National Union Bank of Md. v. Miller Rubber Co. of N.Y.

• Decision Date: 11 June 1925
• Docket Number: 29.
• Citation: 129 A. 688,148 Md. 449
• Parties: NATIONAL UNION BANK OF MARYLAND v. MILLER RUBBER CO. OF NEW YORK.
• Court: Maryland Court of Appeals

129 A. 688

148 Md. 449

NATIONAL UNION BANK OF MARYLAND v. MILLER RUBBER CO. OF NEW YORK.

No. 29.

Court of Appeals of Maryland

June 11, 1925

Appeal from Circuit Court of Baltimore City; Charles F. Stein Judge.

"To be officially reported."

Suit by the Miller Rubber Company of New York against the National Union Bank of Maryland. From an order overruling demurrer to complaint, defendant appeals. Order affirmed and case remanded for further proceedings.

Argued before BOND, C.J., and URNER, ADKINS, OFFUTT, PARKE, and WALSH, JJ.

Joseph France and Harry N. Baetjer, both of Baltimore (Venable Baetjer & Howard, of Baltimore, on the brief), for appellant.

Edgar Allan Poe, of Baltimore (Bartlett, Poe & Claggett, of Baltimore, on the brief), for appellee.

OFFUTT J.

This appeal presents two questions, one whether the appellee has the right to recover from the appellant the proceeds of checks, drawn to the appellee's order, which were deposited by the appellant to the credit of the appellee's agents upon their unauthorized indorsements and second, whether if such a right exists it can be enforced in a court of equity; and these questions are presented by the action of the circuit court of Baltimore city in overruling a demurrer to a bill of complaint, filed by the appellee against the appellant, to require it to pay over to the appellee the proceeds of checks alleged to have been "fraudulently and wrongfully" diverted from its account by the concurring acts of its agents and the appellant.

The bill of complaint alleges that the appellee is engaged in the business of manufacturing and selling automobile tires tubes, and accessories and kindred products, having its principal factory located at Akron, Ohio, and that it sells and distributes its products through agencies located at different points throughout the country; that on January 1, 1920, it entered into a contract with G. R. Schumann and R. Cator Robinson, trading as Schumann & Robinson, whereby they became the distributing agents at Baltimore for its products, and that they continued as its distributing agents until January 1, 1923, when Robinson retired, and that thereafter Schumann continued as its sole distributing agent until January 1, 1924; that in the early part of February, 1920, the appellee opened a deposit account with the National Union Bank of Maryland at Baltimore, Md., "one of the defendants herein, into which account, as was then fully explained to the said bank, and the said bank then well knew, all checks were to be deposited by the said Schumann & Robinson, given by purchasers of the manufactured products of your orator, drawn to the order of your orator, sold, and distributed, and to be sold and distributed, through and by the said distributing agents, Schumann & Robinson, to all of which the said bank then agreed, and at which time signature cards of your orator were given to the said bank, together with certain extracts from the by-laws of your orator, with reference to the authorization of officers of your orator to open bank accounts, and to withdraw therefrom the funds deposited therein;" that thereafter the distributing agents, Schumann & Robinson, daily deposited many checks drawn to the appellee's order to its account in the appellant bank, and the funds so deposited were withdrawn from time to time by the appellee by check duly signed by its officers in accordance with the signature cards given to the appellant until January 1, 1923, when Robinson withdrew from the agency and thereafter the same practice was followed by Schumann until January 1, 1924. That early in January, 1920, Schumann and Robinson opened an account in the same bank under the name of "Schumann & Robinson" and that account was continued until the early part of January, 1923, when it was closed, and an account opened in the name of Schumann alone. The bill then states:

"That your orator has recently discovered that, beginning on or about the 4th of January, 1920, and continuing thereafter until on or about January 1, 1923, the said Schumann & Robinson, fraudulently and for the purpose of diverting and misapplying funds of your orator, deposited in the said deposit account of Schumann & Robinson in the said National Union Bank of Maryland, opened as aforesaid, instead of depositing in the said deposit account of your orator in the said National Union Bank of Maryland, opened as aforesaid, many checks given by purchasers of manufactured products of your orator, drawn to the order of your orator, for manufactured products sold and distributed through and by the said Schumann & Robinson agency at Baltimore, the said checks so diverted having been fraudulently and without authority indorsed by the said Schumann & Robinson for deposit in their said bank account before the said checks were presented to the said National Union Bank of Maryland to be so fraudulently deposited, and notwithstanding the said checks, and all of them, at the time they were presented to the said National Union Bank of Maryland by the said Schumann & Robinson, contained the indorsement of Schumann & Robinson, fraudulently, and without authority made by the said Schumann & Robinson, the said National Union Bank of Maryland negligently, and without exercising ordinary care and prudence, and in violation of the rights of your orator, and in disregard of the duty and obligation it owed to your orator, participated in and took part in the fraudulent conversion and misapplication by depositing said checks in the bank account of the said Schumann & Robinson instead of in the bank account of your orator, where the said National Union Bank of Maryland should have deposited said checks; and that on and after January 1, 1923, the practice as aforesaid was continued by the said G. R. Schumann and the said National Union Bank of Maryland until on or about January 1, 1924, the funds so fraudulently diverted and misapplied being in excess of $30,000, the exact amount thereof being unknown to your orator." It then goes on to allege "that the said checks of purchasers of manufactured products of your orator, drawn to the order of your orator, were received by the said Schumann & Robinson and/or G. R. Schumann, in pursuance of an employment which reposed in them special trust and confidence, and imposing upon them and the said National Union Bank of Maryland specifically the duty of depositing all of said checks in the said deposit account of your orator with the said National Union Bank of Maryland, the funds so represented by said checks being impressed with a trust for the benefit of your orator."

And finally it alleges:

"That the said National Union Bank of Maryland by its gross negligence in depositing in the bank accounts of Schumann & Robinson and/or G. R. Schumann, checks given by purchasers of manufactured products of your orator, sold and distributed through the distribution agency at Baltimore, drawn to the order of your orator and fraudulently and without authority indorsed by Schumann & Robinson and/or by G. R. Schumann before the said checks were presented to said bank for deposit, thereby co-operating with the said Schumann & Robinson and/or the said G. R. Schumann, participated in and took part in the wrongful and

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