Fisher v. Farmers' Cooperative Irrigation Co., Ltd.

• Decision Date: 16 May 1930
• Docket Number: 5397
• Citation: 288 P. 164,49 Idaho 343
• Parties: FRED FISHER, Appellant, v. FARMERS COOPERATIVE IRRIGATION COMPANY, LIMITED, a Corporation, Respondent
• Court: Idaho Supreme Court

288 P. 164

49 Idaho 343

FRED FISHER, Appellant, v. FARMERS COOPERATIVE IRRIGATION COMPANY, LIMITED, a Corporation, Respondent

No. 5397

Supreme Court of Idaho

May 16, 1930

BILLS AND NOTES-PAYMENT BY CHECK-AUTHORITY OF BANK TO ACCEPT-AGENCY.

1. Where collecting bank received check from maker surrendering note and maker had sufficient funds in bank to pay check check constituted payment.

2. Where collecting bank is not expressly forbidden to receive anything but money in payment of collection item, it may make such collection in customary manner.

3. Collecting bank may receive in satisfaction of collection item check which it has good reason to believe will be honored.

4. Payment of money to authorized agent is payment to principal.

5. One paying agent need not trace money into principal's hands to obtain credit for payment.

6. One paying agent is entitled to credit even if agent wilfully converts money or loses it through negligence.

7. Where collecting bank accepted maker's check in payment of note as holder's agent, but did not cash check until bank on which check was drawn had failed, holder of note could not recover from maker.

8. Payee of check taken in payment of note could recover from maker money received from liquidating officer of insolvent bank, on claim for funds with which check should have been paid.

APPEAL from the District Court of the Seventh Judicial District, for Payette County. Hon. Jay L. Downing, Judge.

Action on order to pay money. Judgment for defendant. Reversed.

Judgment reversed, with directions. Costs of appeal awarded to appellant. Petition for rehearing denied.

Ernest Anderson and Rice & Bicknell, for Appellant.

Wm. M Morgan, for Respondent.

Counsel cite no authorities on points decided.

KOELSCH D. J. Budge, Lee and McNaughton, JJ., concur. Givens, C. J., dissents. Varian, J., disqualified.

OPINION

KOELSCH, D. J.

On the twenty-third day of June, 1924, the respondent, Farmers Cooperative Irrigation Company, Limited, borrowed from the Farmers State Bank of New Plymouth the sum of $ 500, and gave its negotiable promissory note therefor to the said bank, said note maturing on December 23, 1924, and bearing interest at the rate of ten per cent per annum. It appears that one G. W. Mason was the treasurer of the respondent Irrigation Company, and at the same time was also the president of the said bank, and that the Irrigation Company carried an account with the said bank. And it also appears that the Irrigation Company paid its obligations by issuing its warrants, addressed to its treasurer, which warrants were accepted and treated by the bank as checks, and when paid were charged against the account of the Irrigation Company.

The promissory note of June 23, 1924, was not presented to the Irrigation Company for payment until January 3, 1927, at which time $ 125 interest had accumulated thereon. When presented, the Irrigation Company, in accordance with its customary method, issued and delivered its warrant to the bank for the sum of $ 625, which the bank received and accepted, and thereupon stamped the note "Paid," and delivered it to the Irrigation Company.

But, at the time the note was so presented and paid, it appeared that the name of the bank, as payee, had been crossed out, and the name of the appellant, Fred Fisher, had been written in place of it. When or by whom this had been done is not shown by the evidence or in the stipulation of facts made between the parties at the trial of this action. But it is stipulated that the Irrigation Company did not, nor did any of its officers, know anything about this substitution of the name of the payee of the note, except only that its secretary had some knowledge to the effect that the appellant Fisher claimed to be the owner of the note.

In this connection it appears that on the twelfth day of May, 1924, Fisher had sent the sum of $ 500 to the Farmers State Bank of New Plymouth, for the purpose of loaning the same to the Irrigation Company, or of buying an obligation of the Irrigation Company. However, the Irrigation Company had no knowledge of this, either at the time or when later it borrowed $ 500 from the bank and gave its note, as herein before set forth.

The stipulation of facts also sets forth that the note was never carried as an asset of the bank, but that after the name of Fisher had been substituted as payee of the note, it was by him left with the bank for collection. It also appears that on the third day of January, 1927, when the bank presented the note to the Irrigation Company for payment, and the Irrigation Company issued its warrant therefor, the Irrigation Company had more than sufficient funds on deposit in its account with said bank with which to pay its said order, and that sufficient funds so remained in its account with the bank until the bank suspended its business. The bank, however, did not cash the warrant, but held it until January 7, 1927, on which date the bank failed to open its doors and was taken over for liquidation by the banking department of the state of Idaho. On the eighth day of February, 1927, the officer of the State Banking Department in charge of the property and affairs of the said bank delivered the said warrant, unindorsed, to Fisher who, after the refusal of his demand for payment made on the Irrigation Company, brought this action on the warrant, alleging that he is the holder of said warrant, that the same is his property, and that the same has never been paid. The action was tried to the court, without a jury, findings of fact and conclusions of law were made, and judgment rendered in favor of the Irrigation Company, for its costs, and denying any relief to Fisher. From this judgment Fisher has appealed.

On this appeal it is urged that the court erred in its conclusion that appellant is not entitled to the relief prayed for in his complaint, and in entering judgment for respondent. Appellant contends that as his $ 500 was the money by the bank loaned to respondent, the substitution of his name as payee for that of the Farmers State Bank of New Plymouth, on the note of the respondent, Farmers Cooperative Irrigation Company, Limited, had the effect of negotiating the note, and that as the warrant issued by the respondent to pay the said note has been delivered to him and has in fact not been paid, this warrant remains the moral obligation of the Irrigation Company, and he is entitled to judgment as prayed for in his complaint. Appellant further contends that the negotiation of the note in the manner it was done, that is, by substituting therein the name of appellant for that of the bank, as payee, was by respondent ratified when the note was presented to it for payment, and it drew its warrant therefor, and received delivery of the canceled note. The respondent contends that the substitution of the name of appellant for that of the bank in the note was ineffectual to assign the note or to transfer the ownership of the debt by it represented.

Supposing we concede, without deciding, that the substitution of the name of appellant for that of the bank as payee of the note wrought an effectual assignment of the note, under the view we take of the law...