Wedge Mines Co. v. Denver Nat. Bank

• Decision Date: 12 October 1903
• Citation: 19 Colo.App. 182,73 P. 873
• Parties: WEDGE MINES CO. v. DENVER NAT. BANK.
• Court: Colorado Court of Appeals

73 P. 873

19 Colo.App. 182

WEDGE MINES CO. v. DENVER NAT. BANK.

Court of Appeals of Colorado

October 12, 1903

Appeal from District Court, Arapahoe County.

Action by the Wedge Mines Company against the Denver National Bank. From a judgment for defendant, plaintiff appeals. Affirmed.

Charles H. Toll and D.V. Burns (R.T. McNeal of counsel), for appellant.

Stuart D. Walling, for appellee.

GUNTER J.

January 1897, appellant corporation was organized and began business consisting of operating its mines at Ouray, this state, and marketing the ore mined with the Omaha & Grant Smelting Company, in this city. J.B. Farish, residing here, was president, and Edward Richards was secretary, treasurer, and general manager; residence, Salt Lake City. Mr. Richards gave attention to the practical management of the company, and visited its offices in this city monthly during the occurrence of events involved in this action. Mr. Farish was absent from the city during much of the time, but was frequently consulted by Mr. Richards concerning the affairs of appellant. January, 1897, appellant opened its principal office in this city. A room adjoining the office was occupied by Mr. Farish as his private office, his clerk being a niece Miss M.L. Farish. Appellant, as stated, sold its ore to the Omaha & Grant Smelting Company. After the value of the ore sold was fixed by sampling and adjustment, a check therefor was mailed to appellant, drawn by the smelting company on appellee bank, and payable to the order of appellant. From January, 1897, to August, 1897, these checks were indorsed either by Miss Farish in this form "The Wedge Mines Co. Per M.L.F." (her initials), or by Mr. Richard thus: "The Wedge Mines Co., Per Ed. Richards," and placed to the credit of appellant with the First National Bank of this city. The checks then passed through the clearing house, were paid by appellee, and charged to the account of the smelting company, which company carried its account with appellee. April, 1897, George E. Peck, an old schoolmate and life-long friend of Parish, and until then a resident of California, was employed by appellant, and placed in charge of its above office. Peck's duties were to keep a ledger, journal, bullion and ore sales book, cashbook, and to attend to the adjustment of the value of the ore shipped by appellant to the smelting company. These books were kept by Peck correctly during the transactions here involved. The value of the ore sold amounted to several thousand dollars per month, and from August, 1897, to January, 1899, to about $223,000. When the value of the ore had been adjusted, the smelting company delivered to Peck personally, or mailed to the company at its Denver office, a statement of its weight and value. A copy of this statement was also sent to Mr. Richards and Mr. Farish, whereby they could know what the ore sales amounted to, and what sum ought to be placed to the credit of appellant in its depository, the First National Bank. Peck entered in the ore and bullion sales book a statement of the amount and value of the ore thus sold. Convenient opportunity for information was thus given at all times to the officers of the company, Farish and Richards, as to the amount of the sales, by this book, in addition to the smelter statements sent them. The cashbook, which was balanced monthly, disclosed the amount of cash which should have been to the credit of appellant in its bank. A comparison of this book, or the ore sales book, or the smelter statements with the bank passbook, would have revealed any discrepancy between the checks received by Peck and those deposited. Miss Farish left the office in August, 1897. Peck was thereafter authorized to indorse all checks, "The Wedge Mines Co. Per Peck," and to deposit them, so indorsed, to the credit of appellant, with the First National Bank of Denver. Such indorsements began with August, 1897, and continued until January, 1899, when appellant first discovered Peck's defalcations. These checks, which were many, and, as stated, amounted to several thousand dollars per month, having received the blank indorsement by Peck, were deposited by him to the credit of appellant, passed through the clearing house to appellee bank, were paid, and charged to the Omaha & Grant Smelting Company's account on its books. It had been agreed between Farish and Richards that whenever the cash balance in bank amounted to over $20,000 a dividend should be declared, and dividends were declared almost monthly on such cash balances during these transactions. This is mentioned as bearing upon the opportunity appellant had for ascertaining, by examination of its accounts, defalcations practiced by Peck. During the time of the transactions here involved, Peck was authorized to indorse the checks payable to appellant, "The Wedge Mines Co. Per Peck." Appellant knew that Peck was indorsing its checks in such manner; that upon such indorsement they were being paid; and during all of this time, by such course of dealing, it held Peck out to appellee bank as authorized to so indorse these checks. It had knowingly permitted appellee to pay about $70,000 of such checks so indorsed, when Peck appropriated for his own use the first check here sued upon. True it is that there was a secret limitation upon the authority given to Peck by authorizing him to make such indorsement. That limitation was, the check so indorsed should be deposited to the credit of appellant at the First National Bank of Denver, but of this limitation appellee had no notice. December 24, 1897, the smelting company mailed its check payable to the order of appellant and drawn on appellee bank for $685. Peck, being in charge of appellant's office, and authorized to do so, received the check, and indorsed thereon, "Wedge Mines Co. Per Peck," and delivered it for value to one Ellis, who indorsed it for value to W.W. Watson, who, after indorsement by him, deposited it to his credit with appellee. This check was charged by appellee to the smelting company, and Watson's account was credited with it. The indorsements appearing upon the check when paid by appellee were: "Wedge Mines Co., Per Peck; J.K. Ellis; W.W. Watson." Peck negotiated the check for his private use. January, 1899, appellant discovered this misappropriation, and in April, 1899, instituted the present action. In a count thereof for money had and received appellant sued appellee for the amount of this check, contending that the indorsement by Peck was unauthorized, and that the facts surrounding the negotiation of this and previous checks were sufficient to put appellee upon notice of...