CRAWFORD V. WEST SIDE BANK.* Plaintiff, April 20, intending to leave town, drew his check on the defendant bank, dated April 22, for $700 payable to his clerk, for the purpose of enabling him to obtain funds to pay plaintiff's workmen. The clerk having altered the date to the 21st drew the money on that day and absconded. In an action by plaintiff to recover his balance at the bank, held, that the bank was not entitled to charge to plaintiff's account the amount of said check. John C. Shaw, for appellant.

D. M. Porter, for respondent.

RUGER, C. J. The relation existing between a bank and its depositor is, in a strict sense, that of debtor and creditor; but in discharging its obligation as a debtor the bank must do so subject to the rules obtaining between principal and agent. In disbursing the customer's funds it can pay them only in the usual course of business, and in conformity to his directions. In debiting his account it is not entitled to charge any payments except those made at the time when, to the person whom, and for the amount authorized by him. Wheeler v. Guild, 20 Pick. 545; Dan. Neg. Inst., 1818. It receives the depositor's funds upon the condition of disbursing them according to his order, and upon an accounting is liable for all such sums deposited as it has paid without receiving valid direction to make. The bank is from necessity responsible for any omission to discover the original terms and conditions of a check once properly drawn upon it, because at the time of payment it is the only party interested in protecting its integrity who has the opportunity of inspection, and it therefore owes the duty to its depositors of guarding the fund intrusted to it from spoliation.

This liability arises, although an alteration of a material part of his order has been effected, even though it be done so skillfully as to defy detection by examination. Dan. Neg. Inst., § 1660. This follows from the fact that after it is put in circulation it passes beyond the reach of its maker, and he has no opportunity, until after it has fulfilled its office, of inspecting it and protecting himself from the loss occasioned by a fraudulent alteration. This opportunity the banker has, and he is responsible for any want of vigilance in detecting the alteration of an order after it has once been correctly drawn with its blank places properly filled up, and is put in circulation by the maker.

The responsibility of the banker however for the exercise of such vigilance is confined to the maker alone. So far as other parties, through whose hands an altered check passes, are concerned, they have the same opportunity for detecting fraudulent alterations in the body of the check that the banker has, and as to them, after payment, he is responsible only for the genuineness of the maker's signature. Bank of Commerce v. Union Bank, 3 N. Y. 230. The principle stated in White v. Continental Bank, 64 id. 316; S. C. 21 Am. Rep. 612; Marine National Bank v. Nation a City Bank, 59 N. Y. 67; S. C., 17 Am. Rep. 305, and kindred cases, that the drawees of a check or bill are held to a knowledge of the signature only of their correspondents, the drawers, and not for a want of knowl edge of the genuineness of the body of the instrument applies only as between them and such other parties as have equal opportunity of inspection, and equa *Affirming 49 N. Y. Sup. Ct. Rep. 68.

means for determining the existence of an alteration. Such parties take the paper relying solely upon the reputed responsibility of their trausferors, and the other parties to it, and its apparent genuineness, and they therefore deal in it at their peril. They have no duty to perform in respect to it except that of guarding their own interests, and in buying and transferring it to others, they take the risk of loss occurring from fraudulent alterations.

The questions arising on such paper between drawee and drawer however always relate to what the one has authorized the other to do. They are not questions of negligence or of liability of parties upon commercial paper, but are those of authority solely. In this view it has been held when the check of a depositor was fraudulently altered from £3 to £200 after issue, and was paid by the bank at the latter amount, that the bank was entitled to charge only £3 to the depositor. Hall v. Fuller, 5 B. & C. 750. Bailey, J., said: “If the banker unfortunately pays money belonging to the customer upon an order not genuine he must suffer, and to justify the payment he must show that the order was genuine not in the signature. only, but in every respect."

The question of negligence cannot arise unless the depositor has, in drawing his check, left blanks unfilled, or by some affirmative act of negligence has facilitated the commission of a fraud by those iuto whose hands the check may come. Young v. Grote, 4 Bing. 253; Dan. Neg. Inst., § 1659.

The theory that a party who makes and issues commercial paper, properly and carefully drawn, to express the liability which he intends to assume, is chargeable with negligence on account of the criminal act of another in altering it after its issue, would render him an insurer against such acts, and is repugnant to justice and reason.

In the present case the plaintiff, on the 20th of April, intending to be absent from his place of business for a few days, drew his check on the defendant, dated April 22, for $700, payable to his clerk, one Morgan, for the purpose of enabling him to obtain funds to pay wages becoming due to the drawer's employees on the 22d. The check was left in the drawer's checkbook in his safe, with directions to Morgan, who had a key to the safe, to take the check on the 22d, draw the money and deliver it to his foreman to pay out to the employees in case the drawer did not return before noon upon that day. The plaintiff did not return until after the time appointed, but on the 21st Morgan took the check, and having altered the date to the 21st, drew the money from the bank and absconded with the funds on the same day.

