Sherwood v. Home Sav. Bank

• Decision Date: 27 September 1906
• Citation: 109 N.W. 9,131 Iowa 528
• Parties: W. H. SHERWOOD, v. THE HOME SAVINGS BANK, Appellant
• Court: Iowa Supreme Court

109 N.W. 9

131 Iowa 528

W. H. SHERWOOD, v. THE HOME SAVINGS BANK, Appellant

Supreme Court of Iowa, Des Moines

September 27, 1906

Appeal from Hardin District Court.--HON. J. H. RICHARD, Judge.

ACTION for value of note and mortgage alleged to have been deposited with defendant for safe-keeping. From judgment as prayed the defendant appeals.

Affirmed.

F. M Williams and Nagle & Nagle, for appellant.

W. L Weaver, for appellee.

LADD J. DEEMER, J., SHERWIN, J., (Concurring).

OPINION

LADD, J.

On March 1, 1901, James F. and Adella Partlow executed to Edwin O. Soule a note for $ 1,100, payable ten years hence, with interest at the rate of 6 per cent. per annum covered by interest coupons attached, and this was secured by a mortgage on a farm of eighty acres in Murray county, Minn., subject to a prior mortgage of $ 800. Soule sold this note and mortgage to the plaintiff April 2, 1902, executing an assignment of the mortgage. The papers were delivered, whereupon plaintiff handed them back, saying that he had "no safe place to keep them," and that he would "leave them for safe-keeping and for them to collect the interest." This occurred at the place of business of the defendant bank, of which Soule was cashier. Plaintiff was credited on the books of the bank with $ 66, the amount of the coupon falling due March 1, 1903, on the 16th of that month. In July following Soule, without the knowledge or consent of plaintiff, transferred the papers to one Briggs, and in September was found to be a defaulter. Shortly afterwards plaintiff, demanded of defendant the return to him of the note and mortgage, and, as this was refused, began this action for the value of the papers.

I. Inquiry was made of several witnesses as to the custom of the several banks in Iowa Falls with reference to receiving valuable papers of their patrons for safe-keeping. The evidence was received over objection, and exception is taken to the ruling (1) because such custom was not pleaded, (2) knowledge thereof by plaintiff was not alleged, and (3) the custom of defendant could not be shown by proving that of other banks in the neighborhood. A local custom, if relied upon as entering into and forming a part of a contract, must be pleaded. Lindley v. First National Bank, 76 Iowa 629, 41 N.W. 381; Eller v. Loomis, 106 Iowa 276, 76 N.W. 686. And it must have been known to the parties contracting. Rindskoff Bros. v. Barrett, 14 Iowa 101; Smith v. Hess, 83 Iowa 238, 48 N.W. 1030; Hughes v. Stanley, 45 Iowa 622.

But it is not claimed in this case that the custom relied on formed any part of the agreement. In the petition the delivery of the papers to the bank is alleged, and its refusal to surrender the same when demanded. The answer denied generally these allegations and specifically averred that the transaction was with Soule personally; that he converted the papers to his own use; that it was without the knowledge or consent of defendant and in excess of its corporate powers; that the service in any event was gratuitous, and defendant was free from any negligence in the matter. In reply the plaintiff denied the contents of the answer, alleged negligence on the part of defendant, and pleaded that it was the custom of defendant and the banks of Iowa Falls to receive valuable papers of their depositors for safe-keeping and to collect interest thereon without charge, and that, aside from its vocation of a savings bank, it carried on a general banking business similar to that done by other banks in Iowa Falls. These allegations pertain solely to the defendant's practice or custom in the transaction of business as bearing on the power of the corporation and the authority of the cashier to bind it in receiving the papers in its behalf, put in issue by the answer, and not to the terms or contents of the implied contract on which the action is based. As contended, the cause of action must be asserted in the petition. This appears from Jones v. Marshall, 56 Iowa 739, 10 N.W. 264, where malice was averred in the reply only, and the court held that exemplary damages should not have been allowed. In Marder v. Wright, 70 Iowa 42, 29 N.W. 799, the reply set up an entirely different cause of action than that contained in the petition and recovery thereon was adjudged to be erroneous; the court saying: "A plaintiff is not permitted to plead in a reply matters which are material only to the cause of action alleged in his petition. Much less will he be permitted to recover on a distinct cause of action which is only in his reply." In Willson v. Harris Bros., 68 Iowa 443, 27 N.W. 374, the plaintiff combined his response to the counterclaim and an amendment to the petition in a pleading denominated a reply, and the court held that as the matters were pleaded by way of an amendment to the petition the mere matter of form had been waived by proceeding to try the issues raised without objection.

