Case Name: B. S. TALBOT v. FIRST AND SECURITY NATIONAL BANK OF MINNEAPOLIS
Court: Minnesota Supreme Court
Jurisdiction: Minnesota
Decision Date: 1920-01-23
Citations: 145 Minn. 12
Docket Number: No. 21,503
Parties: B. S. TALBOT v. FIRST AND SECURITY NATIONAL BANK OF MINNEAPOLIS.
Judges: 
Reporter: Minnesota Reports
Volume: 145
Pages: 12–17

Head Matter:
B. S. TALBOT v. FIRST AND SECURITY NATIONAL BANK OF MINNEAPOLIS.
January 23, 1920.
No. 21,503.
Agent without implied authority to indorse checks payable to his principal.
1. The rule of law is well settled in this state that an agent has no implied authority to indorse checks received by him, payable to his principal, for collections which he was authorized to make.
Bankruptcy — indorsement of trustee checks by agent under power of attorney.
■ 2. Plaintiff executed a power of attorney, authorizing his agent to receive and receipt for dividends upon elaims in bankruptcy. The agent received and indorsed the cheeks and drew the money thereon from the bank. In an action against the bank for the conversion of the checks, defendant had a right to show the rules and practice in bankruptcy with reference to the method of handling and paying out funds by the trustee, as bearing upon the intention of the parties as to the authority of the agent to indorse such checks.
Action in the district court for Hennepin county to recover a balance of $397.58. The amended answer alleged that Erstgaard and Works made the indorsements and each of them, with the full knowledge and consent of the plaintiff, and that plaintiff fully and completely authorized said indorsements and consented thereto, and upon such indorsements the checks, by authority and consent and for the benefit of plaintiff were negotiated to parties other than defendant for the full amount thereof, to whom defendant subsequently paid the same upon proper presentation and indorsement by the then holders thereof; that the difference between the amount received by the plaintiff and the amount of $663.83 was retained by them, the said attorneys and attorneys in fact of the plaintiff, without the knowledge of defendant, as compensation for their services, costs and disbursements performed and incurred, in the matter of the presentation and proof of plaintiff’s claims and the collection and receipt of said money, and not otherwise; and that for their services, costs and disbursements so performed and incurred, the said attorneys and attorneys in fact had at all times a lien upon the checks and the proceeds thereof, and upon the dividends coming on said claims so presented and proved by them; and with full and complete knowledge of all the facts and circumstances connected with the issuance • of the checks, the indorsements, negotiations and payment thereof, the plaintiff fully and completely authorized, ratified and confirmed the delivery, the indorsements, negotiations and the payment of said checks, and all acts done by defendant in the premises.
The case was tried before Steele, J., who, when plaintiff rested on the pleadings, denied defendant’s motion to dismiss the action and at the close of the testimony its motion for a directed verdict, and granted the motion of plaintiff for a directed verdict for $403.53. From an order denying its motion for judgment notwithstanding the verdict or for a new trial, defendant appealed. Reversed.
Lancaster & Simpson and James E. Dorsey, for appellant.
Douglas, Kennedy & Kennedy, for respondent.
Reported in 176 N. W. 184.

Opinion:
Quinn, J.
Action for the conversion, of four bank cheeks of the aggregate face value of $663.83. The trial court directed a verdict for the plaintiff. From an order denying its alternative motion for judgment or for a new trial the defendant appeals.
Three actions by different plaintiffs against the defendant were tried . together. The facts are substantially alike. In 1917, B. S. Talbot, John Knutzen and Frank Talbot incorporated the M. T. & K. Bootery, with a. paid-in capital of $30. In February, 1918, the company went into bankruptcy. It was indebted to the incorporators for services and borrowed money. Each of them executed separate powers of attorney to Robert M. Works and O. J. Ertsgaard, empowering them to present and prosecute their claims in the bankruptcy court, and to receive payment of dividends thereon and receipt therefor and generally to do and perform all and every act and thing necessary to be done in the premises. The claims were presented and allowed in the bankruptcy court. The trustee thereafter issued four checks to B. S. Talbot, three to John Knutzen and two to Frank Talbot for dividends on their claims. The alleged conversion of these checks forms the basis of the three actions. They were drawn by the trustee on the defendant bank against funds which he had on deposit therein, payable to the respective claimants and delivered to the agents so appointed, who indorsed their principals' names thereon, cashed the same and deposited the money in their trust account. There was delay in remitting. The claimants became dissatisfied and on August 25 revoked the authority of Works and Ertsgaard and appointed another in their stead. On August 29 Works and Ertsgaard rendered claimants a statement of the moneys collected, charging them 50 per cent of the amount collected and to be collected for their services, inclosing therewith their personal checks for the amount collected less their charges. Claimants retained the checks until .September 10 when they were cashed.
Upon the trial defendant offered in evidence rule 29 of the General Orders in Bankruptcy, and offered to show that the practice in bankruptcy was to take receipts in the form of an indorsement upon cheeks, and that no other form of receipt was taken. An objection to this offer was sustained and an'exception noted. At the close of the testimony the court directed a verdict against the bank for $403.63, being the difference between the amount of the face of the trustee checks and the amount remitted to plaintiff by his agents. The decisive question is, whether the indorsements by the plaintiffs' agents, of the trustee checks, were .authorized so as to protect the bank in the payment thereof.
The rule of law is well settled in this state, that an agent has no implied authority to indorse checks received by him, payable to his principal, for collections which he was authorized to make. William Deering & Co. v. Kelso, 74 Minn. 41, 76 N. W. 792, 73 Am. St. 324; McFadden v. Follrath, 114 Minn. 85, 130 N. W. 542, 37 L.R.A.(N.S.) 201; Doeren v. Krammer, 141 Minn. 466, 170 N. W. 609. In the instant case, how ever, the agent's authority was to collect, receive and receipt for dividends coming through bankruptcy proceedings. Upon the trial defendant offered to show what the rules and practice in such proceedings were with reference to the method of depositing and paying out funds by the trustee. . The rules in bankruptcy are adopted by the Federal Supreme Court under authority of the Bankrupt Act. The form of the power of attorney used therein is prescribed in the same manner. These rules are effective and control in such proceedings. Since the authority was to receive and receipt for dividends under such provisions, the conclusion might follow that such rules and practice were within the contemplation of the parties, evidenced by the power of attorney, leading naturally to the further conclusion that it was intended that the agent should have authority to do' all that was necessary to entitle him to receive the money, including authority to indorse the trustee cheeks given for such dividends. Under this view of the ease proof of the rules and practice in bankruptcy should not have been rejected. The right of the attorney to indorse such checks does not arise as a matter of law. The authority of the attorney in such cases is one of contract between the attorney and the client in respect to which the Federal 'Supreme Court, in the adoption of the bankruptcy rules of procedure, did not intend to interfere; the rules are matters of procedure only. J. B. Orcutt Co. v. Green, 204 U. S. 96, 27 Sup. Ct. 195, 51 L. ed. 390.
Reversed.
[See 32 C. C. A. XXVIII, 89 Fed. XII.]
[U. S. Comp. St. 1916, § 9585, et seq.]