The check as drawn conferred no authority on the bank to pay the amount for which it was drawn out of the plaintiff's funds before its date. Godin v. Bank of Commonwealth,6 Duer,76; Mohawk Bank v. Broderick, 10 Wend. 304; S. C., 13 id. 133. Such payment did not therefore justify the bank in charging the check to the plaintiff. The bank undoubtedly had the same right as any other person to purchase a post-dated check and enforce it against the drawer in case of his liability thereon. This right to enforce payment however depended upon the question as to whether the purchaser became a bona fide holder of the paper, and also whether it was then a valid obligation of the maker. A material alteration of its terms after execution and before payment would destroy its validity. A change in its date whereby the time of its payment was accelerated was undoubtedly such an alteration. Thus it was held in the case of Vance v. Lowther, 1 Ex. Div. 176; S. C., 16 Moak Eng. Rep. 583, where the date of a check had been altered from March 2 to March 26, and as thus altered was at

tempted to be enforced against the drawer by one wh had paid value to an unlawful holder for it, that such alteration vitiated the check and no recovery could be had thereon.

Whenever the legal rights and liabilities of a maker of commercial paper are changed in a material respect by a fraudulent alteration of the obligation, such alteration vitiates the instrument, and the question whether it is material or not is one of law for the court. 2 Pars. Notes and Bills, 582; 2 Pars. Cont. 721; Dan. Neg. Inst., §§ 1373, 1658; Booth v. Powers, 56 N. Y. 29.

The absence of a date upon a negotiable instrument at its inception, or the fact that it is post or ante-dated may not be material upon the question of its validity; but when a date has been once inserted, and its time of payment has been thus fixed, such date is material and cannot be altered without the consent of the maker. Dan. Neg. Inst., §§ 1376-77, 1577-78; 2 Pars. Notes, 552; Stephens v. Graham, 7 Serg. & R. 505.

In the present case, the check was never a valid in. strument for any purpose, because it had become vitiated by a fraudulent alteration before it had any inception. It never came into the hands of any person entitled to enforce it for any amount, or for any purpose, as against its maker. The whole object of the check had failed before the legally appointed time for its payment, by reason of the unauthorized act of the bank in paying it, and thereby enabling the fraudulent holder to abscond with its proceeds. The check was not therefore a legal obligation enforceable against the drawer by its owner and holder. It is claimed by the appellant, even if it be held that the defendant had no authority to pay this check on the 21st, that having become its owner, and having kept it until after its true date, it was then entitled to charge it to the plaintiff, because it then corresponded, not only as to amount, but as to the time of payment, with the obligation which the plaintiff intended to and did in fact assume. There is some authority for the proposition, that a banker after payment has the right to hold an altered check for its correct amount, as against the maker. Hall v. Fuller, supra; Susquehanna Bank v. Loomis, 85 N. Y. 207; S. C., 39 Am. Rep. 652; Redington v. Woods, 45 Cal. 406. In these cases however the checks had received a legal inception upon their delivery to holders for value, and as thus delivered, authorized their drawees to pay them and debit the makers with the sum originally specified therein. Such instruments not only conferred authority to pay their true amount upon their drawees, but created a legal liability in case of non-payment, against their drawers for the repayment of that amount, and the right to enforce such power, or liability, would no doubt pass as an incident to the transfer of the check to any holder in good faith. Pars. Bills and Notes, 582. But we cannot see how the principle stated in these cases can benefit the defendant, for the possibility that the check could ever become a legal liabil. ity, in the hands of any person, was destroyed by its fraudulent alteration before inception. In the hands of Morgan, the check created no liability in his favor against its drawer. There never existed therefore either a valid written obligation against the plaintiff, or an original legal liability to any one enforceable after the destruction of the written instrument by its fraudulent alteration.

The transfer of the check by Morgan, under the cir cumstances, could not therefore carry to another a right founded either upon the vitiated check, or upon an original liability which never in fact existed.

When a negotiable instrument constitutes in itself the only obligation existing against its maker, all remedies thereon are lost by its fraudulent alteration, and the law refuses to create a new contract to sup

ply the place of the one destroyed. Booth v. Powers, 56 N. Y. 31; Pars. Bills, 572; Meyer v. Huneke, 55 N. Y. 412.

