Newco Land Co. v. Martin

• Decision Date: 14 June 1948
• Docket Number: No. 40289.,40289.
• Citation: 213 S.W.2d 504
• Parties: NEWCO LAND COMPANY, a Corporation, and HARTFORD ACCIDENT AND INDEMNITY COMPANY, a Corporation, Appellants, v. WILLIAM W. MARTIN, WILLIAM S. BEDAL and GEORGE F. HARDIE, as Members of and Constituting a Voluntary Organization Styled "Bondholders' Protective Committee for Holders of Bonds of the St. Louis Joint Stock Land Bank," Respondents.
• Court: Missouri Supreme Court

213 S.W.2d 504

NEWCO LAND COMPANY, a Corporation, and HARTFORD ACCIDENT AND INDEMNITY COMPANY, a Corporation, Appellants, v. WILLIAM W. MARTIN, WILLIAM S. BEDAL and GEORGE F. HARDIE, as Members of and Constituting a Voluntary Organization Styled "Bondholders' Protective Committee for Holders of Bonds of the St. Louis Joint Stock Land Bank," Respondents.

No. 40289.

Supreme Court of Missouri.

Division Two, June 14, 1948.

Motion for Rehearing or to Transfer to Banc Overruled, September 13, 1948.

Appeal from Circuit Court of City of St. Louis. — Hon. Robert J. Kirkwood, Judge.

REVERSED AND REMANDED (with directions).

Igoe, Carroll, Keefe & Coburn and Richmond C. Coburn for appellants.

(1) Where money or property is obtained by an innocent person through the fraudulent practices of another without any consideration moving from the recipient, the latter is required to make restitution to the person defrauded. Restitution may be enforced by an action at law for money had and received or a proceeding in equity to impose a trust upon the property in the hands of the recipient, Third Natl. Bank of St. Louis v. St. Charles Sav's. Bank, 244 Mo. 554, 149 S.W. 495; Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 262, 94 S.W. 527; Universal Carloading & Dist. Co. v. South Side Bank, 224 Mo. App. 873, 27 S.W. (2d) 768; St. Charles Savs. Bank v. Orthwein Inv. Co., 160 Mo. App. 369, 140 S.W. 921; St. Louis Union Society v. Mitchell, 26 Mo. App. 206; Ditty v. Dominion Natl. Bank of Bristol, 75 Fed. 769; City of Lowell v. Stiles, 232 Mass. 341, 122 N.E. 412; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496; Grand Lodge v. Towne, 136 Minn. 72, 161 N.W. 403, L.R.A. 1917 E, p. 344; Rio Grande Fire Ins. Co. v. Concordia Fire Ins. Co., 199 S.W. 824; Knobley Mountain Orchard Co. v. People's Bank of Keyser, 99 W. Va. 438, 129 S.E. 474, 48 A.L.R. 459. (2) The defendants' contention that they received the $7000 check of plaintiff Newco Land Company as bona fide purchasers for value because it was given to them by their debtor in discharge of his debt to them is not supported by the facts and the law of the case. The burden of proving that they were bona fide purchasers for value is on the defendants. Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 262, 94 S.W. 527. (3) Torrence's guilty knowledge that the Newco check had been deposited in the defendants' bank account must be imputed to the defendants. Although the guilty knowledge of an agent will not be imputed to his principal where the agent is engaged in an independent fraud for his own benefit, yet if the agent is the sole representative of his principal in the transaction in question (as Torrence was of the defendants in the instant case), his knowledge must necessarily be deemed the knowledge of his principal. Bartlett v. McCallister, 316 Mo. 129, 289 S.W. 814; Third Natl. Bank v. St. Charles Savings Bank, 244 Mo. 554, 149 S.W. 495; Musgrove v. Macon County Bank, 187 Mo. App. 483, 174 S.W. 171; St. Louis Union Society v. Mitchell, 26 Mo. App. 206; Ditty v. Dominion Natl. Bank of Bristol, 75 Fed. 769; Knobley Mountain Orchard Co. v. People's Bank of Keyser, 99 W. Va. 438, 129 S.E. 474, 48 A.L.R. 459. (4) A principal cannot ratify some of an agent's unauthorized acts by retaining the benefits thereof, and at the same time repudiate his actions in other respects. If the defendants are to retain the funds embezzled by Torrence, they must also assume the guilty knowledge which he had at the time of his abstractions. Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496; Third Natl. Bank v. St. Charles Savs. Bank, 244 Mo. 554, 149 S.W. 495; Musgrove v. Macon County Bank, 187 Mo. App. 483, 174 S.W. 171. (5) The element of payment to the defendants is absent in this case. Payment requires an intention on the part of the debtor to pay and an intention on the part of the creditor to receive payment. 48 C.J., p. 586; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496; Thompson v. Kellogg, 23 Mo. 281; Mercantile-Commerce Bank & Trust Co. v. Meletio, 84 S.W. (2d) 655; Union Biscuit Co. v. Springfield Grocer Co., 143 Mo. App. 300, 126 S.W. 996. (6) If any payment is considered to have been made, it was not made by Torrence but by the plaintiff Newco Land Company, which owed the defendants nothing. Easton Food Center, Inc., v. Beatrice Creamery Co., 119 S.W. (2d) 987. (7) Torrence was not a debtor of the defendants. A debt must arise from some contractual relationship between the parties. 11 Words & Phrases, p. 241; Finlay v. Bryson, 84 Mo. 664; Cable v. McCune, 26 Mo. 371; Ryles-Wilson & Co. v. Shelley Mfg. Co., 93 Mo. App. 178. (8) The Current Fund Doctrine has been held in Missouri to apply only to the passage of currency and not to checks. Easton Food Center, Inc. v. Beatrice Creamery Co., 119 S.W. (2d) 987. (9) But even if the defendants were bona fide purchasers, they still must make restitution. By Section 3039, R.S. 1939, the forged endorsement of a payee's name is wholly inoperative and a subsequent bona fide holder for value without notice of the forgery would acquire no title to the instrument, no right to enforce payment, and no right to the proceeds. First Natl. Bank of Kansas City, v. Produce Exchange Bank of Kansas City, 338 Mo. 91, 89 S.W. (2d) 33; Borserine v. Maryland Casualty Co., 112 Fed. (2d) 409. (10) An identical statute has been similarly construed in other jurisdictions. Seaboard Natl. Bank v. Bank of America, 193 N.Y. 26, 85 N.E. 829; Real Estate Land Title & Trust Co. v. United Sec. Trust Co., 303 Pa. 213, 154 Atl. 593. (11) Since the defendants' signatures on blank checks facilitated Torrence's embezzlements, as between two innocent parties, the defendants must suffer the loss caused by their own carelessness. Clifford Banking Co. v. Donovan Commission Co., 195 Mo. 262, 94 S.W. 527; The International Bank v. The German Bank, 71 Mo. 183; Capital Bank v. Armstrong, 62 Mo. 59. (12) The plaintiffs' remedies are in nowise prejudiced by the fact that after Newco's check had been deposited in the defendants' bank account, virtually all of the money on deposit in the defendants' accounts were checked out. Missouri follows the Swollen Assets Doctrine and a constructive trust may be impressed upon the assets generally of the defendant, and the plaintiff is not required to trace his property into the hands of the defendant. Orr v. St. Louis Union Trust Co., 291 Mo. 383, 236 S.W. 642; Tiernan's Executor v. Security Bldg. & Loan Assn., 152 Mo. 135, 53 S.W. 1072; Nelson v. McClean's Estate, 236 Mo. App. 718, 161 S.W. (2d) 676; Johnston v. McCluney, 80 S.W. (2d) 898. (13) Nor is the fact that virtually all of the money on deposit in defendants' bank accounts was drawn out by the defendants before they knew that the $7000 check of Newco had been deposited in their account any defense to the plaintiffs' action for money had and received. St. Charles Savs. Bank v. Orthwein Inv. Co., 160 Mo. App. 369, 140 S.W. 921. (14) The agreement entered into between the plaintiff Hartford Accident & Indemnity Company and the plaintiff Newco Land Company was a loan, was valid, and the relief sought against the defendants should be granted the plaintiff Newco Land Company and not the plaintiff Hartford Accident & Indemnity Company. Kossmehl v. Millers Natl. Ins. Co., 185 S.W. (2d) 293; Luckenbach v. W.J. McCahan Sugar Refining Co., 248 U.S. 139, 39 S. Ct. 53; Phillips v. Clinton Mfg. Co., 204 S.C. 496, 30 S.E. (2d) 146, 157 A.L.R. 1255.

