Miller v. Citizens National Trust & Savings Bank

Appellants, plaintiffs below, brought suit against respondent bank and Paul A. Wickham to recover damages resulting from wrongful and fraudulent acts of Wickham. The case was submitted on the pleadings and a written stipulation of facts which the lower court adopted as its findings, and thereon made its conclusion that plaintiffs were entitled to take nothing from respondent bank.

At the time of the acts complained of herein Wickham was the employee and agent of the bank and was given the title of “Manager Escrow Department” in its Larchmont Avenue branch in Los Angeles. While so employed and engaged in such service, and without any escrow having been opened or any instructions of any party given in or to such escrow department of the bank, he conceived and executed a plan to secure a reconveyance from the trustee in a deed of trust on property which belonged to him, title to which stood in his sister’s name, and which deed of trust was existing of record as security for a note belonging to and in the possession of appellants. To accomplish his design and plan he forged a copy of the note as it appeared in the deed of trust and an indorsement showing adjustment of interest, a request for reconveyance and an affidavit, each purporting to be signed by appellants; and to the latter he affixed his jurat and seal as a notary public, for which he was at the time commissioned. He then wrote a letter on the letterhead of respondent bank, addressed to the trustee named in the deed of trust, signing it “Paul A. Wickham, Manager Escrow Department” and inclosing therewith the forged note, request for reconveyance, the affidavit, a copy of the deed of trust certified by the county recorder and a cashier’s check for $2.50, which he purchased with his own money although provided by the bank with prenumbered blank voucher checks for use in paying such fees. Relying on the authenticity of these documents and believing the same to pertain to bona fide business of the bank, the trustee marked the note as paid and canceled and executed its deed of reconveyance,

For the loss of their securitj- on their note, and because the makers thereof are insolvent, appellants herein seek to recover from the bank, as employer of Wickham, the damages resulting therefrom, to wit, $6,482.63, unpaid principal on the note, together with interest at the legal rate from February 24, 1931; it being stipulated herein that the real property described in the original deed of trust securing their note was, during all the times herein involved, of the value of $6,500. Upon the facts stipulated and found, the following conclusions or ultimate facts appear, which are pertinent and significant on this appeal: 1. That respondent bank was not negligent in any respect in the matter of employment of Wickham as manager of its escrow department; that it has never ratified Ms wrongful acts and that these acts were done for his sole benefit and not for the bank. 2. That under Ms employment he had authority to forward necessary documents to trustees to secure reconveyances, and accept them on behalf of trustors, only when an escrow was opened in the bank and instructions filed therein for such purpose. 3. That the wrongful acts committed by Wickham in this ease were not within the scope of his employment by respondent bank.

The stipulation of facts from which it follows that the bank was not negligent in placing Wickham in the position of manager of its escrow department eliminates from consideration herein the question of liability of respondent under the law of negligence.

The conclusions numbered 2 and 3 above may be read together, and when so read absolve the bank from any liability under the doctrine of respondeat superior, as it operates on the relationship of master and servant, and renders it un

As a consequence of these stipulations, with their resultant eliminations, and appellants’ contention that their ease is to be determined under the law of agency, there remains but one question herein, and that a question of fact, because the law is settled in its application and effect once that fact is determined. That question is: When Wickham committed and performed the wrongful acts herein stipulated and found, were they committed by such agent in and as a part of the transaction of the business of his agency with respondent bank? Obviously the trial court concluded that they were not, although that ultimate fact was not found as such in the lower court’s decision. In its conclusions of law and judgment, however, the court concluded and adjudged that plaintiffs were not entitled to judgment against the bank on the stipulated facts. It is a necessary implication therefrom that the trial court found, under the probative facts stipulated, that Wickham did not commit the wrongful acts in question in and as a part of the transaction of the business of his agency. If that finding is supported by the stipulated facts, then the judgment appealed from is correct under the law. If not supported, the judgment should be reversed.

Section 2330 of the Civil Code provides in part: “An agent represents his principal for all purposes within the scope of his actual and ostensible authority.” Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess (Civ. Code, sec. 2317); and the principal, under merely ostensible authority, is bound only to those persons who have in good faith and without want of ordinary care incurred a liability or parted with value upon the faith thereof. (Civ. Code, sec. 2334.) Eliminating, as obviously not pertinent herein, the subject of ostensible authority, we turn to the law as declared in Civil Code, sections 2338 and 2339, respecting responsibility of the principal for wrongful acts of his agent.

