Court Opinion

ID: 3964273
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:24:08.034125+00
Date Added: 2024-06-11T14:17:39.184802
License: Public Domain

I concur with the majority in the holding that the trial court did not err in overruling the Slaton bank's plea of privilege, but I find myself unable to agree with Judge RANDOLPH in the disposition made of the case, as well as some of the propositions of law announced, and as applied to the uncontroverted facts disclosed by the record.
Judge RANDOLPH'S opinion fully and fairly states the issues tendered by the plaintiff's petition, but does not sufficiently set out the defendant's defenses. So I will make no further statement of the plaintiff's pleadings, but will give the substance of the answer.
The answer of the Slaton bank, as set out in the plea of privilege and controverting affidavit, and made a part of its original answer by reference thereto, interposed the following defenses: First, a general denial, a general exception, and certain special exceptions. It is then alleged that, if the name of the Slaton bank appears on the note for $5,500, either as maker, indorser, acceptor, or guarantor, it is not the act of said bank, nor did defendant bank ever authorize J. K. Wood, or any other officer, to so execute the note or the repurchasing agreement, nor has it adopted or ratified any such illegal acts. It is further alleged that said bank never at any time, or in any manner, ratified either the agreement or the note or its indorsement, and has received no benefit by reason thereof; that the indorsement of said note by Wood, and the execution of the repurchasing agreement, were without authority, and in his I own individual interest; that the same was fraudulently done to promote his private and personal ends, and without the knowledge or consent of the said bank, and while acting adversely to and in conflict with the interest of said bank; that said bank never at any time saw, possessed, owned, or claimed any interest, right, or title in or to the alleged $5,500 note, and never negotiated the same, or caused it to be negotiated to the Amarillo bank, or any one else; that said note was a forgery, and the indorsement thereon by Wood, and the execution by him of the repurchasing agreement in the name of said bank, were both unauthorized, and are, therefore, forgeries as to said bank; that said illegal and criminal acts were repudiated by said bank, and its liability therefor was denied as soon as said bank was informed of the transfer of said note and the execution of the repurchasing agreement; that said bank never at any time, through the said Wood or any one authorized so to do, entered into any repurchasing contract in writing or otherwise with the Amarillo bank with reference to said $5,500 note.
The material evidence in this case is not contradicted. It discloses a transaction upon the part of J. K. Wood with the Amarillo bank, which as to him is criminal, and as a result thereof J. K. Wood is now a fugitive from justice. It appears that J. K. Wood owned 175 on the 200 shares of the Slaton bank, was its active managing vice president, and that about August 15, 1925, he forged the name of his father, W. A. Wood, to a note of $3,500, which stipulates in part as follows:
"Ninety days after date, waiving grace, I, we, or either of us, jointly and severally, as principals, promise to pay to the order of himself fifty-five hundred and no/100 dollars, for value received, negotiable and payable without defalcation or discount at Slaton State Bank, Slaton, Lubbock county, Tex.," etc.
It further appears that he forged the name of his father on the back of said note, and at the time of the execution of the repurchasing agreement he forged the name of the Slaton State Bank by indorsing it thereon "without recourse." This note was not drawn upon the regular blank notes of the Slaton bank, and said bank's name as the place of payment was written therein with a typewriter. At the time it was transferred to the Amarillo bank there was nothing upon the note which indicated that it belonged to the Slaton bank, or had ever been in possession of said bank. At the time of its transfer, Wood also transferred another note signed by J. F. Anton, as maker, payable to the Slaton bank, and which, by reason of notations made on it, was clearly the property of the Slaton bank.
W. E. Olive, cashier of the Slaton bank, testified in substance, that his bank knew nothing about the forged note; that the teller's journal of his bank showed that two notes had been handled by J. K. Wood, one for $5,500 and the other for $4,500, signed by J. F. Anton; that all of the entries made upon the books of the Slaton bank with reference to the transaction were made by the employees of the bank under the orders of J. K. Wood; that the Slaton State Bank never received any part of the proceeds of *Page 646 
the forged note, but, upon information from J. K. Wood that he had sold the Anton note to the Amarillo bank, and had negotiated a personal loan of $5,500 with said bank, entries were made under the direction of Wood by the assistant cashier of the Slaton bank, who was subject to Wood's orders, charging the Amarillo bank with $9,900.41, being the total of the W. A. Wood note and the Anton note, less the discount paid the Amarillo bank, and that Wood was credited with the $5,500, less the discount, and that only the proceeds of the Anton note, less the discount, went into the funds of the Slaton State Bank. He further testified that the minute books of the Slaton bank did not show any authority in J. K. Wood, or any other officer, to execute a repurchasing agreement such as the one in suit; that Wood left Slaton September 1, 1925, and came to Amarillo; that, when he returned, he had a conversation with Olive on the morning of September 2d, in which he stated that he had sold the Anton note, and secured a personal loan for $5,500, and under his directions the entries were made on the books of the Slaton bank as detailed by the witness. He denied that J. K. Wood ever had any authority to indorse the note without recourse, and at the same time to execute a repurchasing agreement in, the name of the Slaton bank. He stated that the Slaton bank never owned the forged note for $5,500, and that it was never in the possession of said bank; that it never had any communication with the Amarillo bank relative to the note, or the repurchasing agreement, until November 4, 1925, when the witness wrote the Amarillo bank that the Slaton bank knew absolutely nothing about the note; had never owned it, or had any interest in or connection with it, and knew nothing about the repurchasing agreement. This letter was written in reply to a notice from the Amarillo National Bank that the forged note would be due November 1st under the agreement to repurchase.
