COMMERCIAL CASUALTY INS. CO. v. ISBELL NAT. BANK

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Equivalent Citations

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Docket Number

7 Div. 985.

Attorney(S)

Merrill, Jones Whiteside, of Anniston, for appellant. Assumpsit lies in favor of one for whom a check was intended which was misappropriated without reaching him, against the one who cashed it on a forged indorsement and collected it from the drawee, to recover the proceeds so collected. Allen v. Mendelsohn Son, 207 Ala. 527, 93 So. 416; Merchants' Bank v. Capitol Press (D.C.) 288 F. 265; First Nat. Bk. v. Montgomery C. M. Co., 211 Ala. 551, 101 So. 186; Farmer v. People's Bk., 100 Tenn. 187, 47 S.W. 234. That an agent has authority to accept a check payable to his principal does not authorize him to indorse the principal's name thereon, and, if he does, the principal can recover from the bank paying same. Ky. T. S. Bk. T. Co. v. Dunavan, 205 Ky. 801, 266 S.W. 667; 5 R. C. L. 566; Jackson P. M. Co. v. Com. Nat. Bk., 199 Ill. 151, 65 N.E. 136, 59 L.R.A. 657, 93 Am. St. Rep. 113; Deering v. Kelso, 74 Minn. 41, 76 N.W. 792, 73 Am. St. Rep. 324; Hamilton Nat. Bk. v. Nye, 37 Ind. App. 464, 77 N.E. 295, 117 Am. St. Rep. 333; 12 A.L.R. 120, note. Seattle Shoe Co. v. Packard, 43 Wn. 527, 86 P. 845, 117 Am. St. Rep. 1064; First Nat. Bk. v. Peoples Bk., 18 Ala. App. 190, 91 So. 324; K. C. C. Co. v. Westport Ave. Bk., 191 Mo. App. 287, 177 S.W. 1092; Standard S. S. Co. v. Corn Ex. Bk., 220 N.Y. 478, 116 N.E. 386, L.R.A. 1918B, 575; Graham v. Southington B. T. Co., 99 Conn. 494, 121 A. 812; National Bk. v. Tacoma Mill Co., (C.C.A.) 182 F. 1. In pleading an estoppel, it must be definitely alleged that the party against whom it is sought to be invoked made representations or assumed a position where otherwise inequitable consequences would result to another, having right to do so under all circumstances, had relied thereon to his prejudice. Houston Nat. Bk. v. Eldridge, 17 Ala. App. 235, 84 So. 430; Williams Co. v. Newman, 205 Ala. 86, 87 So. 807; Wheeler v. McGuire, 86 Ala. 398, 5 So. 190, 2 L.R.A. 808; Note, 31 A.L.R. 1070; Schmidt v. Garfield Nat. Bk., 64 Hun, 298, 19 N.Y. S. 252; Id. 138 N.Y. 631, 33 N.E. 1084; Pattillo v. Tucker, 216 Ala. 572, 113 So. 1; Scott v. Wilkinson, 215 Ala. 235, 110 So. 34. Harrison Stringer, of Talladega, for appellee. Appellant's assignor was guilty of such negligence in supervision of its business for a period of three years that as a result its agent Gillam was by a course of dealing with appellee permitted to clothe himself with apparent authority to do the acts which it is now claimed he had no authority to perform, and, appellee having acted upon such apparent authority, appellant is estopped on account of its negligence to now assert Gillam did not have the authority appellee was led to believe he had by said cause of dealing. 10 R. C. L. 695; 5 R. C. L. 557; Dispatch Ptg. Co. v. Nat. Bk., 109 Minn. 440, 124 N.W. 240, 50 L.R.A. (N.S.) 74; Columbia Mill Co. v. Nat. Bk., 52 Minn. 224, 53 N.W. 1061; Persons v. Russell, 212 Ala. 509, 103 So. 543; Farmers' Bk. Tr. Co. v. Shut Keihn, 192 Ala. 62, 68 So. 363; Tobias v. Josiah Morris Co., 126 Ala. 535, 28 So. 517; Brooks v. Greil Bros., 179 Ala. 459, 60 So. 387; Reynolds Co. v. Reynolds, 190 Ala. 468, 67 So. 293. A general agent is one who is employed to transact all business of his principal in regard to which he is employed. 2 C. J. 427; British A. Co. v. Cody, 135 Ala. 622, 33 So. 832; Robinson v. Ætna Ins. Co., 128 Ala. 477, 30 So. 665; Birmingham Mineral R. Co. v. Tennessee C. I. Co., 127 Ala. 137, 28 So. 679; Syndicate Ins. Co. v. Catchings, 104 Ala. 176, 16 So. 46; So. St. F. I. Co. v. Kronenberg, 199 Ala. 164, 74 So. 63. Secret or private instructions or limitations on the general authority of an agent can have no effect on a third person who deals with the agent in good faith in ignorance of such instructions or limitations and in reliance upon the apparent authority with which the agent is clothed. 2 C. J. 566, 859; Thornton v. Pinckard, 157 Ala. 206, 47 So. 289; Patterson v. Neal, 135 Ala. 477, 33 So. 39; Lytle v. Dothan Bk., 121 Ala. 215, 26 So. 6; Hall, etc. v. Haley, 174 Ala. 190, 56 So. 726, L.R.A. 1918B, 924; People's Bk. v. Robbins, 167 Ala. 497, 52 So. 412; McCleskey v. Howell Co., 147 Ala. 573, 42 So. 67.

