New York Life Ins. Co. v. Bank of Commerce & Trust Co.

• Decision Date: 18 December 1937
• Citation: 111 S.W.2d 371,172 Tenn. 226
• Parties: NEW YORK LIFE INS. CO. v. BANK OF COMMERCE & TRUST CO.
• Court: Tennessee Supreme Court

111 S.W.2d 371

172 Tenn. 226

NEW YORK LIFE INS. CO. v. BANK OF COMMERCE & TRUST CO.

Supreme Court of Tennessee.

December 18, 1937

Certiorari to Court of Appeals, on appeal from Chancery Court, Shelby County; John E. Swepston, Chancellor.

Action by the New York Life Insurance Company against Bank of Commerce & Trust Company. A decree dismissing the bill was reversed by the Court of Appeals, and defendant brings certiorari.

Decree of Court of Appeals reversed, and that of chancellor affirmed.

Marion G. Evans and John B. Snowden, II, both of Memphis, for appellant Bank of Commerce & Trust Co.

Metcalf Metcalf & Apperson, of Memphis, for appellee New York Life Ins. Co.

CHAMBLISS Justice.

A certain mortgage held by the insurance company on real estate in Memphis having been foreclosed and the property bought in by the insurance company for its debt, a sale was negotiated for the insurance company to a Mrs. Taylor and other parties by the Turley Mortgage Company, an agency which had represented the insurance company in Memphis for some sixteen years, and had made the above mortgage loan originally. The total consideration approved by the insurance company was $12,500, of which $2,064.40 was to be the cash payment; lien notes being executed for deferred payments. Certain commission charges in connection with the sale had been incurred in the sum of $454.50, which it was necessary to discharge to a third party in closing the sale.

The insurance company, from its home office in New York, approved the transaction, and by letter dated March 31, 1932, advised Turley to close the sale, and in this letter called Turley's attention to certain printed instructions in which this paragraph appeared: "Unless otherwise instructed in the accompanying letter, you should collect from the purchaser in New York Exchange to the order of this Company the money to be paid according to the contract when deed is delivered. It should be immediately remitted to this Company."

However in the same letter this was said:

"Insofar as you are able please conduct this closing in accordance with the instructions contained in this memorandum."

On April 6, 1932, Turley wrote the New York Life Insurance Company touching the transaction and explained that it would be necessary to pay out of the cash payment the commissions due a Mr. O'Sullivan, and, referring to the general instruction to collect and remit the cash payment in New York Exchange, he said:

"I presume, therefore, that I am to pay out of the cash payment Mr. O' Sullivan's commission, which will amount to approximately $450.00. *** If your understanding is not in accordance with mine, please advise me at once. ***"

On April 12th the New York Life answered:

"Your presumption that you are to pay Mr. O' Sullivan's commission out of the cash received in the amount of approximately $450.00 is correct. ***"

Now in making the cash payment the purchaser, Mrs. Taylor, acting for herself and associates, on her own initiative, made the cash payment by a check delivered by her to Turley Mortgage Company, which, as above shown, was acting for the vendor, the insurance company. This check was payable to the order of "Turley Mortgage Company, Agents," and bore a notation on the face of it: "Payment on 1874 Jackson, Memphis, Tenn." It was indorsed on the back with a stamp, as follows, "Only pay to the order of Bank of Commerce & Trust Company, Memphis, Tenn., Turley Mortgage Company, Inc.," and the perforations show that it was paid on the date it was drawn, April 5, 1932. The word "Agents" was omitted from the indorsement.

Turley Mortgage Company, having been authorized by the insurance company to deduct and disburse from this collection the sum of $454.50 before remitting to the insurance company, deposited this check to its regular checking account in the Bank of Commerce & Trust Company and therefrom withdrew on the following day and paid the said sum of $454.50. However, the Turley Mortgage Company failed to remit to the insurance company the balance, $1,609.90. On the 14th of July following, something more than three months later, Turley died, and it was found that not only was he insolvent and his company likewise, but that he had been guilty of many irregularities and defalcations in connection with this and other agencies, involving very large figures.

When advised that Mrs. Taylor had delivered her check to Turley Mortgage Company for the cash payment of $2,064.40, recognizing his agency and apparently his right to collect from her the money, the insurance company credited her on her purchase of the real estate with this cash payment, but, learning later that the check had been made payable to Turley Mortgage Company, agents, as above shown, and had been deposited in the Bank of Commerce & Trust Company by the Turley Company the insurance company brought this suit to recover the aforesaid balance of $1,609.90, which its agent had failed to remit, after making the collection from Mrs. Taylor, on the theory that the affix, "Agents," after the name of the payee of the check, Turley Mortgage Company, put the bank on notice that trust funds were involved and that this notice served to charge the bank with responsibility for the proper application of the proceeds of the check.

The chancellor denied recovery against the bank and dismissed the bill. The Court of Appeals reversed, and this court has granted certiorari and heard argument.

There is much in the record, the briefs of counsel and the opinions of the chancellor and Court of Appeals touching the relations, over long years, of the insurance company and the Turley Company, as throwing light on the extent of the powers conferred by the insurance company on its Memphis agent, Turley individually, or one or the other of two corporations, operated by him. In the view taken by this court, this is not a determinative issue in the case. It sufficiently appears, whatever may have been the extent of his general authority, that Turley was empowered by the insurance company to act for it in the closing up of the sale to Mrs. Taylor and associates, and the excerpts from correspondence above set forth clearly show that he was authorized to collect from the purchasers the cash payment expected to be made, and which was made, and, before remitting to the insurance company, to deduct and disburse therefrom the commissions above mentioned.

Counsel for the insurance company argue, a view adopted by the learned Court of Appeals, that this case is ruled by our holding of a bank's liability in United States...