National Bank v. Whitney

This suit was to" recover three thousand dollars on an instrument, in form a promissory note, dated July 14, 1915, and signed by the defendant. Defendant denied the execution of the note and the debt, and in a separate defense and by way of cross-complaint alleged facts to which further reference is made in this opinion, and which were claimed to constitute a complete defense to the action.

The judgment was in favor of the defendant. On this appeal by plaintiff numerous contentions are made, for an understanding of which it is necessary to state the facts disiclosed by the evidence.

The Leslie Salt Refining Company was a corporation of which Leslie D. Whitney was the president, his brother St. John Whitney was a member of its board of directors and business manager, and W. M. Roberts was a stockholder and a director. Roberts was also the cashier of the plaintiff bank. The Salt Company and Leslie D. Whitney were both customers of the plaintiff bank, and had been frequent borrowers for at least five years prior to July 1, 1915. All of the dealings of the defendant, both individually and on behalf of the Salt Company, with the bank had been carried on with Roberts as

The lower court found that the note in suit was never made, executed, or delivered to the plaintiff by the defendant. On behalf of the appellant it is said there is no evidence to contradict the facts: (1) That the defendant signed the note; (2) that he left it with Roberts; (3) that on the date of the note and before its maturity Roberts placed the note in the possession and in the files of the plaintiff; (4) that the employees of the bank entered the note on the day of its date in regular course of business on the books of the bank; (5) that the note remained in the possession of the plaintiff until the trial. These facts correspond in detail with the statement above made. When Roberts placed the note in the files of the bank there was manual tradition, but there was no delivery in legal effect. Roberts, as the cashier of the bank, when he placed the note in the bank’s files had no intention of giving either Whitney or the Salt Company credit for it. Manual tradition was not accepted by the bank in the ordinary course of business, and the delivery, without such acceptance, was not effectual at law. (8 Corpus Juris, p. 210,

It is next contended that under section 1605 of the Civil Code the bank suffered a prejudice by reason of the note, in that Roberts, the bank’s cashier, obtained three thousand dollars of the bank’s funds on the strength of the note, and, therefore, that the second finding that the note was without consideration is not supported by the evidence. [6] Manifestly the prejudice suffered by the bank was by reason of the theft and not by reason of the note. If another customer of the bank whose account was overdrawn had called at the bank on July 14, 1915, and handed the cashier Roberts his note for three thousand dollars, with instructions to charge Mm with the note and credit the proceeds to Ms commercial account, and Mr. Roberts had placed the note in the files of the bank, charged it to its maker, but instead of givmg the customer credit, had Mmself abstracted the money, it could not be claimed that the maker of the note was liable thereon. This case presents the same situation.

The appellant relies upon the presumption of consideration because the note was written, and cites cases to the effect that the burden of showing a want of consideration rests upon the party seeking to avoid it. [7] The presumption cannot overcome the direct evidence in this case that neither

It is contended that, since Roberts was the agent of Whitney until the note passed into the possession of the bank, and since Roberts had access to the bank’s cash, from which he abstracted three thousand dollars, the agent of Whitney received the proceeds of the note. The evident answer to this contention is that Roberts was not the agent of Whitney in abstracting the money from the bank nor in receiving it as a thief. [8] The large number of cases cited by the appellant simply establish the rule that where one trusts another with commercial paper, either signed or unsigned, and the person trusted misapplies the funds received1 for such commercial paper, the loss falls on the trustor, because the wrongdoer was at all times his agent. Where the agent subsequently gets -possession of the money of another principal, as Roberts did in this case, the cases relied upon by the appellant do not apply. For instance, the appellant cites Demarest v. Holdeman, 34 Ind. App. 685 , [ 73 N. E. 714 ], as an illuminating ease. The bank in question was located at the town of Elkhart and one Kerstetter was its cashier. _ Finn, a depositor from the town of Goshen, handed Kerstetter two thousand nine hundred dollars to be by him deposited in the bank to Finn’s credit. Kerstetter did not deposit the money. It was sought to hold the bank for Kerstetter’s defalcation. The court very properly decided that Finn did not intrust the money to Kerstetter as cashier and that Kerstetter never received it as cashier, and, therefore, the bank never received it. In this case the facts are similar up to the point where Roberts placed the note in the bank’s files and thereafter, solely as the bank’s cashier, caused the entries to be made in the bank’s books and took from the bank’s cash the money to which as Whitney’s agent he could have had no access.

