J.L. Mott Iron Works v. Metropolitan Bank

• Decision Date: 28 February 1914
• Court: Washington Supreme Court
• Parties: J. L. MOTT IRON WORKS v. METROPOLITAN BANK.

139 P. 36

78 Wash. 294

J. L. MOTT IRON WORKS v. METROPOLITAN BANK.

Supreme Court of Washington

February 28, 1914

Department 2. Appeal from Superior Court, King County; J. T. Ronald Judge.

Action by the J. L. Mott Iron Works against the Metropolitan Bank. Judgment for plaintiff, and defendant appeals. Reversed.

Douglas, Lane & Douglas and G. E. de Steiguer, all of Seattle, for appellant.

McClure & McClure, of Seattle, for respondent.

FULLERTON J.

This action was brought by the respondent against the appellant to recover the amount of a bank check, claimed to have been collected and misapplied by the appellant. The record discloses that the appellant is a banking corporation, doing a general banking business in the city of Seattle, and that the respondent is a corporation organized under the laws of the state of New York, engaged in the business of manufacturing and selling building furnishings and fixings and plumbers' supplies. The respondent had authority to transact business in the state of Washington, and had in its employment at the city of Seattle one H. M. Crane, whom it denominates in its pleadings and evidence as its selling agent. This person admittedly had authority from respondent to quote prices upon and make sales of the respondent's wares, and 'to collect dues, debts, and obligations owing to the' respondent. Crane maintained an office in Seattle, on the door and windows of which the respondent's name appeared. For use in the trade he was furnished by the respondent with stationery containing advertisements of the respondent's wares on which he is named as 'representing' the respondent. In the city directories he was advertised as the respondent's manager.

Shortly after Crane commenced representing the business of the respondent at the city of Seattle, he began to make deposits in the appellant bank. He opened two accounts, one in his own name and one in the name of his principal. His own account he checked upon in his own name. The respondent's account by the terms of the instructions given the bank by the respondent, could only be drawn upon by checks signed by certain named officers of the corporation residing in the state of New York. The officers of the respondent testified that Crane was authorized to make a restrictive indorsement only on checks drawn payable to the respondent (that is, an indorsement 'for deposit only'). Crane however, seems not to have followed this instruction, as none of the several checks put into the record were so indorsed; the form of indorsement adopted being, 'J. L. Mott Iron Works, per H. M. Crane.' The bank's officers, moreover, testified that they knew of no such limitations upon the authority of Crane, and that they permitted him to make such diversion of the funds which were brought to the bank for deposit as he pleased. The teller also testified that during the time Crane did business with them he deposited a large number of checks drawn in favor of the respondent which were indorsed in the respondent's name by Crane; that checks of this kind were usually directed by Crane to be deposited in the respondent's account, but that certain of such checks were directed by him to be deposited in his private account, and were so deposited. He could, however, recollect only the general fact; the bank's system of bookkeeping with reference to local transactions affording no means of identifying the source of any particular item of an account.

On November 29, 1910, Crane appeared at the appellant bank with a check for $4,231.21, drawn by one Phillip A. Baillargeon on the Seattle National Bank in favor of J. L. Mott Iron Works, indorsed 'J. L. Mott Iron Wks., per H. M. Crane'; the indorsement being in the handwriting of Crane. There is a conflict in the evidence as to the person for whom the check was deposited. The secretary of the respondent testified that the check was deposited by Crane to the credit of the J. L. Mott Iron Works, and later transferred to Crane's private account. The second vice president of the respondent testified to the same effect, and a stenographer in the employment of Crane testified that an officer of the bank, a short time after the transaction occurred, told her that the check had first been deposited to the respondent's account and subsequently transferred to Crane's private account at his request. The officers of the bank, however, give a contrary version of the matter. They testified that Crane appeared at the bank with the check indorsed in the manner before stated, and passed it to the teller with the usual deposit slip made out in the name of H. M. Crane; that the teller accepted it in that form, and later passed the slip to the bookkeeper, who credited the amount of the deposit to Crane's account; and that the check was passed to another employé of the bank, who collected it through the clearing house on the next day. The deposit slip was produced and is a part of the record. Its date and general appearance tends to substantiate the bank officer's version of the transaction. Some few days thereafter Crane withdrew from the bank the amount of his deposit and absconded.