A resolution by the board of directors of the Slaton bank was introduced in evidence, as follows:
"By unanimous vote the vice president and cashier was authorized to rediscount, sell without recourse, and to borrow money and to pledge thereon any of the bills receivable due said bank that may seem necessary to them for the best interests of said bank."
The cashier of the Amarillo bank testified in part that, about September 1st J. K. Wood applied to the Amarillo bank for a loan to the Slaton bank, and offered to put up the Anton note and the forged note; that he wanted the Amarillo bank to rediscount them; and that the witness told him they would rediscount them with the understanding that Wood would give the Amarillo bank an agreement to repurchase; and that Wood so agreed.
The testimony of this witness shows that the forged note was indorsed "without recourse" in the name of the Slaton bank by Wood, and the agreement to repurchase it was signed in the name of the Slaton bank at the same time and as part of the same transaction.
The cashier further testified, in substance, that, at the time the repurchasing agreement was made, it did not notify the Slaton bank, except through Wood, the active vice president. The repurchasing agreement was dictated by the cashier of the Amarillo bank. The cashier testified with reference to the transaction:
"I know that usually an indorser who indorses `without recourse' is not liable. That kind of an indorsement might be made many times for a certain purpose, if it is desired that it shall not show as a liability on the bank's books. They indorse it without recourse, but at the same time the bank is held, or might be held liable by a repurchase agreement or some other kind of an agreement. I am referring to a gentlemen's agreement in that, I guess. I did not know then that, when defendant indorsed the note without recourse, and at the same instant signed a repurchase agreement one simply annulled the other. I understood it this way: That he wanted to indorse that (Wood) note without recourse so it would not show in the liabilities of the bank, but we wanted protection, and, if he wanted to handle it that way, it is satisfactory with us. * * * I understand as a banker that there is nothing about that note to show the liability of the Slaton bank for the payment of it, and, if there is any liability on the note, it must exist by virtue of some instrument not connected with or attached to the note, and that I claim is the repurchase agreement he executed at that time. After I dictated to the stenographer this repurchase agreement, and she had typewritten it, Mr. Wood signed it and indorsed the note `without recourse.'"
According to the foregoing testimony, the note with the qualified indorsement of the Slaton bank, together with the repurchasing agreement which refers to the note although separately written, constitute but one contract. Barber v. Herring (Tex.Com.App.) 229 S.W. 473; Traders' National Bank v. Smith (Tex.Civ.App.) 22 S.W. 1056.
The forged note is the subject-matter of the contract, and the qualified indorsement made by Wood in the name of the bank is a material part of it, and cannot be disregarded in determining the rights of the parties. The Amarillo bank sued upon the repurchasing agreement alone. The forged note is referred to merely for the purpose of showing the measure of its damages for breach of the contract to repurchase. The Amarillo bank, therefore, does not occupy the position of a bona fide holder, and its suit is subject to all the defenses available against the holder of any other nonnegotiable instrument, and the contract must be construed under the general rules relating to the construction of *Page 647 
contracts. The qualified indorsement of the forged note by Wood in the name of the Slaton bank, even if Wood was authorized to so indorse it, made the Slaton bank merely the assignor of the title without subjecting it to such liability as would have followed an indorsement in blank. Revised Statutes, art. 5934, § 38.
