First National Bank v. Produce Exchange Bank

59 S.W.2d 81, 227 Mo. App. 908, 1933 Mo. App. LEXIS 42

• Court: Missouri Court of Appeals
• Decided: April 3, 1933
• Status: Published

Opinions

SHAIN, P. J.

This is an action instituted in the Circuit Court of Jackson County by appellant, plaintiff below, against respondent, the defendant below, for a refund of money which appellant alleges was wrongfully received from appellant by the respondent.

This suit is in three counts, each count alleging wrongful receipt of $1,000 on three (3) specific occasions.

It appears from the evidence that in the years of 1929 and 1930 the “List & Bagwell Construction Company” and the “List & Clark Construction Company” had offices and were operating from the said offices in and around Kansas City, Missouri. It appears that one, C. J. Brown, was the secretary and treasurer of these construction companies and that one, Ben T. Wilson, had charge of the books of said companies and was a confidential employee or office manager and handled the bank account of the aforenamed companies. It is shown by the evidence that Brown, the secretary and treasurer, signed all the checks for the companies, Wilson often filling out the checks for Brown to sign.

The evidence discloses that the two construction companies carried accounts in the First National Bank of Kansas City, appellant herein.

On September 25, 1929, Wilson went to the appellant bank and bought a cashier check, and under his direction the cheek was made payable to James Edgar. The consideration for this cashier check was a $1,000 check, signed by the List & Bagwell Construction Company.

On October 26, 1929, another transaction of the same kind as above was had, differing only as to the date and as to the $1,000 check, being signed by the List & Bagwell Construction Company.

On November 13, 1929, another transaction of the same kind was had, wherein the 1,000 check was signed by the List & Clark Construction Company.

It will be noted that the designated payee in each of these cashier checks was James Edgar. It appears that there was a James Edgar in the employ of the construction company. The whereabouts of said Edgar, at the time of these transactions, is not clearly shown in the evidence.

The deposition of Ben T. Wilson is in evidence. Wilson testifies, that each of the cheeks given in consideration for the cashier checks in issue were signed by C. J. Brown, secretary and treasurer of the construction companies.

It appears from the evidence that after these cashier cheeks were received by Wilson, that he, in each instance deposited the same in his credit in the Produce Exchange Bank of Kansas City, Missouri, the respondent herein, and that he, Wilson, signed the name of James Edgar in each instance.

It is'shown that these cashier checks were in due course cleared through the Clearing House Association of Kansas -City, Missouri; and were in due course paid by the appellant herein. -

There is confusion in the evidence as to when it was discovered that Wilson had endorsed the name of James Edgar on these cashier checks, and also, some confusion as to when the appellant made a demand on the respondent for a return of the money. If it be conceded that these transactions created a legal obligation on the part of the respondent to refund to the appellant, we conclude that in the matter of discovery or demand there is nothing in the delay to preclude recovery; and we will not discuss further, the respondent’s contention on that point.

There appears in the evidence, matters concerning insurance had by the appellant bank, and matters concerning reimbursement had by appellant, by way of indemnity insurance. Based upon this theory of insurance reimbursement, the respondent raises a question of appellant being an improper party to sue.

The court concludes that the matters of insurance, indemnity by way of insurance, and also the question of appellant’s right to sue, is not germane to the real issue in this case.

It appears that at the close of the plaintiff’s case in the trial court, that there was offered by the defendant a peremptory instruction directing a verdict for the defendant, which said instruction was given by the court. Upon this indication of the trial court, but before the judgment was rendered, appellant, plaintiff below, took a nonsuit with leave to move to set aside.

In due time the appellant filed a motion to set aside the nonsuit and for a new trial, said motion was duly taken up and considered by the court and the same was overruled.

From the ruling of the trial court, an appeal was duly taken and cause sent to this court.

Both the appellant and respondent in this case were members of the Kansas City Clearing House Association. Said association having rules and regulations, touching the matter of clearing checks and drafts of member banks. These rules and regulations, we conclude, constitute a contract between the member banks and in all matters covered by the contract, these rules and regulations become the law as between the parties concerned.

The appellant in this case, bases its allegation of right of recovery of the funds in issue, on Article XVIII and Article XIX of said clearing house rules. To the end of a clear understanding of the issue, we herein set forth the articles in question.

