Hill Syrup Co. v. Frederick & Nelson

• Decision Date: 24 February 1925
• Docket Number: 18616.
• Citation: 133 Wash. 155,233 P. 663
• Court: Washington Supreme Court
• Parties: HILL SYRUP CO. v. FREDERICK & NELSON.

233 P. 663

133 Wash. 155

HILL SYRUP CO. v. FREDERICK & NELSON.

No. 18616.

Supreme Court of Washington, En Banc.

February 24, 1925

Appeal from Superior Court, King County; Hovey, Judge pro tem.

Action by the Hill Syrup Company against Frederick & Nelson. Judgment for defendant, and plaintiff appeals. Affirmed.

(Per Fullerton, J.) Mackintosh, Mitchell, Bridges, and Parker JJ., dissenting.

James R. Chambers, of Seattle, for appellant.

Wright Froude, Allen & Hilen, of Seattle, for respondent.

TOTLMAN C.J.

Appellant was the plaintiff below and appeals from a judgment denying it recovery.

The general history of the Hill Syrup Company is sufficiently set forth in Hill Syrup Co. v. Marine National Bank, 128 Wash, 509, 223 P. 595, and Hill Syrup Co. v. National City Bank of Seattle, 129 Wash. 171, 224 P. 578, in both of which cases rehearings have been granted, and they are therefore now referred to only for the purpose of avoiding a restatement of the general situation.

In this case appellant sued to recover upon a number of checks signed 'Hill Syrup Company, by W. E. Sander, President,' payable to the respondent and delivered to it by Sander in payment of his personal obligations to it. The trial court among other things, found:

'That during the year 1916, W. E. Sander and his family acquired the controlling stock of plaintiff and thereafter held such controlling stock until about September 13, 1921 that during said period plaintiff corporation had no other trustees than W. E. Sander, V. W. Sander, and F. T. Kenyon; that said V. W. Sander, the father of W. E. Sander, died during April, 1921; that all of said trustees were during all of said period actively engaged in the business of the company; that said W. E. Sander was president; that said F. T. Kenyon was vice president and sales manager; that said V. W. Sander was secretary until January 3, 1921, on which date one J. Charles Kerr was elected secretary; that said Kenyon had charge of the sales department, and while he was away from the city at times on business of the company, he was in close touch with the affairs of the company and spent a portion of his time in and about the office of the company while he was in Seattle; that the office of the company was maintained in the same building where it had its factory; that its books were kept in this office under the immediate supervision of W. E. Sander; that the work of keeping said books was performed in most instances by one Miss McConnell, who on January 3, 1921, was elected Assistant Secretary.

'That from the time said W. E. Sander first became connected with plaintiff company he maintained for the company and himself a single bank account in the name of the company and paid all his personal bills with checks drawn in the company name, said checks being in some instances payable to his order, and in others payable to the order of his creditors; that in each and every instance when said checks were issued, proper notations thereof were duly entered on the check register, in which the names of the drawer of the check and the payee and the amount thereof were distinctly shown, and all checks so drawn to the order of Sander or for his personal benefit were posted in the company ledger on pages devoted to the personal account of said W. E. Sander, each entry in the ledger having appropriate reference to the check register from which the entry was posted; that said books of account were part of the company's regular books of account; there is no testimony showing authorization by minute entries of these transactions at the time they were had.

'That at various times the personal account of W. E. Sander as shown by said books was overdrawn; that from time to time to meet such overdrafts he paid to the company cash, and conveyed and delivered to the company real and personal property for which he was given credit in the books of account of the company; that these various items were entered as credits to Sander's personal account in the company ledger and were also entered in the company's books and are carried and shown as assets of the company; that the ledger entries of such credits referred to the pages in the company journal where the original entries of such transactions were made and therefrom posted in the ledger. Eventually the real and personal assets referred to proved to be of much less value than the amounts for which the said William E. Sander received credit for them on the books of the plaintiff, and specifically one note for $8,800 for which Sander took credit, the company received no corresponding benefit at the time it was given.

