Merchants & Manufacturers Association v. The First National Bank of Mesa
| Decision Date | 03 October 1932 |
| Docket Number | Civil 3176 |
| Citation | 14 P.2d 717,40 Ariz. 531 |
| Parties | MERCHANTS & MANUFACTURERS ASSOCIATION, a Corporation, Appellant, v. THE FIRST NATIONAL BANK OF MESA, ARIZONA, a Corporation, Appellee |
| Court | Arizona Supreme Court |
APPEAL from a judgment of the Superior Court of the County of Maricopa. Joseph S. Jenckes, Judge. Reversed and remanded with directions.
Mr. K T. Palmer, for Appellant.
Messrs Silverthorne & Van Spanckeren, for Appellee.
This action was brought by the Merchants & Manufacturers Association, an Arizona corporation, against the defendant bank to recover $968.75 paid by the defendant to one L. F Nachtweih upon sixteen checks payable to the order of plaintiff. Fourteen of these checks were indorsed in plaintiff's name "by L. F. Nachtweih," and two "by Clara Livingston." The questions involved are the authority of Nachtweih to indorse in plaintiff's name three of such checks, and the authority of Livingston to indorse the two she indorsed. The eleven other checks indorsed by Nachtweih the evidence conclusively shows he was authorized to indorse in behalf of plaintiff, the question as to them being whether such authority was for the purpose of deposit only and, if so, whether defendant had actual knowledge of such limited authority when it cashed them.
Eleven of the checks were drawn against the Valley Bank of Mesa by its customers, and five against defendant by its customers. The Valley Bank of Mesa paid the checks drawn on it to the defendant, and the defendant credited itself with those drawn against it.
The case was tried to the court without a jury and resulted in a verdict and judgment in favor of the defendant. The plaintiff has appealed and contends by its assignments that the evidence does not support the judgment and that the judgment is contrary to the law.
As the question of agency is one of fact, we state the facts. The plaintiff was engaged in a general collection and credit or mercantile reporting business, with its principal office in Phoenix. In February or March of 1927 it appointed Nachtweih its agent in Mesa, to solicit business but not its agent to make collections. Nachtweih rented rooms of defendant in its bank building in Mesa and began a general collection business, and in that connection assumed, without authority from plaintiff, to sign letters in plaintiff's name and to receive payment of collections and dues in the form of checks payable to plaintiff's order. He opened a personal account with the defendant and on different occasions, before August 1, 1927, presented to defendant three checks, totaling $215.63, for membership dues in plaintiff and for commissions on collections payable to the order of plaintiff, indorsed variously as "Merchants & Manufacturers Association by L. F. Nachtweih," "Merchants & Mfrs. Assn by L. F. Nachtweih," and "M & M Assn by L. F. Nachtweih," and received from defendant either the cash or a credit to his personal account.
On August 1, 1927, plaintiff, for the convenience of its Mesa members, established a branch office in Mesa and appointed Nachtweih local manager thereof and enlarged his authority to make collections, to accept checks therefor, and to indorse them for deposit with defendant for plaintiff's account. Preparatory to and before opening the Mesa branch office, plaintiff on July 25, 1927, wrote defendant a letter, of which the following is a copy:
This letter was inclosed in a stamped envelope, sealed and addressed to defendant at Mesa, and deposited in the United States mail on or about the day of its date. On this envelope was a request to return within five days. A few days thereafter the check-book requested in the letter was brought to plaintiff in Phoenix by Nachtweih. It had three checks per page and otherwise conformed to the specifications set out in the letter. Plaintiff did not receive from defendant an acknowledgment of such letter. The defendant's cashier testified that neither the letter nor the deposit or signature card was on file in the bank and that he had never seen them; that it was customary to file such instruments and to acknowledge their receipt promptly. This witness also testified that he thought the Merchants & Manufacturers Association was Nachtweih's "outfit"; that Nachtweih conducted the banking affairs of the Merchants & Manufacturers Association in the bank.
The record discloses that Nachtweih made many deposits of checks, in which plaintiff was payee, to plaintiff's account with defendant during the time that he was plaintiff's agent at Mesa, and that plaintiff drew upwards of sixty checks against the account on blank checks furnished it by defendant, signed with the printed name of plaintiff, "By D. M. Gillan, Secretary." Nachtweih, in his weekly or bimonthly or monthly reports to plaintiff, did not list any of such converted checks, nor did defendant's monthly bank statements to plaintiff reflect them, or any of them. Their conversion was not discovered until after Nachtweih had ceased to work for plaintiff.
A check made payable to an individual or corporation is an order on the drawee to pay the amount of such check out of the drawer's funds to the payee, and can be paid to no one else without the payee's consent or authority. If the drawee of the check pays it, or anyone else, bank or individual, in the course of business takes it with an unauthorized or forged indorsement, it is at the risk of having to make it good to the payee. If the payee, as was the case here, is a corporation, the check can be indorsed only by an authorized agent of the corporation. The business world, and more especially the banking world, knows that corporations can act only by and through agents, and it also knows, or should know, that the mere fact that a person is in possession of a check payable to the order of a corporation is not proof of his right to indorse it. On the contrary, it is put upon notice that the check and its proceeds belong to the corporation and that the possessor may or may not have authority to indorse it. In such circumstances, common prudence would dictate an inquiry and investigation into the authority of such person to indorse the check before paying it or accepting it in trade. " The well-settled rule" is "that authority to collect does not imply authority to indorse negotiable paper received in payment." It is also a "well-established rule that the authority...
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