Article XVIII is as follows:

“When an item bears a forged endorsement or unauthorized endorsement, alleged by the payee or endorsee to have been forged or unauthorized, the member clearing same shall take it up on demand when said item is accompanied by an affidavit of the complaining payee or endorsee that said endorsement was forged or unauthorized.”

Article XIX is as follows:

• “Endorsements-. In place of written endorsements on all checks sent to the Clearing House, they shall be stamped by a stamp bearing the word ‘Kansas City Clearing House,’ the name of the bank presenting them, and the date of the month and year on which they are cleared. The member using said stamp thereby makes itself responsible for the genuineness of all previous endorsements, and for all in-formalities in such endorsements, without any special endorsement for guarantee; provided, that such endorsement by stamp as aforesaid, shall not be construed to supply, or as a guarantee for, missing endorsements.

“When the regular Clearing'House stamp for endorsing, of any member, is not in a condition to be used, any other stamp endorsement bearing the name of the member and date of clearing, may be used instead, until the former can be repaired and replaced, providing the member making use of such endorsement shall give special guarantee for same.”

The conclusion of this court in this case must be based upon an interpretation of the rules or contract upon which the statement of the cause of action is based. There are well defined rules by which laws and contracts are construed.

The question arises as to what is the purpose of the rules in question, or in other words, what was the intent upon which the minds of the contracting parties met.

In determining this question we must glean from all the facts and circumstances in the evidence, that may bear upon the question, we must carefully read and analyze the text of the contract and apply general rules of interpretation, and finally in interpreting, we feel that we are entitled to exercise such a decree of common horse sense as may be admissible in judicial opinion.

From a careful examination of the Clearing House rules, the court concludes that the purpose in mind is to protect the member banks from loss occasioned by defect of title or other defects, from which loss follows, that attach to the checks of drafts presented by the member bank clearing the same. The court concludes that there is no consideration expressed or implied in the rules to support a further liability than that expressed above.

We conclude from the evidence in this ease, that in the whole of the transactions in evidence in this case, that there was no such defect in the title of the respondent in the cashier checks in issue, as in law, could cause a loss to appellant. The appellant issued the cashier checks for a good and sufficient consideration. There is no contention and no evidence to the effect, that the checks of the construction companies were not of the full face value of $1,000 each. When the appellant bank paid its cashier checks to the respondent bank, the debit and credit of that account balanced.

The appellant contends, that regardless of above, it is entitled to recover for the reason that Wilson forged the endorsement of Edgar’s name on the cashier checks.

The court is presented with the conflicting opinion of the appellant and respondent, as to whether or not the cashier checks being, at the instance of the buyer, made to a third party, who had no interest and who the record shows, is claiming no interest in the checks, should or should not be considered as checks to bearer.

The question if further presented by the parties pro and con, as to whether or not the act of Wilson signing Edgar’s name on the checks, constituted forgery in relation to the duty of the respondent to refund.

In our opinion, the determination of these questions is not absolutely necessary to the determination of the issue herein. However, as the conclusions of these matters have been under consideration of the court in reaching its general conclusions, we think it but fair to state here, that in our opinion, under the evidence, the checks to all intents and purposes were issued to a straw man, who neither had or claimed any interest and therefore, for the purposes of this case, should be treated as checks issued to bearer. In our opinion further. Wilson’s signing the name of Edgar, under the facts and circumstances in evidence, does not constitute such forgery as places any liability on the respondent in this case.

The appellant, however, cites one case, American Sash & Door Co., a Corporation, v. Commerce Trust Co., a Corporation, that if not distinguished would appear in point on questions and matters discussed in the three paragraphs above. The above case was decided by this court and is reported in 25 S. W. (2d) 545. This case being in apparent conflict with the opinion Equitable Assurance Co. v. National Bank of Commerce, 181 S. W. 1175, the case was certified to the Supreme Court and was in October term, 1932, of that court determined and the judgment of this court was sustained. This case has not as yet been officially published, but this court has a copy of same before it in the consideration' of the case at bar.

The above case presents an issue between a bank and a depositor. The opinion clearly defines the relationship between the banker and the depositor and clearly sets forth the law governing that relation ship.

In the opinion, we find this language, to-wit:

“The relation between the bank and the depositor is that of debtor and creditor. The bank’s duty to make charges against the depositor’s account only on his authentic order and genuine indorsements is absolute — contractual. It is not simply a question of using due care and of offsetting negligence against contributory negligence. To be available as a defense the negligence of the depositor must be of such nature as to interfere with the bank’s performance of its contract, and in effect amount to representation operating as an estoppel.”

