S. S. Allen Grocery Co. v. Bank of Buchanan County

• Decision Date: 17 January 1916
• Docket Number: No. 11509.,11509.
• Parties: S. S. ALLEN GROCERY CO. v. BANK OF BUCHANAN COUNTY.
• Court: Missouri Court of Appeals

182 S.W. 777

192 Mo. App. 476

S. S. ALLEN GROCERY CO. v. BANK OF BUCHANAN COUNTY.

No. 11509.

Kansas City Court of Appeals. Missouri.

January 17, 1916.

Rehearing Denied February 7, 1916.

Appeal from Circuit Court, Buchanan County; Thos. B. Allen, Judge.

Action by the S. S. Allen Grocery Company against the Bank of Buchanan County. From a judgment for defendant, plaintiff appeals. Affirmed.

Culver & Phillip, of St. Joseph, for appellant. C. F. Strop and Graham & Silverman, all of St. Joseph, for respondent.

JOHNSON, J.

This is an action against defendant bank by the depositor of a checking account to recover a deposit of $2,938.70. On August 27, 1914, plaintiff, the depositor, presented a check for that amount to the bank, but payment was refused on the ground that plaintiff had no funds on deposit, and this suit followed. The answer alleges that defendant "has paid to plaintiff or upon its order all sums of money that have been deposited by plaintiff with defendant." A jury was waived, and after hearing the evidence the court rendered judgment for defendant. Plaintiff appealed.

At the beginning of the trial the parties agreed that on August 27, 1914, plaintiff had a deposit of $2,938.70 with defendant which was payable on demand unless it should be found that defendant was justified in charging against the deposit, as it did, three checks dated August 15, 1914, which bore the signature of plaintiff, and purported to have been drawn to the order of O. J. Rose. These checks, which were for the respective amounts of $2,700.95, $395.60, and $195.15, were paid by defendant on presentation and charged to the account of plaintiff. They had been signed in blank by plaintiff, but had been stolen from its office by Rose, who, by forgery, had converted the signed blanks into checks for the respective sums stated.

Plaintiff, a corporation operating a large retail grocery in St. Joseph, has a president, secretary, general manager, six or seven chiefs of departments, and about fifty employés. Its office is in a mezzanine room six or seven feet above the first floor of the store, and is reached by a narrow stairway from that floor. It is occupied by the officers, i. e., president, secretary, and general manager, and the stenographer and telephone operator. Persons having business with these officers have access to the office, which may be designated as the general office of the company and of the business it conducts. The president, S. S. Allen, alone has authority to sign checks on behalf of the company, and such authority never has been conferred upon any other officer. When Allen found it necessary to be absent from the city, it was his custom to sign a number of blank checks and leave the check book in the custody of the manager, with authority to fill out the blanks and issue checks for use in carrying on the business until his return. He was absent on his summer vacation when the events under consideration occurred, and, as usual, had signed plaintiff's name to a number of checks, and had left the book with Mr. Morrow, the manager. Following his usual practice, Morrow had allowed this book to remain on the top of his desk in the office without instructions to any one respecting its safe-keeping, and, when he had occasion to issue a check, sometimes would draw it himself, and sometimes would have the secretary or stenographer draw it.

On August 15, 1914, Rose, a traveling salesman who had been selling merchandise to plaintiff and was well acquainted with its officers and office employés, especially with the manager, visited the office during the luncheon hour, and found no one there but the stenographer. On being informed that Morrow, for whom he inquired, was out for lunch, he asked and was accorded the privilege of writing some letters, and seated himself at Morrow's desk, on which the check book was lying in full view and, of course, within easy reach. When the telephone operator returned from lunch, the stenographer left the office in her charge, and shortly thereafter Rose, apparently having finished his writing, asked for and was given an envelope, into which he placed some papers. Then he departed without waiting for Morrow to return. Some time while at the desk he surreptitiously cut out a sheet from the check book which contained three signed blanks and their stubs. After filling out the blanks Rose went first to defendant bank, where he was known to the paying teller, and presented the check for $395.50, which the teller paid, finding the signature genuine. Next he went to the Empire Trust Company, where he was also known, and presented the check for $2,700.95, and, at his request, was given a cashier's check, which subsequently he cashed at a bank in Atchison. Then he went to a jewelry store and passed off the third check in payment of a diamond he purchased. After this he disappeared, and thus far has eluded capture. The check for $2,700.95 came to defendant through the clearing house bearing the indorsement of the Empire Trust Company, and was honored by defendant though its payment overdrew plaintiff's account by more than $600. The third check for $195.15 also passed through the clearing house with the indorsements of the jeweler and the Tootle-Lemon National Bank, and was paid by defendant, further increasing the overdraft.