It is clear from the foregoing testimony that the purpose of the parties in having the forged note indorsed "without recourse" by the Slaton bank, and, as a part of the same transaction, executing an agreement to repurchase, was to deceive the bank examiner. The qualified indorsement of the note would lead the bank examiner to believe that the Amarillo bank had acquired the note by regular transfer, and that no liability attached to the Slaton bank. It is clear from the evidence that the parties did not intend that the bank examiner should ever see or know of the repurchasing agreement. That was what the cashier of the Amarillo bank termed "a gentlemen's agreement." The sole purpose of this transaction, executed in the manner shown in the record, was to deceive a public official, and that would have been its effect. It is uniformly held that all contracts, the purpose of which is to deceive a public officer in the performance of his duties, are contrary to public policy, and void. Barnsdall v. Owen, 200 F. 519, 118 C.C.A. 623; Kentucky 
Indiana Bank v. Globe Bank  Trust Co. (Ky.) 116 S.W. 792; Ong Exchange National Bank v. Clay Center State Bank, 100 Neb. 278,159 N.W. 409; Lion Bonding, etc., Co. v. Capital Fire Ins. Co., 96 Neb. 51,146 N.W. 1051; Brooks v. Cooper, 50 N.J. Eq. 761, 26 A. 978, 21 L.R.A. 617, 35 Am.St.Rep. 793; Logan v. Fidelity-Phenix Fire Ins. Co.,161 A.D. 404, 146 N.Y.S. 678.
In the original opinion, Judge RANDOLPH relies upon the case of Central State Bank v. First State Bank (Tex.Civ.App.) 276 S.W. 941, to sustain the legality of this transaction. In my opinion, that case is not authority for the holding. The Central State Bank of Dallas took the note of the Empire Drug Company, and credited the drug company with the amount, and charged the Abilene bank's deposit with a like amount. At the time the note was executed, Squires, the cashier of the Central bank, indorsed it "without recourse" in the name of his bank. The note and a debit slip were then transmitted by him to the president of the First State Bank of Abilene with a letter, in which he agrees that his bank would take up the note any time the Abilene bank needed the money. The qualified indorsement of the Central bank was no part of the discount contract between the two banks, and was not mentioned by Squires, but he did mention the indorsement of Ardrey upon it. The case is further distinguishable, in that the drug company's note was the property of the Central bank when the indorsement was placed thereon. In the instant case the forged note, according to the uncontradicted testimony, was never the property of the Slaton bank, and the officers of the Slaton bank, except Wood, did not know that such a note was in existence until called upon in November to pay it. Furthermore, in that case it appears that the Central State Bank received the proceeds of the note from the Abilene bank by charging that bank's deposit account with the amount of the note, while in the instant case not one penny of the money represented by the forged note was ever received or used by the Slaton bank. The question of the illegality of the transaction was not raised in that case, and I am not willing to accept it as authority in this controversy. Equity regards the substance, and not the form.
The transaction between Wood and the cashier of the Amarillo bank violates both the letter and spirit of the banking laws of this state. Revised Statutes, art. 499, provides that no officer of a state bank shall have power to indorse, sell, pledge, or hypothecate any note or other obligation received by such corporation for money loaned until such power and authority shall have been given such officer by the board of directors in a regular meeting of the board, a written record of which proceeding shall have first been made upon the minutes of the corporation; and further declares that all such acts done by any officer without such authority shall be null and void.
Revised Statutes, art. 528, makes article 499 more specific by providing:
"No bank organized under the laws of this state shall ever make any bills payable, and no bills shall ever be rediscounted by such bank, except with the consent of the board of directors, said consent to be a matter of record."
It is true that the board of directors of the Slaton bank had passed a resolution authorizing its vice president to discount and sell without recourse, and to borrow money and to pledge thereon any of the bills receivable due said bank that might seem necessary to them, but this authority cannot be extended so as to authorize Wood to rediscount a note which the bank never owned, and it certainly cannot be contended that authority to sell without recourse authorized him to execute a repurchasing agreement, the legal effect of which would be to nullify such a qualified indorsement.
Penal Code 1925, art. 545, provides, in substance, that every officer of any state bank who, without authority from the directors, assigns any note with intent to defraud the bank or any other corporation, or with intent to deceive any officer of such bank or banking and trust company, the banking commissioner, or any examiner, shall be confined in the penitentiary for not less than 5, nor more than 10, years. *Page 648 
Penal Code, art. 547, provides that any such officer who shall do or perform, or assist in doing or performing, any act or transaction prohibited by the provisions of the laws of this state governing such banks, shall be fined or imprisoned.
Penal Code, art. 552, which relates to the statements to be made by state banks upon call of the banking commissioner, provides that, should any officer of any state bank willfully and corruptly make a false statement, he shall be subject to a fine and imprisonment.
It being known to the parties to this transaction that there was a violation of the statutes, and that its purpose was to deceive a public officer, I think the contract is absolutely void, and will not support an action, especially since the trial judge's twelfth finding of fact, supported by uncontroverted testimony, is "that the W. A. Wood note * * * was never owned by the defendant, the Slaton State Bank of Slaton, Tex., as shown by the books of said bank."
