Case ID: ohio-st_41/html/0535-01.html
Source: Caselaw Access Project
Author: {"author": "Martin, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Keys v. Follett.
    An attorney who receives a promissory note from the agent of the owner for collection, may, in good faith, deliver the proceeds of the collection to such agent, or pursuant to his direction. Accordingly: One Richey being agent merely of the owner, delivered a collectible note to Cox & Follett, attorneys, for collection, and subsequently gave to Keys & Co. an order, which reads :
    
      “ Cincinnati, August 13,1872.
    “John F. Follett, Esq.
    “ Please deliver to Samuel B. Keys & Co., or order, on demand, the proceeds of a note drawn by Gabriel Simon for $15,000, sécured by mortgage on property on northwest corner of Third and Race Streets, now in your hands for collection. R. W. Richey.”
    The attorneys accepted this order by writing the firm name across its face, under the word “accepted” ; and Keys <fe Co., relying on the acceptance, advanced moneys to Richey for his individual use. Held: .
    
    1. The acceptance is a contract, binding the acceptors to deliver as directed ; but is not a warranty that Richey was the owner of the note, or had the right to appropriate its proceeds to his own use, and does not estop the acceptors to show the truth in that regard.
    2. The rightful resumption by the owner of the possession and control of the note and discharge of the attorneys, before any proceeds were received by them, constitute a defense to an action against the attorneys on the contract for non-delivery.
    Error to the District Court of Hamilton County.
    In June, 1871, one Richey, as agent of Mrs. Davenport (who with her family was then sojourning in Europe), left for collection with Cox, Burnett & Follett, attorneys, of Cincinnati, a note made by one Simon, secured by his mortgage of certain real estate in that city. In July, 1871, judgment by confession was taken for $10,907.18, with order of sale, but it was agreed to suspend execution for three years, if, in the meantime, the interest was annually paid. In August, 1872, Lea, then a partner with plaintiff, in the name of Keys & Co., bankers in Cincinnati, presented to Follett the following order:
    “ Cincinnati, August 13, 1872.
    “ John F. Follett, Esq. ■
    “Please deliver to Samuel B. Keys & Co., or order, on demand, the proceeds of the note drawn by Gabriel Simon for $15,000, secured by mortgage on property on northwest corner of Third and Race Streets, now in your hands for collection.
    “R. W. Richey.”
    Follett wrote the name of Cox & Follett under the word “ accepted,” which Lea had previously written across the face of the order, and handed it back to Lea. Follett at the time was at his desk occupied with other business, and nothing was said by either. Cox & Follett were then partners and successors to Cox, Burnett & Follett. At the time of this transaction Follett knew that Richey, as Mrs. Davenport’s agent, had trouble in procuring sufficient funds for her needs in Europe, and had been borrowing moneys for that purpose from Keys & Co. Richey was then engaged in losing stock speculations with Keys & Co., and in pursuance of their requirement for indemnity, he gave them this order, and represented that he owned the note, and subsequently received large advances from Keys & Co. on the faith of it. In November, 1872, Richey failed, being at the time indebted to Keys & Co. in about the sum of $50,000. Follett knew nothing of the representations made by Richey as to the ownership of the note, nor of Richey’s stock speculations, nor of any transactions with them on private account. The mortgage was duly recorded. After Richey’s failure Mrs. Davenport took the collection of the claim from Cox & Follett, who never received any of its proceeds.
    The original action was .brought by Keys, as trustee of Keys & Co., on the acceptance as an implied warranty that Richey was the owner of the note. A trial in the common pleas on issues joined resulted in a verdict and judgment for defendants. The plaintiff requested intructions to the jury to the effect that the acceptance of itself was a warranty that Richey owned the note, or had the right to pledge it on his individual account. This the court refused to give, but instructed the jury, amongst other things, as follows:
    “But said acceptance alone, of itself, did not necessarily admit, or warrant, that Richey owned said note and mortgage-, or had the right to pledge, or otherwise appropriate, the proceeds for his individual transactions; and if he did not own it, nor had any interest therein, and had no authority, in fact, from the owner to use it for his individual purposes, the defendants in this action are not estopped, by reason of said acceptance alone, from showing such facts by way of defense. And if, in fact, said note and mortgage belonged to Mrs. Davenport, and said Richey had no interest therein, or control over it, excepting as her agent, and she had never authorized him to use it, or its proceeds, for his individual purposes, and if, before it was collected, and before the commencement of this suit, Mrs. Davenport asserted her ownership, and, as such owner, took the collection thereof from the defendants, and required the payment to be made to her, and no proceeds ever came into their hands, this is a defense to the action.”
    A proceeding in the district court for error in the charge given and in the refusal to charge, resulted in an affirmance.
    To reverse this judgment of affirmance the present proceeding is here.
    
