The Chamberlin Metal Weatherstrip Company v. The Bank of Pleasanton

• Decision Date: 05 June 1920
• Docket Number: 22,552
• Citation: 107 Kan. 79,190 P. 742
• Parties: THE CHAMBERLIN METAL WEATHERSTRIP COMPANY, Appellee, v. THE BANK OF PLEASANTON, Appellant
• Court: Kansas Supreme Court

190 P. 742

107 Kan. 79

THE CHAMBERLIN METAL WEATHERSTRIP COMPANY, Appellee, v. THE BANK OF PLEASANTON, Appellant

No. 22,552

Supreme Court of Kansas

June 5, 1920

Decided January, 1920.

Appeal from Linn district court; EDWARD C. GATES, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

BANK CHECK--Authority of Agent to Indorse Check Drawn in Favor of His Principal A corporation of Michigan sent its agent to Kansas to contract for and supply weather strips to such customers as he could induce to purchase them. The form of contract furnished to and used by him provided for payment in cash on completion of the work. On completing a contract with one customer she gave him a check on a local bank whose cashier knew he had been in the vicinity for some time filling similar contracts. The agent indorsed the check "Chamberlin Metal Weatherstrip Co. By Sprague T. Haskell, Agent," and the bank paid it to the agent, who absconded with the proceeds. Held, that the principal cannot compel the bank to pay to it the amount of the check thus indorsed and collected by its agent.

John A. Hall, of Pleasanton, for the appellant.

Charles F. Trinkle, of La Cygne, for the appellee.

OPINION

WEST, J.:

The defendant appeals from a judgment holding it liable for the amount of a check cashed by it.

The plaintiff sent its agent, Sprague T. Haskell, out to sell weather strips and authorized him to contract with Mrs. S. J. Ellis to supply strips for thirty-six openings. The contract closed with the following words:

"Terms: Unless specially written herein are cash on completion of work.

Respectfully submitted July 1st, 1912, In Duplicate.

CHAMBERLIN METAL WEATHERSTRIP CO.

By SPRAGUE T. HASKELL."

Haskell, who took several other orders in the vicinity, filled this for Mrs. Ellis and received her check for $ 134 on the defendant bank, receipting therefor in the following words on the back of the contract:

"July 16, 1912. Received of Mrs. S. J. Ellis check for one hundred and thirty-four dollars in full of this contract.

CHAMBERLIN METAL W. S. CO.

By SPRAGUE T. HASKELL."

The collection manager of the company testified that Haskell was not authorized to collect any money from Mrs. Ellis for him, or to sign or indorse any checks for the company, or ever permitted to do so. It seems that the money never reached the company. The secretary and treasurer testified that he never authorized Haskell to collect money from customers, and that he never had any authority to take money from Mrs. Ellis. It was agreed that Mrs. Ellis gave the check to Haskell, who indorsed it--

"CHAMBERLIN METAL WEATHERSTRIP CO.

By SPRAGUE T. HASKELL,"

and presented it to the bank and received payment. The company wrote to the bank's attorney that a review of the correspondence failed to show that Haskell had any authority to collect accounts--

"The contract also states that remittances be sent direct to either the St. Louis office or Detroit office."

Later, he wrote that he took it for granted that the Ellis contract was on the form containing this clause. As a matter of fact, the contract contained no such clause whatever.

The cashier of the defendant bank testified that Haskell came in and talked to him about various jobs he was doing in the vicinity; that he was around there about sixty days; and that he, the cashier, knew of no one else connected with the company. There was testimony of other witnesses to the effect that Haskell was the only man in the neighborhood doing business for the company.

The theory of the plaintiff is that Haskell had no authority to indorse the check and therefore the bank paid it to him at its peril and must pay it over again. It is plain that Haskell was the agent of the company, and the only one in the vicinity of Pleasanton who had any connection with the company and was acting on its behalf in contracting for weather strips, and that the contract with Mrs. Ellis specifically provided for cash payment upon completion of the work, and bore no sort of indication that such payment could be made to anyone other than Haskell, or at any place except Pleasanton. It is equally clear that had Haskell collected the cash from Mrs. Ellis and absconded with it the company could not look to her for payment over again. So the one question is whether or not the weatherstrip company can send an agent into a neighborhood with material and authorize him to contract for and to carry out contracts for weather strips, payment to be made in cash upon completion of the work, and then when he takes a check instead of cash and indorses it as in this case, the bank whose cashier knows that he has been doing this sort of work for the company for several weeks, and which honors the check must lose rather than the company whose agent has failed to remit. There is certainly nothing in the elements of justice and fair dealing to lend support to the plaintiff's contention, and unless some settled rule of law places the loss on the bank, it should fall on the company whose agent seems to have played it false, and not on the innocent party whose check was the mere instrument or conduit by and through which Mrs. Ellis paid for the work on its completion.

When the case was first here (Chamberlain Co. v. Bank, 98 Kan. 611, 160 P. 1138), it was on an objection to testimony under the petition which alleged that Haskell had no authority to indorse the check and that the indorsement was a forgery, and that he had no authority to make collection on the plaintiff's account. The bank demurred, and after its demurrer was overruled, it answered by general denial. After the opening statements of counsel in harmony with the pleadings, an objection to the introduction of testimony was sustained. The general rules of the law merchant set forth in that opinion are correct, but as already indicated they do not solve the problem now presented.

This time in the court below an agreed statement of facts was offered in evidence, which covered nothing necessary to be noticed now. The company relies on Vacuum Cleaner Co. v. Bank, 101 Kan. 726, 168 P. 870, as decisive of this case. But there we read:

"It is said that Berryhill was held out as the plaintiff's agent, and that authority to indorse the plaintiff's name on the check should be implied. The evidence was that Berryhill installed a vacuum cleaner in the home of C. E. Roth--made the contract, did the work, and collected the price--and the defendant knew these facts. The evidence further disclosed, however, that Berryhill had made a contract in his own name to sell Roth a vacuum cleaner not manufactured by the plaintiff. The plaintiff had a machine which had been used for purposes of demonstration. The plaintiff sold this machine at a discount to Berryhill, who used it to fill his contract with Roth. Consequently Berryhill did not act for the plaintiff in any capacity in the Roth transaction." (p. 727.)

True, it was further said that even if Berryhill had the authority to install and take checks for the price, the authority to indorse could not be implied, reference being made to 2 C. J. 636. In this text it is said that the most comprehensive grant in general terms of power to an agent does not include authority to indorse commercial paper--

"Unless the exercise of such power is so necessary to the accomplishment of the agency that such intent of the principal must be presumed in order to make the power effectual."

Also, that mere authority to receive negotiable paper carries with it no power to indorse--

"As the receipt of the paper accomplishes the purpose of the agency, and hence exhausts the power. . . ." (p. 637.)

Following this the author says:

"Much must depend upon the position of the agent and the circumstances of the case, and the agent's authority to execute or indorse commercial paper will be presumed whenever such power is reasonably necessary to effectuate the main object of the agency." (p. 638.)

This is not a case involving the mere question of an agent's authority to indorse commercial paper for his principal because the agent's power would ordinarily include no such authority. But here the company sent its man out to a distant state with full...