'That plaintiff had its books examined by expert accountants at the end of each year; that the examination for the year 1920 was made by E. G. Shorrock & Co., certified public accountants, who submitted to the company early in January, 1921, their written report of such examination, which report shows large sums carried as assets of the corporation in mortgages and real estate other than the real estate used by the company in its business; that such real estate and mortgages were the identical properties conveyed by Sander to the corporation in reduction of his overdrafts. * * *

'That on January 6, 1920, William E. Sander, then president of plaintiff corporation, executed and delivered to defendant a check for the sum of $300, signed 'Hill Syrup Company, by W. E. Sander, Pres. & Treas.,' and made payable to Frederick & Nelson, which check was drawn upon the National Bank of Commerce, which was then the depository of the plaintiff. Thereafter Sander executed and delivered similar checks for the following sums, on the following dates: June 28, 1920, $400. October 26, 1920, $200. December 11, 1920, $100. January 20, 1921, $200. February 28, 1921, $200. July 27, 1921, $100. All of these checks bore notations 'Acct. W. E. Sander,' or similar statements, and were paid in the regular course of business and applied to the personal account of William E. Sander with the defendant.

'That the custom of Sander in drawing company checks for his own bills was known to the trustees and was followed for such length of time as to charge all the then stockholders with knowledge of this practice, and the new stockholders now controlling said company purchased their stock with knowledge of the fact that Sander had followed this practice. * * *

'That during the time Sander was connected with plaintiff company the account of said company was carried in the National Bank of Commerce of Seattle, and that during said time all checks issued by said company (including the checks herein mentioned in finding of fact VIII) were drawn on said bank and were promptly paid, and were thereafter by said bank returned to plaintiff company and became a part of its records.

'That the books of account of plaintiff company were at all times open to the inspection of its officers and stockholders and were frequently examined by the members of its board of trustees.

'That from time to time during the period said Kenyon was connected with said company, he caused to be issued company checks, signed by Sander, in payment of his personal obligations; Kenyon never signed any checks; that notations of all checks so issued were made in the books of account of plaintiff company in the same manner as notations were made in said books of company checks issued in payment of the personal obligations of said Sander; that the officers and trustees of plaintiff company, and numerous of its stockholders, knew that company checks were being issued in payment of Kenyon's personal obligations.

'That defendant at no time had any actual knowledge of any lack of authority on the part of said Sander to issue the checks herein mentioned in finding of fact VIII.'

Upon this finding was based the conclusion of law:

'That the acts of said W. E. Sander in causing to be issued the checks of plaintiff corporation mentioned in plaintiff's complaint and in the foregoing finding of fact No. VIII were authorized by plaintiff corporation and have been ratified, confirmed, and approved by plaintiff corporation, and plaintiff corporation is estopped from questioning the legality or regularity of its issuance of said checks, and is estopped from asserting any claim against defendant arising out of the issuance of said checks.'

We fully admit the general rule laid down in the earlier cases above referred to, which are now pending on rehearing: That a person who receives the checks of a corporation, signed by one of its officers, with knowledge that they are being used by the person who signed them for his individual benefit, is liable to the corporation on an implied contract for money had and received. Such has been our holding in a number of cases. Mooney v. Mooney Co., 71 Wash. 258, 128 P. 225 ; Hoffman v. Gottstein Investment Co., 101 Wash. 428, 172 P. 573; Farmers' Market v. Austin, 118 Wash. 103, 203 P. 42; Barto Co. v. Aylmore, 125 Wash. 394, 216 P. 857; Schaffer v. Sunnyside-Yakima Oil Co., 125 Wash. 689, 215 P. 958. In all of these cases, however, the acts complained of were of a sporadic nature, and nothing in the nature of negligence was shown justifying the application of the exception to the rule which is as well established as the rule itself.

The findings above quoted, which are supported by the great weight of the evidence and are therefore binding upon us under our well-known and long-followed rule, establish that Sander, from the beginning of his connection with the appellant company, maintained the practice of keeping a personal account on its books and using the company's bank account for his personal benefit in connection therewith. He habitually deposited his individual funds with the company, received credit therefor on his...