Kentucky Title Sav. Bank & Trust Co. v. Dunavan

• Decision Date: 02 December 1924
• Citation: 266 S.W. 667,205 Ky. 801
• Parties: KENTUCKY TITLE SAVINGS BANK & TRUST CO. v. DUNAVAN.
• Court: Kentucky Court of Appeals

266 S.W. 667

205 Ky. 801

KENTUCKY TITLE SAVINGS BANK & TRUST CO. v. DUNAVAN.

Court of Appeals of Kentucky.

December 2, 1924

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Third Division.

Action by Rufus Dunavan against the Kentucky Title Savings Bank &amp Trust Company From judgment for plaintiff, defendant appeals. Affirmed.

Helm Bruce and Bruce, Bullitt & Gordon, all of Louisville, for appellant.

D Moxley, of Louisville, for appellee.

McCANDLESS J.

Dunavan owned two small houses and lots in the city of Louisville. Aside from taxes, these were free from incumbrance. Arnold owned a farm in Bullitt county, which was incumbered by mortgage lien to the extent of $1,600, due the Louisville Title Company. He had listed this farm for sale with Etheridge, a real estate dealer. Etheridge negotiated a deal with Dunavan for the exchange of these properties. The parties mutually executed a writing in the nature of a title bond, by the terms of which Arnold exchanged the farm for the two houses and lots, deeds to be executed when Arnold secured a release of the lien on the farm. Each delivered possession to the other. In addition to this, it was agreed that Arnold might sell one of the lots for the purpose of securing funds to pay the lien debt on the land, and that, if he did so, Dunavan would execute deed therefor to the purchaser.

Arnold listed the lots with Etheridge for that purpose, and he negotiated a sale of one of them to Martin at the price of $1,700. Of this sum, Martin gave a check for $300, payable to Etheridge, and arranged with the Kentucky Title Company, hereinafter known as the Title Company, to examine the title, giving it the remaining $1,400, to be paid the vendor on the delivery of the deed, if title was satisfactory. Thereupon a deed was prepared for this lot from Dunavan to Martin, and Etheridge carried it to Dunavan, who executed it and delivered it back to Etheridge. At the same time, Dunavan executed a deed to Arnold for the other lot and delivered it to Etheridge.

Etheridge carried the Dunavan deed to the Title Company, and the latter received the deed for Martin and executed and delivered to Etheridge a check for the sum of $1,400, drawn in favor of Dunavan on the Kentucky Title Savings Bank & Trust Company, hereinafter called the Savings Bank. Etheridge wrote Dunavan's name on the back of the check, and his own name, followed by the word "agent," and deposited it and the $300 check he had received from Martin to his own credit in the First National Bank. Twenty days later Etheridge gave his personal check on the First National Bank to the Louisville Title Company for the sum of $500, to be credited on the Arnold mortgage.

The Louisville Title Company credited $400 of this on the Arnold note, reducing it to $1,200; the other $100 was reserved for interest and taxes. The Title Company, the Savings Bank, and the First National Bank were all housed in the same building, and were under the same management. Shortly thereafter, Etheridge committed suicide, leaving an insolvent estate. Dunavan was not advised as to Etheridge's transactions subsequent to the execution of the deed, but the facts were developed in a suit between Arnold and Dunavan, in which it is indicated that Dunavan was unsuccessful. At any rate, about one year after Etheridge's death Dunavan filed this action against the Savings Bank, alleging the issual of the $1,400 check on that bank, payable to his order by the Title Company; that this was upon a sufficient consideration; that the Title Company had a sufficient amount to its credit in the Savings Bank to pay the check; that the check was delivered to Etheridge without plaintiff's knowledge; that Etheridge had no authority from him to collect the check, and the Savings Bank paid the check to Etheridge on his forged indorsement of plaintiff's name, and returned it to the Title Company, all without his knowledge or consent.

The answer denied that the payment to Etheridge was without authority from plaintiff, and affirmatively pleaded that Dunavan authorized Etheridge to act as his agent in the indorsement and collection of the check, and this was controverted.

Upon the trial, defendant assumed the burden, the facts appearing substantially as above set out. The court gave a peremptory instruction to the jury to find a verdict for plaintiff in the sum of $1,200, which was accordingly done. Defendant, in addition to its motion for a new trial, moved the court for a judgment in its favor non obstante veredicto. This was refused, and it appeals.

It is conceded that the purpose of the Martin transaction was to procure a release of the lien on the Arnold farm; that Dunavan executed the deed to Martin and delivered it to Etheridge, with the understanding that Etheridge would collect the consideration from Martin, and pay off the lien debt or deliver it to Arnold, who would pay it off; that Dunavan did not know the check was being drawn in his favor, or learn of that fact until long afterward. It is argued that really Dunavan had no interest in the check, and that, so far as he had an interest in the transaction, Etheridge was authorized to act for him, and he was thus authorized to collect the check.

This argument is not impressive. It is true that Arnold was primarily liable for the lien debt but Dunavan was also indirectly liable, so long as the lien remained. In this he was protected, so long as he retained the legal title in the lot. When he conveyed that title, he surrendered the protection thus afforded and became vitally interested in the consideration paid. True, he was careless and confiding, and Etheridge had an opportunity to collect the consideration in cash from Martin. Indeed, if the Title Company had issued the check to Etheridge, perhaps Dunavan could not complain, but the Title Company, in a businesslike way, protected his rights, and he was thus constituted the legal and rightful owner of the check.

Etheridge unquestionably had a right to accept the check payable to Dunavan, but this did not authorize him to indorse Dunavan's name thereon. The indorsement itself gave notice that Etheridge was assuming to act as agent. Mitchell v. First Nat. Bank, 203 Ky. 770, 263 S.W. 15. Our statute, section 3720b19, provides:

"The signature of any party may be made by an agent duly authorized in writing."

This and similar sections have been construed in a number of cases, and uniformly held to be mandatory. Inter-Sou. L. I. Co. v. First National Bank of Hazard, 178 Ky. 95, 198 S.W. 563; Finley v. Smith, 165 Ky. 445, 177 S.W. 262, L.R.A. 1915F, 777; Robinson v. Bank of Winslow (Ind. App.) 85 N.E. 794; Jackson Paper Co. v. Commercial Bank, 199 Ill. 154, 65 N.E. 136, 59 L.R.A. 657, 93 Am.St.Rep. 113; Burstein v. People's Trust Co., 143 A.D. 165, 127 N.Y.S. 1093; Dispatch Packing Co. v. Nat. Bank of Commerce, 109 Minn. 451, 124 N.W. 236, 50 L.R.A. (N. S.) 74.

Clearly the Savings Bank acquired no title to the check by this transaction. The question to be determined is whether this gave a...