
    American Surety Co. of New York, Appellee, v. The Cortland Savings & Banking Co., Appellant.
    (No. 29627
    Decided May 31, 1944.)
    
      
      Messrs. Garfield, Baldwin & Vrooman and Mr. William F. Aigler, for appellee.
    
      Messrs. Guarnieri é Secrest, for appellant.
   Weygandt, C. J.

Section 11225-1, General Code,, reads as follows:

“No bank which has paid and charged to the account of a depositor any money on a forged or raised check issued in the name of said depositor shall be liable to said depositor for the amount paid thereon unless either, (1) within one year after actual written notice to said depositor that the vouchers representing payments charged to the account of said depositor for the period during which such payment was made are ready for delivery, or (2) in case no such notice has been given, within one year after the return to said depositor of the voucher representing such payment, said depositor shall notify the bank that the check so paid is forged or raised.”

It is conceded that under the second part of this statute the cancelled checks or warrants were returned by the defendant bank to Martin as the duly elected, qualified and acting clerk-treasurer of the township. However, it is vigorously contended by the plaintiff surety company that the delivery of the cancelled warrants to the clerk-treasurer of the township was not a delivery to the township as the depositor of the funds within the terms of the above statute.

On this issue the trial court charged the jury as follows:

‘ ‘ And the court says to you that delivery of the can-celled checks, or warrants, to the clerk-treasurer of Vernon township, is delivery to the township itself.
“Now, this statute I have read may be confusing to you but it means this: That when the bank delivers to the depositor the cancelled checks it is liable for only ■one year thereafter on any forged checks that might be included in those cancelled checks; it places the burden upon the depositor, after it has returned the checks, to examine them and if there are any forged checks among them it gives the depositor one year so to do.
“By reason of this limitation of the statute, the bank would not be liable, either to the plaintiff or to the township, for- any amount of money paid out on forged checks or warrants prior to April 5, 1939.
‘ ‘ On the undisputed evidence in this case, and on the-pleadings, the plaintiff’s petition, and from the schedule of warrants set out in plaintiff’s petition, we find the total amount of the warrants paid from April 5,. 1939, to aggregate $293.75.
“The court says to you that, if you find in favor of' the plaintiff in this case, your verdict in no event shall, exceed the amount paid out by the bank on forged checks before April 5, 1939, which amount totals-$293.75.”

The Court of Appeals held that this charge of the trial court is erroneous; and this ruling constitutes-the sole question of law now before this court for review.

In the opinion of the Court of Appeals and in the brief, of the plaintiff it is observed that the clerk-treasurer was not the depositor and that, therefore, the cancelled warrants should not have been returned to-him. It is insisted further that the depositor was tbe board of trustees and that the cancelled warrants should have been returned to the board instead of the clerk-treasurer, especially in view of the fact that it-was the latter who was guilty of the forgery.

To the contrary it is contended by the defendant-that the clerk-treasurer of the township is an elected official under Section 3299, General Code; that under-Section 3300, General Code, he is required to furnish a bond for the faithful performance of his duties; that under Section 3301, General Code, he is charged with the duty of keeping a record of the proceedings of the trustees as well as a record of all their accounts and transactions; that under Section 3304, General Code, he is charged with the duty of preparing a detailed statement of the receipts and expenditures of" the township; that in townships in which a depository has been provided (as in the instant case) the clerk performs all the services and discharges all the duties formerly required of the township treasurer under Section 3316-1, General Code; that the treasurer was required to receive all moneys belonging to the township and handle all books, accounts and vouchers for the expenditures of funds; and that although the present statutes do not specificially designate the person nr persons to whom cancelled warrants of the township shall be returned, it clearly is implied that the clerk-treasurer is the proper official of the township for this purpose.

It is true, as contended by the plaintiff, that the clerk-treasurer was not the “depositor” within the meaning of the statute; but neither were the trustees. 'The funds belonged to neither the clerk-treasurer nor the trustees but to the township. The statutes and the pleadings properly refer to the funds as belonging to the township. If there were any doubt as to who was the owner and depositor of the funds this is removed by the warrants themselves on which appear the words “The Cortland Savings and Banking Co., Cortland, Ohio, Depository of said Township.” The name of the township also appears on the warrants.

As the owner and depositor of the funds the only manner in which the township could function was through its duly constituted officers. The clerk-treasurer was one of them. He made all of the deposits in the bank, and all of the. cancelled warrants were returned to him. These facts were known to the trustees. The plaintiff contends that the defendant bank was careless in not discovering the forgeries; and the defendant insists that the trustees were guilty of carelessness in failing to make the discovery. However this may be, these were questions of fact for the' jury, and of course this court does not weigh the evidence.

The plaintiff further contends that although ordinarily it might have been proper for the bank to return the cancelled warrants to the clerk-treasurer, he was without authority to receive them in this instance since it was he himself who had perpetrated the forgeries. However, Martin was still the duly elected, qualified and acting clerk-treasurer in spite of his undiscovered misconduct, and as long as the bank was without fault in making the discovery it was justified in assuming that his authority remained unimpaired.

