Twellman v. Lindell Trust Co.

• Decision Date: 10 February 1976
• Docket Number: 35965,Nos. 35964,s. 35964
• Citation: 93 A.L.R.3d 943,19 U.C.C.Rep.Serv. 604,534 S.W.2d 83
• Court: Missouri Court of Appeals
• Parties: , 19 UCC Rep.Serv. 604 Harvey TWELLMAN, Plaintiff-Respondent, v. LINDELL TRUST COMPANY, a corporation, Defendant, Third-Party Plaintiff(Appellant), v. CONTINENTAL BANK & TRUST COMPANY, a corporation, Third-Party Defendant(Appellant). . Louis District, Division Three

Page 83

534 S.W.2d 83

93 A.L.R.3d 943, 19 UCC Rep.Serv. 604

Harvey TWELLMAN, Plaintiff-Respondent, v.LINDELL TRUST COMPANY, a corporation, Defendant, Third-Party Plaintiff(Appellant), v.CONTINENTAL BANK & TRUST COMPANY, a corporation, Third-Party

Defendant(Appellant).

Nos. 35964, 35965.

Missouri Court of Appeals, St. Louis District, Division Three.

Feb. 10, 1976.

Barnard, Baer, Lee, Timm & McDaniel, Michael J. Doster, Herbert E. Barnard, St. Louis, for third-party defendant(appellant).

Evans & Dixon, Ralph C. Kleinschmidt, Gerard F. Hempstead, St. Louis, for defendant, third partyplaintiff(appellant).

Greenfield, Davidson, Mandelstamm & Voorhees, Lawrence N. Doreson, Alphonso H. Voorhees, St. Louis, for plaintiff-respondent.

McMILLIAN, Judge.

This is a civil action for money damages sustained by plaintiff when defendant, Lindell Trust Company(Lindell Trust), paid a Treasurer's check bearing a forged endorsement.Lindell Trust brought a third-party action against defendant, Continental Bank and Trust Company(Continental) alleging that Continental had guaranteed and warranted that the endorsement in question was genuine and that the endorser had the authority to endorse.At the close of all the evidence, the court sustained plaintiff's motion for a directed verdict and entered judgment against Lindell Trust for $50,000.The court also directed a verdict in like amount in favor of Lindell Trust against Continental.Both Lindell Trust and Continental appealed.In an opinion filed October 21, 1975, we affirmed the judgment in favor of plaintiff, but ordered that the amount be reduced from $50,000 to $14,500.Plaintiff then moved for a rehearing, which we granted.

At the rehearing, the parties argued two issues: (1) whether we had exceeded our authority by reducing the judgment as a matter of law and (2) whether plaintiff is a proper party to sue for conversion under § 400.3--419, RSMo 1969.After duly considering the arguments made upon the rehearing, we again determine that judgment should be entered for plaintiff against Lindell Trust and for Lindell Trust against Continental in the amount of $14,500.

We glean from the transcript that plaintiff lent one Michael Londe $50,000 for two (2) days under an arrangement whereby Londe would purchase and sell for a quick profit certain International Harvester vehicles.Since plaintiff knew that the loan was to be used to purchase International Harvester vehicles, he purchased, from Lindell Trust, a Treasurer's check payable to International Harvester and delivered the check to Londe, who, in turn, delivered his two day post-dated check to plaintiff to secure the loan.Not only did Londe's postdated check 'bounce,' but also he forged the endorsement of the payee and cashed the Treasurer's check at Continental, which guaranteed prior endorsements and was paid by Lindell Trust.

Prior to cashing the check, Londe had taken the check to Roedel Brothers, Inc., an International Harvester dealer.He wanted to give the dealer the $50,000 check for a $4,000 truck and to receive the difference in change.However, Roedel Brothers, Inc., refused to accept the check because the payee was International Harvester.

In any event, the endorsement accepted by Continental was as follows:

'Pay to the order of Michael Londe Roedel Brothers Internation (sic) Harvester Trucks

(signed)Carle (sic) Roedel

(signed)Michael Londe' (Emphasis added.)

Continental accepted the check and added its own endorsement.The Treasurer's check was forwarded through the Federal Reserve Bank to Lindell Trust who paid out the $50,000.

From the evidence it is unclear who first questioned the Roedel endorsement, but eventually plaintiff obtained an affidavit from Carl Roedel stating he did not sign the check.Both the affidavit and the check through the Federal Reserve were returned to Continental, but Continental refused to reimburse Lindell Trust.

After having discovered that the check was not used for the intended purpose and that Londe's check had 'bounced,'plaintiff sought repayment from Londe.While not altogether successful, plaintiff did recover $35,500.However, plaintiff testified that he was not seeking reimbursement for the $50,000 transaction, but rather for any part of the $121,000 Londe owed him overall from other transactions.In any event, although plaintiff used the $35,500 to make payments on his own notes at Lindell Trust, he did not tell Lindell Trust which of his obligations owed to them it should apply the payment.Therefore, Lindell Trust applied the $35,500 payment to the $50,000 note which plaintiff had executed in exchange for the $50,000 Treasurer's check.This allocation reduced the balance due on the $50,000 note to $14,500.Subsequently, plaintiff paid, from his own funds, his entire indebtedness owed to Lindell Trust.

