Strickland Transp. Co. v. First State Bank of Memphis, A-1638.
| Decision Date | 10 November 1948 |
| Docket Number | No. A-1638.,A-1638. |
| Citation | 214 S.W.2d 934 |
| Parties | STRICKLAND TRANSP. CO. v. FIRST STATE BANK OF MEMPHIS. |
| Court | Texas Supreme Court |
Rawlings, Sayers & Scurlock and Nelson Scurlock, all of Fort Worth, for petitioner.
Hamilton & Deaver and John Deaver, all of Memphis, for respondent.
Petitioner, Strickland Transportation Company, a corporation, operating a motor truck line, employed one John W. Akard as its commission agent in Memphis, Texas. His duties included picking up and delivering freight transported by petitioner; he was authorized to accept checks of customers payable to petitioner for freight charges; but he was not authorized to indorse or cash these checks, only certain officers of the petitioner being so authorized.
Akard served as petitioner's employee for about four weeks in December, 1945, and January, 1946. During that time he received for freight charges due petitioner from a customer, White Auto Store, six checks, totaling $1304.73, all drawn by White Auto Store on respondent, First State Bank of Memphis. He indorsed these checks and presented them to the respondent for payment. They were made payable and indosed as follows:
Date Amount Payee Indorsement
--------------------------------------------------------------------
12-4-1945 $ 27.08 Strickland Transportation Stricklin Motor
frate argeis
John W. Akard
12-17-1945 386.11 Strickland Transportation John W. Akard
Stricklin frate
Agan
1-14-1946 32.24 Strickland Transportation Co. John W. Akard
Agent
1-17-1946 64.81 Strickland Transportation Co. John Akard
Agent
1-19-1946 754.26 Strickland Transportation John Akard
Agent
1-23-1946 40.23 Strickland Transportation John Akard
Agent
Upon being presented with the checks, the bank paid their amounts to Akard, and charged them against the account of White Auto Store, which at all times had on deposit sufficient funds to pay the checks. Later the canceled checks were returned by the bank to White Auto Store. Akard appropriated to his own use the money so paid to him, and left for parts unknown.
When petitioner learned of Akard's misconduct it demanded that the bank pay it the amounts of the checks and offered to deliver the checks properly indorsed. It also got from White Auto Store an assignment of all of its rights and causes of action against the bank, arising out of the transactions set out above. After the bank refused to make the payments demanded, petitioner filed this suit.
It alleged that the bank was liable to it, as payee of the checks, for wrongful conversion of the checks when "it was apparent to the defendant (bank), its agents and officers, that the said Akard was not acting for and on behalf of the plaintiff and was obtaining the funds for his own use and benefit." It also alleged that the bank was guilty of negligence in cashing the checks without petitioner's indorsement. It further alleged that the payment of the checks upon an unauthorized indorsement was a breach of the bank's duty to its depositor, White Auto Store, that the bank was without authority to charge the amounts paid to Akard against the account of such depositor, and that as assignee of White Auto Store, the petitioner was entitled to recover the amounts.
Respondent answered by special exceptions and a general denial and pleaded specially that the execution and delivery of the checks to Akard constituted payment of the indebtedness of White Auto Store to petitioner, and that the assignment made by White Auto Store to petitioner conveyed no rights, because White Auto Store had suffered no damage by the payment of the amounts of the checks by the bank to Akard and the charging of the amounts against the account of White Auto Store.
The case was tried by the court without a jury and judgment was entered for the bank. No findings of fact or conclusions of law were filed or requested. The court of civil appeals affirmed the judgment of the trial court. 207 S.W.2d 941.
