Tarrant American Sav. Bank v. Smokeless Fuel Co.

• Decision Date: 07 January 1937
• Docket Number: 6 Div. 1
• Citation: 172 So. 603,233 Ala. 507
• Parties: TARRANT AMERICAN SAVINGS BANK v. SMOKELESS FUEL CO.
• Court: Alabama Supreme Court

172 So. 603

233 Ala. 507

TARRANT AMERICAN SAVINGS BANK v. SMOKELESS FUEL CO.

6 Div. 1

Supreme Court of Alabama

January 7, 1937

Rehearing Denied March 4, 1937

Appeal from Circuit Court, Jefferson County; Richard V. Evans Judge.

Suit in trover by the Smokeless Fuel Company against Tarrant American Savings Bank. Judgment for plaintiff, and defendant appeals.

Reversed and remanded.

Refusal to instruct that owner suing for bank's payment of checks on forged indorsement of owner's agent could not recover loss resulting from such payment after owner was charged with notice of agent's forged indorsements held error. Code 1923, § 9051.

Those parts of the oral charge made the basis of assignments 12 and 13 are as follows:

"12. The conception that the Court has of the matter is that if Bailey, an employee of Smokeless Fuel Company, was the principal in a collateral contract or indemnity contract on which the American Mutual Liability Insurance Company was the surety, and the American Mutual Company--I will call it that for short--was the surety on an indemnity contract or bond, the Court's conception of it is that if that be the case that it is purely a collateral contract. That is an accessory contract, collateral; and, so far as I can see, it has got nothing to do with the issues that are before you to be decided. It is a collateral matter; it is something not of your concern."

"13. And we have got a law in this State that says that if and when a person who is a surety, in dealing with the question of principal and surety, if and when a surety pays all of the debt that by operation of the statute, which is Code, § 9553, dealing with what is known as subrogation, and says this: 'A surety who has paid the debt of his principal is subrogated both at law and in equity, to all the rights of the creditor, and in a controversy with other creditors, ranks in dignity the same as the creditor whose claim is paid.' Now, then, with that statute, which changes the common law, the Court is of opinion that when and if a surety pays in toto or in full a debt, then that works a subrogation at law as well as in equity, which means, in plain English, that the surety in that event could bring suit in its own name, because it would be subrogated at law as well as in equity, and he would not have to let somebody else sue for the use and benefit of him; but that is not true where he has not paid in toto or in full. If it is only partial payment, then in that event the form of the action is such as the case in this case. In other words, this is a suit by the Smokeless Fuel Company, a body corporate, suing for its own use, whatever it may have paid, and for the use and benefit of the American Mutual Liability Insurance Company; in which event, where it is a partial payment, the proper way to bring the suit is, in my judgment, just as it is brought here, by the owner or the payee of the check, the owner of the chattel, and these collateral matters, or collateral contracts, while they cannot be pleaded in defense at all, they, as a surety pro tanto, could sue for the use and benefit of that surety just as they have here."

The following charges were refused to defendant:

"F. The court charges the jury that if it is reasonably satisfied from all the evidence in this case that the plaintiff, Smokeless Fuel Company, has heretofore collected any part of the shortage charged to William Z. Bailey, then it cannot recover in this suit the amount so collected.

"H. The court charges the jury that if it is reasonably satisfied from all the evidence in this cause that the plaintiff has been reimbursed for a part of its loss by a bonding company which stood as surety upon William Z. Bailey's employe's bond to the plaintiff, then the plaintiff cannot again recover the amount of such partial reimbursement, but must allow the amount thereof as a credit against any amount which it might find is owing to the plaintiff by the defendant by reason of the conversion by the defendant of checks belonging to the plaintiff.

"I. The court charges the jury that if it is reasonably satisfied from all the evidence in this case that the Smokeless Fuel Company continued to hold William Z. Bailey out as its agent to collect and receive money after it was charged with notice of his dishonesty, then it cannot recover in this suit on any items or incidents originating or arising subsequent to the time that it was so charged with notice of the dishonesty of the said William Z. Bailey.