Moreover, the contract, when considered in its entirety, and even aside from the element of forgery (which will be discussed later), is rendered void by its repugnant clauses, in this: By the qualified indorsement the Slaton bank says in legal effect that it is not liable, while the legal effect of the agreement to repurchase is to make it liable. These stipulations are repugnant and beyond the possibility of reconciliation. The rule is that repugnant clauses which cannot be reconciled destroy each other, and render the contract void. Tompson v. Waits (Tex.Civ.App.)159 S.W. 82. These clauses are not merely "apparently repugnant"; they are glaringly inconsistent and conflicting, and are not ambiguous, and for the court to reject one and enforce the other would be the making of a new and entirely different contract which the parties themselves never intended to make, and, since the evidence shows that the inconsistency in the two stipulations was the result of design, deliberation, and an express purpose, and did not result from carelessness in drawing the contract, the rules of construction adopted in Prince v. Frost-Johnson Lumber Co. (Tex.Civ.App.) 250 S.W. 785, should not be applied.
However, if the rule sometimes adopted in such cases, that the first clause is to prevail, and the second to be rejected, is applied in this case, the Amarillo bank cannot recover, because the second paragraph of the agreement to repurchase clearly implies as an existing fact that the forged note was already indorsed by the Slaton bank without recourse when that agreement was written.
Moreover, if the rule of construction that the intent of the parties is to be ascertained from the entire instrument and the surrounding circumstances is to control, still, the Amarillo bank is in no more favorable position because that intent is shown beyond controversy by uncontradicted evidence to have been illegal and against public policy. As said in Amarillo Oil Co. v. Ranch Creek Oil  Gas Co. (Tex.Civ.App.)271 S.W. 145, 151:
"When the evidence tends to show that the contract sued upon is void for illegality, the matter is fundamental, and it is the duty of the appellate courts to consider it in the absence either of pleading setting up such illegality or of an assignment presenting it in the appellate court, and that, too, whether it is malum in se or malum prohibitum."
The repurchasing agreement was dictated by the cashier of the Amarillo bank. It is therefore the language of that bank, and, if it requires construction at all, it must be construed most strictly against the party who prepared it and who used the language. Security Banking 
Investment Co. v. Flanagan (Tex.Civ.App.) 241 S.W. 702; Id. (Tex.Com.App.) 254 S.W. 761; Harding v. Giddings (Tex.Civ.App.)256 S.W. 305; Pledger v. Business Men's Accident Association (Tex.Com.App.) 228 S.W. 110.
The appellant attacks the fourth finding of the trial court to the effect that the Slaton State Bank, on the 1st day of September, 1925, had and held two certain promissory notes which it desired to rediscount or sell and obtain money thereon, and, acting through its vice president, who was duly authorized to act in such matters, brought said notes (one of them being the forged note) to Amarillo for the purpose of obtaining money thereon. It is insisted that this finding is not supported by the evidence, but is contrary to all the evidence, which shows that the Slaton State Bank never owned or held the discounted note. We think this contention is sound. The forged note was never in possession of the Slaton bank, does not appear upon its books, and the court so found in its twelfth finding of fact. None of the officers of that bank, except J. K. Wood, ever saw the note prior to the transaction in question, or ever heard of its existence. It was not filled out upon one of the bank's blanks, and, at the time the Amarillo bank acquired it, there was nothing upon the face of the note to indicate that the Slaton bank had ever owned or had it in its possession. The cashier of the Amarillo bank admitted that there was no number of the Slaton State Bank on it, or any other notation indicating that that bank had owned it, while the Anton note, negotiated at the same time, bore the number of the Slaton State Bank and other memoranda indicating that it had been owned by that bank. I think this contention should be sustained and the finding set aside because there is no evidence to support it, and because the court held to the contrary in the twelfth finding, which is supported by all the evidence. Grand Fraternity v. Melton, 102 Tex. 399, 117 S.W. 788.
The court further found that the Amarillo bank agreed to purchase from the Slaton bank *Page 649 
both notes, provided the Slaton bank would execute to it a repurchase agreement, and that the Slaton bank, in pursuance thereof, did execute and deliver to the Amarillo bank, for a valuable consideration, the repurchasing agreement. This finding is also contrary to all the evidence, in so far as it relates to the forged note, and appellant's contention should be sustained.
The repurchasing agreement was made by J. K. Wood, acting adversely to the interests of the Slaton bank, and in his own interest, and without the knowledge or consent of the Slaton bank, and it is therefore a forgery as to the Slaton bank. All the evidence shows that the Slaton bank never received any consideration for the execution of the repurchasing agreement, but that the entire consideration went to J. K. Wood. Ferguson v. State, 79 Tex.Cr.R. 641, 187 S.W. 476.
