First National Bank v. Badger Lumber Co. , 54 Mo. App. 327 ( 1893 )

Smith, P. J.

— The plaintiff is a national bank and the defendant a business corporation. The general business office of the latter is at Kansas City, though it has a lumber yard at Trenton which at the time-the transaction took place out of which this action arose was under the management of one Hershe whose duties it seems were to use his best endeavors to make sales of lumber furnished by defendant, make collections, pay the necessary expenses of the business there,, make daily reports of the business to the general office, make deposits of money collected in the local banks, and check out the same in the name of the defendant.

Hershe made two notes in the name of the defendant which he paid before he made the one of which we. shall have occasion to presently speak, but whether the-defendant knew of these transactions is not shown by the evidence. Hershe fell behind with the defendant in respect to the faithfully accounting for all moneys-received by him in his capacity as agent for the defendant. To cover up his defalcations he made in the name of the defendant a note to the plaintiff bank in which he had been depositing the moneys of the' defendant for the sum of $500, which the defendant refused to pay at maturity, or at all, on the ground that Hershe had no authority to make and sign the same for it. It does not appear that the plaintiff had knowledge of Hershe’s want of authority to do this. It seems to have loaned the money on the credit of the defendant. Indeed there is much evidence adduced from which this might possibly have been inferred; but however this, may be the. plaintiff seems to have conceded after the defendant’s refusal to pay the note that Hershe'had not the requisite authority to make the note, and so sued the defendant for the return of the money borrowed on its. note. It appears further that Hershe received'for the note so made to plaintiff a draft for $500 on the Bank of Commerce of Kansas City which he sent to the defendant who collected the same.

The defendant not only refused to pay the note but to return the amount thereof which it received after becoming acquainted with all the facts. The trial court in effect declared that the defendant incurred no-liability to plaintiff in consequence of these facts. It repudiated the unauthorized act of its agent in signing the note but ratified the transaction to the extent of retaining the proceeds of the discount after becoming aware of all the facts. This of course the law does not tolerate. A party under such circumstances cannot repudiate that part of an unauthorized transaction of an agent which is unfavorable to him and adopt that part which is favuorable. Nichols v. Kern, 32 Mo. App. 1; Ruggles v. County, 3 Mo. 497; State ex rel. v. Harrington, 100 Mo. 170; Mechemon Agency, sec. 148, and authorities cited in note 1. He must approve and ratify it entirely or not at all.

Although the defendant did not authorize its agent to borrow of the plaintiff said sum of money and was ignorant of the fact that he had done so when the said sum was paid over to it, yet if after defendant ascertained the fact that its agent had borrowed said sum on its credit and that he had paid over the same to it, then upon every principle of right doing and justice the debt became its own as much so as if it had in the first instance authorized its agent to procure the loan of the plaintiff. Under all the circumstances it would be more reasonable and equitable to hold the defendant to an agreement which it' ignorantly ratified than that the plaintiff who was acting in good faith should be subjectedto loss. Ruggles v. County, 3 Mo. 497; Norton v. Bull, 43 Mo. 113; Watson v. Bigelow, 47 Mo. 413; Carson v. Cummings, 69 Mo. 325; Fowler v. Bank, 22 N. Y. (Sickels) 138; Davis v. Krum, 12 Mo. App. 279; Mechem on Ageney, sec. 113-116-148; Herman on Estoppel & Res Adjudicata, sec. 1073-1074.

The defendant should upon repudiating the unauthorized act of its dishonest agent have returned the fruits of the latter’s crime which had come into the possession of the former, though innocently so. When defendant was advised of the fact that it had money in its possession which it had received from its agent and which had been obtained by him in its name and upon its credit by fraud, the least that it could have done would have been to make restitution to the rightful owner. The defendant by retaining the fruits of Hirshe’s crime after acquiring full knowledge of the unauthorized transaction made that transaction its own. Davis v. Krum, 12 Mo. App. 279; Mechem on Agency, supra. The court erred in directing the jury that under the evidence the plaintiff could not recover.

The judgment of the circuit court will be reversed and cause remanded' to be proceeded with in accordance with the views we have herein expressed.

Gill, J., concurs in separate opinion, Ellison, J. dissents.