Midland Savings & Loan Co. v. Tradesmen's Nat. Bank

• Decision Date: 04 May 1932
• Docket Number: No. 441.,441.
• Citation: 57 F.2d 686
• Parties: MIDLAND SAVINGS & LOAN CO. v. TRADESMEN'S NAT. BANK OF OKLAHOMA CITY, OKL.
• Court: U.S. Court of Appeals — Tenth Circuit

57 F.2d 686 (1932)

MIDLAND SAVINGS & LOAN CO. v. TRADESMEN'S NAT. BANK OF OKLAHOMA CITY, OKL.

No. 441.

Circuit Court of Appeals, Tenth Circuit.

March 8, 1932.

Rehearing Denied May 4, 1932.

Jno. D. Rogers, of Denver, Colo. (J. H. Everest and J. B. Dudley, both of Oklahoma City, Okl., on the brief), for appellant.

Claude Nowlin, of Oklahoma City, Okl. (J. R. Spielman and M. M. Thomas, both of Oklahoma City, Okl., and John J. King, on the brief), for appellee.

Before LEWIS and McDERMOTT, Circuit Judges, and SYMES, District Judge.

SYMES, District Judge.

The Midland Savings & Loan Company, plaintiff appellant, hereafter called the plaintiff, is a Colorado building and loan association with headquarters in Denver, and was at all times mentioned making loans secured by real estate in Arkansas, Oklahoma, and elsewhere. The Tradesmen's National Bank of Oklahoma City, Okl., defendant appellee, hereafter referred to as the defendant, was a national bank, with its principal place of business at Oklahoma City, Okl. The plaintiff company was a customer and depositor of the defendant bank.

One Dan Dewberry had been the designated agent of the plaintiff for Arkansas, with offices at Texarkana, Ark., a border city, partly in Texas and partly in Arkansas, and was authorized to solicit and close loans for the Midland Company, taking his commissions from the borrowers, collected payments due on loans, and remitted to his principal in the regular course of business. About the 1st of April, 1927, Dewberry disappeared. An investigation disclosed that he had been unfaithful; that numerous checks sent him by the plaintiff company, payable to himself and various borrowers jointly, had been cashed without being indorsed by the borrowers.

It is established by litigation in the state court that each of the 19 checks which formed the basis of the 19 separate causes of action set out in the amended petition were in each instance drawn by the plaintiff on the defendant bank, to the order of the respective borrowers — in some instances two parties — and "Dan Dewberry, Agent," as joint payees; that the said checks had been forwarded to Dewberry by the Midland Company, with a letter of instructions in each case to close each particular loan in the manner set out therein.

It is also undisputed that Dewberry forged the indorsements of the payees on each check, other than himself, indorsed his own name, "Dan Dewberry, Agent" thereon, and deposited them to his own credit in an account in another bank, the Texarkana National Bank, designated "Dan Dewberry, Agent;" and that this had been his custom during his connection with the plaintiff company.

Dewberry was likewise loan agent for another company known as the Home Savings & Loan Association of Ft. Smith, Ark., and handled their business in a similar manner. Whenever Dewberry received, or purported to have received, an application for a loan, he would forward a written form application to the plaintiff company in Denver, together with an abstract, or purported abstract of title, to the property offered as security for the loan. The abstract would then be examined by the plaintiff company, together with whatever report was made as to the desirability of the loan, and, in each of the 19 transactions made the basis of this suit, the Midland Company would prepare a bond and mortgage covering the security offered, and forward the same, together with a check made out as above to Dewberry. The written instructions that went with each set of loan papers stated "in closing this loan, you act as our agent," followed by other directions as are customary in such transactions, varied in some details to suit each particular case. The plaintiff seeks to recover from the defendant bank the amount of these checks so paid by defendant and charged to its account.

The first cause of action of the amended petition was dismissed without prejudice, and the case went to trial on the other 18.

The second cause of action — typical of all — is as follows: "That on the 11th day of August, 1926, this plaintiff drew its check in writing, of said date, whereby it ordered and directed the defendant to pay to the order of R. M. Pinchin and Bonnie Bessie Pinchin, and Dan Dewberry, agent, the sum of Twenty-five Hundred Dollars ($2,500.00); said check was numbered 14603, and was presented for payment to the Tradesmen's National Bank on the 15th day of August, 1926, and the plaintiff then and there having money on deposit to the credit of this plaintiff in said bank, sufficient to pay said check, the same was paid by the defendant and charged to the account of this plaintiff, and the amount of said check deducted from the amount this plaintiff then and there had on deposit."