While it is true that the funds were credited by the Amarillo bank to the Slaton bank, and were charged to the Amarillo bank by the Slaton bank upon the latter's books, it is also true that J. K. Wood's individual account was credited at that time with the amount of the forged note, less the discount. This is simply a process of bookkeeping, and the entries were made by the employees of the Slaton bank upon the order of J. K. Wood, and upon his statement to Olive that the money was a personal loan to him by the Amarillo bank. The real facts are, as disclosed by the testimony, that Wood received all of the consideration for the forged note, and that not a penny of it ever moved to the Slaton bank. I think this finding, for the reasons stated, is erroneous.
The W. A. Wood note as to him was a forgery, and the trial court so finds. J. K. Wood, who forged his father's name to the note as maker and indorser, also, as vice president, forged the name of the Slaton bank upon the back of the note, and also to the agreement to repurchase. That the act of J. K. Wood in executing the agreement to repurchase without the authority of the Slaton bank to do so constitutes forgery seems to be settled law. "An agent for some purposes may commit forgery by making or signing an instrument in disobedience of his instructions, or in the improper exercise of his authority. Although a person is authorized to sign the name of another to certain documents, yet, if he signs such name to a false document, it is forgery." 26 C.J. 898, § 7c; State v. Pratt, 3 Pennewill (Del.) 264, 51 A. 604; People v. Dickie, 62 Hun, 400, 17 N.Y.S. 51.
In the original opinion Judge RANDOLPH says:
"At the time of the occurrence of the transaction sued on herein, the Amarillo bank did not know that this resolution was in existence, but, regardless of this want of knowledge of the officers of the plaintiff bank, this resolution having been duly passed by the directors, and having been entered on their minutes, question is brought before us: Did such resolution authorize J. K. Wood, as such vice president, to execute such repurchase agreement for the defendant bank? The writer is of the opinion that it did."
No reason is given, and no authority is cited, upon which the opinion is based. This writer is of the opinion that it did not. The resolution quoted in the original opinion simply authorized the vice president and cashier to rediscount, sell without recourse, etc., "any of the bills receivable that may now or hereafter belong to said bank." The forged note never belonged to the Slaton bank, and was not made payable to it. None of its officers, except J. K. Wood, ever saw it or heard of it until several weeks after the transaction. The Amarillo bank knew as a matter of law that Wood could not rediscount notes without express authority from the board of directors, because the statutes of this state expressly so provide. It therefore had constructive notice of the extent of Wood's authority as set out in the resolution. It had the right to call upon the Slaton bank for a copy of the resolution, and, in the exercise of ordinary care, it should have done so, but it negligently failed to exercise such diligence. If this had been done, they would have known that Wood had no right to execute an agreement to repurchase a note which it had taken from him with a qualified indorsement.
While J. K. Wood, as the active vice president of the Slaton bank, was, in a certain sense, the general agent of that bank, yet, in the matter of discounting, selling, and indorsing the paper of the bank, he was a special agent, with specific authority limited and defined by the terms of the resolution which gave him his power as agent. The effect of Revised Statutes, arts. 499 and 528, requiring the directors to appoint certain agents to perform these duties, and to record such authority upon the minutes of the bank, is to require state banks to create by orders entered upon their minutes certain of its officers to be therein named, not as general, but special, agents to perform the particular duties therein specified. Under the general laws relating to the power of bank officials, third parties would not be necessarily protected. In making the resolution defining the extent of such special agent's authority, a matter of record would evidence an intent on the part of the Legislature to require every person interested to be bound by the extent of the authority and to take notice thereof. Unless the Legislature intended by this provision to protect third parties, as well as the banks, it is difficult to understand why a record showing what officials were appointed and the extent of their authority should be made at all. Such an agency is analogous to that of a municipal officer whose authority is prescribed by statute or ordinance, and the same rule which *Page 650 
governs as to public officers it seems should control in cases of this character. 1 Mechem on Agency (2d Ed.) § 763. The evidence of the conduct of the parties while executing the agreement discloses that the Amarillo bank knew that Wood had no such authority, and, as a matter of law, they knew that the Slaton bank could not authorize him to perform an act criminal in its nature, contrary to express statute, and against public policy. They cannot rely upon an express authority, for there was none, and for the reasons stated are not protected under the rule of apparent authority.
No ratification by the Slaton bank is shown. The evidence shows that as soon as Olive, the cashier of the Slaton bank, was notified that the Amarillo bank held such a note and repurchasing agreement, he immediately repudiated the whole transaction, and emphatically denied the authority of Wood to bind the bank thereby.
