Smith v. Halverson

• Decision Date: 29 December 1978
• Docket Number: No. 11913,11913
• Parties: Donald J. SMITH, Plaintiff and Appellant, v. Russell R. HALVERSON, Defendant, and First National Bank in Sioux Falls, a corporation, Defendant and Respondent.
• Court: South Dakota Supreme Court

Page 146

273 N.W.2d 146

Donald J. SMITH, Plaintiff and Appellant, v. Russell R. HALVERSON, Defendant and First National Bank in Sioux Falls, a corporation, Defendant and Respondent.

No. 11913.

Supreme Court of South Dakota.

Argued Oct. 3, 1977.

Decided Dec. 29, 1978.

Gale E. Fisher of May, Johnson & Burke, Sioux Falls, for plaintiff and appellant.

Deming Smith of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendant and respondent.

DUNN, Justice (on reassignment).

This is an appeal by Donald J. Smith (Smith) from a judgment dismissing his complaint against the First National Bank in Sioux Falls (bank) on a verdict directed against Smith by the trial court. We reverse and remand the case for trial.

Smith is a trucker who on August 20, 1974, entered into a contract with the Kolman Division of Athey Products Corporation of Sioux Falls to deliver some machinery manufactured by Kolman for use in the construction of the Alaskan pipeline. On September 9, 1974, Smith received authority from the Interstate Commerce Commission to transport the equipment to Alaska. Because Smith owned no trucks himself, he entered into an agreement with Russell R. Halverson (Halverson), who was operating a number of trucks under the business name of M & R Trucking. Under the terms of the agreement, Halverson was to be paid $.45 per mile for the 6,700 mile round trip between Sioux Falls and Fairbanks, Alaska.

On September 30, 1974, Smith and Halverson went to the bank's downtown office and explained to Pat Marso, a bank officer, the general terms of the agreements between Smith and Kolman and between Smith and Halverson. Smith explained that in compliance with Interstate Commerce Commission regulations, payments for the shipments would be received in the name of Donald J. Smith so a checking account was established in the name of Donald J. Smith Transportation. Halverson then deposited $5,000 in the account. Smith and Halverson discussed the need for a third-party manager who would be authorized to sign checks on the Smith account. According to Marso's testimony, Halverson and Smith took the two yellow signature cards, on which Marso had printed "Donald J. Smith Transportation" and the social security number of either Halverson or Smith, with them when they left the bank. Smith testified that he and Halverson signed a white signature card before leaving the bank that day. Marso was not apprised of the exact nature of the financial arrangements between Halverson and Smith. He knew only that they were engaged in a joint venture with respect to hauling equipment to Alaska. At the time this account was opened, Marso knew that Halverson had a line of credit with and an account at the bank's industrial branch under the name of M & R Trucking and that he was considered to be in good standing with the bank.

Because the signature cards were not returned promptly, Marso asked Lee Viberg the manager of the industrial branch, to ask Halverson to return the cards to the bank, Marso being aware that Viberg had worked closely with Halverson's trucking account at the branch office. After Viberg contacted Halverson several times, the signature cards were finally returned with a letter dated October 30, 1974, which was signed by Halverson and Patricia Streett, and which asked the bank to recognize the signature of Streett for both the account of M & R Trucking and Donald J. Smith Transportation. The enclosed signature cards bore the signatures of both Halverson and Streett.

Because neither Halverson nor Streett testified either at trial or by way of deposition, the exact nature of Streett's role in the affairs of M & R Trucking and Donald J. Smith Transportation was never fully explained. Smith testified that he knew that Streett worked for Halverson. One of the exhibits introduced by Smith a copy of the operating contract between Smith and Halverson described above contained a vehicle inspection report, dated October 1, 1974, which was signed by Streett under the title "Inspector" and which bore Smith's signature certifying to the fact that the person who had made the inspection described in the report was duly authorized to make the inspection as Smith's representative.

The first two loads of equipment were loaded on Halverson's trucks on October 7, 1974, and were subsequently delivered to Alyeska Pipeline Service Company in Fairbanks, Alaska, on October 17, 1974. The bill of lading provided that the freight charges were to be collected from Morgan Equipment Co. of San Francisco, California (Morgan Equipment). On October 11, 1974, Streett prepared invoices in the amount of $5,798 for each of the first two shipments and sent them to Morgan Equipment for payment. Upon receiving signed copies of the bills of lading evidencing receipt of the shipment by the consignee, Smith sent statements to Morgan Equipment requesting payment. Morgan Equipment in return sent Smith a check in the amount of $11,596, representing payment for the two shipments. Smith in turn endorsed the check and gave it to Halverson in payment of the $6,034 Halverson was entitled to under the hauling contract and as reimbursement for the $5,000 which Halverson had contributed to open the Donald J. Smith Transportation account. The check from Morgan Equipment was deposited in the Donald J. Smith Transportation account on November 1, 1974.

