Court Opinion

ID: 3305324
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:20:28.272994+00
Date Added: 2024-06-11T14:57:52.692727
License: Public Domain

This action was brought by the Arcade Realty Company against the defendant bank to recover $2,650 paid by defendant upon checks drawn in favor of the Arcade Realty Company by C.W. Phillips upon the defendant bank. Phillips assigned his claims thereon against the bank to the plaintiff. The question involved in the case is the authority of one A.W. Clement to indorse such checks on behalf of the plaintiff. Judgment was rendered in favor of the defendant, upholding the authority of Clement to make such indorsements, and plaintiff appeals. Clement was the appellant's *Page 319 
agent for the collection of the rents from its tenants in appellant's business block in Oakland. [1] Appellant relies upon the well-settled rule that authority to collect does not imply authority to indorse negotiable paper received in payment, and upon the further well-established rule that the authority of an agent to indorse negotiable paper is a very responsible power, not lightly to be presumed or implied. [2] There is no doubt as to the correctness of these rules. (See Daniel on Negotiable Instruments, 6th ed., secs. 292-294, 296;Hamilton Nat. Bank v. Nye, 37 Ind. App. 464, [117 Am. St. Rep. 333, 77 N.E. 295]; Lonier v. Ann Arbor Sav. Bank, 162 Mich. 541, [127 N.W. 685]; National Fence Machine Co. v. Highleyman,71 Kan. 347, [80 P. 568]; Jackson v. National Bankof McMinnville, 92 Tenn. 154, [36 Am. St. Rep. 81, 18 L.R.A. 663, 20 S.W. 802]; Tiedman on Commercial Paper, sec. 77;Jackson Paper Mfg. Co. v. Commercial Nat. Bank, 199 Ill. 151, [93 Am. St. Rep. 113, 59 L.R.A. 657, 65 N.E. 136].) As these rules are conceded to be correct, and as there is no evidence of an express authorization to Clement to indorse these checks, it will be necessary to state the facts more in detail for the purpose of disclosing the scope of Clement's agency. It will appear therefrom that the agent was given and exercised far more power than a mere collector. Clement, as the agent of appellant, for some years had collected the rents from the tenants of appellant's building, had deposited the moneys or checks received, in his own bank account to his personal credit, and had remitted such rentals to appellant in San Francisco, by a check drawn against such personal account. The rents of the Hotel Arcade, however, were paid by Phillips direct to appellant by his personal check until February, 1912. Phillips' rental was one thousand dollars monthly under a ten-year lease. Phillips, however, failed to pay promptly under this arrangement, and in order to facilitate collection the appellant directed Clement to collect such rentals. Beginning February 26, 1912, Clement collected a check in favor of the Arcade Realty Company and mailed the same to appellant. Thereafter Clement collected the sixty-four checks in issue at intervals until May 29, 1913. Each check was indorsed by him as follows: "Arcade Realty Company by A.W. Clement, Agent, A.W. Clement," and deposited in his personal account either in the Union Savings Bank of Oakland, or the *Page 320 
Oakland Bank of Savings, Oakland. The checks were paid by the respondent, the drawee bank, in due course through the clearing-house. Clement remitted these rents and others collected by him for rent by his personal check as formerly, together with his accounts of rentals collected. In June, 1913, appellant discovered that Clement had remitted $2,650, the amount involved here, less than he had collected up to that date. Nevertheless the appellant did nothing more about the matter than to instruct Clement thereafter to remit the Phillips' checks direct to it, a direction which Clement carried out. On Clement's death about seven months later, the appellant discovered that Clement during the period when he was depositing the Phillips rent to his account had been making the indorsements in question, for such purpose. In addition to Clement's authority to collect rents, the correspondence shows that he was authorized to act as the general agent of the appellant for leasing, care, and repair of the building. It should be observed that we are not dealing with a general authority to indorse negotiable paper, but rather with the power power necessary to deposit checks on local banks in another local bank for collection through the clearing-house, for the purpose of transmitting the proceeds to the principal in a near-by city. The appellant on receiving from month to month the personal check of its agent in satisfaction of rentals collected, must have been aware of the fact that Clement was depositing all rents in his own personal account, and thus by implication must have approved such deposit. The conclusion cannot be escaped in this case that the authority of the agent included the power to deposit money or paper collected to his own account. That is exactly what was done with the checks here in question. They were deposited to his own account and the indorsements were made solely for the purpose of accomplishing such deposit. It may well be that indorsements for any other purpose would have been unauthorized. But when the principal permitted its agent to deposit the collections to his personal account, to be transmitted by his personal check, it is a fair if not in fact a necessary inference that he had the authority to make such indorsements as were necessary to do this. Rents in large amounts are not habitually paid in money, but by check. The principal could hardly have assumed that such paper was all drawn to the order of the agent. The tenants would not naturally so draw *Page 321 
their checks, but to the order of the landlord. The appellant receiving all its rentals by the agent's personal check cannot claim that it did not know that its tenants were paying by checks to its order. It should have presumed that they were doing so in some instances at least, and this being so the appellant should have known that the agent was indorsing such checks for deposit. Furthermore, it was immaterial to appellant, as long as it permitted its agent to deposit the rents in his own account, whether the rents were paid by check to the appellant's order, as was the case with the checks in question, or by check to the agent's order, where no question of indorsement could have arisen. In fact, checks to the order of the agent would have given him a far greater measure of control over the fund than checks to the order of the appellant, and yet the appellant either permitted the latter, or else assumed that the paper was drawn to its own order and that the agent was indorsing it for deposit. The point is that the principal either tacitly or expressly authorized the agent to deposit his collections to his own account, and the conversion by Clement, discovered in June, 1913, was not accomplished by the indorsements in question by which the funds were deposited in the agent's personal account, but by the agent's failure to remit from his account moneys of his principal which he had so deposited by authority. The authority to indorse for deposit in a local bank may reasonably be inferred in such a case, where it would be wholly unreasonable to infer authority to indorse for sale or discount a foreign bill of exchange. There is a most substantial difference between the various kinds of paper and the various purposes of indorsement. [3] The test for ascertaining the question of the agent's authority to indorse negotiable paper is stated inJackson Paper Mfg. Co. v. Commercial Nat. Bank, supra, to be this: Can the agent perform the duties of his agency without the exercise of such authority? "In other words," says the court, "the power of an agent to indorse commercial paper for his principal must be a necessary implication from an express authority conferred upon such agent." Conceding the correctness of this rule, we here have evidence justifying the conclusion that the agent had authority to deposit all rents collected by him in his personal account, for the purpose of remitting the same to his principal by his personal check. [4] This authority carried with it the power essential to that course of *Page 322 
business, namely, the indorsement for deposit of checks made payable to the principal where such were collected. (Civ. Code, sec. 2319, subd. 1.) The case of Dispatch Printing Co. v.National Bank of Commerce, 109 Minn. 440, (50 L.R.A. (N.S.) 74, 124 N.W. 236], cited by appellant, is somewhat similar in its facts, but differs in the essential particular that in that case the agent was expressly directed by the principal not to indorse or deposit checks payable to them, but to remit them direct to the principal.
The evidence amply justified the finding of the trial court that the agent was authorized to make the indorsements made by him for the deposit of the checks to his account, including the checks in question.
The judgment is affirmed.
Lennon, J., Olney, J., Shaw J., Lawlor, J., and Angellotti, C. J., concurred.