Columbia Mill Co. v. National Bank of Commerce

• Decision Date: 13 January 1893
• Citation: 53 N.W. 1061,52 Minn. 224
• Parties: Columbia Mill Co. v. National Bank of Commerce
• Court: Minnesota Supreme Court

53 N.W. 1061

52 Minn. 224

Columbia Mill Co. v. National Bank of Commerce

Supreme Court of Minnesota

January 13, 1893

Argued December 22, 1892

Appeal by defendant, the National Bank of Commerce, from an order of the District Court of Hennepin County, Hicks, J., made August 10, 1892, denying its application for a new trial.

The plaintiff, the Columbia Mill Company, was in 1890, engaged in the manufacture and sale of flour at Minneapolis, and had for six years kept its bank account with defendant. It averaged over $ 100,000 a month. In payment of its bills for flour its customers sent to it checks and drafts payable to its order. Leo Heilpern was its bookkeeper and had charge of the petty cash received at the office for local sales at retail. Between April 14 and September 12, 1890, he feloniously purloined nineteen checks and drafts belonging to plaintiff and payable to its order, and with a rubber stamp wrongfully placed upon the back of each the indorsement of plaintiff "Columbia Mill Co.," and signed his own name underneath. From time to time he sold these checks and drafts to the defendant and converted the proceeds to his own use. This action was to recover of the bank the gross amount of these checks and drafts, $ 7,546.59, and interest. The questions litigated were whether Heilpern had authority from the Mill Company, express or implied, to indorse and sell checks and drafts, and whether if he did not, the Mill Company had negligently permitted it to appear that he had.

At the first trial the jury disagreed. It was again tried January 15, 1892. The jury returned a verdict for plaintiff for $ 8,188.20. The defendant moved for a new trial, and being denied, appeals.

Order reversed.

Koon Whelan & Bennett and Eustis & Morgan, for appellant.

The question is, whether the plaintiff so conducted its business and held the agent Heilpern out, as to lead the defendant reasonably to suppose that he possessed the authority which he assumed to exercise.

Where the acts are of such character and so continuous as to justify a reasonable inference that the principal had knowledge of them, and would not have permitted them if unauthorized, the acts themselves are competent evidence of agency. 1 Amer. & Eng. Encyc. of Law, 340; Reynolds v. Collins, 78 Ala. 94; Proctor v. Tows, 115 Ill. 138; Weaver v. Ogletree, 39 Ga. 586; Friedlander v. Cornell, 45 Texas, 585.

The plaintiff's manager, Mr. Zeidler, knew, or in the exercise of ordinary care and prudence would have known, that Heilpern and and his predecessors in office were accustomed to indorse and collect the checks from the retail department and obtain the money thereon for the purposes of the business. The practice grew up under its first bookkeeper, was followed by the second, and continued under Heilpern, the third. It covered a period of eight years, and it is manifest that a reasonable surveillance or oversight of the business and the general methods pursued by the bookkeepers would have revealed the fact. McCord v. Western Union Tel. Co., 39 Minn. 181; Webster v. Wray, 17 Neb. 579; Kasson v. Noltner, 43 Wis. 646; Lorton v. Russell, 27 Neb. 372; Johnson v. Donnell, 90 N.Y. 1.

The scope of Heilpern's agency was to be determined, not alone from what plaintiff's officers may have told him to do, but from what they knew, or in the exercise of ordinary care and prudence ought to have known, he was doing. Kingsley v. Fitts, 51 Vt. 414; McCormick v. Kelly, 28 Minn. 135.

Jackson & Atwater, for respondent.

Under the issue it was incumbent on defendant to establish:

1. That it paid the checks in good faith, which for the purposes of this case would require an honest belief on the part of the bank officials that Heilpern had authority from the Mill Company to make indorsements and get the checks cashed, instead of depositing them to the Mill Company's credit in the usual manner.

2. That this honest belief on the part of the bank officials was reasonably induced by some act, language or course of conduct on the Mill Company's part which "held Heilpern out" as apparently possessing such authority. People v. Bank of North America, 75 N.Y. 547; Shipman v. Bank of State of N. Y., 126 N.Y. 318; Frank v. Chemical Nat. Bank, 84 N.Y. 209; Welsh v. German American Bank, 73 N.Y. 424; Wheeler v. Guild, 20 Pick. 545; Atlanta Nat. Bank v. Burke, 81 Ga. 597; First Nat. Bank v. Whitman, 94 U.S. 343.

Dickinson, J. Mitchell, J., did not participate in the hearing or decision of this case.

OPINION

Gilfillan, C. J.

The plaintiff was a corporation in the business, at Minneapolis, of manufacturing and selling flour, and the defendant was a bank at that place.

The action is for the conversion of nineteen checks drawn by different persons or firms upon different banks or concerns, each payable to the order of, and the property of, the plaintiff. The allegations of the complaint are that one Leo Heilpern feloniously abstracted and purloined the checks from plaintiff, wrongfully and without authority impressed on the back of each, with a rubber stamp, the words "Columbia Mill Co.," and wrote underneath his name, L. Heilpern, and wrongfully sold and disposed of them to defendant, which collected and appropriated to its own use the money called for by them. Heilpern was plaintiff's bookkeeper and cashier; that is, he had charge of its books and its "petty cash," i. e. the payments received upon its sales at retail.

The sole controversy was on Heilpern's authority to dispose of and receive the money for the checks. It was conceded that he had no express authority to do so, and the question was narrowed to that of implied authority, and the further question, if it be not included in that, as to whether the plaintiff had either intentionally or negligently so conducted its business with defendant, or permitted it to be so conducted, that it had a right in good faith to believe, and did believe, that Heilpern had the authority he assumed to exercise, and, acting on and because of such belief, received the transfer of the checks, and paid him the money.

It appeared that, when the relation of banker and patron between defendant and plaintiff began, the latter left in the signature book of the former the signature of S. Zeidler, its treasurer, as of the only person authorized to sign for it in its transactions with the bank, and except during a short period, when he was absent, his was the only signature in the bank for that purpose.

It also appeared that there grew up and continued for years a usage that when plaintiff sent to the bank, for deposit to its credit, checks payable to its order, it made no other indorsement on them than by impressing them with a rubber stamp. Whether there was a similar usage in any other bank is immaterial. It existed between these parties.

It also appeared that Heilpern and his predecessors in employment as bookkeeper and cashier, extending over a period of two or three years, were accustomed to take or send to the bank, and transfer to it, and receive the money for, checks, mostly small ones, payable to its order, with no indorsement except with the stamp, or with none at all.

It was upon this custom mainly that defendant relied to show implied or at least apparent authority in Heilpern to transfer the checks without the signature of Zeidler, and receive the money for them.

And because one dealing with an agent may show actual authority in him, -- that is, such...