Morris v. Ohio Cas. Ins. Co.

• Decision Date: 13 January 1988
• Docket Number: No. 87-287,87-287
• Citation: 35 Ohio St.3d 45,517 N.E.2d 904
• Parties: , 5 UCC Rep.Serv.2d 849 MORRIS et al., Appellees, v. OHIO CASUALTY INSURANCE COMPANY, Appellant, et al.
• Court: Ohio Supreme Court

Page 45

35 Ohio St.3d 45

517 N.E.2d 904, 5 UCC Rep.Serv.2d 849

MORRIS et al., Appellees, v. OHIO CASUALTY INSURANCE COMPANY, Appellant, et al.

No. 87-287.

Supreme Court of Ohio.

Jan. 13, 1988.

Syllabus by the Court

1. An attorney, absent any express authority from his client, has no authority to endorse the client's name on a check or draft tendered to effect a settlement.

2. An insurance company may, as drawee of a draft, be liable in conversion, pursuant to R.C. 1303.55(A)(3), when it pays the draft through its collecting bank over a forged endorsement. (R.C. 1303.55[A], applied.)

Apparently, on March 21, 1981, the residence of Paul E. and Nyla R. Smith was partially destroyed by fire. It is undisputed that as a result of the fire, Paul Smith died and Nyla Smith was incapacitated. At the time of the fire, the Smith residence was insured by appellant, Ohio Casualty Insurance Company. Subsequently, a guardianship, with Tom H. Swope as guardian, was created for Nyla Smith, and an administrator, Orin E. Morris, was appointed for the estate of Paul Smith. Both the guardianship and the estate were represented by attorney James W. Whitney.

Following the settlement of certain property damage claims arising out of the fire, appellant delivered a series of drafts to attorney Whitney. The drafts were drawn on appellant's account at First National Bank & Trust Company, and made payable "[t]o the Order of Orin E. Morris, Administrator of the Estate of Paul E. Smith, and Tom H. Swope, Guardian of the Person and Estate of Nyla R. Smith."

The first draft, No. X558576, in the amount of $15,031 was paid with the appropriate endorsements. The second draft, No. X559281, in the amount of $40,125 and the third draft, No. X559280, in the amount of $600 were each paid over a "typed endorsement." ¹ Neither Morris nor Swope signed the second or third draft. Further, the proceeds from the second and third drafts were never received by either the estate or the guardianship. Instead, the drafts had apparently been deposited into one of attorney Whitney's business accounts at the Huntington National Bank. ²

Huntington credited Whitney's account and stamped each draft "P.E.G." ("prior endorsement guaranteed"). Further, each draft was processed through the banking system, presumably presented to appellant for payment authorization and ultimately paid by appellant.

Subsequently, on June 3, 1985, appellees, Orin Morris, as administrator, and Thomas J. Kilbane, successor guardian for Nyla Smith, instituted the present action in conversion against appellant seeking the proceeds of draft No. X559281. On August 7, 1985, appellees amended their complaint to include draft No. X559280. In turn, appellant filed a third-party complaint against, inter alia, the Huntington National Bank and James Whitney. Thereafter, Huntington cross-claimed against Whitney, and appellees filed supplemental complaints against both James Whitney and the Huntington National Bank.

Opposing motions for summary judgment were eventually filed by appellees and appellant. On July 14, 1986, the trial court sustained appellant's motion for summary judgment, overruled appellees' motion for summary judgment and entered judgment for appellant. Upon appeal, the Franklin County Court of Appeals reversed and vacated the judgment of the trial court, remanding the cause to the trial court with instructions to enter judgment on behalf of appellees, on the basis that appellant was, pursuant to R.C. 1303.55, liable to appellees for conversion.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Francisco A. Garabis, Columbus, for appellees.

Earl, Warburton & Adams and Dick M. Warburton, Jr., Columbus, for appellant.

DOUGLAS, Justice.

The sole question posed for our consideration is whether an insurance carrier may be liable for conversion when the carrier authorizes its bank to pay a draft over a forged endorsement. For the reasons expressed infra, we answer the question in the affirmative and, accordingly, uphold the decision of the court of appeals.

