Oklahoma State Bank v. Galion Iron Works & Mfg. Co.

• Decision Date: 28 January 1925
• Docket Number: No. 6553.,6553.
• Parties: OKLAHOMA STATE BANK v. GALION IRON WORKS & MFG. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

4 F.2d 337 (1925)

OKLAHOMA STATE BANK v. GALION IRON WORKS & MFG. CO.

No. 6553.

Circuit Court of Appeals, Eighth Circuit.

January 28, 1925.

W. O. Thomas, of Kansas City, Mo. (Dyer & Keim, of Enid, Okl., and C. O. Blake, of El Reno, Okl., on the brief), for plaintiff in error.

J. D. Lydick, of Oklahoma City, Okl. (H. J. Sturgis, of Enid, Okl., and McPherren & Wilson, of Oklahoma City, Okl., on the brief), for defendant in error.

Before SANBORN, Circuit Judge, and TRIEBER and PHILLIPS, District Judges.

TRIEBER, District Judge (after stating the facts as above).

The assignments of errors as set out in the brief of defendant are:

(1) That the court erred in directing a verdict for the plaintiff, as there was substantial testimony warranting a verdict for the defendant and thereby depriving it of a trial by jury.

(2) That the amount directed was for a larger sum than the evidence warranted.

(3) That the court erred in instructing the jury to include interest in the verdict.

The fourth assignment complains of the exclusion of certain evidence offered by the defendant. This assignment does not comply with rule 24 of this court, and for this reason cannot be considered by this court, as has been so many times decided by us.

The substantial errors, on which counsel for the bank in their briefs and oral arguments rely, are:

1. That Boyd had apparent authority, by reason of the facts and circumstances surrounding his dealings with the bank, as established by the evidence, to indorse the warrants in plaintiff's name, and have the proceeds placed to his individual credit; that his dealings with the bank relating to the transactions in controversy were known to the plaintiff for over two years, and never objected to, nor notice given to the bank that Boyd had no such authority, and therefore it is claimed that the plaintiff is estopped to challenge Boyd's and the bank's acts.

Whether Boyd had authority from plaintiff, either express or by implication, to indorse the warrants, which were payable to the plaintiff, in its name, it is unnecessary to determine. The issue in this case is whether, assuming there was such authority, could the bank permit him to deposit the funds received for them in his own name and withdraw them by his individual check for his personal uses?

That an agent may not deposit funds collected by him for his principal with a bank to his own individual credit, and draw them for his own personal and private use, in the absence of authority from his principal is well settled, and when a bank with knowledge that its funds belong to the principal and not the agent, which was apparent from the face of the warrants, permits him to do so, it is liable to the principal for the moneys, thus deposited and withdrawn by the agent on his individual check and by him converted to his own use, and embezzled, unless the agent acted within the apparent scope of his authority, which is not claimed, or the principal, with knowledge of the acts of the agent permits him to do so, or ratifies his acts. Union Stock Yards Nat. Bank v. Gillespie, 137 U. S. 411, 11 S. Ct. 118, 34 L. Ed. 724; McNulta v. West Chicago Park Com'rs, 99 F. 900, 40 C. C. A. 155; Chicago, Rock Island & Pacific Ry. v. Chickasha National Bank, 174 F. 923, 98 C. C. A. 535, decided by this court; United States F. & G. Co. v. Union Bank & Trust Co., 228 F. 448, 143 C. C. A. 30; Security Bank & Trust Co. v. Geren (C. C. A.) 288 F. 317 (5th Ct.); Richmond Guano Co. v. E. I. Du Pont de Nemours & Co. (C. C. A.) 284 F. 803 (4th Ct.); Carroll County Bank v. Rhodes, 69 Ark. 43, 63 S. W. 68; Knoxville Water Co. v. East Tennessee National Bank, 123 Tenn. 364, 131 S. W. 447; Kansas City Casualty Co. v. Westport Avenue Bank, 191 Mo. App. 287, 177 S. W. 1092; 7 Corp. Jur. § 333, p. 644; 3 Rul. Case Law, p. 177.

Was the plaintiff estopped from denying this authority of Boyd as contended on behalf of defendant?

To constitute an estoppel, in the absence of false representations by the party sought to be estopped, he must have been guilty of such conduct as to lead the person, pleading the estoppel, to have reasonable cause to believe that the agent, in this instance Boyd, had authority from plaintiff to receive the money therefor, and have it placed to his own individual credit and withdraw it by his personal check for any purpose he may desire, and for his private use.