Judges

BROWN, J.

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Smart Summary

Factual and Procedural Background

This appeal arises from a suit involving the recovery of proceeds from checks intended for the East Side Packing Company but misappropriated by an agent, Gillam, who indorsed the checks without proper authority and deposited them to his own trade-name account at the defendant bank. The plaintiff, as assignee of the East Side Packing Company, sought to recover the money collected by the bank from these checks. The case was previously appealed and remanded, with the court initially holding that the plaintiff should recover the money held by the defendant bank. On remand, the plaintiff amended the complaint multiple times, eventually focusing on counts treated as for money had and received. The defendant bank filed special pleas asserting that Gillam had apparent authority to endorse the checks based on a long course of dealing and that the plaintiff was estopped from denying such authority. The plaintiff filed replications which were demurred to and the demurrers sustained, leading to a voluntary nonsuit. The circuit court’s rulings were affirmed on appeal.

Legal Issues Presented

Whether the plaintiff, as assignee of the East Side Packing Company, can recover money collected by the defendant bank on checks indorsed by an agent without actual authority to endorse.
Whether the defendant bank is estopped from denying the agent’s authority to indorse the checks based on the course of dealings and apparent authority.
The sufficiency of the defendant’s special pleas asserting estoppel and apparent authority as a defense to the plaintiff’s claim.
The legal effect of the assignment of the cause of action arising ex contractu as opposed to causes ex delicto.

Arguments of the Parties

Appellant's Arguments

The appellant’s assignor (East Side Packing Company) was negligent in supervising its business for three years, allowing its agent Gillam to acquire apparent authority to endorse checks without actual authority.
Because the appellee bank acted on this apparent authority, the appellant is estopped from now denying Gillam’s authority.
Secret or private limitations on an agent’s authority cannot affect third parties who deal in good faith relying on apparent authority.
Cited authorities support that a general agent’s apparent authority binds the principal where third parties rely on it in good faith.