It is axiomatic that a motion for summary judgment may only be granted where there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Civ.R. 56(C). Moreover, summary judgment is inappropriate unless it appears from the evidence that reasonable minds could come to but one conclusion and that conclusion is adverse to the nonmoving party. Civ.R. 56(C). Furthermore, in reviewing a motion for summary judgment, this court, as other courts, must construe the evidence in a light most favorable to the party opposing the motion. Temple v. Wean United, Inc. (1977), 50 Ohio St.2d 317, 4 O.O.3d 466, 364 N.E.2d 267; Toledo's Great Eastern Shoppers City, Inc. v. Abde's Black Angus Steak House No. III, Inc. (1986), 24 Ohio St.3d 198, 201-202, 24 OBR 426, 429, 494 N.E.2d 1101, 1104; Wills v. Frank Hoover Supply (1986), 26 Ohio St.3d 186, 26 OBR 160, 497 N.E.2d 1118; McKinney v. Hartz & Restle Realtors, Inc. (1987), 31 Ohio St.3d 244, 31 OBR 449, 510 N.E.2d 386. Therefore, absent an affirmative showing by the moving party, appellees herein, that no genuine issues exist as to any material fact, Toledo's Great Eastern Shoppers City, Inc., supra; Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 66, 8 O.O.3d 73, 74, 375 N.E.2d 46, 47; Hamlin v. McAlpin Co. (1964), 175 Ohio St. 517, 519-520, 26 O.O.2d 206, 207, 196 N.E.2d 781, 783, and that such party is entitled to judgment as a matter of law, no summary judgment may be granted.

Appellees contend that appellant failed to oppose their motion for summary judgment with evidentiary materials sufficient to satisfy the requirements of Civ.R. 56(E) and that, additionally, they are, pursuant to R.C. 1303.55, entitled to summary judgment. We agree.

This court has recently, in Savransky v. Cleveland (1983), 4 Ohio St.3d 118, 4 OBR 364, 447 N.E.2d 98; Mathis v. Cleveland Public Library (1984), 9 Ohio St.3d 199, 9 OBR 511, 459 N.E.2d 877; and Toledo's Great Eastern Shoppers City, Inc., supra, had the opportunity to analyze Civ.R. 56(E). This rule provides in part that " * * * [w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavit or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him." Thus, it might appear that the nonmoving party must respond to an adverse motion for summary judgment or face the entry of judgment against him. However, this court has stated that even where the nonmoving party fails completely to respond to the motion, summary judgment is improper unless reasonable minds can come to only one conclusion and that conclusion is adverse to the nonmoving party. Toledo's Great Eastern Shoppers City, Inc., supra. Accordingly, as the burden is upon the moving party to establish the non-existence of any material factual issues, the lack of a response by the opposing party cannot, of itself, mandate the granting of summary judgment.

Therefore, notwithstanding appellant's lack of response to appellees' motion for summary judgment, appellees are not entitled to summary judgment absent proof that such judgment is, pursuant to Civ.R. 56(C), appropriate. We do, however, find that summary judgment is appropriate in this case.

Initially, appellant asks this court to find that its payment to James Whitney, the attorney for the estate and guardianship, constituted payment to the estate and guardianship. Accordingly, appellant would have us hold that appellant's obligation to the estate and guardianship was discharged when appellant both delivered the drafts in question to the agent of the estate and the guardianship, and then authorized payment of such drafts to the same party. We decline to make such a finding in this case.

In essence, appellant asks this court to determine whether an attorney has the inherent power to endorse a settlement check on behalf of his client. If so, appellant would be discharged from its obligation to the estate and guardianship; if not, appellant's obligation remains unpaid and owing. We find both that an attorney has no inherent authority to endorse a settlement check in the name of his client, and that, on the basis of the record before us, attorney Whitney made no such endorsement in this case.

In Ohio, as elsewhere, "[a]n attorney who is without special authorization has no implied or apparent authority, solely by virtue of his general retainer, to compromise and settle his client's claim or cause of action." Morr v. Crouch (1969), 19 Ohio St.2d 24, 48 O.O.2d 43, 249 N.E.2d 780, paragraph two of the syllabus. See, also, Annotation (1953), 30 A.L.R.2d 944, 945. Similarly, an attorney has no inherent authority to enter into a contract for the sale of real estate for his client. Morr, supra, at paragraph three of the syllabus. See, also, Blanton v. Womancare, Inc. (1985), 38 Cal.3d 396, 212 Cal.Rptr. 151, 696 P.2d 645. While this court has not previously addressed whether an attorney may endorse his client's name on a check or draft tendered to effect a settlement, numerous other courts have done so. The clear majority of these courts find that no such authority exists. See Jones v. Van Norman (1987), 513 Pa. 572, 581, 522 A.2d 503, 508, fn. 6; State v. Musselman (Utah 1983), 667 P.2d 1061, 1068; Palomo v. St. Bar of California (1984), 36 Cal.3d 785, 205 Cal.Rptr. 834, 685 P.2d 1185; Moran v. Loeffler-Greene Supply Co. (Okla.1957), 316 P.2d 132, 138; Crahe v. Mercantile Trust & Savings Bank (1920), 295 Ill. 375, 129 N.E. 120; Pearcy v. First Natl. Bank in Wichita (1949), 167 Kan. 696, 208 P.2d 217; Dacus v. Maryland Cas. Co. (1936), 40 N.M. 110, 55...