Wells v. Walker Bank & Trust Co., Inc.

• Decision Date: 05 February 1979
• Docket Number: No. 15750,15750
• Parties: Frank M. WELLS, Assignee for Creditors of Financial Service Company, Inc., Plaintiffs, v. WALKER BANK & TRUST COMPANY INC., and First Security Bank of Utah, Defendants. WALKER BANK & TRUST COMPANY, Third-Party Plaintiff and Appellant, v. Golden STETTLER et al., Third-Party Defendants and Respondents.
• Court: Utah Supreme Court

Page 1261

590 P.2d 1261

Frank M. WELLS, Assignee for Creditors of Financial Service

Company, Inc., Plaintiffs, v. WALKER BANK & TRUST COMPANY INC., and First Security Bank of

Utah, Defendants.

WALKER BANK & TRUST COMPANY, Third-Party Plaintiff and Appellant, v. Golden STETTLER et al., Third-Party Defendants and Respondents.

No. 15750.

Supreme Court of Utah.

Feb. 5, 1979.

N. George Daines, III, Daines & Daines, Logan, for plaintiffs.

Calvin L. Rampton, D. Miles Holman, of Jones, Waldo, Holbrook & McDonough, Salt Lake City, for third-party plaintiff, appellant.

Dan B. Allen, Ray, Quinney & Nebeker, Salt Lake City, for defendants.

W. Scott Barrett, of Barrett & Mathews, Logan, for third-party defendants, respondents.

CROCKETT, Chief Justice:

Plaintiff Frank M. Wells, an assignee for the benefit of creditors of Cache Valley Syndicate Trust (CVST), brought an action against defendants Walker Bank & Trust Co. and First Security Bank of Utah, alleging that those banks had negligently honored "altered" checks drawn on the trust account, and seeking damages of about $96,000. The defendant Walker Bank answered, denying any liability. It also filed a third-party complaint against the trustees of CVST, asserting that if Walker Bank were found to be liable, it should be indemnified by the trustees whose employee, one Elmer G. Erickson, allegedly made the alterations to the checks.

The trustees moved to dismiss the complaint for failure to state a claim upon which relief could be granted. From an order granting that motion, Walker Bank appeals.

In 1971, Financial Services Company, Inc., an insolvent corporation, transferred its assets to the Cache Valley Syndicate Trust as means of satisfying creditors' claims against that corporation. Golden Stettler, Lynn Toolson, Alma Dittmer, H. M. Nielson and Elmer Gibson are the trustees of CVST. Mr. Erickson was employed by them to assist in the management of the trust.

Plaintiff Frank M. Wells alleges that Mr. Erickson altered checks drawn on the trust account by inserting either the clause "Investors Mortgage Corporate Trust" or "Elmer G. Erickson, Trustee" after the phrase "to the order of" and then adding the word "for" in front of the name of the intended payee and bracketing that clause, so that the check would appear: Pay $______ to the order of Investors Mortgage Corporate Trust (for payee). Mr. Erickson then presented the checks to the defendant banks where they were credited for deposit to the accounts just referred to, which were his own.

Plaintiff's complaint further alleges that the checks were "wrongfully and unlawfully" altered; that the alterations were done in such a haphazard and faulty manner as to be plainly apparent on the face of the checks, and that therefore the defendants banks had been negligent in dealing with the accounts and negotiable paper of CVST.

In its third-party complaint, Walker Bank alleged that, when Mr. Erickson presented the checks, he warranted "that he had good title to the checks, or was authorized to obtain payment of acceptance on behalf of one who had a good title, and that all signatures were genuine and authorized." Walker Bank also alleged that Mr. Erickson's misappropriation of the trust funds occurred "in the course of his work as an agent or servant of the third-party defendants (i. e., the trustees) . . . ." Finally, incorporating by reference the answer which it had already filed, Walker Bank alleged that all "signatures or alterations to the checks sued upon in the complaint herein were made with appropriate express or implied authority" of the trustees.

Walker Bank asserts that the case should not have been dismissed because relief could have been granted upon either: (1) a finding that Mr. Erickson was acting as the trustees' agent when he altered and deposited the checks, or (2) a finding that the trustees knew or should have known of his actions, yet retained him in their employ, and failed to adequately supervise his management of the trust funds.

In addressing those arguments, we make the following observations. When a motion to dismiss is made, the trial court should adhere to a policy of being reluctant to turn a party out of court without a trial. ¹ A dismissal which does so is a severe measure and such a motion should be granted only when it clearly appears that the party would not be entitled to relief under any state of facts provable in support of its claim. ² In ruling on such a motion, the court should accept as true all material allegations and such reasonable inferences as to proof that properly could be adduced thereunder. ³ Moreover, consistent with the policy of allowing parties access to the courts to settle controversies, where there is doubt about the foregoing, it should be resolved in favor of allowing the party the...