During the latter part of October 1974, Smith and Halverson made six more shipments of equipment to Fairbanks, Alaska. Invoices totaling $34,788 were mailed to Morgan Equipment on October 27 and 29, 1974. Sometime in November of 1974, Smith discovered that Streett was writing checks on the Donald J. Smith Transportation account. Smith testified that he confronted Halverson with this fact as soon as he became aware of it.

On November 8, 1974, Streett made a deposit in the amount of $12,500 to the M & R Trucking account in the form of a check drawn by her on her account in a Waynesburg, Pennsylvania, bank. Immediate credit was given to the M & R Trucking account. The check was returned to the industrial branch unpaid on November 21, 1974, bearing a slip with a notation "acct closed." On November 14, 1974, a check in the amount of $10,500, drawn by Trans-Agri Leasing, Mankato, Minnesota, in favor of M & R Truxs, Inc., was deposited in the M & R Trucking account. Immediate credit was given to M & R Trucking on this deposit. The check was in payment for two truck trailers sold by M & R Trucking to Trans-Agri Leasing. When it developed that M & R Trucking could not deliver clear title to the trailers, Trans-Agri Leasing stopped payment on the check.

As a result of the unpaid status of these two checks, the bank prepared a debit slip on November 22, 1974, charging the M & R Trucking account $23,000. Starting in October and November of 1974, the M & R Trucking account frequently was in an overdrawn status. Streett had led the bank officers to believe that M & R Trucking was entitled to a substantial payment from Morgan Equipment. In mid-November of 1974, the assistant manager of the bank's industrial branch, Joe Lorang, had called Morgan Equipment and learned that a large payment had been sent.

On the morning of November 21, 1974, Viberg assisted Streett in depositing a check in the Donald J. Smith Transportation account by preparing a deposit slip for her in the amount of $34,728, which represented a check in that amount from Morgan Equipment. Viberg then prepared a counter check for her in the amount of $29,728 on the Donald J. Smith Transportation account payable to M & R Trucking. Streett signed the check and Viberg prepared a deposit slip in the amount of $29,728 in favor of the M & R Trucking account, and the proceeds of the counter check were credited to that account.

On that same morning of November 21, 1974, Smith received a $34,000 check from Morgan Equipment. He took the check to Halverson who informed him that payment had been stopped on the check. Smith called to Morgan Equipment to confirm the stop payment and was informed that a second check had been issued and sent to the bank by the direction of Viberg. Smith confronted Viberg with this information the next day and Viberg indicated that he did not know anything about the check coming directly to the bank.

Smith brought suit against Halverson and the bank for tortious conversion of the $34,728 check from the Donald J. Smith Transportation account to the M & R Trucking account in order to cover the outstanding bad checks totalling $23,000. Halverson failed to appear and judgment was entered against him at the same time a verdict was directed in favor of the bank. Smith appeals from the judgment upon the directed verdict.

Upon a motion for a directed verdict, the trial court must consider the evidence in the light most favorable to the nonmoving party and give the nonmoving party the benefit of every reasonable inference in his favor. The trial court must determine whether there is any substantial evidence to sustain the cause of action. If there is such substantial evidence that would allow reasonable minds to reach differing conclusions, the case must be submitted to the jury. Lytle v. Morgan, 1978, S.D., 270 N.W.2d 359. Upon review of the directed verdict in favor of the bank, we will view the evidence in the light most favorable to Smith. Snell v. Watts, 1959, 77 S.D. 534, 95 N.W.2d 453.

The record shows that the bank officers were apprised of the general terms of the business agreement between Smith and Halverson prior to the establishment of the checking account. Smith testified that he did indeed sign a white card at the bank when the account was opened. Regarding those authorized to sign on the account, the fact that Smith knew who Pat Streett was and knew she signed a vehicle inspection report for him does not imply that he authorized her to sign on the account or that he acquiesced in such signing.

Viberg denied that he personally handled the account...