The case at bar is to be distinguished from those first cited, in that no new claim or element of damage is asserted in the reply, and from the last, in that the local custom was not alleged by way of amendment to the petition. The petition was sufficient in itself, and the implied contract averred therein was not added to nor detracted from by the reply. It merely responded to the defendant's denial of power to receive the deposits as alleged and Soule's authority to bind it, and on these issues evidence of the bank's course of dealing and of any local custom with reference thereto had a direct bearing and was admissible had no reply been filed. In other words, when a contract is made with reference to a local custom which it is claimed has become a part of it, such custom should be alleged, but when a practice or custom is incidental merely, and is relied upon only as evidence of some other fact put in issue, there is no more occasion for asserting it in the pleadings than any other evidence relied on to make out a case.

II. In response to the allegation that it had received the securities and refused to deliver them, the defendant pleaded, among other things, that its cashier had appropriated the papers, and that they have been lost without negligence on the part of the defendant. To this the plaintiff replied, averring specific acts of negligence, and defendant objected on the ground that it was not alleged in the petition. This was not necessary. The action was not one sounding in tort, but was for a breach of contract; that is, on the ground that the bank had refused to deliver the papers on demand, though it had received them upon the implied promise to return when called for. Prima facie the defendant was liable for this breach of contract, if there was any, and could excuse itself therefrom only by setting up the loss and that it occurred notwithstanding the exercise of ordinary care on its part. On this issue the burden of proof was on the defendant, and it was not incumbent on the plaintiff, under the circumstances disclosed, to affirmatively allege negligence. Tindall v. McCarthy, 44 S.C. 487 (22 S.E. 734); Green v. Sizer, 40 Miss. 530. The evidence may have been introduced out of order, but this was not made a ground of objection.

III. Evidence of the local custom of banks in Iowa Falls, including defendant, with reference to receiving special deposits of valuable papers for safe-keeping and also of the general custom of like banks, was received over objection. If it was a local custom of banks to receive valuable papers and the officers of defendant knew this or such was the general custom, knowledge of which is to be presumed, such evidence had a direct bearing not only on the bank's powers, as will be noted later, but on Soule's authority as well. True knowledge of the local custom was not shown. This might have been a ground for striking the evidence upon failure to prove such knowledge, but was not ground for its exclusion when offered for the order of the proof was discretionary with the court.

IV. Appellant contends that there was no evidence that the papers were received by the bank. The plaintiff testified that, in handing them to the cashier, he said to him, "I would leave them for safe-keeping and for them to collect the interest." Soule testified that he, referring to plaintiff, "asked me to put them [the papers ] in the safe and keep them for him at the bank. No entry was made on the books of these papers. They were merely left in the bank for safe-keeping." This transpired at the bank's usual place of business, and it was for the jury to say whether, even though plaintiff had just purchased the security of Soule, the deposit was with the bank or its cashier personally.

V. The evidence was in conflict as to whether it was the custom of the defendant to receive securities of its patrons for safe-keeping. This being so, the jury might have found as they did, that the custom had been followed, and therefore that the action of the cashier was not in excess of his authority. The directors appear to have given little attention to the management of the bank, but to have intrusted practically everything to this officer, and what he did within the scope of authority which might have been conferred would seem to be binding on the bank. If the cashier of a bank is permitted to exercise general authority with respect to its business for a considerable time--in other words, held out to the public as having authority in the premises--the bank is bound by his acts, as in the case of the agent of any other corporation in the same manner as if the authority were expressly conferred. Wing v Commercial & Savings Bank, 103 Mich. 565 (61 N.W. 1009); Fifth Ward Savings Bank v. Nat. Bank, 48 N.J.L. 513 (7 A. 318); Martin v. Webb, 110 U.S. 7 (3 S.Ct. 428, 28 L.Ed. 49). Of course,...