Is there any substantial evidence that the plaintiff had knowledge of these dealings between Boyd and the defendant, either express or implied, and by its conduct and silence led the defendant, in the exercise of a reasonable judgment, to believe that Boyd had that authority and it acted on it to its detriment?

As stated by this court in Central Improvement Co. v. Cambria Steel Co., 210 F. 696, 718, 127 C. C. A. 184, affirmed 240 U. S. 166, 36 S. Ct. 334, 60 L. Ed. 579:

"The indispensable elements of an `estoppel in pais' are: (1) Intentional or reckless misrepresentation of a known and material fact inconsistent with the subsequent claim of him who makes the misrepresentation; (2) ignorance of the truth and absence of equal means of knowledge of it by the party who claims the estoppel; (3) action by the latter induced by the misrepresentation; and (4) injury to the latter if the truth is permitted to be proved. Bigelow on Estoppel (4th Ed.) p. 679; Illinois Trust & Sav. Bank v. City of Arkansas City, 76 F. 271, 293, 22 C. C. A. 171, 193, 34 L. R. A. 518; Farmers' & Merchants' Bank v. Farwell, 58 F. 633, 638, 639, 7 C. C. A. 391, 396, 397; New York Life Ins. Co. v. McMaster, 87 F. 63, 66, 67, 30 C. C. A. 532, 535, 536."

To the same effect are Bailey v. Lisle Mfg. Co., 238 F. 257, 152 C. C. A. 3 (C. C. A. 3), and numerous other authorities.

As there is no evidence whatever that the plaintiff had actual knowledge of Boyd's dealings with the bank, so far as they related to the matters in issue, the defendant relies on an implied knowledge, based on the fact that it claims that remittances for warrants, collected by Boyd, were made by cashier's checks of the defendant, and in many instances by checks or drafts of Boyd on it. There were four checks drawn by Boyd in favor of plaintiff during the three years the acts complained of were committed. One of these was drawn by Boyd on September 4, 1919, for $24.85, marked, "For interest on Order No. 83893." Another was drawn September 20, 1918, for $32, but it does not state for what purpose. Third was a draft by Boyd, on the bank for $1,108.82, drawn at Galion, Ohio, on October 21, 1919; and one on April 1, 1921, for $103.20, also at Galion.

The check for $1,108.82 drawn at Galion, while Boyd was there, was for a warrant, but whether he had collected or discounted it with the bank is not shown. As he paid for it, the plaintiff probably paid no attention how it was paid. As this draft was drawn after the correspondence between the parties, later referred to, it certainly cannot be claimed as a ground for estoppel. This also applies to the check for $24.85. The draft for $103.24 was drawn while Boyd was in Galion, Ohio. Whether he drew it for his personal expenses or for a warrant is not shown, but most likely for expenses of his trip to Galion, as this was only three months before his discharge from plaintiff's employ.

On the other hand, the correspondence between the plaintiff and defendant established beyond question that the plaintiff had at no time knowledge, either actual or implied, that Boyd was permitted by the bank to deposit moneys, for warrants belonging to the plaintiff, to his individual account and withdraw them for any purposes he desired, most of it evidently for his individual use, as he never accounted for their proceeds to the plaintiff.

The correspondence between the parties began after receipt of a letter by the plaintiff from Boyd dated February 15, 1919. After receipt of this letter by the plaintiff, the following correspondence was had by it and the defendant:

"The Galion Iron Works & Mfg. Co. "Manufacturers of "Road Machinery and Culvert Pipe. "Galion, Ohio, March 4, 1919.

"The Oklahoma State Bank, Enid, Oklahoma — Gentlemen: Attention Mr. Lentz, President. We are in receipt of a letter under date of February 25th from our Mr. C. J. Boyd, manager of sales at our Enid office, which conveys the information that he had an interview with you relative to handling our Oklahoma township and county warrants. He states that you would handle these items if we would open an account with you and deposit these warrants, receiving credit for same, and in turn have a checking account in your bank.

"In this connection we might state that nearly all of our business in Oklahoma is transacted with townships and counties. The bills are all paid in accordance with terms `by warrants' which, of course, have no due date but are registered and bear 6 per cent. interest from date of registration and are paid all the way from 30 days to 6 months. The treasurer of the township or county usually notifies our Enid office when the items should be sent forward for collection. This is an advantage as you would receive the information from your own city instead of from the home office.

"In all the years of our business career in the state of Oklahoma, we have never had one of these items disputed or lost any of the interest on any of the warrants, but the laws and conditions are such that when the items are issued they cannot place a due date on same until the treasurer has funds in his possession, at which time payment will be...