Rohner, Gehrig & Co. v. Capital City Bank

Citation655 F.2d 571
Decision Date08 September 1981
Docket NumberNo. 79-3297,79-3297
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Parties32 UCC Rep.Serv. 231 ROHNER, GEHRIG & COMPANY, et al., Plaintiffs-Appellees, v. CAPITAL CITY BANK, Defendant-Appellant. . Unit B

Ronald W. Rogers, Atlanta, Ga., for defendant-appellant.

Sutherland, Asbill & Brennan, Carey P. DeDeyn, John W. Bonds, Jr., Atlanta, Ga., for plaintiffs-appellees.

Appeals from the United States District Court for the Northern District of Georgia.

Before SIMPSON, RONEY and THOMAS A. CLARK, Circuit Judges.

SIMPSON, Circuit Judge:

In this diversity case, Capital City Bank (the Bank), defendant below, appeals from an adverse jury verdict and judgment for $60,000 plus interest, in favor of the appellees, plaintiffs below, Rohner, Gehrig & Company (Rohner, Gehrig), Panalpina International Forwarding, Ltd. of Milano (Panalpina Milano) and Panalpina World Transport, Ltd., Hamburg (Panalpina Hamburg). The District Court granted a directed verdict upon the conclusion of defendants' case as to Panalpina International Forwarding, Ltd., a New York corporation (Panalpina New York) because the evidence showed that its claim was for less than the $10,000 jurisdictional amount. This appeal followed the trial court's denial of the Bank's motion for judgment notwithstanding the verdict or for a new trial. We affirm.

The facts essential to an understanding of the setting of this case include a description of the parties and the situation in which those parties became embroiled. The Capital City Bank is a small Atlanta bank with one main office and a branch employing about thirty people. In this matter, it was the depositary bank.

The appellees, Rohner, Gehrig, Panalpina Milano, Panalpina Hamburg, and Panalpina New York were engaged in the international freight-forwarding business. Rohner, Gehrig arranged the most economical means of exporting goods from the United States to Europe; whereas, the Panalpina network of companies planned the flow of goods from Europe to the United States. Emil Zurcher was the president of Rohner, Gehrig from 1963 through the date of trial and owned 79% of the company's stock at the date of trial and was also the president of Panalpina.

An agreement of mutual cooperation existed between Panalpina World Transport, Ltd., a Swiss corporation and parent company of the Panalpina organization, and Rohner, Gehrig. Under this agreement, Rohner, Gehrig provided office space in its United States offices and reimbursement of business expenses for sales representatives of the Panalpina organization who were to solicit increased business for the Panalpina companies. Because of treaty requirements and visa restrictions, these sales representatives were formally employed by United States subsidiaries of the European Panalpina companies, although the employees' remuneration and management came from the European parent company. Panalpina New York was organized as a United States entity to which European sales representatives working out of Rohner, Gehrig offices could be attached for treaty compliance purposes and had no active existence of its own. During this action, Rohner, Gehrig had an Atlanta office primarily to provide office space for a European Panalpina sales representative. This lawsuit arose out of misappropriation of checks by one sales representative, Erwin Grabenweger, who misused an account Rohner, Gehrig maintained with the Bank.

The history of this imbroglio began before Grabenweger's employment, when Henri Ferrier was assigned to the Atlanta office as the Panalpina sales representative. Ferrier opened a personal checking account at the Bank; and Frank Castellow, an officer of the Bank, formed an impression that Ferrier was the head man of Panalpina, which Castellow assumed to be a small Atlanta freight-forwarding company.

Because the United States sales activity of Panalpina involved only the solicitation of freight-forwarding contracts between United States customers and appropriate European Panalpina freight forwarders, Panalpina New York did not have either financial transactions or active bank accounts. To cover office expenses of the Atlanta sales representation activity a petty cash account was opened in Rohner, Gehrig's name with the Bank in May of 1973. The account, opened with an initial deposit of $2,000, was dormant until the start of the fraudulent activity which formed the basis of this action. Personnel of the Bank were unaware of the limited purpose of the account and assumed that the account was a general checking account.

Ferrier, the only nonsecretarial person in the Atlanta office, was given authority on the Bank's signature card as office manager to draw checks on the account. The company's president and district manager were also given authority on this signature card. Also, the Rohner, Gehrig corporate resolutions provided to the Bank indicate that all drafts, checks, etc. could be signed singly by the President, Controller, District Manager or Office Manager.

