Opinion
July Term, 1900.
Judgment affirmed, with costs.
This is an action of replevin of ten municipal bonds issued by the city of Yonkers. In 1875 the bonds were held by the plaintiff, from whom they were stolen, together with other securities aggregating $3,000,000. Eighteen years after this robbery one George H. Pell, a customer of the defendant bank, presented the bonds to the bank as collateral security for a loan of $7,500, which the defendant granted and has since that time had the bonds in its custody, the loan not being repaid. This case has been once before in this court, and upon such appeal it was determined that the bonds in question were negotiable securities, and that, although they were stolen from their owner, yet if the defendant, without notice of the theft and otherwise acting in good faith, advanced money upon them before their maturity, it obtained good title thereto, although the defendant had at the time of the robbery advertised its loss and described the bonds. ( 42 App. Div. 147.) The defendant is, therefore, to be protected to the extent of its property interest in the bonds unless they were taken under such circumstances as to put it upon inquiry or charge it with notice of the infirmity of Pell's title when it received them. ( Canajoharie Nat. Bank v. Diefendorf, 123 N.Y. 191.) It must be regarded as settled by our former decision that the notice given at the time of the robbery through the public press and otherwise is not sufficient, standing alone, either to show notice to the defendant or indicate lack of care upon its part in taking the bonds. It is now insisted by the appellant, however, that this fact, coupled with other facts and circumstances disclosed by the record, make a case which required the submission of the question of notice and defendant's good faith in the transaction to the jury. The added circumstances upon which the appellant relies consist mainly in the fact that the account which the defendant had with Pell stood in his name as trustee; that he was a person of bad character, who had previously been convicted upon a criminal charge and served a term in State's prison. We do not think that there is anything in the fact that Pell had the account in his name as trustee or that he added to his signature "trustee" upon the note, which put defendant upon inquiry as to the infirmity of his title to the bonds. It is well known that such accounts are frequently kept in financial institutions where no fiduciary relation is intended or in fact exists. A variety of reasons induce persons so to carry their individual accounts, which the courts have had occasion to consider many times. If the question, with respect to the form of the account in other matters, had arisen between the defendant and a cestui que trust whom Pell represented, it might be that the defendant would have been put upon notice to inquire into Pell's authority. ( Suarez v. de Montigny, 1 App. Div. 494; Kirsch v. Tozier, 143 N.Y. 390.) The facts, however, in connection with the opening of this account, are such as to exclude any inference of a fiduciary relation. It appears from the testimony that Pell negotiated the sale of certain gas stocks through the agency of defendant, and, after such transaction, he opened the account in question with the commissions earned in the transaction, and he informed the defendant at that time that the deposit which opened the account was his commissions in effecting such sale. The defendant had no reason, therefore, to suppose that this account represented any other person that Pell. The bonds were not burdened with anything to show that Pell stood in the relation of trustee to them, and nothing in that connection put defendant upon inquiry. So far as Pell's conviction of a criminal offense is concerned there is no evidence which would justify a finding that the defendant had any actual knowledge of such fact. This conviction was had some five years prior to the bond transaction, and during the intervening time between the opening of the bank account by Pell and the pledging of the bonds as collateral security for the loan he had numerous dealings with the bank, had presented to it and had discounted the paper of Danat Pell, a firm of lumber merchants in good standing, having a large capital and a large credit. The junior member of this firm was Pell's brother, and the notes which he presented, and which were discounted, were promptly cared for in the ordinary course of business. During this whole period Pell deposited the proceeds of discounted notes, made other deposits and checked upon the account as was usual with customers making use of the bank for such purposes. In all this dealing there was scarcely a circumstance unusual in character or from which the defendant's suspicions, acting as a person ordinarily prudent, would have been aroused that Pell was a thief or a person of bad character and that it was unsafe to have any business dealings with him. The fact that the securities which were pledged were bonds was not unusual nor singular. The first transaction which Pell had with the bank was of stocks and bonds, and the fact that this transaction was without fraud or defect was a pertinent circumstance to justify the defendant's dealing with Pell in receiving these bonds. No single circumstance which is relied upon by the appellant, nor all of them combined, is, in our judgment, sufficient to justify the finding that the bank had notice or that it was put upon inquiry with respect to the ownership of the bonds. On the contrary, the law applicable to negotiable instruments, as expressly held in Cheever v. Pittsburgh, etc., R.R. Co. ( 150 N.Y. 65); Second National Bank v. Weston (161 id. 526), excludes such basis as grounds upon which to predicate infirmity in the title. It is clearly excluded from the circumstances which were found sufficient in Canajoharie Nat. Bank v. Diefendorf ( supra) to put the purchaser upon notice. It is generally recognized that the last case carried the question as to what facts and circumstances were sufficient to put the purchaser upon inquiry to the extreme, and the courts have been reluctant to carry the doctrine further. While the later decisions have reaffirmed the protection to which persons dealing in negotiable instruments are entitled and which are essential to uphold commercial transactions, to hold that the circumstances appearing in this case are sufficient upon which notice could be charged of the infirmity of the title in those bonds would extend the doctrine beyond that of any reported case and shake the foundation upon which the law of negotiable paper rests. When the defendant took the last bond from Pell it undoubtedly had notice which put it upon inquiry, and it obtained no title thereto. As to the other bonds, however, it must be protected as a bona fide holder to the extent of its interest therein. It follows, therefore, that the judgment should be affirmed, with costs. Van Brunt, P.J., Rumsey, Patterson and O'Brien, JJ., concurred.