Section 2338 reads as follows: “Unless required by or under the authority of law to employ that particular agent,

Section 2338, supra, may be divided into two parts, one providing for liability of the principal for negligence of his agent in the transaction of the business of the agency, the other providing for liability of the principal for the wrongful acts committed by. the agent in and as a part of the transaction of the business of the agency. It has been held that the word “including”, between the two parts, is equivalent to “and also”, or “as well as”, and thus construed the part relating to wrongful acts is separated from the part relating to negligence, mailing the two independent' parts above stated. (Johnson v. Monson, 183 Cal. 149 [ 190 Pac. 635 ].) The charge herein not being based on negligence of the agent, the sole remaining ground of liability of respondent must be found in the facts as affected by the second part of the section quoted, read in connection with section 2339.

Appellants contend that upon the facts of this case the principle that where one of two innocent persons must suffer for the wrongful acts of the agent of one of them, the principal, who put it in the power of the agent to do such acts, must sustain the loss occasioned by their commission, controls. In support they cite the so-called “telegraph company eases”, relying chiefly on Pacific Postal Tel. Cable Co. v. Bank of Palo Alto, 109 Fed. 369 [ 54 L. R. A. 711 ]. In that case the Circuit Court of Appeals, Ninth Circuit, at the beginning of its opinion announced that the general rule as to liability of a corporation for the acts of its agents, servants or employees acting within the scope of their authority, and in the performance of duties regularly entrusted to them, was not called into question, but that in a certain sense the court was called upon to deal solely with exceptions

Appellants cite the ease of Henry Cowell Lime & Cement Co. v. Santa Cruz County Nat. Bank, 82 Cal. App. 519 [ 255 Pac. 881 ], Therein the court held that the evidence supported the finding that the bank’s bookkeeper had ostensible authority to receive and indorse checks of customers. Under such authority he had indorsed and cashed certain checks and appropriated the proceeds to his own use. The main issue in that case was that of ostensible authority, and all that was said by the court in respect to liability of the principal was predicated on the proposition that the wrongful acts of the agent were committed in and as a part of the agency.

The case of Otis Elevator Co. v. First Nat. Bank, 163 Cal. 31 [ 124 Pac. 704 , 41 L. R. A. (N. S.) 529 ], cited by appellants, presents clearly a case wherein estoppel to deny responsibility for wrongful acts of an agent was sustained as a defense offered by the bank in justification of its cashing of forged checks, thus overcoming the effect of the general rule that banks pay forged checks at their peril. The court quotes the substance of section 2338 of the Civil Code, and from Story on Agency, section 452, quotes the following: “In such cases the rule applies respondeat superior; and it is founded upon public policy and convenience, for in no other way could there be any safety to third parties in dealings either directly with the principal or indirectly through the instrumentality of agents. In every such ease the principal holds out the agent as competent and fitted to be trusted; and thereby, in effect, he warrants his fidelity and good conduct in all matters within the scope of his agency.” The court then referred with approval to the so-called telegraph cases, in the particular already herein mentioned.

The foregoing review of the cases relied upon by appellants has been deemed necessary in order to show that in this case there is no basis for invoking the principles relied on by them to affix liability on respondent bank. The basis of liability herein is to be found in sections 2338 and 2339 of the Civil Code above quoted, and it is clear from the analysis of the cited authorities that therein the same basis was used, for in all of them the relief granted was grounded on the fact that the wrongful acts complained of were done in and as part of the transaction of the principal’s business.

Herein a crime was the proximate cause of the injury to appellants. In such a case the maxim that where one of two innocent persons must suffer from the wrongful act of another the loss must fall on the one making the act possible has no application. (Walsh v. Hunt, 120 Cal. 47 [ 52 Pac. 115 , 39 L. R. A. 697 ].)

The acts committed by Wickham were not only admittedly outside the scope of his employment, but were outside the scope of his authority and were not done in performance of any part of his principal’s business. Even though such wrongful acts were committed while he was engaged in his principal’s service, the principal is not responsible unless they were committed in and as a part of the transaction of the principal’s business. (Civ. Code, secs. 2338, 2339.) “The liability of a master does not extend to willful or malicious acts of the servant done while engaged in the master’s service but independent of that service and for the servant’s own benefit. And this is true even where the employment furnishes the opportunity for the wrong doing.” (Copelin v. Berlin Dye Works etc. Co., 168 Cal. 715 [ 144 Pac. 961 , L. R. A. 1915C, 712].) To the same effect are Stephenson v. Southern Pac. Co., 93 Cal. 558

The judgment is affirmed.

Stephens, P. J., and Desmond, J., concurred.

A petition by appellants to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on December 17, 1934.