Jacob M. Lashly, and Lashly, Lashly, Miller & Clifford for respondents.

(1) Where, as here, there is only a general finding the trial court must be presumed to have found in favor of respondents every fact warranted by the evidence and necessary to sustain its judgment and the appellate court will not set aside the judgment unless it is shown by appellants to be clearly erroneous. R.S. 1939, Ann., 847.114 (d); Peters v. Jamison's Estate, 202 S.W. (2d) 879; Heller v. Jentzsch, 303 Mo. 440, 260 S.W. 979; Tebeau v. Globe & Rutgers Fire Ins. Co., 271 Mo. 626, 197 S.W. 130; Weber v. Interstate, 205 S.W. (2d) 291. (2) And in determining whether appellants have shown that the trial court's judgment is "clearly erroneous" the appellate court must consider the evidence in a light most favorable to the respondents, giving due regard to the opportunity of the trial court to judge the credibility of the witnesses. The appellate court will usually defer to the findings and judgment of the trial court when based on conflicting evidence or when conflicting inferences may be drawn from the evidence. Laws 1943, p. 388, sec. 114 (d); Peters v. Jamison's Estate, 202 S.W. (2d) 879; State v. Bradshaw, 313 Mo. 334, 281 S.W. 946; Bell v. Barrett, 76 S.W. (2d) 394; Bokata v. Ill. Bankers Life Ins. Co., 195 S.W. (2d) 888; Dell-Wood Tires, Inc., v. Riss & Co., 198 S.W. (2d) 347; Lambert v. Rodier, 194 S.W. (2d) 934. (3) No action will lie for money had and received or to raise a constructive trust against persons (respondents here) who have received the proceeds of a check wrongfully drawn on the depositor's account, where, as here, such persons acting as a "conduit" received the money in good faith and paid it over to another without collusion or prior knowledge of claimant's (Newco Land Company) claim to the money. The recipient (respondents here) of the money in such a case has not been "enriched." Ford-Davis Mfg. Co. v. Maggee, 233 S.W. 267; Brink v. Kansas City, 198 S.W. (2d) 710; Propst v. Sheppard, 174 S.W. (2d) 359; Burbank v. Farnham, 220 Mass. 514, 108 N.E. 492; Marine Co. v. Milwaukee, 151 Wis. 239, 138 N.W. 640. (4) Where an agent has done an unauthorized act or an act beyond the scope of his authority (as here) the knowledge of the agent is not imputed to the principal; and there is no ratification of an agent's unauthorized act where, as here, at the time it becomes known to the principal the...