Appellee's Arguments

The money collected from the checks was in the possession of the defendant bank and was the money of the payee, East Side Packing Company, assigned to the plaintiff.
Gillam was acting under contracts that authorized him to collect payments and render statements to Miller, the general agent, who in turn acted for the East Side Packing Company.
Gillam indorsed checks in the name of the East Side Packing Company using a rubber stamp for deposit to his own trade-name account, which was accepted and acquiesced in by the packing company for over three years.
Because of this long course of dealing, the defendant bank reasonably believed Gillam had authority to indorse the checks, and the plaintiff and its assignor are estopped from denying this authority.
The defendant bank had no knowledge that the indorsements were unauthorized and made payments accordingly; the loss must fall on one party, and it would be unjust to allow the plaintiff to dispute Gillam’s authority after acquiescence.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Allen v. Mendelsohn Son, 207 Ala. 527, 93 So. 416	Assumpsit lies for one for whom a check was intended but misappropriated by forged endorsement.	Supported the plaintiff’s right to recover proceeds collected on forged endorsement.
Commercial Casualty Insurance Co. v. Isbell National Bank, 220 Ala. 179, 124 So. 413	Money held by a bank collected on a check payable to a payee is the money of the payee, constituting a liability ex contractu.	Affirmed that plaintiff should recover money held by defendant bank.
Tobias v. Josiah Morris Co., 126 Ala. 535, 28 So. 517	Estoppel arises where a party acquiesces in a course of dealing leading others to believe an agent has authority.	Held plaintiff estopped from denying agent’s authority after acquiescence.
Brooks v. Greil Bros., 179 Ala. 459, 60 So. 387	Same principle of estoppel applied to agency authority.	Reinforced estoppel holding in favor of defendant bank.
Dispatch Printing Co. v. Nat. Bank, 109 Minn. 440, 124 N.W. 240	Course of dealing may clothe agent with apparent authority binding principal.	Supported defendant’s argument on apparent authority.
Farmers' Bank Trust Co. v. Shut Keihn, 192 Ala. 62, 68 So. 363	Apparent authority arising from acquiescence and negligence of principal.	Affirmed estoppel based on course of dealing.
Sanders v. Gernert Bros. Lumber Co., 221 Ala. 469, 129 So. 46	Notice to or knowledge of agent is notice or knowledge to principal.	Applied to hold East Side Packing Company charged with knowledge of agent’s dealings.
People's Bank of Evergreen v. Robbins, 167 Ala. 497, 52 So. 412	Same as above regarding notice to principal through agent.	Supported court’s analysis on notice and estoppel.

Court's Reasoning and Analysis

The court analyzed the contractual and agency relationships among the parties, focusing on the authority of Gillam, the agent. It found that Miller was the general agent of the East Side Packing Company with authority to collect payments and deposit funds. Gillam was employed by Miller to sell products and collect payments, authorized to collect amounts and report with checks attached. Instead of following the contract, Gillam indorsed checks payable to the East Side Packing Company with a rubber stamp and deposited them to his own trade-name account at the defendant bank. This practice continued for over three years without objection, constituting a course of dealing that gave rise to apparent authority.

The defendant bank, acting in good faith, accepted these indorsements and made payments accordingly, unaware of any lack of actual authority. The court held that the plaintiff, as assignee of the East Side Packing Company, was estopped from denying Gillam’s authority due to the packing company’s acquiescence and negligence in supervision. The court found the defendant’s special pleas asserting estoppel and apparent authority sufficient defenses, and that the plaintiff’s replications failed to allege facts avoiding estoppel. Consequently, the demurrers to the replications were properly sustained.

The court emphasized that the money held by the bank was the money of the payee, constituting a liability ex contractu, and that the assignment of such a claim was valid and not barred by the rule against champerty. The court affirmed the circuit court’s judgment, finding no error in the proceedings.

Holding and Implications

The judgment of the circuit court is affirmed.

The court held that the plaintiff, as assignee of the East Side Packing Company, is estopped from denying the authority of its agent, Gillam, to indorse checks based on a long course of dealing and acquiescence. The defendant bank was justified in accepting the indorsements and making payments accordingly. The decision directly resolves the dispute between the parties by upholding the estoppel defense and confirming the validity of the agent’s apparent authority under the circumstances. No new precedent was established beyond the application of established principles of agency, estoppel, and contract assignment.