In the fall of 1973, Erwin Grabenweger, a twenty-three year old Austrian, was assigned to the Atlanta area to replace Ferrier as the Panalpina sales representative. According to Castellow's testimony, Ferrier introduced Grabenweger to him at the Bank as a "trusted employee of Panalpina" who would succeed Ferrier as head man of Panalpina and office manager for Rohner, Gehrig.

In October of 1974, after Ferrier's departure, Grabenweger became office manager of the Rohner, Gehrig office and was given authority to sign checks on the Rohner, Gehrig account. A new signature card was made showing the President and Treasurer, Controller, District Manager and Office Manager had authority to sign checks.

In June of 1974, before Ferrier's departure and before Grabenweger was given authority with respect to the petty cash account, Grabenweger presented for deposit to the Rohner, Gehrig account a $3,545.60 check payable to Panalpina International Forwarding, Ltd. and indorsed in blank by means of a rubber stamped impression in that name. The teller, questioning whether such a check should be accepted for deposit, brought it to Castellow's attention. Based on his impression that Grabenweger was head man of Panalpina and his representation that he had affixed the stamped indorsement himself and was authorized to do so, Castellow directed the teller to accept not only the check, but all subsequent Panalpina checks so indorsed by Grabenweger.

Over the subsequent one year period, Grabenweger deposited into the Rohner, Gehrig account at least 24 checks payable to the Panalpina name, representing more than $130,000 in payments due Panalpina Milano and Panalpina Hamburg for freight-forwarding services. Some of these checks were altered to add Rohner, Gehrig as a payee and all (except a few with no indorsements at all) bore the rubber-stamped Panalpina indorsement.

Over the same period, Grabenweger drew some checks which he then exchanged for Bank instruments payable to an appropriate European Panalpina company, in an effort to disguise his fraud as simply a slow pay problem on the part of that company's United States customers. Most of the proceeds, however, were withdrawn from the account by Grabenweger for his own use and benefit. After the fraud was discovered and criminal prosecution was imminent, Grabenweger took his own life.

Following Rohner, Gehrig's discovery of the misappropriation and ascertainment by Panalpina Milano and Panalpina Hamburg of the amounts of their apparent losses, Rohner, Gehrig paid those companies the principal amounts of their determined losses in exchange for their rights against the Bank.

Rohner, Gehrig successfully asserted those rights in the course of the litigation below.

The appeal presents the following issues:

1. Whether the trial court's denial of the Bank's breach-of-warranty defense to the conversion claims brought by Rohner, Gehrig as subrogee was reversible error in light of the District Court's previous ruling that the Bank's attempt to add the same contentions as a counterclaim was untimely?

2. Whether the trial court's ruling allowing plaintiffs Panalpina Milano and Panalpina Hamburg, as subrogors of the claims asserted against the Bank to remain as parties to the action constituted reversible error?

3. Whether the trial court's instruction on apparent authority was reversible error?

Consideration of the first question raised, whether the trial court's denial of the Bank's breach-of-warranty defense to the conversion claims brought by Rohner-Gehrig as subrogee was reversible error, requires a statement of the procedural development of the case.

The complaint was filed February 19, 1976, timely responded to by answer and an amendment to the answer. Denial of the Bank's motion for summary judgment was followed by a pretrial conference, all by August 30, 1978.

Following a second scheduled pretrial conference on January 3, 1979, the Bank moved for leave to amend its answer to add a counterclaim asserting that Rohner, Gehrig was liable for breach-of-warranty under Georgia Code Annotated § 109A-3 417 and § 109A-4 207. 1 By order dated February 16, 1979, the trial court denied the Bank's motion as inexcusably untimely. The case proceeded to trial.

On the second day of the trial, the Bank, by filing its requests to charge numbers 13 and 14, attempted to raise Rohner-Gehrig's breach-of-warranty as a defense. The jury instructions requested by the Bank were not used by the District Judge in his charge to the jury, to which the Bank excepted. Breach-of-warranty was also argued by the defendant in its motion for judgment notwithstanding the verdict or in the alternative for a new trial, which was denied.

The applicable law is clear. The appellant raised the 4 207 warranties for the first time by the assertion of a counter-claim which the District Court denied as inexcusably untimely under Federal Rule of Civil Procedure 13(f). The pertinent rule of...

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