California Stucco Co. of Washington v. Marine Nat. Bank

• Decision Date: 09 July 1928
• Docket Number: 21134.
• Citation: 268 P. 891,148 Wash. 341
• Parties: CALIFORNIA STUCCO CO. OF WASHINGTON v. MARINE NAT. BANK.
• Court: Washington Supreme Court

268 P. 891

148 Wash. 341

CALIFORNIA STUCCO CO. OF WASHINGTON v. MARINE NAT. BANK.

No. 21134.

Supreme Court of Washington

July 9, 1928

Department 2.

Appeal from Superior Court, King County; Mitchell Gilliam, Judge.

Action by the California Stucco Company of Washington against the Marine National Bank. Judgment for plaintiff, and defendant appeals. Affirmed.

George F. Hannan, of Seattle, for appellant.

Poe Falknor, Falknor & Emory, of Seattle, for respondent.

ASKREN J.

Plaintiff brought this action to recover the amount of certain checks alleged to have been converted by the defendant bank. From a directed verdict in plaintiff's favor upon which a judgment was entered, this appeal was taken.

The facts of the alleged conversion are briefly as follows: The respondent corporation, with its place of business in Seattle, had in its employ one Culpepper, whose duties were that of bookkeeper and cashier as well as salesman. The bank account of the corporation was kept in the Dexter Horton National Bank, and all checks were required to be signed by a Mr. Belcher, the corporation's president, or its secretary, Mr. Paddock. It appears that Culpepper also countersigned the checks issued by the corporation; but this was not required so far as the depository bank was concerned but was a method employed by the corporation to be sure that such checks were entered upon its books. Culpepper's instructions required him to deposit all checks belonging to the corporation in the depository bank. To this end he was provided with the customary rubber stamp reading 'Pay to the Order of Ballard Branch Dexter Horton National Bank of Seattle. California Stucco Co. of Washington.'

He had no authority to cash, indorse, handle, or dispose of the checks in any other manner. Culpepper, however, decided to embezzle some of the moneys of the corporation, and to this end adopted the following scheme: The corporation had in its office another rubber stamp reading: 'California Stucco Company of Washington.' This stamp was used for marking goods, packages, etc., and was not intended for use on checks. Culpepper would take checks belonging to the corporation and affix this stamp on the back and underneath it write: 'By Charles Culpepper.' Those checks were then presented by him to certain retail establishments and cashed. The money so received was converted by him to his own use. The firms receiving the checks involved in this action all deposited them in the Marine National Bank of Seattle, and the proceeds were collected by that bank from the several banks on which they were drawn.

When the corporation discovered these facts it brought suit on the theory that the Marine National Bank by collecting the proceeds of the checks had in law been guilty of conversion. The facts just stated are not in dispute, and we turn to the first point raised by appellant, namely, that the appellant was not liable because it had no notice that Culpepper's indorsement was without authority. It seems to be contended that notice or knowledge of want of authority is the controlling feature in cases of this character. In support thereof appellant has cited Hill Syrup Co. v. American Savings Bank & Trust Co., 133 Wash. 501, 234 P. 11 where we held not liable a bank which paid corporate checks drawn by the president of the corporation in favor of another corporation in which he had a controlling interest, on the ground that the bank had no notice of want of authority to draw the checks. The distinction between that action and this is quite obvious. There the checks were drawn by one having authority to draw the checks of the corporation, but did not have authority to draw the particular checks. This, however, was something that the bank in that action could not know. Its duty was to see that the check was drawn by one having authority to sign the corporation's checks, and nothing but a personal investigation would disclose whether each particular check was authorized by the corporation.

Here the endorsement was made by one having no authority under any conditions to indorse the checks belonging to the corporation. The bank stands in the same position with regard to the indorsements as the stores where the checks were first cashed. The parties cashing them had no right to assume that because Culpepper was employed by the California Stucco Company he also had authority to indorse and cash its checks. If mere employment furnishes apparent authority to indorse checks, then no business would be safe.

The observation of the New York Court of Appeals in Standard Steam Specialty Co. v. Corn Exchange Bank, 220 N.Y. 478, 116 N.E. 386, L. R. A. 1918B, 575, is especially illuminating. In that case it appeared that a bookkeeper whose powers were limited to placing a rubber stamp indorsement on the back of checks belonging to the corporation and depositing them took several checks, indorsed them in her own handwriting, cashed them with third parties, and kept the proceeds. The parties who cashed the checks presented them to the defendant bank, which was not the depository bank. The bank collected the checks from the drawers. Neither the parties who first cashed the checks nor the bank had any notice of the fact that the indorsements were without authority or were made for the bookkeeper's personal benefit. Said the court:

'Any person taking checks made payable to a corporation which can act only be agents, does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority, unless the corporation is negligent ( People v. Bank of North America, supra ), or is

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