"J. The Court charges the jury that if it is reasonably satisfied from all the evidence in this case that had the plaintiff exercised due diligence it would have discovered the defalcations of William Z. Bailey at an earlier date it cannot return a verdict for the plaintiff for the amount of or on account of any checks thereafter converted."

Graham & Wingo, of Birmingham, for appellant.

London & Yancey, Fred G. Koenig, and W.F. Shillito, all of Birmingham, for appellee.

THOMAS Justice.

The action was in trover.

The many counts of the complaint claimed damages for checks drawn to plaintiff, and which were alleged to be the property of the payee on the date of conversion.

The suit was by plaintiff, "suing for its own use and benefit and for the use and benefit of the American Mutual Liability Insurance Company, a body corporate."

The judgment was for plaintiff for the aggregate amount of the many checks alleged to have been converted.

The suit was under section 9051 of the Code, which reads as follows: "Where a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority."

The construction of this statute is to the effect that a bank is bound to obtain a genuine indorsement on a check, and if it fails to do so it is liable, although the check was made to a fictitious payee. Robertson Banking Co. v. Brasfield, 202 Ala. 167, 79 So. 651; Florence et al. v. Carr et al., 226 Ala. 654, 148 So. 148; 99 A.L.R. notes p. 440, 442.

The defendant moved to strike from the complaint the words "and for the use and benefit of the American Mutual Liability Insurance Company, a body corporate," on the grounds: (1) That "an action of trover can only be brought or maintained by one who had title to or right to possession of the property converted at the time of the conversion"; and (2) "that it is not permissible to bring or maintain an action of trover in the name of one for the use and benefit of another." The motion was overruled, and defendant excepted.

The demurrer to the complaint assigned, among others, like grounds of objection as to the sufficiency of the complaint as those contained in the motion to strike from the complaint the words "and for the use and benefit," etc. The demurrers were overruled, and defendant pleaded the general issue, in short, by consent.

A check is a chose in action that is the subject of conversion and an action of trover. The amount stated on its face is prima facie evidence of its value. First Nat. Bank of Montgomery v. Montgomery Cotton Mfg. Co., 211 Ala. 551, 101 So. 186; A. Paul Goodall Real Estate & Ins. Co. v. North Birmingham American Bank, 225 Ala. 507, 144 So. 7; W.E. Herron Motor Co., Inc., v. Maynor et al., 232 Ala. 319, 167 So. 793.

It is established, that to support an action of trover the plaintiff must have, at the time of the conversion, a general or special right to the property, and possession or an immediate right of possession thereto. Sullivan v. Miller, 224 Ala. 395, 140 So. 606.

The general authorities are to the effect, that where one who sues for the use of another, and such party is entitled to recover, the fact that the usee's name is inserted in the pleading may be treated as surplusage on demurrer. Such is the declared rule in this jurisdiction, so far as concerns a defendant in a suit by the plaintiff entitled to possession prior to the inception of the wrongful possession of the defendant, and prior to the beginning of the unlawful detainer. Whaley v. Wynn, 208 Ala. 342, 95 So. 16 [[unlawful detainer]; Gambill v. Cooper, 159 Ala. 637, 48 So. 691 [unlawful detainer].

In Collins v. Mobile & O.R. Co., 210 Ala. 234, 237, 97 So. 631, 633, which was a suit for negligence, the following observation was made:

"In Southern Ry. Co. v. Stonewall Ins. Co., 163 Ala. 161, 164, 50 So. 940, this court said:

" '*** Without any statute, the insurance company, on paying the insurance

for the property insured and alleged to have been tortiously destroyed by the railroad company, would be subrogated to the rights of the insured or owners of the property, against the railroad company, if any there were, to make good its loss, and could certainly sue in its own name, or in the name of the insured, for its use.'

"See also, Coffman v. L. & N.R.R. Co., 184 Ala. 474, 480, 63 So. 527; Wyker v. Texas Co., 201 Ala. 585, 79 So. 7, L.R.A.1918F, 142. The principle on which such authorities rest is that the insurer and insured are considered as one person, and the distribution of the proceeds is a matter wholly between the insurer and insured (Long v. K.C.M. & B.R.R. Co., 170 Ala. 635, 54 So. 62), and does...