Dispatch Printing Co. v. Nat'l Bank of Commerce

• Decision Date: 14 January 1910
• Citation: 109 Minn. 440,124 N.W. 236
• Parties: DISPATCH PRINTING CO. v. NATIONAL BANK OF COMMERCE.
• Court: Minnesota Supreme Court

109 Minn. 440

124 N.W. 236

DISPATCH PRINTING CO.

v.NATIONAL BANK OF COMMERCE.

Supreme Court of Minnesota.

Jan. 14, 1910.

Appeal from District Court, Hennepin County; F. V. Brown, Judge.

Action by the Dispatch Printing Company against the National Bank of Commerce. Verdict for defendant. From an order denying motion for judgment or for a new trial, plaintiff appeals. Reversed.

(Syllabus by the Court.)

Durment & Moore, for appellant.

Chas. G. Laybourn, for respondent.

BROWN, J.

Plaintiff, Dispatch Printing Company, is a corporation organized under the laws of this state, doing business at St. Paul, and publisher of the St. Paul Dispatch. In 1901 it employed one Sturm and placed him in charge of its advertising department at Minneapolis, with authority to solicit advertising from the merchants of that city and to collect and remit to plaintiff all accounts due therefor. He was paid for his services a commission of 15 per cent. of all amounts received for advertising secured by him. From the date of his employment in 1901 until 1906, when he died, he made his headquarters at Minneapolis, and advertised as ‘M. A. Sturm, Minneapolis Manager, St. Paul Dispatch.’ He kept no books of account with advertisers, who became such at his solicitation, nor did he render bills to them. He transmitted to plaintiff by mail copies of all advertising secured, and all accounts in reference thereto were kept by clerks upon the books of the company at the St. Paul office. Statements of account were there made out and sent to Sturm for collection and remittance to the home office. While he was given full authority in the matter of securing advertising and making collection of bills sent him, his authority did not extend beyond acts of that kind. Though he was permitted to advertise as manager of the Minneapolis department of plaintiff, he was not a general agent with unlimited power and authority, but was expressly confined within the limits stated. Many of the accounts transmitted to him for collection were paid by the debtors with checks payable to plaintiff by name and drawn upon Minneapolis banks in which they carried a deposit. Most of these checks were forwarded direct to plaintiff by Sturm, but some of them he indorsed with plaintiff's name as manager, and deposited them in Minneapolis banks to his own credit. From October, 1902, until January 20, 1903, he kept an account with the Hennepin County Savings Bank under the name of ‘St. Paul Dispatch, Minneapolis Department, M. A. Sturm, Mgr.’ And he undoubtedly deposited therein moneys paid him on advertising accounts, and it appears that he drew upon this account at least one check payable to plaintiff for $1,546.50, and transmitted the same by mail to plaintiff at St. Paul, where it was received and applied in payment of advertising accounts. Just what proportion of accounts were paid Sturm by check does not appear, but it does appear that authority to indorse checks delivered to him and payable to plaintiff was expressly withheld from him. In February, 1904, he opened an account with the Germania Bank of Minneapolis in the name of ‘M. A. Sturm,’ but at the time informed the officers of that bank that he was the Minneapolis manager of the St. Paul Dispatch. In January, 1905, he closed this account by transferring a balance then remaining to his credit to an account in the name of ‘M. A. Sturm, Trustee.’ From and after the opening of this account he received a large number of checks in payment of advertising, payable to plaintiff by name, and upon a number of them, some 25, he indorsed, ‘St. Paul Dispatch Printing Co. St. Paul Dispatch, M. A. Sturm, Mgr.,’ and ‘Pay to the order of Germania Bank, Minneapolis, Minn. M. A. Sturm, Trustee,’ depositing the amount of each in the Germania Bank to his own credit as ‘Trustee.’ All the checks involved in this action were drawn upon the defendant, National Bank of Commerce, and were in the due course of business paid by it through the clearing house. All other checks received by Sturm in payment for advertising were transmitted direct to plaintiff at its home office in St. Paul. Those involved in this action and converted to the use of Sturm in the manner stated aggregated $3,246.88. Some time before the commencement of this action, plaintiff discovered the fraudulent conduct of its agent and the misappropriation of funds collected by him, and-brought this action to recover the amount, upon the ground that the agent had no authority to indorse its name upon the checks, or to collect or receive the money thereon, and that the payment of the checks by defendant to the Germania Bank was unauthorized and did not discharge its liability to plaintiff.

