Court Opinion

ID: 6770956
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:43:43.558743+00
Date Added: 2024-06-11T16:02:44.291316
License: Public Domain

Wright, J.,
dissenting. I agree wholeheartedly with both paragraphs of the syllabus and the majority’s determination that Security Federal applied the funds inconsistently with the restrictive indorsement in this case. However, unlike the majority, I would not hold Security Federal liable to Society in conversion, because the unique circumstances of this case provide Security Federal with a valid defense.
The majority correctly points out that John Vedrody had the authority to indorse checks and modify indorsements on behalf of Microtek. However, the majority fails to note the critical fact that the parties stipulate that Microtek had given Vedrody the unlimited authority to direct the application of its check proceeds. The majority does concede that Vedrody had the authority to cash the Microtek check or withdraw all the funds from the Microtek account after depositing the check proceeds into Microtek’s account.
By stating that Vedrody was acting only on behalf of NovelTree when he directed Security Federal to return cash and to deposit the remaining check proceeds into the NovelTree account, the majority is, in essence, saying that Vedrody was some thief who was stealing the proceeds from Microtek. Obviously, this cannot be so, because Microtek had given Vedrody the authority to deposit the funds into the NovelTree account. It is clear that the teller at Security Federal followed Vedrody’s instructions regarding the application of the Microtek check not because Vedrody was an authorized agent of NovelTree, but because he was an authorized agent of Microtek. In point of fact, the parties stipulate that the Security Federal teller personally knew Vedrody and knew that Microtek had given Vedrody the unlimited authority to direct the application of the proceeds of the Microtek check.
As is evident from the second paragraph of the syllabus, a depositary bank is not automatically liable in conversion for applying funds inconsistently with a restrictive indorsement. A depositary bank is liable only if it has no valid defense. R.C. 1301.03 provides: “Unless displaced by the particular provisions of Chapters 1301., 1302., 1303., 1304., 1305., 1306., 1307., 1308., 1309., and 1310. of the Revised Code, the principles of law and equity, including * * * the law relative to * * * principal and agent, estoppel, * * * or other validating or *329invalidating cause shall supplement their provisions.” Thus, the common-law principles relating to estoppel, waiver, and agency supplement the statutory provisions concerning restrictive indorsements. If the defenses of waiver and estoppel were not available, I could place a “for deposit only” restrictive indorsement upon a check payable to me, take the check to my bank, instruct the teller that I have changed my mind and want cash, and then sue the bank in conversion if it gives me the cash instead of depositing the check proceeds into one of my accounts.
Microtek, through the words and actions of its general agent who was authorized to direct the application of check proceeds, waived the right to have the check proceeds deposited into one of its own accounts. A waiver is generally defined as a “voluntary relinquishment of a known right.” State ex rel. Hess v. Akron (1937), 132 Ohio St. 305, 307, 8 O.O. 76, 77, 7 N.E.2d 411, 413. See, also, Michigan Auto. Ins. Co. v. Van Buskirk (1927), 115 Ohio St. 598, 155 N.E. 186, paragraph one of the syllabus. A person may waive rights and privileges secured by contract, conferred by statute, or guaranteed by the Constitution, provided the waiver does not violate public policy. See Hess, supra, 132 Ohio St. at 307, 8 O.O. at 77, 7 N.E.2d at 413. Furthermore, a duly authorized agent may waive the rights of his principal, with respect to matters within the scope of the agent’s authority. See 28 American Jurisprudence 2d (1966) 837, Estoppel and Waiver, Section 155. The only means by which a corporation like Microtek can waive its contractual or statutory rights is through the actions of an authorized agent like Vedrody.
In this case, Vedrody exercised his express authority to direct the application of the check proceeds when he instructed Security Federal to return cash and to deposit the remaining proceeds from the Microtek check into the NovelTree account. By doing so, Vedrody voluntarily relinquished Microtek’s right to have the check proceeds deposited into one of its own accounts in accordance with the restrictive indorsement.
Because Microtek, through its authorized agent, waived the right to have the check proceeds deposited into one of its accounts, it is precluded from asserting any claims against Security Federal based upon the latter’s failure to apply the check proceeds consistently with the restrictive indorsement. Society, as Microtek’s successor-in-interest, can assert no greater rights than Microtek. Therefore, Society cannot assert any claims against Security Federal for violating the restrictive indorsement on Microtek’s check.
For the foregoing reasons, I respectfully dissent.
Pfeifer, J., concurs in the foregoing dissenting opinion.