The telegram which Wood had the assistant cashier to send on September 3, 1925, as follows: "Charge our account and credit J. K. Wood fifty seven hundred dollars," was not pleaded as estoppel, nor mentioned in any way in the appellee's petition. Without contradiction, the evidence shows that Wood sent a telegram from Corsicana to the assistant cashier of the Slaton bank at Slaton, and that, in obedience to Wood's commands, the assistant cashier wired the Amarillo bank as above stated. No officer or employee of the Slaton bank, except the assistant cashier, knew anything about this telegram. The rule is that an agent cannot ratify his own illegal act so as to bind his principal. Cole v. Bammel, 62 Tex. 108, 114; Citizens' National Bank v. Good Roads Gravel Co. (Tex.Civ.App.)236 S.W. 153; where it is held that —
"The cashier of national bank did not act as its agent in guaranteeing payment of note, which was never owned or transferred by the bank, and his acts were not ratified because the proceeds of the note passed through the bank without knowledge on the part of the bank of the material facts. * * * Knowledge of cashier of national bank of his own acts in guaranteeing payment of note of third parties, in his own personal interest, and not in the transaction of the bank's business, and hostile to that of the bank, and concealed therefrom, was not imputable to the bank."
Since the resolution of the board of directors did not authorize Wood to execute a repurchasing agreement under the conditions shown, and since Wood could not ratify his own illegal act, there is, as stated, no ratification shown.
Estoppel was not pleaded in this case. The Slaton bank never received a penny of the funds. The entries upon its books, made under the directions of Wood in his own interest and to conceal his own crime, and without the knowledge of any of the other officers of the bank, did not constitute an estoppel The telegram sent by his orders for the same reason would not constitute estoppel, even if it had been pleaded. Moreover, the Amarillo bank is in no position to insist upon estoppel as a defense. The agreement to repurchase was suggested and dictated by its cashier. It was not only illegal, but ultra vires, and in making the contract under such circumstances the Amarillo bank cannot be heard to say that it acted in good faith. It was bound to know the extent of Wood's authority, and it did know that it was making an illegal contract with him.
Good faith is a necessary element in behalf of one who relies upon estoppel. First National Bank of Tombstone v. Abilene Hotel Co. (Tex.Civ.App.) 103 S.W. 1120; Sourlake Co. v. Jackson,62 Tex. Civ. App. 140, 130 S.W. 662; 2 Pom.Eq.Jurisp. §§ 810, 812. In 1 Mechem on Agency (2d Ed.) § 751, it is said:
"It is evident that the rules which have been described were established for the protection of third parties who acted in good faith. Collusion with the agent to take advantage of the apparent at the expense of the real authority, the willful shutting of eyes to restrictions which would otherwise be obvious, or any other practice or device to pervert the rules of law to a purpose not contemplated by them, should be fatal to a recovery. This is especially true where the parties seeking to recover claim the benefit of an apparent authority, a holding out, or any conduct alleged to work an estoppel. Only those who have relief in good faith are entitled to protection."
Revised Statutes, art. 5932, § 23, provides:
"When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party, against whom it is sought to enforce such right, is precluded from setting up the forgery or want of authority."
"Precluded," as used in this statute, has been held to mean "estoppel," and does not include ratification or adoption in their strict primary meaning, but only when they involve some of the elements of estoppel. Olsgard v. Lemke, 32 N.D. 551, 156 N.W. 102; 1 Mechem on Agency (2d Ed.) § 364.
The Slaton bank would therefore not be precluded from setting up forgery as a complete defense, unless all of the elements of an estoppel en pais were present. This record is void of any facts which would preclude the Slaton bank from setting up forgery as a defense. The weight of authority is to the effect that one who is in pari delicto in the execution of an illegal contract can neither recover on the contract nor plead estoppel. Having suggested the execution of the "gentlemen's agreement," the Amarillo *Page 651 
bank is in equal fault with Wood, and cannot, therefore, successfully plead estoppel and recover under the rule of apparent authority, because of the absence of good faith. Even though it be held that the Amarillo bank is not in pari delicto with Wood, the transaction upon its face, as well as when viewed in light of the testimony, is ultra vires and illegal. This being true, J. K. Wood, and certainly the Slaton bank, can defend upon that ground (Hartford Fire Ins. Co. v. City of Houston [Tex. Civ. App.] 110 S.W. 973 [affirmed on this point in 102 Tex. 317,116 S.W. 36, 38]), especially where estoppel is not pleaded (W. C. Bowman Lumber Co. v. Pierson, 110 Tex. 543, 221 S.W. 930, 11 A.L.R. 547).
There is a conflict of authority in other jurisdictions upon the question as to whether forgery may be ratified irrespective of estoppel or a new consideration. 1 Mechem on Agency (2d Ed.) §§ 360-363, 386, 395, 403; Shinew v. First National Bank of Bowling Green, Ohio,84 Ohio St. 297, 95 N.E. 881, Ann.Cas. 1912C, 587, 36 L.R.A. (N. S.) 1006, and cases cited and note. No new consideration has ever moved to the Slaton bank upon which ratification might be predicated. It is not necessary to cite authorities to sustain the proposition that there can be no ratificacation of an unauthorized act without full knowledge of all the facts. For a stronger reason there cannot be ratification of a criminal and illegal act. Ratification can stand upon no higher ground than the original authority. Commercial Bank v. Jones, 18 Tex. 825.
