96 So. 2d 578 | La. | 1957
The plaintiff, Evangeline Iron Works, Ltd., alleging the defendant E. J. Smith
The defendants, after their exceptions of no cause and no right of action were overruled and Smith’s plea of prescription of one year was referred to the merits, answered, generally denying the allegations of the petition. Smith further answered, averring that although he had cashed the checks, he had no knowledge of wrong doing on the part of Lyons and had not profited in any way from the transactions.
Following trial on the merits there was judgment in favor of the plaintiff and against Lyons in the sum of $18,726.05, with recognition of the lien and mortgage. As to Smith, the suit was dismissed, for the reasons as stated by the trial judge that (1) plaintiff conceded it failed to make out a case against him under Article 2324 of the Revised Civil Code, and (2) failed to prove with the certainty required by law its right to recover under a subsequently advanced theory that, having received money due
The record reveals the plaintiff, a small corporation composed almost entirely of its own employees, operates in the city of Lake Charles, Louisiana, a machine and welding shop for the repair of oil field and general contractor equipment. The defendant Lyons, a trusted employee for many years, originally joined the company in a bookkeeping and clerical capacity, being made vice-president in 1943 and secretary-treasurer in October of 1950. After his election to the vice-presidency, Lyons, from April of 1944 through October of 1950 systematically cashed customer checks payable to the company, retaining the funds thus secured and altering the books to conceal the resulting shortage. These defalcations were revealed when D. J. Schanz,
After carefully studying the record, we are constrained to conclude, as did the trial judge, that the plaintiff totally failed to prove any conduct on the part of Smith that could have brought him within the purview of Article 2324 of the Revised Civil Code and the jurisprudence thereunder, upon which plaintiff’s suit is predicated and which provides: “He who causes, another person to do an unlawful act, or assist! or encourages in the commission of it,, is answerable, in solido, with that person,
Counsel representing plaintiff nevertheless argue here, both orally and in brief, that (1) inasmuch as Smith cashed these checks without inquiry as to Lyons’ authority to endorse and negotiate them, a fact he could have easily ascertained, this constituted “negligent ignorance” on Smith’s part, which had the effect in law of actual knowledge, and thus placed him in the position of having aided and assisted Lyons in embezzling funds, for which he is answerable in solido under Article 2324, and (2) in any event, the money received by Smith under this unauthorized endorsement was not money due Smith and he is, therefore, obliged to restore it to plaintiff whether he received it through error or knowingly under the provisions of Article 2301 of the code.
There is clearly no merit to the first contention since plaintiff, as stated by the trial judge in his written reasons for judgment, has already conceded in the lower court it failed to establish its case so as to bring it within the purview of the provisions of Article 2324. Furthermore, taking plaintiff’s own brief, wherein it is admitted that in order to prevail on this theory it was required to establish that Smith, in cashing the checks, had knowledge of Lyons’s appropriation of the funds and himself profited by the transactions, we find the concession that “the record fails to prove that Lyons lost a substantial part of the proceeds from the checks in gambling with Smith.”' In fact, the record fails to establish that Lyons lost any money gambling with Smith or in a place operated by him, or that Smith, in fact, derived any benefit or profit of any kind from Lyons’s manipulations. Moreover, as will be shown hereafter, the checks were cashed by Smith in good faith, for full value, and without knowledge of any defalcation.
The second argument is equally without merit. Plaintiff having elected to sue in tort, a quasi-offense, under Article 2324, waived any right it may have had to. recover in quasi-contract under Article 2301. Morgan’s Louisiana and T. R. & S. S. Co. v. Stewart, 119 La. 392, 44 So. 138; State v. Younger, 206 La. 1037, 20 So.2d 305. But if we were to concede that under the pleadings this particular action has not been waived, Article 2301 must be read and considered together with the negotiable instrument law of this state — particularly R.S. 7-52 and R.S. 9:3804 et seq. — and plaintiff still cannot recover under the facts, of this case.
It is unmistakably shown that the authority of Lyons to endorse checks payable to the corporation in the course of its
We think, as did the trial judge, that “if plaintiff sustained its loss, it was because of its failure to have audits of its books frequently enough and its undue confidence in its officer, Lyons, and the further fact that they encouraged him in his gambling activities,” the evidence disclosing further that Lyons habitually engaged in card games with other members of the corporation both at the office and at home, with stakes running considerably higher than is generally encountered in a friendly game. He apparently lost to these members most, if not all, of the sums he secured by cashing the checks with Smith.
Under these conditions we find particularly applicable the following quotation from American Jurisprudence: “Where the prejudicial situation has resulted from the wrongful act of a third person, the decision must be against the party whose conduct made possible the wrongdoer’s act, breach of trust, fraud, or negligence. It is said: ‘As between two innocent persons, one of whom must suffer the consequences of a breach of trust, the one who made it possible by his act of confidence must bear the loss.’ * * * Thus, where the owner of a negotiable instrument has intrusted the note or check to another and the latter, in violation of instructions, has transferred the instrument to one who has taken it innocently or without knowledge of the breach of trust, the loss must be borne by the owner rather than by the transferee.” Volume 19, page 335, Section 484. See, also, Young v. Gretna Trust & Savings Bank, 184 La. 872, 168 So. 85; Whittington Co. v. Louisiana Paper Co., 224 La. 357, 69 So.2d 372, and the authorities therein cited.
The conclusion we have reached renders it unnecessary for us to consider the prescriptive plea of one year.
. Smith died on May 13, 1954, shortly after trial on the merits, and his widow, Mrs. Bernice Smith, was substituted as party defendant in his stead.
. Shortly after the defalcation was discovered, Lyons gave plaintiff a check for $1,700 and a $4,000 mortgage on property belonging to him as a partial restitution of the funds secured, stating this would cover all amounts embezzled. Subsequent check disclosed funds in excess of $20,000 had been thus secured over a 6-year period.
. Schanz succeeded to the presideucy upon the death of his brother shortly after the shortage was discovered.
. The record also shows Smith rented out a part of the establishment to various persons who operated gambling in the rented space.
. Article 2301 provides: “He who receives what is not due to him, whether he receives it through error or knowingly, obliges himself to restore it to him from whom he has unduly received it.”