"That there was endorsed on the back of said check the following names: `R. M. Pinchin, Bonnie Bessie Pinchin', and `Dan Dewberry, agt.'; that the signatures of the said R. M. Pinchin and Bonnie Bessie Pinchin, were forged thereon, and were not the true and genuine signatures of the said R. M. Pinchin and Bonnie Bessie Pinchin, or either of them, but their names were fraudulently signed to said check by some person unknown to this plaintiff; that neither the plaintiff, the said R. M. Pinchin nor the said Bonnie Bessie Pinchin, gave any authority to any person to sign their names thereto."

Plaintiff further alleged that there was no general contract of agency between the plaintiff and Dewberry.

The remaining causes of action, from the third to the nineteenth, inclusive, are substantially identical with the above, except as to the dates, names of payees, and the amounts of said checks. It was further alleged that each of the checks was presented to, and paid by, the defendant bank, after they had been paid by the Texarkana National Bank, and that the indorsement of the latter, together with that of the Federal Reserve Bank of Oklahoma City, guaranteeing prior indorsements, were on the checks when they were presented to, and paid by, the defendant bank.

The answer of the defendant consisted, first, of a general denial; then the allegation that Dewberry was the agent and representative of the Midland Company in Arkansas and Texas, was authorized to handle its loan business in that vicinity, to complete loans, disburse funds in making, completing, and protecting loans made by it; that at the times mentioned, and for a long time prior, it was the custom of Dewberry, as agent and representative aforesaid, to carry in the Texarkana National Bank of Texarkana, Tex., an account for and in behalf of the appellant, in the name of "Dan Dewberry, Agent"; that the instructions sent Dewberry for closing each of the loans contained the following language: "In closing this loan, you act as our agent." Also that Dewberry should not pay out any money to the borrowers from the proceeds of the checks until he had paid all taxes, obtained receipts, paid off liens, secured necessary releases, had all papers recorded, and the abstract brought down to date, showing the Midland Company's mortgage to be a first lien on the property in question.

It is then alleged that it was the custom and intent of the Midland Company in drawing the checks as aforesaid to make Dewberry its agent, to hold and cash the checks as its agent, and to deposit the proceeds as agent in his agency account in the Texarkana National Bank in Texarkana, Tex.; so that he could carry out their instructions in closing the loan, "all of which was known to the Texarkana National Bank to be the system of appellant, and under which circumstances the Texarkana National Bank was induced to pay checks * * * aforesaid."

It is further alleged in the answer that the proceeds of each check were paid to and received by the person intended to receive, hold, and disburse the same, to wit, "Dan Dewberry, Agent," for the plaintiff company, because of which plaintiff is not entitled to recover; that, by reason of the above facts, the plaintiff company represented to all persons dealing with Dewberry that he was its agent, with authority to indorse the checks, collect the money, and apply the proceeds in accordance with his instructions, and that the indorsees of each check, other than the payees named, accepted each check on the face of such representations, and but for such representations would not have accepted the same without making inquiries as to the genuineness or necessity of the signature of each payee; that, by reason of holding out Dewberry as agent, and by such representations, plaintiff company is now estopped to assert any indebtedness of the bank to it in any amount upon any of the several causes of action.

It is also a fact that some of the bonds and mortgages purported to have been signed by the borrowers were forged, and that some of the prior incumbrances on the properties on which the Midland Company loans had been placed had not been paid off, and that false certificates from abstracters had been put out.

The parties are in substantial agreement on the facts as set forth above, as distinguished from the legal conclusions pleaded. The plaintiff company, upon being apprized that signatures of the borrowers — the mortgagees — had been forged on the checks, notified the bank of the facts, and that it could proceed to protect itself against loss on account of these forged instruments.

Many of the borrowers sued the Midland Company in the chancery court of Miller county, Ark. where their properties were situated, to get relief from the mortgages of record, alleging they had not signed them; others who had signed mortgages alleged they had not received the money, and in some cases on the ground that prior mortgages had not been paid and released. Each of these suits involved a different set of facts, but were all of the same general character.

The Midland Company appeared in these suits as a defendant, asserted the validity of their mortgages, and sought to foreclose. The borrowers, however,...