The judgment of the Court of Appeals must be reversed and that of the Court of Common Pleas affirmed.

Judgment reversed.

Matthias, Zimmerman, Bell and Turner, JJ., concur.

Hart and Williams, JJ., dissent.

Hart, J.,

dissenting. I am unable to concur in the judgment and in the majority opinion in this case. The defendant was, in law, required to know that the funds of its depositor, Vernon township, Trumbull county, Ohio, were being withdrawn from its bank on forged warrants. First National Bank of Belmont v. First National Bank of Barnesville, 58 Ohio St., 207, 50 N. E., 723, 65 Am. St. Rep., 748, 41 L. R. A., 584; 7 American Jurisprudence, 360 and 413.

Upon this hypothesis only was judgment entered against the defendant. The amount of such judgment was $293.75 because of the withdrawals within the year preceding the notice to the defendant of the forgeries, which judgment has become final. And, since the jury found for the plaintiff, except as to items barred by the statute, it necessarily found that, in respect to the forged warrants for which recovery was allowed, the depositor was not guilty of such negligence in failing to notify the defendant of the forgeries as would defeat a recovery.

The only defense which the defendant had against liability for the remainder of withdrawals was that, pursuant to the statute, Section 11225-1, General Code, it had not received any notice of the forgeries from the depositor within one year after the return of the can-celled warrants. My view is that the warrants were not, in law and in fact, returned to the depositor as contemplated by the statute which, being in derogation-of the common law, must be strictly construed. 37 Ohio Jurisprudence, 728, Section 408.

The contract with the defendant, as depositary for the township, was made under the Uniform Depository Act by the township trustees constituting the “governing board” of the township. Significant also is the fact that Section 3316, General Code, provides that no money belonging to the township shall be paid out except upon an order signed by at least two of the three township trustees and countersigned by the township clerk. Under this provision, the real drawers of the warrants on the funds held by the depositary were the •township trustees, while the clerk was merely the countersigner of the warrants. His signature, in this capacity, was to attest the validity of the signatures of the superior or principal officers issuing the warrant. Logically, it seems to me, the cancelled warrants should have been returned to those authorized under the statute to draw them, rather than to one whose only authority was to countersign them. The fact that the clerk-treasurer is charged with keeping the records of the proceedings and of all accounts and transactions of the trustees, and was required to prepare a detailed statement of the receipts and expenditures of the township and to act in the capacity of its treasurer, thus making the fiscal business of the township a one-man operation, is a most cogent reason why the can-celled warrants should have been returned to the drawers thereof as representing the depositor.

The depositor was Vernon township, a governmental unit. It could act or be bound only by the acts of its officers as its duly authorized agents. The defendant was not only bound to the knowledge of this fact but it was bound to ascertain and to know the scope and continuity of the authority of such agents. Even if the defendant, in the first instance, was justified in delivering the cancelled warrants to Martin, as clerk-treasurer of the township, when it became aware and knew, as it did know in law, that he was withdrawing the funds of the depositor to himself personally on forged warrants, it had no right to continue to make such deliveries. It knew, in law, that Martin was no longer acting in good faith for the depositor or within the scope of his authority as its agent. The defendant knew, in law, that the signatures of the township trustees were forged. The defendant knew, in law, that Martin, as countersigner of the warrants, was certifying that the signatures of the trustees were genuine when they were not. The defendant knew, in law, that the warrants, bearing the forged signatures of the trustees, were being wrongfully honored and paid to Martin. It must also have known that the warrants would, in all probability, not be delivered to any of the persons representing the depositor, whose names had been forged to the warrants. Under such circumstances, the defendant, was charged with knowledge that Martin was breaching his trust as agent or representative of the depositor.

Can it be said, following its constructive knowledge of bad faith and fraud upon the part of Martin, that it, the defendant, was returning the cancelled warrants to the depositor when it delivered them to Martin who had violated the duties of his office? I think not. These circumstances, in my opinion, made it improper to regard Martin as the agent to whom it could properly deliver the warrants and thus bind the depositor. As a consequence, the defendant could not invoke the protection of the statute.

“A third person who delivers goods or pays money to an agent designated by the principal to receive them, if without notice of an improper purpose on the part of the agent, is subject to no duty to the principal to see that the goods are delivered to him or are otherwise properly applied, and the delivery to the agent binds the principal although the agent at the time of receipt intends to use the thing for his own purposes* and subsequently so uses them.” Restatement of Agency, 405, Section 165, comment d.

But, on the other hand, if the third person does-have knowledge or the means of knowledge of a wrong-intent and purpose on the part of the agent with reference to the use or disposition of the subject matter which is to be delivered to him for the principal, then the third person cannot claim immunity from liability for delivery to the agént under such circumstances. The agent by his infidelity, known to the third person dealing with him, has terminated his authority as-agent. See Restatement of Agency, 699, Section 314* Comment a; 3 Corpus Juris Secundum, 217, Section 280 and 3 Corpus Juris Secundum, 218, Section 281.

This principle has application to the situation here presented. In my opinion, the judgment of the Court of Appeals should have been affirmed.

Williams, J., concurs in the foregoing dissenting opinion.  