Brannen v. State Exchange Bank of Parkersburg
| Decision Date | 11 January 1921 |
| Docket Number | 32646 |
| Citation | 180 N.W. 886,190 Iowa 630 |
| Parties | TERESA BRANNEN, Appellee, v. STATE EXCHANGE BANK OF PARKERSBURG, Appellant |
| Court | Iowa Supreme Court |
Appeal from Butler District Court.--M. F. EDWARDS, Judge.
ACTION at law to recover $ 612, with interest, evidenced by a certificate of deposit, alleged to have been paid by the bank to a person not authorized to redeem the certificate. Verdict and judgment for plaintiff. Defendant appeals.
Affirmed.
W. T Evans, for appellant.
Stipp Perry, Bannister & Starzinger and E. G. Burling, for appellee.
DE GRAFF, J.
Plaintiff Teresa Brannen, nee Schultz, is a resident of Seattle, Washington, and had lived in said city for several years prior to the bringing of this suit. In 1907, she resided with her sisters at Cedar Rapids. At the time she changed her residence, she left a certificate of deposit with one of her sisters, and subsequently this sister turned the certificate over to a half brother, Herman Schultz, who, under the instructions of C. C. Wolf, cashier of the defendant bank, transferred the certificate from the issuing bank at Waterloo to the defendant bank, receiving therefor a duplicate deposit slip, reading as follows:
Plaintiff was not advised that the certificate had been placed in the possession of her brother, or that the same had been transferred to the defendant bank, nor did she instruct or authorize her sister to turn over the certificate to Herman, or to have same transferred to the Parkersburg bank.
The deposit slip was later put in the form of a certificate of deposit, which was renewed, from time to time. The final certificate read as follows:
At the end of the first year, the interest was sent by Herman Schultz to his sister Teresa, and subsequent interest was added to the principal, and new certificates issued. No instructions or authorization were given by Teresa to her brother Herman, relative to the certificate in question, except that, in one instance, she wrote to him to have the certificate renewed, as it was past due.
On the 17th day of April, 1911, Herman Schultz indorsed her name on said certificate and cashed it, without any express authority from his sister, and applied the proceeds in payment of an indebtedness owed by him to the defendant bank. A short time prior to the surrender of the certificate, Herman Schultz had a conversation with Cashier Wolf, and the record testimony of Schultz-is as follows:
After further talk of this character, Schultz finally indorsed the certificate, and, according to Schultz, the cashier told him "to sit tight, and say nothing about it." Cashier Wolf, on the witness stand, denied the conversation referred to above, but stated that he had no reason to think that these funds belonged, in fact, to anyone except Teresa Schultz; that he treated the funds as her property; that all of the money that was paid on the certificate remained in the bank, and "all of it was applied upon a debt of Herman Schultz which he owed the bank." After the certificate had been deposited to the credit of Schultz, the latter drew a check on his funds, which included this deposit, to apply on his debt to the bank, evidenced by a $ 2,000 note. This was done with the knowledge of Wolf and the bank. In March, 1914, Herman Schultz sent to the plaintiff his note, prepared by the cashier, representing the money which the sister had in the defendant bank. The plaintiff denies accepting said note in payment of her claim, or that she ever confirmed or ratified the transaction in this particular.
The plaintiff was not advised of the surrender of her certificate of deposit until some time in the year 1914, when she received the promissory note from her brother, Herman, with a very brief explanation of his transaction with the bank. Later, this note was returned; but it was never paid, nor was any attempt made to enforce collection thereon.
I. The errors assigned by the appellant and relied on for a reversal of the judgment are: (a) The admission of testimony on behalf of the plaintiff, over the objection of the defendant; (b) the refusal to admit testimony offered on behalf of defendant; (c) the refusal of the court to give instructions requested by the defendant; (d) the giving of certain instructions; (e) the withdrawal from the jury, at the close of the testimony, of the defense that Herman Schultz was the agent of plaintiff, with authority or apparent authority to indorse and surrender the plaintiff's certificate of deposit to the defendant bank; and (f) the overruling of the motion for a new trial.
These assigned errors focus around the fundamental question in this case: Has an agent, who has deposited his principal's money in a bank the authority to check it out, and apply the proceeds to his own indebtedness to the bank? The correctness of the ruling of the trial court on this proposition will, in the main, determine the controversy, and with this proposition we are primarily concerned.
Herman Schultz was a self-constituted agent, in the first instance, in depositing his sister's money in the defendant bank; for he acted on his own initiative, and without any instructions from the plaintiff. True, she impliedly ratified this act by accepting the interest due at the end of the first year, and later, by instructing Schultz to renew the certificate; but more than this she never did, in relation to the deposit.
Agency is a contractual relation, and the powers of the agent are created either by express authority conferred by his principal, or are such as arise by implication.
If the act of Schultz constituted a conversion of the property of plaintiff, no difficulty is encountered in reaching a correct legal conclusion. The deposit at all times was in the name of the plaintiff; and the final act of the alleged agent, in surrendering the certificate and applying the proceeds to his own indebtedness, was without the knowledge or consent of the title holder, but with the full knowledge and consent of the defendant bank.
No express authority having been given Schultz by this plaintiff, what facts, acts, or circumstances create his authority by implication? No inquiry was made by the cashier, Wolf, as to the authority of Schultz in the premises, and, according to the testimony of Schultz, he told the cashier that he (Schultz) had no such authority, and that he was not the agent of the plaintiff.
The surrender of the certificate by Schultz was, in effect, the borrowing of plaintiff's money from the bank to pay Schultz's indebtedness to the bank. The bank could put no other construction on this transaction. The very nature of this act was sufficient to put the bank on inquiry as to the authority that Schultz in fact had. The act itself was a warning, a danger signal, which the defendant bank was compelled to heed. A power so perilous cannot be implied from acts which, in other transactions, less hazardous, might create an agency.
So strict is this rule that the authority will not be presumed even from an appointment of one as a general agent, unless the character of the business or the duties of the agent are of such a nature that he was bound to do the act, in order to carry out the duties of the agency. The very form of the certificate itself carried notice to the defendant bank of a possible want of power to make the indorsement of the title holder thereon, and was sufficient to put the cashier on his guard. When he fails to avail himself of such notice and obtain the information which is thus suggested to him, it is his own fault; and, as against an innocent party, the bank must bear the loss....
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