Despite Lindell Trust's application of the $35,500 from Londe to the December 15 note, plaintiff seeks in this lawsuit to recover the face value of the Treasurer's check, i.e., $50,000 from Lindell Trust for having paid out that amount over a forged endorsement.While we uphold the trial court's decision that Lindell Trust and ultimately Continental are liable to plaintiff as a matter of law, we reduce the amount of the judgment to $14,500.

Defendant Lindell Trust and third-party defendant Continental allege several points of error which we will discuss individually.First of all, we note Continental's contention that the directed verdict denied them their right to a jury trial under Art. I, § 22(a),Const. of Mo. 1945, V.A.M.S.But this constitutional provision for right of jury trial does not apply to questions concerning directed verdicts.Auffenberg v. Hafley, 457 S.W.2d 929, 934(Mo.App.1970)andKnight v. Calvert Fire Ins. Co., 268 S.W.2d 53, 55(Mo.App.1954).A verdict may be directed for a plaintiff(who naturally has the burden of proof) in those rare cases where there are no genuine fact issues which should be submitted to the jury.Morris v. Reed, 510 S.W.2d 234, 238(Mo.App.1974);Alaska Fed. Sav. & Loan Ass'n v. Hoffman, 485 S.W.2d 118 120 (Mo.App.1972);Auffenberg v. Hafley, supra, at p. 934.In our case, after reviewing the evidence in the light most favorable to the defendant and third-party defendant, we find that there was no fact issue which could have been decided which would have supported a jury verdict against plaintiff.Therefore, the trial judge did not err in directing a verdict for plaintiff.

The first of the substantive arguments made by Lindell Trust and Continental is that they are not liable to plaintiff since their payment over the forged endorsement was not the proximate cause of plaintiff's losses.Plaintiff's loss is said to be due to his dealings with Londe and the failure of Londe's post-dated check of December 15, to cover plaintiff's note.It is true that if Londe's check had cleared Lindell Trust would have applied its proceeds to pay off plaintiff's $50,000 note of December 15 and plaintiff would have suffered no loss.But Londe's wrongdoing is not what is at issue in this case.We are concerned with the liability of two banking institutions who wrongfully dealt with a negotiable instrument.Defendants recognize that the Uniform Commercial Code(hereinafter referred to as U.C.C.)§§ 400.3--101 to 400.3--307 RSMo 1969, governs liability wherever its specific provisions apply and they, in fact, cite several sections of Articles 3 and 4 as being applicable.In view of the purpose of the U.C.C. to promote uniformity and certainty and the negotiability of instruments such as the Treasurer's check in this case, we do not think that a collateral issue of proximate cause should apply.Though the U.C.C. sets out various defenses to suits on a negotiable instrument, it does not mention proximate cause.We feel that only the specific U.C.C. defenses should be considered in a suit on this instrument.If these defendants are liable on the $50,000 instrument under the U.C.C., then any possible unliquidated liability Londe might have on another instrument or on a contract is irrelevant.

We note, however, that there is a recent Missouri case, Union Fin. Co. v. Nat. Bank in North Kansas City, 463 S.W.2d 70(Mo.App.1970), which uses the proximate cause concept to relieve a bank from its liability for paying a check over a forged endorsement.In the Union Fin. Co. case, the plaintiff made a loan to a husband and wife by drawing a check payable to them jointly.The wife forged the name of the husband both on the endorsement of the check and on the promissory note and the security agreement which constituted the consideration for the loan.The plaintiff-drawer sued the drawee bank for paying the amount of the check over the forged endorsement of the co-payee husband.The court held that the bank was not liable since plaintiff's loss was proximately caused by the forgery on the note and security agreement, not the forgery of the check's endorsement.Union Fin. Co., supra, at pp. 72, 74.

Our case can be distinguished on the facts from the Union Finance Company case since there, forgeries had occurred on three instruments (the negotiable note, security agreement and the check) all within the same transaction.Here, there was only one forgery on one instrument, the Treasurer's check--and plaintiff suffered a loss when the defendants paid that check over the forged endorsement.Furthermore, the Union Finance Company case although it was subject to the U.C.C., was based primarily on three pre-U.C.C. cases: Public Loan Corp. of Warren v. Jacobs, 144 N.E.2d 505(Ohio App.1955);Lincoln Building & Loan Ass'n v. Liberty Nat. Bank & Trust Co., 312 Ky. 282, 227 S.W.2d 191(1950)andProvident Sav. Bank and Trust Co. v. Fifth-Third Union Trust Co., 43 Ohio App. 533, 183 N.E. 885(1932).The courts in all three of these pre-U.C.C. cases, as well as the Union Finance Company case, all seemed to have been heavily influenced by the fact...