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COMMERCIAL CASUALTY INS. CO. v. ISBELL NAT. BANK.

BROWN, J.

In the case presented on the former appeal it appeared that the money, the proceeds of the check, was at the commencement of the suit in the hands of the defendant bank, and on the case made by the pleadings, consisting of the common counts, special count in assumpsit, plea 11 and replication 4 thereto, it was held that "no reason appears why plaintiff should not recover." Commercial Casualty Insurance Co. v. Isbell National Bank, 220 Ala. 179, 124 So. 413, 415.

Along with other facts, it was alleged in the special count "that at the time the said W. S. Gillam received said checks he was acting for the East Side Packing Company under a contract between said Gillam and D. K. Miller, dated June 19th, 1922, a copy of which contract is hereto attached and marked 'Exhibit A,' and at the time of the execution of said contract with Gillam, and at the time said checks were received by said Gillam the said Miller was acting under a contract with the East Side Packing Company, a copy of which is hereto attached and marked 'Exhibit B,' which said exhibits are made a part of this complaint; that said checks were delivered to the said Gillam as payment on account due the East Side Packing Company by the drawers of said checks."

It was further alleged in said count that Gillam, using his trade-name, "Gillam Brokerage Company," indorsed said checks "East Side Packing Company for deposit, The Isbell National Bank," and the bank collected the money from the drawees, and retained it in its possession.

The legal effect of these averments, as the court held, was that the money so in the bank's possession was the money of the payee, the East Side Packing Company, constituting a liability purely ex contractu, which had been assigned or transferred by the owner of the contract obligation to the plaintiff. There was nothing in this situation that in any way impinged the rule against champerty, which prevents the assignment of a cause of action arising ex delicto. 5 C. J. 885, §§ 50, 51. The rule is stated in the following cases: Foy v. Cochran, 88 Ala. 353, 6 So. 685; Alabama State Bank v. Barnes, 82 Ala. 607, 2 So. 349; Dunklin v. Wilkins, 5 Ala. 199; Prouty v. Alabama Great Southern Railway Co., 174 Ala. 404, 56 So. 980; Sylacauga Lodge, No. 200, F. A. M., v. McGhee, 17 Ala. App. 52, 81 So. 689.

After the remandment of the case, and on the last trial, the plaintiff amended its complaint by withdrawing the special assumpsit count and adding counts 6, 7, and 8, which appear in the reporter's statement. And after plaintiff's demurrers to the defendant's special pleas D, E, F, and G were overruled, the plaintiff again amended its complaint by withdrawing the common counts, including the count for money had and received, leaving in the complaint counts 6, 7, and 8.

The plaintiff then filed replications to the defendant's special pleas, and, demurrers to these being sustained, it took a voluntary nonsuit.

Whatever may be said of special counts 6, 7, and 8, the basis of plaintiff's case on this record, it seems they were treated by the trial court as special counts for money had and received, and will be so treated here.

Coming to the sufficiency of the pleas as a defense to the case made by these counts, it appears from the "Memorandum of Agreement," made Exhibit B, to counts 6, 7, and 8, that D. K. Miller was the general agent of the East Side Packing Company to receive, store, deliver, collect, and account for, in its name, all products consigned to and disposed of by him or others for him and by his authority, on a commission basis of $1 per hundred weight on all products except dry salt meats and lard, on which he was to receive 75 cents per hundred weight. He had authority to receive payments for goods disposed of and make deposits thereof for and in the name of said packing company in Anniston National Bank, sending copy of all such deposits to said packing company, showing from whom collections were made.

By "Memorandum of Agreement," Exhibit A, said Miller employed said Gillam to offer and sell such packing house products as said Miller might desire to offer through Gillam to dealers in certain of Miller's territory, Gillam to mail orders direct to the packing house as directed by Miller, and shipments were then made direct to customers, carbon copies of which were mailed daily to Miller. Gillam was authorized by Miller to " collect the amounts and render party of the second part [ Miller] a statement of such collections, with the checks attached each day, itemizing individuals from whom collections were made." (Italics supplied.)

