On motion for summary judgment.
[22 NJSuper Page 607] Commonwealth Trust Company and the Trust Company of New Jersey, defendant banks, move for summary judgment against the plaintiff. Rule 3:56. The suit was brought originally against Commonwealth Trust Company on the ground that it had unlawfully charged plaintiff's account with the sum of $5,000, the face amount of a check drawn by plaintiff to the order of Grantwood
Electric, a corporation, and delivered by him to one Eisenberg, for the payee. The check, in accordance with endorsements made by Eisenberg, was deposited by him in a trade name account of his own in the Trust Company of New Jersey. Through routine clearance it was presented to Commonwealth Trust as drawee and paid by it, the check being charged against plaintiff's account. Upon the bringing of plaintiff's suit against it, Commonwealth Trust complained against the Trust Company of New Jersey as third-party defendant on the ground that the latter's endorsement guaranteed the prior endorsements. The banks base their motion for summary judgment mainly upon the contention that Eisenberg's authority as agent of the payee corporation to endorse as he did is sufficiently obvious to warrant the judgment sought.
The facts appear to be undisputed. On or about August 1, 1951 the check in question was presented by Eisenberg to the Trust Company of New Jersey at its West New York Branch for deposit. As presented it bore two endorsements, in Eisenberg's handwriting, the first "Grantwood Elect.," a corporation, and the second "Grantwood Elect. App. Co." The second endorsement is in the trade name of a business, hereinafter called the Appliance Company, then solely owned and conducted by Eisenberg, who had an account in that name at the branch where the check was presented. The bank accepted the check and it was deposited to the credit of Eisenberg's trade name account. In a word, the instrument was one drawn for payment to a corporation and endorsed for deposit in a personal account. The corporation payee had no account with the Trust Company of New Jersey. Plaintiff alleges that no part of the check proceeds reached the corporation.
The Trust Company of New Jersey does not contend that in making the deposit it inquired in any manner concerning the authenticity of the corporate endorsement. It does contend, by way of avoidance, that Eisenberg was competent as the corporate agent to endorse the check and to
deposit it as he did. The merit of that contention is the subject of the motion. The law that is basic to the controversy is well established. "A bank which has dealings with a corporation must be assured that an officer who endorses checks payable to the corporation and receives from the bank the proceeds therefrom has such authority." Slavin v. Passaic National Bank & Trust Company , 114 N.J.L. 341 (E. & A. 1935). The same decision is authority for the doctrine that in paying to one other than the designated payee, without due inquiry, a bank disobeys the direction of its depositor and "for such failure must suffer the consequences." It is further declared that "the law holds banks to a strict accountability" in this regard. Callaway v. Hamilton National Bank of Washington , 195 F.2d 556 (D.C. Cir. , 1952); Singer Sewing Machine Company v. Citizens National Bank & Trust Company , 111 N.J.L. 199 (Sup. Ct. 1933), affirmed 112 N.J.L. 497 (E. & A. 1934); Wagner Trading Company v. Battery Park National Bank , 228 N.Y. 37, 126 N.E. 347, 9 A.L.R. 340 (N.Y. 1920); Ward v. City Trust Company of N.Y. , 192 N.Y. 61, 84 N.E. 585 (N.Y. 1908). It has been held that a bank's acceptance of a check for deposit in a depositor's account is equivalent to the cashing of the check for such depositor. Bryan v. First National Bank , 205 Pa. 7, 54 A. 480 (Pa. 1903); Teas v. Third National Bank & Trust Company , 125 N.J. Eq. 224 (E. & A. 1939). In the last cited case the court says (at p. 227): "There is no substantial difference between an unauthorized endorsement and a forged endorsement, the result being the same in so far as concerns the passing of title." Altogether, the decisions clearly evince a canon of discipline in the relation of banker and depositor that is founded upon necessity, and firmly established. The validity of this principle and its application to the case are not controverted by either defendant.
Certain other pertinent rules of law are equally clear. They bear in general upon the banks' contention for Eisenberg's agency.
"A president of a corporation does not have, by virtue of holding the office of president, any power to endorse chacks, drafts, notes and other obligations payable to the corporation * * *. Where a bank receives a check payable to a corporation and endorsed by the president so as to make it payable to himself, and the president deposits it in his personal account with the bank, the bank is chargeable with notice so as to put it on inquiry to determine whether the president of the corporation was authorized so to use its funds as against the corporation." Dennis Metal Mfg. Co. v. Fidelity Union Trust Company , 99 N.J.L. 365, at 368, (Sup. Ct. 1924).
See also Aerial League of America v. Aircraft Fireproofing Corporation , 97 N.J.L. 530 (E. & A. 1922); Economy, etc., Company v. Fidelity, etc., Company , 105 N.J.L. 206, at 207-8 (E. & A. 1928); Slavin v. Passaic National Bank & Trust Company, supra.
By what do the banks seek to induce the award of a summary judgment? Their argument for competency in the endorser to deal with the check as he did is based upon a somewhat complicated narrative of events and circumstances anterior to the check's issuance. These things are all ...