The evidence in that case shows that the Sash & Door Corporation had many employees, that one, Tschupp was the payroll clerk and timekeeper. It is shown, that Tschupp became guilty of padding the payroll. He would make out weekly payrolls that contained the names of people who had not worked. This payroll was turned over to a bookkeeper, who verified the amount due by her own calculation from the data on the payrolls. She then made out checks to conform and these checks were sent to the secretary and treasurer, whose duty it was to sign, the payroll cheeks. In some way, not clearly shown in the evidence, but clearly wrongfully, Tschupp extracted the bogus cheeks and then indorsed the name of the person, fictitious or otherwise, who were named as payee in the checks and cashed the checks, either at the bank on which drawn or at other banks. These bogus checks were accepted and paid by the bank and charged to the deposit account of the Sash & Door Corporation.

It will be observed, that not a one of these cheeks was presented for payment by any person, who had lawfully received the same from the maker or had been commissioned or authorized by the maker to present. It will be further observed, that none of these checks were presented by the person to whom made payable, but that each check purported to be indorsed by the one to whom made payable.

The language used in court opinions is entitled to the same consideration in interpretation, as that of any other discourse. To understand what is meant, we must always giv'e cognizance to the subject discussed. In court opinions, it is requisite to have in mind the issue involved.

In the Sash and Door ease, there is presented a situation where loss must be sustained by one of two innocent parties. The rule, in such eases, is that the one using the least diligence must sustain the loss. Pertinent to this principle the court in the above case, in its opinion, used the language that has been used in many cases involving the issue, to-wit:

"It seems plain that only negligence which is a direct and proximate cause of the payment can be effectual in making such a defense. ’ ’

In the above case, the court after defining the relation between the bank and the depositor, concludes and decides that in respect to that relationship, under the evidence presented, that the depositor has not been guilty of sueh negligence as will preclude the depositor from relief in a suit against the bank for money taken from the depositor’s account to pay the cheeks in question.

In the case at bar, the relationship between the bank and the depositor is neither primarily nor secondarily involved. To be secondarily involved, there would have to be a showing that the appellant stood to lose something by reason of the transaction, wherein it issued the cashier check in consideration of a check given direct to it by the construction company. The evidence in the ease at bar, is clearly to the effect that the secretary-treasurer of the construction corporation made the checks, for which the cashier checks were issued, direct to the appellant bank. There is no principle of law or equity that would place any liability on the bank to the Construction Companies, under the state of facts disclosed by the evidence of this case. The principles involved in the determination of the Sash and Door Corporation case are not presented by the pleadings or the evidence in the case at bar.

In our consideration of the issue presented in this case, we have had in mind the old truism of law, that law is reason and that when the reason of law ceases, the law ceases. The reason of refund based on loss of a fund, and as the evidence discloses no loss to the appellant, the reason for refund ceases.

The issue in this ease, in so far as we have been able to ascertain, presents a matter of first instance in this State. Authorities are cited by counsel discussing kindred matter, but as these authorities do not go direct to the grounds upon which we base our opinion, we do not feel that it is necessary for us to discuss the same here.

In determining the issue in this ease, we make an application of that fundamental principle of our system of jurisprudence, to-wit:

“The purposes of the law are to redress wrongs and preserve rights. ’ ’

In the course of consideration of this case, it has been presented that under the express terms of the clearing house rule, regardless as to where the loss might finally rest, that a judgment restoring the $3,000 to the appellant should be had; that thereafter the matter of the ultimate right to the money could be adjudicated in such actions as the parties might bring. Such a procedure is untenable in that the law does not contemplate that useless things be done.

In the case at bar, the appellant neither pleads nor proves loss and the evidence clearly shows that the appellant has sustained no loss, and no fact or circumstance is shown in the whole proceeding from which it can be inferred that the appellant can sustain loss from the transactions shown by the pleadings and evidence in this case.

This case presenting all the facts necessary to a determination of all the rights of the parties touching the $3,000 in issue, we see no reason why the final determination should await the useless procedure of other actions.

We conclude, that the appellant has suffered no wrong and that the appellant presents no rights in the matter to be preserved.

Judgment of the trial court affirmed. Bland, J., concurs; Trimble, J., dissents in a separate opinion.