Atlantic Trust Co. v. Subscribers to Automobile Ins. Exchange

• Decision Date: 08 April 1926
• Docket Number: 57.
• Citation: Atlantic Trust Co. v. Subscribers to Automobile Ins. Exchange, 150 Md. 470, 133 A. 319 (Md. 1926)
• Parties: ATLANTIC TRUST CO. v. SUBSCRIBERS TO AUTOMOBILE INS. EXCHANGE ET AL.
• Court: Maryland Court of Appeals

133 A. 319

150 Md. 470

ATLANTIC TRUST CO. v. SUBSCRIBERS TO AUTOMOBILE INS. EXCHANGE ET AL.

No. 57.

Court of Appeals of Maryland

April 8, 1926

Appeal from Superior Court of Baltimore City; Eli Frank, Judge.

"To be officially reported."

Action by Subscribers to the Automobile Insurance Exchange and the Keystone Indemnity Company, attorney in fact, against the Atlantic Trust Company.Judgment for plaintiffs, and defendant appeals.Affirmed.

Argued before BOND, C.J., and PATTISON, URNER, ADKINS, OFFUTTDIGGES, PARKE, and WALSH, JJ.

Richard F. Cleveland and William D. Macmillan, both of Baltimore (Semmes, Bowen & Semmes, of Baltimore, on the brief), for appellant.

Clifton S. Brown, of Baltimore, for appellees.

BOND C.J.

This is an appeal, by a corporation engaged in banking, from a judgment procured against it by the appellees for amounts misappropriated by their agent, by indorsing checks drawn to their order and depositing them in his private, individual checking account in the trust company, and then checking the money out for his own purposes.The trial court, in its rulings on prayers for instructions and on objections to testimony, held that there was no express or implied authority in the agent to indorse and deposit the checks as he did, and excluded from the consideration of the jury evidence offered to show apparent authority for such indorsement and deposit, and to show acquiescence, estoppel and contributory negligence on the part of the plaintiffs.The appellant contends that there was evidence for the consideration of the jury on these defenses.

The appellees were engaged in issuing insurance on automobiles and had their home office in Philadelphia.They had an office or agency in Baltimore, and John W. Leland was their resident manager in that office.During the time with which the suit is concerned he was paid by commissions, and himself bore all the expenses of the Baltimore office.He testified for the defendant, now the appellant, and said his duties were to solicit business, and to collect and remit premiums.He was paid his commissions semimonthly, by check from the home office.The premiums were paid to him sometimes in cash and sometimes by check; the cash so received, he was, according to the regular practice, supposed to forward by his own personal check.He had no actual authority to indorse the checks made out to his principal.And this testimony agreed with that given for the plaintiffs, or appellees.

In July, 1922, Leland opened a private checking account with the trust company, in the name of "John W. Leland--signature: J. W. Leland," and had noted at the bottom of the signature card, by way of identification, that he was resident manager of the Auto Insurance Exchange.In December and January he forwarded his company four checks on this account, for $533.42 in all, for cash premiums collected, and those personal checks were deposited by the company without comment or inquiry.Between February and July, 1923, he indorsed 36 checks payable to his principal, by stamping the name "Automobile Insurance Exchange, by Exchange Operators, Inc.," with a rubber stamp he found in the office when his agency began, and writing after it "J. W. Leland, Res. Manager"; and the trust company collected and deposited these to his private account, without further indorsement.Leland then checked the money out for his office and living expenses, according to his evidence, and has not since made the loss good.

The suit is founded, of course, on the general rule that a bank is liable to a principal for the loss of funds resulting from the honoring of checks payable to the principal and indorsed by the agent without authority.Nat. Union Bank v. Miller Rubber Co.,148 Md. 449, 129 A. 688;Standard Steam Specialty Co. v. Corn Exchange Bank,220 N.Y. 478, 116 N.E. 386, L. R. A. 1918B, 575;Oklahoma State Bank v. Galion Iron Works (C. C. A.)4 F. (2d) 337; authorities collected in a note, 12 A. L. R. 111;article on "Participation in a Breach of Trust,"34 Harvard LawRev. 454, 474.There having been no actual authority from the principal here, the only questions raised are those of the legal sufficiency of evidence to support the defenses of implied or apparent authority in the agent and estoppel of the principal, or of negligence on the principal's part.

An implication of authority to indorse the principal's checks could arise only from the fact that the indorsement was necessary to the performance of the duties actually conferred on the agent, or was a customary incident of the agency conferred.Bortner v. Leib,146 Md. 530, 538, 126 A. 890.But we do not understand it to be contended that it was a necessary incident to Leland's actual duties, and the facts in evidence would not support such a contention.He was, actually, only a commission agent, charged with the duty of forwarding premiums to the home office; and there would seem to have been no necessity for his indorsing the checks payable to the company and banking them here.Bortner v. Leib, supra.Roland v. People's Bank,134 Md. 218, 220, 106 A. 570;Jackson Paper Mfg. Co. v. Commercial Nat. Bank,199 Ill. 151, 65 N.E. 136, 59 L. R. A. 657, 93 Am. St. Rep. 113;Lonier v. Ann Arbor Sav. Bank,162 Mich. 541, 127 N.W. 685;Robinson v. Chemical Nat. Bank,86 N.Y. 407;Porges v. United States Mtg. & Trust Co.,203 N.Y. 181, 96 N.E. 424;Schaap v. State Nat. Bank,137 Ark. 251, 208 S.W. 309;Doeren v. Kammer,141 Minn. 466, 170 N.W. 609;Pluto Powder Co. v. Cuba City State Bank,153 Wis. 324, 141 N.W. 220.There was no evidence offered to show that it was customary for such agents to have this authority.Kraft v. Fancher,44 Md. 204, 216;Third Nat. Bank v. Boyd,44 Md. 47, 63, 22 Am. Rep. 35.

But the appellant contends that the agent might be found to have been invested by the appellees with apparent authority to indorse the checks, by their designating him as "resident manager," by having in the office a rubber stamp which could be used for indorsing checks, and by receiving his checks on this personal account in payment of premiums received.The testimony was that upon these facts the officials were misled into believing that Leland had authority to indorse and bank the company's checks as he was doing.A principal may so characterize his agent, or permit such an extension of the agent's functions, as to lead third persons to assume reasonably that the agency was general, or covered the power in question; and, if he does so, the principal will not be heard to say that he actually limited the agent short of the authority which he had thus apparently given.Brokerage Co. v. Harrison,141 Md 91, 100, 118 A. 192;Brager v. Levy,122 Md. 554, 560, 90 A. 102;Oxweld...