, 3 Denio, 575. Bentley v. The Columbia Ins. Co., 17 N. Y. Rep. 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 [545] 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 its 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 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 there 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. Rep. 345. Story on Bills, § 194. 34 Eng. L. and Eq. 131.) The legal principles respecting the subject of agency, as applicable to the certification of checks, their character and negotiability, and the protection to which bona fide holders [546] thereof are entitled, are fully considered by the court of appeals in The Farmers and Mechanics’ Bank of Kent Co. v. The Butchers and Drovers’ Bank, (14 N. Y. Rep. 634, and 16 id. 125,) and are controlling, as far as they are applicable in the case now before the court. [New York General Term, May 6, 1861. Clerhe, MuWim and Leonard, Justices.] 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. The judgment is affirmed with costs.