The pleas, in substance and legal effect, aver that, in lieu of making collections and reports as specified in the above italicized stipulation, said Gillam, who in carrying out said contract had adopted the trade-name "Gillam Brokerage Company," received from customers their checks, payable to the East Side Packing Company, in payment of accounts, indorsed the name of said packing company on said checks with a rubber stamp for deposit in the defendant bank, to the credit of the Gillam Brokerage Company, and then issued a check in the name of the Gillam Brokerage Company payable to said East Side Packing Company, and forwarded the same with report and itemized statement to said packing company who deposited said checks of Gillam Brokerage Company; that said course of dealings continued between defendant bank, said Gillam Brokerage Company, and said East Side Packing Company for a term of three years or more, involving many transactions and many thousands of dollars, without objection on the part of said packing company, leading defendant to believe and act on the belief that said Gillam had authority to indorse said checks received from customers in payment of said accounts. That all moneys received by the defendant were in due course paid out on the checks of Gillam Brokerage Company, and, at the time of the alleged transfer of the right of action to plaintiff, the defendant had no money in its possession belonging to the said East Side Packing Company or to said Gillam or to Gillam Brokerage Company. That defendant did not have knowledge or notice that the indorsement of said checks by said Gillam was not authorized by said packing company, the payee thereof, and no complaint or objection was made to said course of dealings, until checks issued by said Gillam Brokerage Company to said East Side Packing Company were refused payment because said Gillam Brokerage Company had no funds to its credit.

In these circumstances one of the parties, unless they can recover from Gillam, must suffer the loss. The plaintiff as the assignee of the East Side Packing Company stands in its shoes, and it is clear, if the facts pleaded are true, and they must be so treated on this appeal, that it would be unjust to allow said packing company, who acquiesced in the course of dealings by Gillam, or its assignee, to now dispute the authority of said Gillam to indorse for the packing company, and we hold that they are estopped so to do. Tobias v. Josiah Morris Co., 126 Ala. 535, 28 So. 517; Brooks v. Greil Bros. Co., 179 Ala. 459, 60 So. 387; H. C. W. B. Reynolds Co. v. Reynolds et al., 190 Ala. 468, 67 So. 293; Dispatch Printing Co. v. National Bank of Commerce, 109 Minn. 440, 124 N.W. 236, 240, 50 L.R.A. (N.S.) 74; Farmers' Bank Trust Co. v. Shut Keihn, 192 Ala. 62, 68 So. 363.

The demurrers to the special pleas were properly overruled.

As before stated, Miller was the general agent of the East Side Packing Company, whose duty it was to collect from its customers and deposit the money to its credit in the Anniston National Bank.

The replications aver that said checks, during the course of dealings alleged in the pleas, were sent to and indorsed by him. Notice to or knowledge by Miller of the course of dealings was notice or knowledge to his principal, the East Side Packing Company. Sanders v. Gernert Bros. Lumber Co., 221 Ala. 469, 129 So. 46; Hall Brown Woodworking Mach. Co. v. Haley Furn. Mfg. Co., 174 Ala. 190, 56 So. 726, L.R.A. 1918B, 924; People's Bank of Evergreen v. Robbins, 167 Ala. 497, 52 So. 412.

The replications which confess the averments of the pleas do not allege facts in avoidance of the estoppel, and the demurrers to the replications were well sustained. Highland Ave. Belt R. Co. v. South, 112 Ala. 642, 20 So. 1003; Louisville N. R. Co. v. Mothershed, Adm'r, 110 Ala. 143, 20 So. 67; Adams v. Thomas, 54 Ala. 175.

The record and proceedings of the circuit court are free from error.

Affirmed.

ANDERSON, C. J., and SAYRE and THOMAS, JJ., concur.