The telegram sent by George, the assistant cashier, upon the order of Wood, is the only possible basis upon which the defense of estoppel might be predicated. As has heretofore been shown, this telegram was sent in the name of the Slaton bank upon the orders of Wood without the knowledge of the bank, and at a time when the bank did not know that the money had been secured upon the forged indorsement.
Judge RANDOLPH says in the original opinion (as amended since the greater part of this dissenting opinion was handed to him) that "the plaintiff's petition alleges the transaction, alleges that the money was deposited by it to the credit of the Slaton State Bank, and was by that bank checked out," and holds that these facts sufficiently plead estoppel. I cannot assent to such holding. In State v. Broadway National Bank (Tenn.) 282 S.W. 194, it is held that negligence to work an estoppel must be the proximate cause of leading the complainant into the mistake, and must occur in the same transaction. Judge Randolph so held in Sugg v. Johnson (Tex.Civ.App.) 284 S.W. 705.
It is further held in the Broadway National Bank Case that the maxim that, "where one of two innocent persons must suffer by the acts of a third, he who has enabled such person to occasion the loss must sustain it," does not apply, where crime, and not the negligent act, is the proximate cause of the loss. This rule is followed in Schumann v. Bank of California, 114 Or. 336, 233 P. 860, 37 A.L.R. 1531.
In Guaranty Bank  Trust Co. v Beaumont Cadillac Co. (Tex.Civ.App.)218 S.W. 638, the doctrine is announced that, where the manager of a branch plant of a corporation, who had no authority to sign notes or borrow money for the branch business, by means of a note signed in the business name of the corporation, obtained money sufficient to cover in part shortages, and paid said money to the corporation, the corporation which in good faith received the money without notice of the manager's wrongful act is not liable to the payee. Notwithstanding Judge RANDOLPH'S assertion, which is contradicted by the record, that the Slaton bank actually received the money and checked it out, under the rule announced in the case just cited, the Slaton bank would not be liable, even if this suit was based upon the note without the allegation and proof showing that it received the money and used it with notice of all the facts. It is further held in the Beaumont Case that, where actual authority does not exist, apparent authority or estoppel cannot be established by facts known to the party dealing with the agent and relied upon by him in such dealings.
In Jett v. Jett, 171 Ky. 548, 188 S.W. 669, the court, in discussing estoppel by negligence, declares:
"It is likewise true that active negligence may operate as an estoppel; but negligence, to amount to an estoppel, must be in the transaction itself and the proximate cause of leading the party, in whose behalf the right to rely upon it arises, into mistakes."
Judge RANDOLPH'S insistence that the Amarillo bank has pleaded estoppel is not sustained by any authority cited. The rule is that no intendments are made in favor of a plea of estoppel, but it is incumbent on the pleader to aver all facts essential to its existence with particularity and precision. It must be pleaded fully and specifically, charging by direct averment every fact necessary to constitute the estoppel relied upon (El Paso  S.W. Ry. Co. v. Eichel  Weikel [Tex. Civ. App.]130 S.W. 922, 939), and the rule is applied more strictly when it is sought to estop a corporation by the acts of its officer or agent (Western Union Telegraph Co. v. Cobb [Tex. Civ. App.] 118 S.W. 717; Cleburne St. Ry. Co. v. Barber [Tex. Civ. App.] 180 S.W. 1176; W. C. Bowman Lumber Co. v. Pierson, 110 Tex. 543, 221 S.W. 930; Swayne v. Union Mutual, etc., Co. [Tex. Civ. App.] 49 S.W. 518; Tres Palacios R. I., etc., Co. v. Eidman, 41 Tex. Civ. App. 542, 93 S.W. 698). Tested by these authorities, there is not a syllable in the plaintiff's petition to support the statement that estoppel is pleaded. *Page 652 
Bailey v. Triplett Bros. (Tex.Civ.App.) 286 S.W. 914, was a suit upon a draft or bill of exchange given by Walker to one Collins in payment for cotton as shown by scales tickets which Collins had stolen from Walker's office. Collins had by forgery made him self the apparent owner of the cotton represented by the tickets. Walker had drawn the draft on his partner or principal, Bailey, in the cotton business, payable at a Lubbock bank. Triplett Bros., in good faith, cashed the draft for Collins. Walker discovered the theft and forgery of the scales tickets, and notified the bank not to pay the draft. Triplett Bros. pleaded estoppel by conduct and course of dealing. The trial court rendered a judgment for Triplett Bros. against both Walker and Bailey. A majority of this court affirmed the judgment upon the ground that the draft was a negotiable instrument of which Triplett Bros. were bona fide holders, and upon the theory that Bailey was estopped to set up want of consideration or any other defense by his previous course of dealing in so accepting drafts drawn by his partner on himself. It was shown that Walker was guilty of negligence in the transaction itself, and that such negligence was the proximate cause of the loss. Judge RANDOLPH dissented, holding that the draft was not a negotiable instrument as to Bailey or the bank, and for that reason Bailey could plead the fraud on the part of Collins as a defense, and further held that, as Triplett Bros. had not pleaded estoppel by conduct, they could not rely upon estoppel as a defense. If Bailey, sued upon a nonnegotiable instrument which his partner had the right to draw in that case, could plead fraud, why cannot the Slaton bank, sued upon a nonnegotiable contract to which its name had been forged, plead it in this case? If it was necessary for Triplett Bros. to plead estoppel in that case, is it not necessary for the Amarillo bank to plead it in this case?