The paragraph of the complaint by which it was sought to charge the appellant with liability for the amount of the check is as follows: 'That heretofore and on, to wit, the 29th day of November, 1910, one H. M. Crane was employed by the plaintiff in the city of Seattle, King county, Wash., as its selling agent; that as such selling agent the said H. M. Crane had authority from the plaintiff to collect dues, debts, and obligations owing to the plaintiff, and to deposit the same to the credit of the plaintiff in a commercial account kept and maintained by the plaintiff and in the name of the plaintiff in the bank of said defendant in said city of Seattle; that, incidental to such authority, the said H. M. Crane was authorized to collect and receive and to deposit for collection and credit to the account of the plaintiff, and not otherwise, drafts, checks, and other evidences of indebtedness, drawn to the order of the plaintiff, and for that purpose the said H. M. Crane was authorized to indorse for deposit only, in the name of the plaintiff, such drafts, checks, and other evidences of indebtedness, so by him collected and received; that the said H. M. Crane was not authorized to draw or check, in the name of the plaintiff or otherwise, against said deposit or account of the plaintiff, nor to indorse for negotiation or for any other purpose than for deposit only, in his own name or in the name of the plaintiff or at all, drafts, checks, or other evidences of indebtedness, drawn to the order of the plaintiff; that the scope of the authority of the said H. M. Crane, as agent of the plaintiff, and the limitations thereupon, were well known to the defendant.'

The appellant, answering the paragraph quoted, admitted that Crane had authority to collect dues, debts, and obligations owing the respondent, and to deposit the same to the credit of the respondent in the bank of the appellant, and that incidental to such authority was authorized to collect and receive, and to deposit for collection and credit to the respondent, checks, drafts, and other evidence of indebtedness drawn to the order of the plaintiff, but denied each and every other allegation therein contained, and particularly denied that the scope of the authority of Crane, as agent of the respondent, 'had the limitations therein mentioned.' For a further and separate answer it set up facts tending to show that Crane had been held out to the public, and particularly to the appellant bank, as the general agent of the respondent, having general authority to conduct and manage the respondent's business in the city of Seattle. A reply was filed putting in issue the affirmative matter in the answer, and a trial was had on the issues thus made, which resulted in a verdict for the respondent for the amount of the check, with interest.

Prior to answering the complaint the appellant moved to strike from paragraph 4 thereof the phrase reading, 'That the said H. M. Crane was not authorized to draw or check, in the name of the plaintiff or otherwise, against said deposit or account of the plaintiff,' on the ground that the same was wholly immaterial and irrelevant to the respondent's cause of action. The court overruled the motion, and the order recording the ruling constitutes the first error assigned. But, notwithstanding the appellant has submitted in its brief a somewhat extended argument upon the question, we cannot think it one of serious import. The allegation was not wholly foreign to the general subject-matter of the cause of action as outlined in the complaint. One of the inquiries suggested therein was as to the extent of the agent's authority to indorse checks received by him in the collection of obligations due the respondent, and it tended to throw some light upon this inquiry to show that the agent had no authority to check upon an account deposited in the appellant bank to the credit of the respondent by the agent. Moreover, it was a matter properly to be shown as bearing upon the agent's general authority, and we think it not error to refuse to deny the motion to strike.

At the commencement of the trial the court, at the suggestion of the respondent, ruled that the burden was upon the appellant to establish its nonliability to account to the respondent for the proceeds of the check, and over the objection of the appellant compelled it to assume the burden of proof. This in our opinion, was manifest error. Clearly, had the appellant refused to introduce any evidence, judgment could not have gone against it on the pleadings, and this is one of the tests for determining on whom rests the burden of proof. This is...