The third finding was that no part of the principal or interest of the note had been paid and “that no part of the principal sum or the interest on said promissory note is due or owing. ’ ’ On behalf of the appellant it is maintained that the last clause of the finding is a conclusion of law. [9] This contention is correct, but as there was no delivery of, nor consideration for, the note, the appellant is not prejudiced by the addition of a clause which is but surplusage. [10] The findings must be construed together to uphold the judgment

It is further claimed that the blanket findings of the truth of the allegations of the defendant’s separate defense in the cross-complaint were not supported by the evidence. The argument is based on the contention that the cashier of the bank as such had no power to make the original agreement with Whitney in regard to filling in the note and carrying it to the credit of the Salt Company when instructed by Whitney or his brother to do so, for the reason that express authority had never been given him by the bank to that end. Whitney testified that he had had similar transactions, where he had left signed blank notes with Roberts as cashier of the bank, and the bank had carried through the transactions as agreed upon between him and Roberts. This evidence was sufficient to support findings 4 and 5.

It is sought to apply the rule that where one of two innocent parties must suffer by the act of á third, the loss must fall upon the first negligent actor. [11] The analysis of the facts of this case shows that the rule has no application here. As above stajted, if Whitney himself had handed his filled in and signed note to Roberts in the bank with the instruction that Roberts should charge it to Ms personal account and give the credit to the Salt Company, it would have been an ordinary banking transaction and would have implied no suggestion of negligence on the part of anyone. This was exactly the position on July 14th, when Roberts put into the bank’s files the fully filled in and signed note. His subsequent appropriation of three thousand dollars was not because of any negligence of WMtney, but by virtue of his connection with the bank.

Many cases are cited to support the proposition that where an agent receives notice, it is not imputed to the principal if the agent is engaged in committing an independent fraudulent act upon Ms own account. The contention is that the bank was not chargeable with any notice of the limited purpose to which the proceeds of the note could rightfully be applied, for the reason that the knowledge of its cashier Roberts on that matter was acqMred by him in furtherance of his own fraudulent plan to rob the bank. [12] The rule contended for is subject to tMs well-established exception: Where the agent is the sole representative of the principal in the trans

The facts of the instant ease bring it within the exception to the rule above referred to. Roberts alone acted for the bank throughout the entire transaction. In furthering his own fraudulent designs he dealt with no representative of the bank other than himself as its cashier. Here his knowledge as such must be imputed to the bank.

It is contended on behalf of the appellant that the note was not signed in the ordinary course of business. This, too, may be conceded. The method of signing and filling in the note has nothing to do with the case. It was signed by Whitney, it was filled in by his agent, and it was not until the note passed into the files of the bank. that the bank had any interest in it.

The last contention of the appellant is that the finding that the defendant had done no acts and was guilty of no omission or conduct to estop him from denying the making, execution, and delivery of the note and alleging its want of consideration, is a conclusion of law, since an estoppel is always a deduction or conclusion, and cases are cited to this effect. Cases are also cited to the proposition that it is the duty of the court to find upon all the material issues. Pacts were set up in the answer to the cross-complaint from which it was claimed the defendant was estopped. The facts set up in the answer to the cross-complaint, however, were simply a detailed statement of the facts set up in the cross-complaint itself. [13] “It is well settled that a judgment will not be reversed for failure to find upon an affirmative defense, if the record does not show that evidence was introduced in support thereof, and

The court found that the note was never delivered and that it “was and is entirely without and unsupported by consideration. ’ ’ Those findings control the judgment. Others are immaterial. [14] It is incumbent upon the appellant to show not alone error, but injury from error. (Sewell v. Price, 164 Cal. 265 , [ 125 Pac. 407 ].)

The judgment is affirmed.

Langdon, P. J., and Brittain, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on May 12, 1919.

All the Justices concurred.