In my opinion, the only possible negligence which could be pleaded as an estoppel against the Slaton bank in this case is sending of the telegram by its assistant cashier, George, upon the authority of which the Amarillo bank permitted Wood to withdraw the $5,700. As heretofore shown, the Slaton bank had no knowledge whatever of the sending of such telegram, except such knowledge as might be imputed to it because of the agency of Wood and George. Since Wood was acting in his own interest, adversely to the interest of the bank, in furtherance of his criminal intent, and since George acted under the orders of Wood, his superior officer, it constitutes neither ratification nor estoppel.
Negligence cannot be predicated upon the ground that the bank was negligent in having Wood for its vice president. Judge RAN. DOLPH seems to predicate his affirmance of the judgment upon these grounds by applying the equitable maxim, as sometimes stated: "That he who trusts most must suffer most." A correct statement of it is, "Where one of two innocent persons must suffer, he who trusts most must suffer most." If that maxim is applied to the facts of this case, it requires that the judgment of the trial court be reversed and here rendered, because the Amarillo bank, under all the testimony, was not an innocent person in the making of this repurchasing agreement. Moreover, it is the person who "trusted most," in that it entered into a contract with a special agent without information, or in disregard of information, as to the extent of Wood's authority, when the statutes of the state, and ordinary business prudence, demanded that it inquire of Wood's principal as to the extent of his powers. In dealing with a special agent under such circumstances, it acted at its peril, and by reason of its negligence should suffer the consequences. Bourland v. Huffhines (Tex.Civ.App.) 269 S.W. 184, affirmed in (Tex.Com.App.) 280 S.W. 561.
The Slaton State Bank did not trust Wood, because, as required by statute, it limited his authority by a resolution spread upon its minutes for the information of every one dealing with him. It cannot be charged with negligence in trusting him upon the ground that Wood was its vice president. Prior to this time Wood's conduct had been exemplary, and the record shows that he held a majority of the stock, and, in so far as the election of officers is concerned, was for all practical purposes the whole bank. He could elect himself to any office in the bank.
As stated in 1 Mechem, supra, § 749: "The maxim is often put in the form of `one of two equally innocent parties,' etc., but for this case it is clear that in general there is no reason for preferring one of two equally innocent parties, and the loss must in general lie where it has fallen. It seems perfectly clear that the incidence of the loss can only be shifted where the parties were not equally innocent, and that before the loss can be thrown upon the principal, he must be shown to have been guilty of some misconduct — that his conduct must have contributed in some way, which reasonable care would have avoided, to the perpetration of the wrong. Certainly the mere employment of an agent in the ordinary way is not such misconduct unless we are prepared to say that one avails himself of this common, useful and supposedly lawful instrumentality at his risk, and this has not hitherto been deemed to be the law."
This is in accordance with Judge Randolph's holding with reference to the estoppel of Sugg by the fraudulent act of Ben Johnson in that case. The employment of an agent is not the proximate cause of the loss of one whom the agent defrauds by criminal act. People's Trust Co. v. Smith,215 N.Y. 488, 109 N.E. 561, L.R.A. 1916B, 840, Ann.Cas. 1917A, 560, and cases therein cited; Melick v. Liberty Trust Co., 85 N.J. Eq. 29,95 A. 357; Guaranty Bank  Trust Co. v. *Page 653 
Beaumont Cadillac Co. (Tex.Civ.App.) 21 S.W. 638.
Because I think the evidence fails to shot any liability on the part of the Slaton ban I cannot assent to an affirmance of the judgment, and because estoppel was neither pleaded nor shown, I think the Judgment should be reversed and the cause remanded for an other trial.