It follows that there is no principle upon which the defendant has the right to charge the check in question for any amount to the plaintiff.

The judgment should therefore be affirmed.
All concur.

MASTER AND SERVANT-BREACH OF CONTRACT OF HIRING-EMBEZZLEMENT.

NEW YORK COURT OF APPEALS, OCTOBER 6, 1885.

TURNER V. KOUWENHOVEN.*

A mere failure to account for moneys received while engaged in service will not prevent a recovery of stipulated wages where a servant has fully completed his term of service, and a charge that plaintiff was entitled to recover unless defendant satisfied the jury that there had been a withholding by plaintiff, and that even if plaintiff had retained and failed to pay over moneys, he was nevertheless entitled to recover his wages less such sums retained, is not erroneous.

A

PPEAL from a judgment of the General Term of the Supreme Court, affirming a judgment of the County Court, second department, in favor of the plaintiff entered upon a verdict; also from an order of said General Term affirming an order denying defendant's motion for a new trial.

Action by servant against his master to recover a year's wages upon an express contract of hiring. The opinion states the facts.

John Reynolds, for appellant.

Wm. J. Gaynor, for respondent.

MILLER, J. This action was brought by the plaintiff, who was a farm servant, to recover, under a contract for one year with the defendant, for farm work, and carrying produce to market at a stipulated price agreed upon of $20 per month, and in addition $1 per load for carrying and marketing such produce. There was no dispute as to the contract, but there was a controversy as to the number of loads, but this was arranged in submitting the case to the jury, it being admitted that the number of loads should be as stated by the defendant. It was also agreed that $10 had been advanced upon wages during the year, and it was conceded that there remained unpaid to the plaintiff $230 for the monthly wages, and $201 for two hundred and one loads, amounting in all to $431.

The principal question litigated upon the trial was whether the plaintiff had retained and converted any of the moneys received by him from the sale of the farm produce to his own use, and thus defrauded the defendant. Evidence was introduced upon the trial tending to show that the plaintiff had appropriated and embezzled some of the moneys received by him, belonging to his master, to his own use, and it was claimed that the contract was an entire one, and full performance of the same was a condition precedent to the recovery of any part of the servant's wages.

The counsel for the defendant made various requests to the court to charge the jury in substance to the effect that if the plaintiff, during his term of service, kept back or retained, without defendant's consent, any part of the proceeds of the sales, he could not recover any amount whatever. The court did charge that it was an implied part of plaintiff's contract of service that he should fully pay over all proceeds collected by him upon sales of defendant's farm produce,

*29 Hun, 232, affirmed.

but refused to charge as requested, and did charge that even if plaintiff had retained and failed to pay over part of such proceeds, he was nevertheless entitled to recover his stipulated wages under the contract, less such sums as he had retained, or in other words, less such damage as defendant had sustained by plaintiff's failure to perform fully. The ruling of the court presents the distinct question whether a failure by the servant to account for the proceeds of sale made by him, and to pay over the same, was such a breach of the contract as prevented a recovery by the plaintiff of any amount to which he was entitled by the terms of the contract.

We are referred by the appellant's counsel to numerous reported cases to sustain the position that a single breach of the contract of service is of itself sufficient to prevent a recovery. None of them however go to the extent of holding that a mere failure to account for moneys received while engaged in service of itself prevents a recovery where the servant has fully completed his term of service. It is undoubtedly the law that where a party fails to perform the full term required, unless prevented by the act of God, or by some sufficient legal excuse, no recovery can be had upon the contract, but that rule cannot be invoked, under ordinary circumstances, where there has been only a simple failure in reference to some particular portion of the contract. There must be something more than a mere breach of a slight character during the continuance of the time of service, where the contract has been substantially performed, as to time and its most material parts, to prevent a recovery by a party of any sum provided for by the contract. Ordinarily the damages sustained by a failure to perform some of the conditions of the contract may properly be allowed against the full amount claimed, but unless the failure is substantial, material, and strikes at the very essence of the contract, or it appears that the parties intended that any such violation should render the contract of no effect, it cannot defeat a recovery.