The defense was: (1) That Sturm had authority in fact to indorse checks received by him as plaintiff's manager, and to collect and receive the money thereon; (2) that if no such authority had in fact been conferred upon Sturm, plaintiff, either knowingly or through culpable negligence, permitted him to so conduct its affairs that the Germania Bank was justified in concluding that he had such authority; and (3) that the Germania Bank, having paid the checks in good faith and in reliance upon the apparent authority of Sturm, acquired a perfect title thereto, which passed to defendant, the drawee of the same, as they came to it through the clearing house.

At the conclusion of the trial, both parties requested an instructed verdict. The requests were refused, the issues in the case submitted to the jury, and a verdict returned for defendant. Plaintiff appealed from an order denying its alternative motion for judgment or for a new trial. The assignments of error present for consideration several important questions in agency, which we dispose of in the order of their appearance in the record.

1. The checks upon which the action is founded were drawn upon defendant, National Bank of Commerce, payable to the Dispatch Printing Company, and were cashed or paid to Sturm by the Germania Bank in the manner already outlined. The question whether Sturm had authority, express, implied, or apparent, to indorse the checks, as agent of plaintiff, was one of the principal issues litigated on the trial; it being asserted in defense that he had such authority, and that the Germania Bank had the right to rely thereon in paying the checks, and therefore became a bona fide purchaser thereof. It was not claimed that defendant, the drawee of the checks, had any knowledge of or acted upon any supposed authority, real or apparent, of Sturm in paying the checks to the Germania Bank through the clearing house; but its defense to the action was predicated upon the claim that, as the Germania Bank acquired good title to the checks as against plaintiff, its title passed to defendant and fully protects it from further liability. Upon this branch of the case the court below charged the jury, as follows: ‘If the Germania Bank acquired a good title to the checks, under the rules of law, as I have stated them to you in connection with this branch of the case, then it also acquired a good title to transfer the checks to the defendant bank, or to receive pay thereon and deliver up the checks to that bank, and the defendant bank is protected by the rights thus acquired by the Germania Bank.’

This instruction is assigned as error. The trial court was entirely right in this view of the law. Bank checks are negotiable instruments, and the rules and principles of law applicable to commercial paper govern and control the rights and liabilities of purchasers and holders thereof. If Sturm had no authority, express or implied, to indorse the checks, and plaintiff was not estopped from denying his authority to so act, within the principle of law presently to be adverted to, his indorsement thereof amounted to forgery, and the Germania Bank took no valid title to them. But if he had such authority, or for any reason plaintiff is estopped from denying it, as to the Germania Bank, then that bank must be held a bona fide purchaser of the checks, and its title, valid in law, passed to defendant. The rule generally applicable to commercial paper is that a purchaser of such instruments from a bona fide holder acquires a valid title thereto, even though he have at the time notice of defenses which might have been available against the original payee. The theory of the law is that a bona fide holder of such paper may deal with it on the basis of his own valid title, and transfer that title and all appurtenant rights to whomsoever may purchase. 6 Curr. Law, 789; Robinson v. Smith, 62 Minn. 62, 64 N. W. 90; note to Green v. Wilkey, 36 L. R. A. 441;Prentiss v. Strand, 116 Wis. 647, 93 N. W. 816;Black v. Bank, 96 Md. 399, 54 Atl. 88;Symonds v. Riley, 188 Mass. 470, 74 N. E. 926. As applied to this particular case, the question is whether the Germania Bank could have recovered upon the checks in an action against the drawee and the plaintiff. It seems quite clear, if a bona fide holder, that it could. Or, if the Germania Bank had brought an action against defendant alone, it is equally clear that the Dispatch Company could have been brought in as a party to the action at the instance of defendant and compelled to litigate the rights and title of the Germania Bank. So that it necessarily follows that if the Germania Bank acquired a valid title to the checks, and was a bona fide holder thereof, defendant may assert that title as a defense in this action-may assert the same defense which that bank could interpose against the Dispatch Company.

2. Error is also assigned to those portions of the instructions submitting to the jury the question of Sturm's actual or apparent authority to indorse the name of plaintiff upon the...