JOMACK LUMBER CO. V. GRANTS STATE BANK, 1966-NMSC-032,
75 N.M. 787, 411 P.2d 759 (S. Ct. 1966)
JOMACK LUMBER CO., INC., a New Mexico
Corporation,
Plaintiff-Appellant,
vs.
GRANTS STATE BANK, Defendant-Appellee
SUPREME COURT OF NEW MEXICO
1966-NMSC-032, 75 N.M. 787, 411 P.2d 759
Appeal from the District Court of
Valencia County, Larrazolo, Judge
F. L. NOHL, Albuquerque, New Mexico,
Attorney for Appellant.
RODEY, DICKASON, SLOAN, AKIN & ROBB,
Albuquerque, New Mexico, Attorneys for Appellee.
MOISE, Justice, wrote the opinion.
DAVID CHAVEZ, JR., J., M. E. NOBLE, J.
{1} In this action plaintiff
seeks to recover $11,253.26 from defendant because of the claimed failure of
the defendant to credit to its account the proceeds of six checks totalling
that amount. The facts about which there is little controversy are as follows:
On April 29, 1960, plaintiff executed a signature card on a
form provided by defendant which stated, "GRANTS STATE BANK, Grants, New
Mexico is hereby authorized to recognize the signatures given below in payment
of funds or the transaction of other business for this account - Two Signatures
Required." Following were the typed names and signatures, as follows:
"Marion Mead, President; Hugh Mead, Vice President; Joe Lockwood,
Sec.-Treasurer; Frances Burton." Plaintiff's business was located in
Milan, New Mexico, close to Grants. Neither Marion nor Hugh Mead lived in Milan
or Grants. Joe Lockwood was the resident manager of the business and Frances
Burton worked in the office. Among the duties of Frances Burton were the
preparing and making of bank deposits.
{2} Six checks from customers
of plaintiff and made payable to plaintiff were cashed by defendant upon the
same being presented to it by Frances Burton, and part of the proceeds then
deposited as cash in plaintiff's account and the remainder returned to
plaintiff's cash drawer in its place of business.
{3} The first of these checks
bore a rubber stamp endorsement, "Pay to the order of Grants State Bank,
Grants, New Mexico, For Deposit Only, Jomack Lumber Co., Inc.," under
which appeared the signature "Joe Lockwood." This check, as well as
the other five, was carried to the defendant Bank by Frances Burton and cashed
as stated above with part of the proceeds being deposited as cash and the
remainder returned to the cash drawer of plaintiff. The second and third checks
were endorsed in the same manner as the first, except the words, "For
Deposit Only," were scratched through and Joe Lockwood did not endorse
them; the fourth check was endorsed by rubber stamp, "Jomack Lumber
Co."; the
{*789} fifth check was
endorsed simply, "Jomack Lumber Co.," with pen and ink; and the sixth
check was endorsed by rubber stamp at one place, "Jomack Lumber Co.,"
and at another, "Jomack Lumber Co., P.O. Box (illegible), Milan S.S.,
Grants, New Mexico."
{4} About June, 1961, Marion
Mead and Louis Rice, plaintiff's accountant, became suspicious of shortages in
the accounts but did nothing beyond discussing the same with Frances Burton.
They made no inquiry concerning the practice of cashing checks, and did not ask
defendant to discontinue the practice. In June, 1962, plaintiff suffered a fire
and all its records at its place of business were destroyed. Some sixty days
later it was determined that there was a shortage of some $22,000.00 in
plaintiff's accounts. Although the evidence suggests that Joe Lockwood might
have been responsible for the losses, the court found that this was not
determined and no charges were ever filed against Lockwood.
