Municipal Corporations, Officers and agents. Bills and Notes. Bank. Conversion. The treasurer of a town has no authority to indorse for circulation a check payable to the order of the town.
If a check payable to the order of a town is indorsed in blank in the name of the town by the treasurer of the town and is deposited in a bank by one of the bank's customers not connected with the town, this is notice to the bank of a defect in the title of the depositor, and, if the bank pays out the proceeds of the check upon drafts of the depositor and the town receives no part of such proceeds, this is a conversion for which the bank is liable to the drawer of the check.
HAMMOND, J.
In view of the decisions of this court as to the powers conferred by law upon a town treasurer, this seems a simple case. The check was made payable to the town of Framingham and could be put into circulation only by the indorsement of the town acting by its agent duly authorized for that purpose. The only indorsement in the name of the town was made by Lombard, the treasurer, in these words: "Town of Framingham, by John B. Lombard, Treasurer." But he as treasurer had no power to indorse the check for circulation. His only power was to indorse it for deposit for collection to the account of the town. The check was not received for deposit on account of the town, but on account of the American Banking Company, one of the defendant's depositors, to which on the same day the defendant gave a certified check for an amount which included very nearly the whole amount of the check in question.
The infirmity in the title of the American Banking Company to the check was thus apparent upon the check itself with the indorsement, when interpreted under the law, and the defendant must be held to have had knowledge of it. Having taken the check with such knowledge it is answerable to the plaintiff for the proceeds. The case is clearly distinguishable from Fillebrown v. Hayward, 190 Mass. 472, upon which the defendant places much reliance. The treasurer in that case was treasurer of a private corporation, not of a town. The distinction between the general powers of these two officers as to commercial paper has been frequently stated by this court. For cases illustrative of the law applicable to the present case see Smith v. Cheshire, 13 Gray, 318; Lowell Five Cents Savings Bank v. Winchester, 8 Allen, 109; Abbott v. North Andover, 145 Mass. 484, and cases cited; Newburyport v. Fidelity Mutual Life Ins. Co. 197 Mass. 596. See also Holden v. Phelps, 135 Mass. 61.
The principle also invoked by the defendant that where one of two innocent parties must suffer, the loss must rest where it falls, is for manifest reasons not applicable.
There was no prejudicial error in the admission of the evidence relating to the purchase of the note by the plaintiff and the making and negotiation of the check in payment therefor. The check was wrongfully received by the defendant, who was guilty of conversion on that day. By the terms of the report there should be judgment for the plaintiff, with interest from December 1, 1908.
So ordered.