Bogue Electric Mfg. Co. v. Coconut Grove Bank

• Decision Date: 09 September 1959
• Docket Number: No. 17286.,17286.
• Citation: 269 F.2d 1
• Parties: BOGUE ELECTRIC MANUFACTURING COMPANY, Appellant, v. COCONUT GROVE BANK, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

269 F.2d 1 (1959)

BOGUE ELECTRIC MANUFACTURING COMPANY, Appellant, v. COCONUT GROVE BANK, Appellee.

No. 17286.

United States Court of Appeals Fifth Circuit.

July 15, 1959.

Rehearing Denied September 9, 1959.

Linton R. Lovett, Miami, Fla., for appellant.

Leland Hyzer, Miami, Fla., for appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and JONES, Circuit Judges.

JONES, Circuit Judge.

The appellant is the successor in interest through merger of its one-time subsidiary, Belco Industrial Equipment Division, Inc. In 1950 Belco, by a written agreement, made an appointment of Florida Industrial Equipment Division, Inc., as its exclusive agent in Florida for the sale of electrical and filtration equipment for swimming pools, for the period of a year. The agreement was extended from year to year through 1956. George H. Neubauer was the president, principal stockholder and the directing head of Florida Industrial. Until 1952 Belco sold equipment to Florida Industrial on open account. The equipment was sold by Florida Industrial to customers from whom it collected. The payments were deposited by Florida Industrial in its account with the appellee, Coconut Grove Bank, on which account Florida Industrial drew its checks to pay Belco for the equipment. In 1952 Belco learned that Florida Industrial had failed to remit to Belco after the collection of funds from a customer, McCann Plumbing Company. Belco then terminated the open account arrangement. Equipment was thereafter sold under written contracts, negotiated by Neubauer, between Belco and the customers. These contracts contained a clause providing, "All remittances are to be made direct to Belco Industrial Equipment Division, Inc., Patterson 3, N. J."

In July, 1956, Neubauer and V. A. Pisani, an employee of Belco, procured a check drawn on the Miami Beach First National Bank from a customer referred to as Miami Station. It was feared that the check would not be good at the expiration of the time that would be required to send the check to Belco in New Jersey for indorsement and return by it for presentment at the bank on which it was drawn. So it was arranged by Pisani and Neubauer, with the assistance of an officer of the appellee bank, that the check should be indorsed by Neubauer in the names of Belco and Florida Industrial and exchanged for a cashier's check of the Miami Beach bank on which it was drawn payable to Belco.

In most instances, during the 1952-1956 period, payments of customers were made by their checks payable to Belco and transmitted to it either directly or through Florida Industrial. In some instances payments were made to Belco through the medium of bank drafts or cashier's checks. Florida Industrial, from time to time, purchased for its own account materials and supplies from Belco for which payments were made by checks of Florida Industrial drawn on the appellee bank. Neubauer testified that checks were sometimes received by him, of which some were payable to Belco, some to Florida Industrial and some to Neubauer personally. There was no evidence with respect to any particular check or checks payable to Belco which were indorsed in its name by Neubauer and deposited in the appellee bank to the credit of Florida Industrial except the Miami Station check and the checks involved in this suit. It does not appear that Belco knew that any checks payable to it had been deposited to the account of Florida Industrial with the appellee bank. Neubauer was asked if he knew of any and replied that the only ones he could recall were from the McCann Plumbing Company jobs. These, as has been noted, were during the period when Belco was selling direct to Florida Industrial which negotiated contracts in its own name with customers and was entitled to collect from customers for its own account. It may again be noted that it was the failure of Florida Industrial to remit to Belco the collections made from McCann which caused the change in 1952 in the method of dealings between Belco and Florida Industrial. It appears that Florida Industrial drew three checks in 1953 and two in 1954 to Belco's order which may have been remittances for payments on Belco contracts. It was not shown that any of these collections were made by customers' checks to Belco.

Between June 12, 1955, and November 27, 1956, Neubauer received from contract customers seven checks payable to Belco in an aggregate amount exceeding $17,000. These were indorsed by Neubauer with a rubber stamp indorsement bearing Belco's name and Florida Industrial's name, directing payment to the appellee for deposit to the account of Florida Industrial. On the reverse of one of these checks, dated September 9, 1955, Neubauer had supplemented the rubber stamp indorsement by writing under the name of Belco the following, "George H. Neubauer, V. P." Neubauer was not and had not ever been a Vice President or other officer of Belco. The appellee bank credited the account of Florida Industrial with the proceeds of the seven checks. In course of time Florida Industrial withdrew the funds. Approximately $10,000 was sent by cashier's checks to Belco. When Belco discovered that Neubauer had diverted its funds to Florida Industrial it made a demand on the bank and followed its demand with a suit. The case was tried to the court without a jury.

The district court concluded that although Florida Industrial had no actual authority to indorse checks payable to Belco and deposit them in the appellee bank to the credit of Florida Industrial, there was an ostensible authority so to do with which Belco had clothed Florida Industrial by a long continued course of conduct in permitting such practice.

Florida Industrial had no express authority to indorse and deposit in its bank account checks payable to Belco. Florida Industrial was Belco's agent for the purpose of negotiating sales. Where an agent has personal property in his possession he may have an implied authority to receive payment. 2 C.J.S. Agency § 107a(2), p. 1273. There is no such presumption of power where the agent does not have possession of the goods which he is authorized to sell. Pasco County Peach Ass'n v. J. F. Solley & Co., 4 Cir., 1945, 146 F.2d 880. Cf. Boord v. Strauss, 39 Fla. 381, 22 So. 713; Tiffany on Agency 73, § 24. It follows that there would be no implied power of the agent authorized to sell by which he could lawfully indorse checks payable to his principal. 2 C.J.S. Agency § 112a (2), pp. 1301-1302.

The case was brought and tried on the theory that Florida Industrial had apparent authority to indorse and deposit in its bank account checks payable to Belco. The court held that there was such authority. The Supreme Court of Florida, whose decisions are controlling here, has this clear statement with respect to apparent authority:

"Apparent authority is such as the principal knowingly permits the agent to assume or which he holds the agent out as possessing. This rule is sometimes spoken of as the rule of agency by estoppel, and embraces three primary elements. They are: (1) A representation by the principal; (2) reliance on that representation by a third person; and (3) a change of position by the third person, in reliance upon such representation. To bring a case within the rule, all three elements must be present." Fidelity & Casualty Co. of New York v. D. N. Morrison Const. Co., 116 Fla. 66, 156 So. 385, 387, appeal dismissed 293 U.S. 534, 55 S.Ct. 348, 79 L.Ed. 642.

The foregoing definition of apparent authority was approved by this Court in Hartline v. Mutual Benefit Health & Accident Ass'n, 5 Cir., 1938, 96 F.2d 174. In an earlier case the Supreme Court of Florida stated the rule in this manner:

"Where a principal has, by his voluntary act, placed an agent in such a situation that a person of ordinary prudence, conversant with business usages and the

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