The rule is well settled in this State that if the master, for good and sufficient cause, discharge the servant before the expiration of the term of service; or if the servant, without good cause, quit service before the end of the term, he can recover nothing for the part of the term past, nor for the future. But where the servant has served his full term this rule has no application and has never been upheld by the decisious of the courts. Cases may no doubt arise where the dishonesty of the servant is of such a character as would justify the conclusion that his contract had been violated in a most material and substantial part and to an extent which would bar any recovery whatever, but the act in such cases, to bar a recovery, must be misconduct and unfaithfulness which substantially violates the contract of service. Brown v. Craft, 6 C. & P. 16, note g; Libhart v. Wood, 1 Watts & Serg. 265. Flagrant acts of dishonesty or crime which seriously affect the master's interest, continued during the service, might well be regarded as a bar to the recovery of wages, although the amount received and fraudulently appropriated might be far less than the amount fixed by the contract. But no such case was presented here by the requests to charge. None of the requests

to charge, in reference to the questions which have been considered. Independent however of the reasons already given in support of the decisions of the trial court, it appears from the record before us that the jury rendered a verdict for the plaintiff for the full amount conceded to be due to him. This was a direct finding that the plaintiff had not embezzled any of the moneys belonging to the defendant which were received by him, and hence it follows, that the questions of law presented are really not in the case. If the plaintiff did not embezzle or dishonestly appropriate any of the moneys of the defendant, as the jury found, the requests to charge which were refused, as well as the charge made, to which exceptions were taken, were of no sort of importance and had no bearing upon the issue presented.

Some stress is laid by the appellant's counsel upon the fact that the jury allowed no interest upon the amount of the plaintiff's claim, and it is argued that they may have regarded some of the evidence introduced as proof that the plaintiff had retained moneys of the defendant, and allowed the same as an offset against such interest. There is no foundation for such a claim. There is nothing in the case which shows that any point was made in regard to interest or any instruction given as to the same, and it would be going very far thus to speculate upon the supposed intention of the jury.

There was no error in the charge of the judge that plaintiff was entitled to recovery unless defendant satisfied the jury that there had been a withholding by plaintiff. After the plaintiff had proved his claim under the contract, the burden of proof was clearly upon the defendant to prove the counter-claim set up in his answer. The presumption is that the servant has performed his duty, and that a servant in the habit of daily or weekly accounting for moneys received for his master will have paid over the money received. 1 Cooley Bl. Com. 428.

We have examined the other question raised on the trial and discover no ruling which furnishes any ground for a reversal of the judgment.

The judgment should be affirmed.

Ruger, C. J., Andrews, Danforth and Finch, JJ., concur in result; Earl, J., concurs on the ground that the jury found no embezzlement; Rapallo, J., not voting.

NEGLIGENCE-CLOTHES WRINGER-NOTICE.

NEW YORK SUPREME COURT, GENERAL TERM, THIRD
DEPARTMENT.
MAY, 1885.

MORRIS V. NEW YORK CENT. R. Co.*

If a conductor or other employee chargeable with care and prudence in looking after the safety of passengers, has notice and knowledge of danger to any of them, because of their having an unusual and improper package in the rack overhead when seated in the car, the company is chargeable with negligence for its non-removal; and when on the question of notice the evidence is conflicting, the case is properly submitted to the jury.

priation of the moneys of defendant. They include a mere failure to pay over moneys received belonging to the defendant, which failure may not have been criminal and have been caused by a mistake, misapprehension or neglect. They were not sufficiently broad to include criminal conduct on the part of the plaintiff, and this point is not distinctly presented.

The facts lead to the conclusion, that the judge upon the trial committed no error in his charge, or refusals

the facts.

Reilly & Hamilton, for plaintiff.

Hale & Buckley, for defendant.

BOCKES, J. The immediate cause of the injury for which a recovery was allowed in this case was the falling upon the plaintiff, a passenger on the defendant's train going west from Fonda, from the rack or

*Not elsewhere reported.

basket over his seat, of a clothes wringer, placed there by another passenger who took passage at Amsterdam, the next preceding station. The accident occurred between Fonda and Palatine Bridge, possibly between the last place and Fort Plain, stations next nearest from Fonda. The conductor had passed through the train before reaching Fonda, and also after leaving Fort Plain, and collected the passengers' tickets, without observing the wringer in the rack. The wringer was wrapped up in brown paper, more or less concealing its real character. On this point there was some diversity, perhaps conflict of proof. The plaintiff testified that he noticed the parcel that was in there when he sat down; that he could see that the ends were open, but could not discover what it was; that the reason he could not tell what the parcel was, because his eyesight was so short. The defendant's witnesses testified to the effect that the package was so wrapped up that an observer could not tell or see what it was. The learned trial judge ruled that there was no evidence upon which the jury could find that the car or the rack was insufficient; also that there was no negligence on the part of the defendant in receiving the wringer in the car, or in permitting it to be put in the rack, or in allowing it to remain there, unless the appearance of the package conveyed to the defendant's employees implied notice of its character; and further, that the conductor was not bound to examine packages placed in the rack to see that they contained nothing dangerous to passengers, from falling therefrom; but he refused to nonsuit the plaintiff, and submitted the case to the jury upon the question whether the package, as done up, was in such shape, as under the circumstances, should have attracted the attention of the defendant's employees, in the exercise by them of reasonable care and prudence, to its real character; and charged the jury that if this was so, then that they should have seen to it that it was removed. To the refusal to nonsuit, and to such ruling, the defendant's counsel excepted.

if it had been proved that the latter had been notified of the misplaced switch, and had omitted to put it in place; and so also in Joy v. W. Co., 114 Mass. 63, in case the company had been held to knowledge that the guard chain was down, and yet had made no effort to prevent the too hasty egress of passengers from the boat.