Petitioner's first contention is that the bank is liable to it as payee of the checks on the theory of wrongful conversion. It concedes that under the decision in Fidelity & Deposit Co. v. Fort Worth Nat. Bank, Tex.Com.App., 65 S.W.2d 276, the payee of a check ordinarily has no direct cause of action against the drawee for payment of the check upon a forged or unauthorized indorsement. While the theory of conversion is not discussed in the opinion in Fidelity & Deposit Co. v. Fort Worth Nat. Bank, supra, it is made evident from the opinion of the court of civil appeals in that case, 48 S.W.2d 694, that recovery was sought on that theory, and the denial by this court of liability on the bank's part can only be construed as a rejection of the conversion theory as a ground of liability. Furthermore the Commission of Appeals expressly refused to approve the earlier decisions of courts of civil appeals, allowing recovery on the theory of conversion, in City Nat. Bank & Trust Co. v. Pyramid Asbestos & Roofing Co., Tex.Civ.App., 39 S.W.2d 1101 and Pierce Petroleum Corporation v. Guaranty Bond State Bank, Tex.Civ.App., 22 S.W. 2d 520. See Fidelity & Deposit Co. v. Fort Worth Nat. Bank, supra, 65 S.W.2d 276, at page 278. We must hold to that decision.
Petitioner, however, would distinguish the present case on the theory that respondent knowingly and willfully paid the checks to an unauthorized person. In this connection, petitioner argues that as a matter of law, because of the forms of the indorsements on the checks, the bank knew that Akard was acting without authority. We cannot agree with that contention. We assume, without deciding, that if it had been established that the bank knowingly and willfully aided Akard in his wrongful disposition of the checks, the bank would be liable to petitioner. See American Surety Co. v. Fenner, 133 Tex. 37, 125 S. W.2d 258. But the record does not establish as a matter of law that the bank had any such knowledge or intent. The evidence shows that Akard, in presenting the checks for payment, was purporting to act in a representative capacity. For some purposes, he was in fact the agent of petitioner. While the form of the indorsements was such as might reasonably cause inquiry as to Akard's authority, we do not think that the bank was necessarily informed that he was acting without authority in cashing the checks. The bank, as drawee, could pay the amount of the checks to the agent of the payee without requiring an indorsement, if it chose to do so. 9 C.J.S., Banks and Banking, § 341, page 684. If Akard had been authorized to cash the checks, the bank would not be liable for paying the amounts of the checks to him, regardless of the defects in the form of the indorsements. By entering judgment against petitioner the trial court impliedly found that the bank was not acting in bad faith and that it did not have actual notice of Akard's lack of authority to indorse and cash the checks, and we cannot say as a matter of law that the evidence does not support those implied findings. Mere negligence would not impose liability on the bank to the payee. See Quanah, A. & P. R. Co. v. Wichita State Bank & Trust Co., 127 Tex. 407, 93 S.W.2d 701, 106 A.L.R. 821; West v. First Baptist Church, 123 Tex. 388, 71 S.W.2d 1090.
Therefore we conclude that, under the record, the petitioner as payee of the checks has no direct cause of action against the bank.
Petitioner also sues as the assignee of White Auto Store. This situation was not involved in Fidelity & Deposit Co. v. Fort Worth Nat. Bank, supra. The question on this aspect of the case is whether White Auto Store had any cause of action to assign; and to decide it we must determine whether the liability of White Auto Store to petitioner was discharged by the delivery of the checks to Akard and their subsequent payment by the bank to Akard. The question appears to be one of first impression in this state. Turning to the authorities and decisions in other jurisdictions, we find some hold unequivocally that the liability of White Auto Store was discharged, while others hold with equal emphasis that it was not. In that situation we must choose, and we have concluded that the better reasoned authorities hold that White Auto Store's liability was discharged when the checks were paid to Akard.
It is admitted that the checks were good when given and were paid in full to Akard when presented. The only thing that kept petitioner from getting the proceeds was the infidelity of its own agent. So the question is: Must the harm wrought by that agent's unfaithfulness fall on the one who selected him and sent him out to receive checks under an implied representation that he was worthy of that office or on one who was wholly innocent both of him and of his breach of trust?
There is an excellent discussion of the proposition in McFadden v. Follrath, 114 Minn. 85, 130 N.W. 542, 544, 37 L.R.A., N.S., 201. There the creditor instructed his agent to call on the debtor to collect the account. The agent had authority to receive payment either in cash or by check, but he had no authority to indorse and receive money on checks...
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