      Matthews & Shoemaker, and Ramsey & Matthews, attorneys for plaintiff in error.
    
      Cox & Cochran, and Follett, Hyman & Kelley, attorneys for defendants in error.
   Martin, J.

The sole question here relates to the interpretation of the contract of acceptance. Does it contain an implied warranty that Richey was the owner of the note ? This question would properly have arisen on demurrer to either of the pleadings, and is here presented on the exceptions to the charges given and refused. It is conceded that when Richey, as agent of Mrs. Davenport, left the note with Follett for collection, he thereby became entitled to direct a delivery of the proceeds of the collection, or to receive them himself, subject to the superior righkof Mrs. Davenport to be exercised at any time before the proceeds are delivered by the attorney.

The order given by Richey is valid. It simply directs the attorney to deliver the proceeds of the collection to Keys & Co. No particular purpose is expressed. It carried with it implied notice that it was revocable by the true owner; and it did not appear to be irrevocable by Richey whether owner or not, as its terms do not import á sale or transfer, and more appropriately consist with the idea of a bailment to the bank for the true owner. Follett accepted the order in the name of the firm, subscribing its signature to the word “ accepted.” This was an act of mere convenience to Keys & Co., because their rights under the order were fixed by notice, and the written acceptance was merely superior evidence.

The right of Mrs. Davenport to rescind the direction and resume control of the claim is not disputed. Being an element of the contract to collect, it became a condition annexed by law to the order and its acceptance. By lawfully resuming custody of the claim Mrs. Davenport put it out of the power of the attorneys to collect it. No proceeds had been received and none could be. The bailment was ended, and the contingency on which they were to deliver did not and could not happen. In other words, the contract with Keys & Co., by its terms, was ended by the intervention of Mrs. Davenport, and there was no default by i'ollett. But the ground of action is not a default in delivery, but a breach of an alleged implied warranty of Richey’s ownership. This claim rests on the assumption that the order contains such a representation, and that the acceptance impliedly recognizes and repeats it. If an order to deliver be given by a client and owner it may be rescindable or not, as its terms or the facts may allow. If it is given, however, by the party who left it for collection and not by the owner, it is rescindable by the owner irrespective of its terms. But in either case an acceptance of the order is not an implied warranty of the collectibility of the claim, either as respects the solvency of the debtor or the title' of the client, because there are no words to that effect, and the act of acceptance is foreign to such purpose, being merely an act in conformity to his original employment. Hence, the most that can be claimed is that the acceptance recognized the right of the drawer to give the direction. And Richey’s right to do so is not disputed. Hence, there was no error m the charge, and the judgment must be affirmed.

It may be proper to add that the elaborate argument on estoppel in pais, and the authorities cited are not in point. Keys supposed Richey was absolute owner; Follett knowing that Richey had the right to direct generally, and seeing that he had done so, supposed it was done for the owner. The supposition in either case was erroneous. Keys, at his peril, relied on the extraneous fact of Richey’s misrepresentation; whilst Follett, unadvised of Richey’s falsehood, safely relied on the natural import of the act of acceptance.

The claim amounts to this, that Follett is answerable for Richey’s extrinsic fraud, of which he had no knowledge. We are not aware of any principle of law or morals that sanctions that position.

If Follett had known of the misrepresentation, his acceptance without any explanation would have been a fraud, and prima fade actionable, which would probably operate as an estoppel in a suit on the supposed warranty, unless countervailed by contributory negligence.

It is enough, however, to say that such questions are not only not presented in .the record, but are, as we have seen, excluded by its admissions.

Judgment affirmed.