234 P. 11 | Wash. | 1925
Lead Opinion
This is an action to recover the proceeds of four checks amounting to $2,080, and the facts are substantially as follows: *502
In the year 1921, W.E. Sander was the president of the Hill Syrup Company, a corporation, and at the same time he was the principal stockholder, trustee and president of the Hardware Specialties Manufacturing Company. In the months of March and April, 1921, Sander drew checks on the National Bank of Commerce against the funds of the Hill Syrup Company, payable to the American Savings Bank Trust Company. The checks were cashed by the American Savings Bank Trust Company and the proceeds thereof deposited to the credit of the Hardware Specialties Manufacturing Company, which had an account at that bank. The Hardware Specialties Company thereafter checked out these funds so deposited to its credit. At the time the checks were cashed by the American Savings Bank Trust Company, the bank knew that Sander was the president, and that he with his father-in-law were the owners of a controlling interest in such company. The evidence further shows that, at the time the checks were drawn by Sander, the Hill Syrup Company, a corporation, was not indebted to him. On this state of the evidence the trial court decided that, since the defendant bank had never received nor retained to its own benefit any of the proceeds of the checks, and had no notice or knowledge, at the time it paid out the proceeds, that Sander did not have authority from the Hill Syrup Company to direct the deposits of the proceeds of the checks to the account of the Hardware Company, recovery could not be had. Plaintiff appeals therefrom.
The state of facts surrounding the affairs of the Hill Syrup Company and the actions of its former president, W.E. Sander, are detailed very much at length in Hill Syrup Co. v. MarineNational Bank,
The sole question to be decided in this case is whether the circumstances surrounding the cashing of the checks and the deposit of the proceeds thereof to the credit of the Hardware Specialties Company was such as to put the bank upon inquiry. In other words, was this such a suspicious circumstance that the bank had no right to assume that there was a legitimate transaction between the Hill Syrup Company and the Hardware Specialties Company?
Counsel for appellant insists that because Sander was an officer in each company, that fact is sufficient to show the bank that he was using the money for his own benefit. Appellant relies upon the case of Harden v. State Bank of Goldendale,
The facts in this case are wholly different. It is not an unusual or uncommon thing for corporations to *504 deal with each other, or to draw checks for the payment of accounts to each other. There was no state of facts upon which the bank had any reason to believe that there was not a bonafide indebtedness from one company to the other. There would be no difference in the rights of the parties if Sander, instead of drawing the checks to the American Savings Bank Trust Company and ordering the proceeds to be placed to the credit of the Specialties Company, had made the check direct to the specialties company and deposited the check to its account. This court has gone a long way to protect the funds of corporations where their officers have attempted to use the funds for their own personal ends, and have even held third persons liable where no financial benefit was gained therefrom. But transactions between corporations are so numerous, and it is such a frequent thing for officers of one corporation to be interested either as officers or stockholders in another corporation, that to hold that the bank at its peril received deposits for one corporation which consist of checks of another corporation drawn by an officer interested in both, is to extend the rule beyond all reason.
Numerous cases are cited by appellant to establish the liability of the bank, but we think this case is controlled by the reasoning in National City Bank v. Shelton Electric Co.,
"While it is out of the usual course of business and, therefore, suspicious for a corporation, in the name of its president, to execute a promissory note payable to the president in his individual capacity, it is not at all out of the ordinary for it to execute obligations to third persons, and we fail to see how this situation is altered solely because of the fact that the name of the payee concern includes the name of the president of the maker corporation." *505
While in that case the president who executed the note was not actually interested in the payee corporation, yet a reading of the opinion will show that fact alone was not controlling.
There being no facts or circumstances sufficient to put the bank upon inquiry or to suggest to it that the money was being used for Sander's personal benefit, it follows that the judgment of the superior court was right and it is affirmed.
TOLMAN, C.J., HOLCOMB, MAIN, BRIDGES, and FULLERTON, JJ., concur.
Concurrence Opinion
I concur in the result reached in the foregoing opinion, but not in the observations therein made which seem to suggest that the bank might be put upon inquiry, under some circumstances, as to what Sander did or was going to do with the Hill Syrup Company money. To my mind, it its enough to relieve the bank of all liability to know, as the record here shows, that it was not receiving from Sander any of the Hill Syrup Company money in payment of any debt or obligation due or owing from him to the bank. *506