From all the facts and circumstances in evidence the inference is strong that Rose, who two or three days before had received a check from Morrow in payment of an account for potatoes he had sold plaintiff, had obtained knowledge through that transaction of the fact that the check book contained signed blanks and was allowed to remain on top of the manager's desk without any special watch being kept over it. Doubtless his visit to the office at the noon hour was prompted by a criminal motive and his theft of the sheet was not the result of a mere accidental opportunity which arose while he was waiting for Morrow to return.

After paying the last-mentioned check defendant notified plaintiff of the overdraft, and the discovery of the forgeries was a quick result of this notice. The good faith of defendant in paying the checks is not and cannot be questioned, but an effort was made by plaintiff at the trial to show that defendant had been negligent, especially in view of the facts that plaintiff, during the long period of its relation to defendant of depositor, which had continued a number of years, had never before overdrawn its account nor issued a check for so large a sum as $2,700. We shall treat these facts as proved for the purposes of the present discussion, but the inference of negligence drawn from them by plaintiff will be considered in the course of our opinion.

The principal argument of counsel for plaintiff in support of their contention that the loss caused by the crime of Rose should fall upon defendant assumes the good faith and reasonable care of defendant in the transaction, but would charge it with liability on the ground that its title to the checks was that of an innocent holder for value within the technical definition of that term, and that the checks, never having been delivered by plaintiff, did not become valid negotiable instruments, nor acquire any contractual status or obligatory character by the mere affixing of plaintiff's signature to blanks which thereafter plaintiff retained in its own possession until deprived thereof not by or through its own voluntary act, but by theft. Counsel insist that their position has the support of the weight of authority as it stood at the time of the passage of the Negotiable Instruments Act, and is completely and irrefutably sustained by that act, which provides (section 9986, R. S. 1909):

"Where an incomplete instrument has not been delivered it will not, if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery."

Especially is this argument urged against the validity of the checks of $2,700.95 and $195.15, the payment of which, not being made out of funds of plaintiff on deposit, was voluntary on the part of defendant, and should be regarded as the act of a purchaser, rather than that of a debtor bound by law to honor the demand of his creditor.

The position of defendant is that the relation between the parties, being that of banker and depositor, involved reciprocal duties peculiar to such relationship which lie outside the scope of rules pertaining to holders for value of negotiable instruments, and that one of the duties of plaintiff towards defendant forbade the latter from signing blank checks, except for the sole purpose of directing defendant to pay them, and that in signing such blanks, and then negligently exposing them to theft, plaintiff was guilty of such a breach of duty as to estop it from claiming the checks were not delivered or were not binding contractual orders to pay money which defendant, as banker and debtor, was bound to honor on presentation.

On the theory of plaintiff that the position of defendant is that of a mere purchaser or innocent holder for value, the questions to arise are interesting and difficult of solution. If this were a case where an agent to whom the drawer had delivered a signed blank check had exceeded his authority with reference to filling out the blanks, the drawer would be held liable for such unauthorized acts of his agent under the maxim that, where one of two innocent persons must suffer, the one must be the sufferer who gave occasion for the commission of the wrong (Bank v. Armstrong, 62 Mo. 59), and the delivery of the check to the agent would preclude the application of the provisions of section 9986, R. S. 1909, since they relate only to cases where there has been no delivery of the instrument...