First Nat. Bank of Garden City v. Daniel

• Decision Date: 08 April 1933
• Docket Number: 31085.
• Parties: FIRST NAT. BANK OF GARDEN CITY v. DANIEL.
• Court: Kansas Supreme Court

20 P.2d 488

137 Kan. 423

FIRST NAT. BANK OF GARDEN CITY v. DANIEL.

No. 31085.

Supreme Court of Kansas

April 8, 1933

Syllabus by the Court.

Where check was payable to "Young & Foster," who were individuals, indorsement by one without authority of other held not to transfer title (Rev. St. 1923, 52--208, 52--209 52--412).

A grain buyer purchased wheat from Isaac Young and W. H. Foster and made the check payable to the order of "Young &amp Foster" and delivered it to Isaac Young, who sold it to plaintiff and received the proceeds thereof. He indorsed the check "Young & Foster, by Isaac Young." They were not partners and Isaac Young had no authority to indorse for W. H. Foster. Held, the indorsement did not transfer title to the check to the indorsee.

Appeal from District Court, Kearny County; H. E. Walter, Judge.

Action by the First National Bank of Garden City against Thomas L Daniel. From a judgment in favor of the defendant, the plaintiff appeals.

C. E Vance, Clifford R. Hope, and A. M. Fleming, all of Garden City, for appellant.

H. O. Trinkle, of Garden City, for appellee.

HARVEY Justice.

This is an action by the holder of a check against the maker. The defense was lack of proper indorsement. At the close of the evidence the trial court sustained defendant's motion for judgment in his favor upon the pleadings and all the evidence. Plaintiff has appealed.

The petition alleged that plaintiff is a national bank doing business at Garden City; that the defendant, Thomas L. Daniel, was in the grain business at Deerfield, Kan.; that about July 23, 1931, defendant purchased from Isaac Young and W. H. Foster a quantity of wheat, for which he became indebted in the sum of $202.06, and in payment therefor executed his negotiable check for that amount, drawn on the Deerfield State Bank, in which check the payee was designated as "Young & Foster," and delivered the check to Isaac Young; that about July 23, 1931, Isaac Young indorsed the check as follows, "Young & Foster, by Isaac Young," and sold and delivered the same to plaintiff, who paid Young the sum of $202.06 therefor; that plaintiff duly presented the check to the Deerfield State Bank for payment, but the bank refused payment, at defendant's request, although he had funds on deposit in the bank sufficient to pay the same; that both Isaac Young and W. H. Foster were interested in the wheat sold defendant for which the check was issued, but plaintiff does not know the exact interest of each of the parties in such wheat, but alleges that their interests therein were known to defendant at the time the check was issued; that Isaac Young and W. H. Foster were not partners, or engaged in business as a firm or otherwise under the name of Young & Foster at the time the check was issued, which fact was then known to defendant, but was not known to plaintiff at the time it became the owner thereof. A copy of the check is attached, and the prayer is for judgment for the amount of the check, with interest.

The answer admitted plaintiff's corporate capacity and business; that defendant was engaged in the grain business; that the check in question was issued by him in payment of wheat which he had purchased from Isaac Young and W. H. Foster; that the check was made payable to "Young & Foster"; that he had funds in the Deerfield State Bank sufficient to pay the check at the time it was drawn and when presented, and that he requested the bank not to pay the check; denied that Isaac Young in due course negotiated the check to plaintiff and that plaintiff became the owner thereof; alleged the wheat sold to defendant by Isaac Young and W. H. Foster for which the check was issued in payment was owned jointly by Isaac Young and W. H. Foster, and that the check was their joint property; that Isaac Young and W. H. Foster are not and never have been partners; that the check has not been indorsed by W. H. Foster, and that he did not authorize any one to indorse the check for him; that his right, title, and interest in the check have not been legally transferred by indorsement or otherwise to plaintiff, and for this reason he caused the bank on which the check was drawn to refuse payment thereof. It is further alleged that at the time plaintiff received the check and paid for the same it knew that Isaac Young and W. H. Foster were not partners, and that Young had no authority to indorse the check for and on behalf of Foster. The reply was a general denial.

The facts as disclosed by the evidence are not seriously controverted and may be stated as follows: W. H. Foster was and had been for many years a resident of Garden City. He transacted his banking business at the plaintiff bank and was well acquainted with its active managing officers. In 1928 he sold land which he owned to Isaac Young on the crop payment plan. He had never been in partnership with Young. In 1931 Young harvested wheat he had raised on this land and took the same to defendant's elevator at Deerfield, twelve miles west of Garden City, where it was sold. Foster had an interest in this wheat--in fact, his interest amounted to almost all of it. On July 23, 1931, in payment for the wheat, the defendant Daniel issued his check, payable to the order of Young & Foster, and delivered the check to Young. At the time he made this check defendant was well acquainted both with W. H. Foster and with Isaac Young, and he issued the check in payment of "wheat grown by Mr. Young on Foster's land, as I understood it." On the next day Young took this check to the plaintiff bank at Garden City, where he had an account, indorsed it "Young & Foster, by Isaac Young," and deposited it to his credit in his personal account at plaintiff bank. W. H. Foster did not know the check had been issued and never authorized Isaac Young to indorse any check for him. Plaintiff's cashier, who received the deposit, assumed Isaac Young had authority so to indorse the check and he credited the amount of it to Isaac Young's personal account. It seems the bank had no account under the name of Young & Foster and that its cashier made no inquiries concerning the payees of the check or the right of Isaac Young to indorse it and to receive credit for it as he did. Plaintiff promptly sent the check through the usual channels for payment. When it reached the Deerfield State Bank, on which it was drawn, its cashier observed the indorsement, questioned whether that would be satisfactory to Mr. Daniel, the maker, inquired of him if the indorsement were satisfactory, was informed that it was not, and was instructed by Mr. Daniel not to pay the check, and he returned the same to the plaintiff, through the clearing house, without protest. Plaintiff mailed the check back with the request that it be paid or protested. It was protested on August 8th. In the meantime, and within two days after he had deposited this check, Isaac Young drew all of his deposit from the plaintiff bank, except 16 cents, and left the country.

A section of our statute (R. S. 52--412 [section 41, N. I. L.]) pertinent to the matter reads as follows: "Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others."

In this case both the plaintiff and the defendant alleged that Young and Foster were not partners, and the only evidence touching that question is to the same effect. Here both Young and Foster were named as payees. The cases are uniform in holding in conformity to the plain language of the statute. Kaufman v. State Savings Bank, 151 Mich. 65, 114 N.W. 863, 18 L.R.A. (N. S.) 630, 123 Am.St.Rep. 259; Allen v. Corn Exch. Bank, 87 A.D. 335, 84 N. Y. S 1001; First Nat. Bank v. Gridley, 112 A.D. 398, 98 N. Y. S. 445; Glens Falls Indemnity Co. v. Chase Nat. Bank, 232 A.D. 219, 249 N. Y. S. 686; Virginia-Carolina Joint Stock Land Bank v. First and Citizens Nat. Bank, 197 N.C. 526, 150 S.E. 34...