In Carpenter v. B. & A. R. Co., 97 N. Y. 494; S. C., 49 Am. Rep. 540, the doctrine of the cases above referred to was recognized and approved; but the defendant was held responsible on the ground that it was chargeable with notice of the danger, yet with such notice it omitted to take reasonable and proper precaution to prevent injury therefrom. So in the case here before us, if the defendant was chargeable with notice of the danger which impended over the plaintiff, and permitted its continuance after such notice, liability for the injury to him resulting from it must follow as a matter of law, so be it that he was himself free from fault in the matter. On the questions of fact above suggested, the jury have found for the plaintiff, and as we think, on evidence sufficient to make it proper for the jury to determine them.

Some other questions have been discussed by the learned counsel for the defendant, involving, as is argued, grounds of error; but none of them, as we conclude, so touch the merits of the case as to require a reversal of the judgment.

Judgment and order appealed from affirmed, with

costs.

NEW YORK COURT OF APPEALS ABSTRACT.

CONSTITUTIONAL LAW-COUNTY TREASURER'S SALARY -PERCENTAGE ON STATE TAX.-The compensation of the county treasurers of Monroe and Seneca counties is limited to the salaries as fixed by the supervisors of those counties. Where the compensation of county treasurers is diminished by an act of the Legislature, which does not in terms apply to treasurers in office at the time of its passage, it will be presumed that it was intended to operate only as to future treasurers. Kerrigan v. Force, 68 N. Y. 381. A county treasurer hav

Were the case destitute of all proof on the subject it would be quite different from what it is; but there was proof bearing on the question submitted. The appearance of the package, how wrapped up, its qualities of danger, and to what extent they were concealed from observation, were subjects as to which witnesses were examined and gave testimony proper to be considered and weighed. This case differs from Dougan v. C. T. Co., 56 N. Y. 1, to which we are cited by the defendant's counsel. There the question was whether the defendant had reason to apprehend the danger charged as ground of negligence. It was held that it had not, hence was under no obligation to provide against the danger. Not so here, in case the defendant had notice or knowledge, or on the proof, should be held to notice or knowledge of the danger impending over the passengers.

The case of Crocheron v. N. S. S. I. F. Co., 56 N. Y. 656, is similar in principle to the Dougan case; as is also Cleveland v. N. J. S. Co., 68 N. Y. 306; and the same may be said of Loftus v. U. F. Co., 84 N. Y. 455; S. C., 38 Am. Rep. 533.

As regards the case of Keeley v. E. R. W. Co., 47 How. 256, it will hardly be contended that the liability of the defendant for the injury would have been in doubt

ture, which directed that they should be allowed to him for the benefit of his county, cannot set up the invalidity of the act under which he received the money, and on that ground claim to retain it for himself, as

against the party for whose benefit he received it. Ross v. Curtis, 31 N. Y. 606; People v. Mead, 36 id. 224; First Nat. Bank v. Wheeler, 72 id. 201. Supervisors of Seneca Co. v. Allen. Opinion by Rapallo, J. [Decided Oct. 6, 1885.]

INSURANCE MARINE- BREACH OF CONTRACT — RIGHTS OF PARTIES.-A preliminary contract of insurance is not, in and of itself and standing alone, the basis of an action, but amounts to an agreement to insure upon the terms of the usual policy afterward to be issued, for a breach of which agreement the action lies, and the loss may be recovered. Ellis v. Albany City Fire Ins. Co., 50 N. Y. 402; De Grove v. Metropolitan Ins. Co., 61 id. 594; S. C., 19 Am. Rep. 305. This doctrine implies that essential conditions of the contract remain to be performed and that the insurance takes effect upon that assumption. These condi. tions are subsequent in point of time, but on each side precedent to the right of action. The insurer is bound to issue the policy in the usual and ordinary way and within the usual and reasonable time, and within the same time the insured is bound to pay the premium, or if credit is allowed, to give the customary note. But the insured is not bound to pay if the policy is refused,