{5} Plaintiff relies on ten
points wherein the failure of the trial court to make certain requested
findings of fact and conclusions of law is asserted, and the findings and
conclusions which the court made are claimed to be erroneous. However, the real
thrust of plaintiff's argument is to the effect that Frances Burton was without
authority to alter the rubber stamp endorsement to eliminate the restrictive
phrase, "For Deposit Only"; that the defendant violated the contract
between the parties when it permitted Frances Burton to cash checks without
requiring the endorsement by two of the persons whose signatures were
authorized; that the endorsements of the checks were unauthorized and
forgeries, and no rights could be predicated thereon; and that the defendant
was liable for plaintiff's loss resulting from cashing of checks by Frances
Burton, an employee, without authority.
{6} We assume, for the
purpose of this case, that plaintiff is correct in the propositions of law
advanced by it to the effect that in the absence of negligence, laches, or
estoppel, a payee is entitled to recover against a collecting bank cashing a
check bearing a forged or unauthorized endorsement of the payee, and procuring
payment thereof from the drawee of the check. State v. First Nat. Bank of
Albuquerque,
38 N.M. 225,
30 P.2d 728; see 100 A.L.R.2d 670, 672. Also, we
agree with the rule that absent knowledge thereof by the principal, a bank cannot
over a long period of time cash checks for an agent who lacks authority and
then rely on a custom in the business to estop the principal from denying the
agent's authority. See Industrial Plumbing and Heating Supply Co. v. Carter
County Bank, 25 Tenn. App. 168, 154 S.W.2d 432; annotation in 37 A.L.R.2d 453,
460. However, we do not consider that these rules apply here because of the
unusual
{*790} facts present. If Frances
Burton had pocketed the cash received by her from the bank, the authorities
would seem clearly to support a conclusion that the owner and payee of the
checks could recover from the bank that cashed them for her with unauthorized
or altered endorsements. See Rivers v. Liberty Nat. Bank of Columbia, 135 S.C.
107, 133 S.E. 210; Palmetto Compress and Warehouse Co. v. Citizens &
Southern Nat. Bank, 200 S.C. 20, 20 S.E.2d 232; Standard Steam Specialty Co. v.
Corn Exchange Bank, 220 N.Y. 478, 116 N.E. 386, L.R.A.1918B 575, together with
annotation commencing on page 576; Gresham State Bank v. O and K Construction
Company, 231 Or. 106, 370 P.2d 726, 372 P.2d 187, 100 A.L.R.2d 654; R. Mars,
Contract Co. v. Massanutten Bank of Strasburg (C.A. 4, 1960) 285 F.2d 158, 87
A.L.R.2d 633; Fidelity and Deposit Co. of Maryland v. Marion Nat. Bank, 116 Ind.
App. 453, 64 N.E.2d 583.
{7} The uncontradicted facts
here disclose that Frances Burton cashed the checks in question at defendant
bank. It was she who struck the restriction from the rubber stamp endorsement.
However, the cash received by her was either deposited in plaintiff's account
in the bank, or returned to the cash drawer by her. It is plaintiff's position
that shortages were present in the accounts and the cash was necessary in the
cash drawer in order to conceal them. It is argued that if the defendant had
not violated its duties in this regard this cash would not have been available,
and accordingly the defendant should be liable for the loss.
{8} Although Morgan v. First
National Bank in Albuquerque,
58 N.M. 730,
276 P.2d 504, was relied on by plaintiff
in the court below, the case was not cited by either party on this appeal.
Nevertheless, we consider it helpful. The court, in its opinion, recognized the
rule that where an endorsement has been forged and the proceeds reach the hands
of the true payee, no recovery may be had, but held that under the facts of
that case the bank was responsible for plaintiff's loss.
{9} It seems to us that the
instant case comes directly under the rule recognized in Morgan, supra, but not
there deemed applicable, viz., that absent loss because of the wrongful cashing
of the check there can be no recovery from the wrongdoer. National Surety
Corporation v. City Bank & Trust Co., 248 Wis. 32, 20 N.W.2d 559; Andrews
v. Northwestern Nat. Bank, 107 Minn. 196, 117 N.W. 621; Coplin v. Maryland
Trust Co., 222 Md. 119, 159 A.2d 356; Sweeney v. National City Bank of Troy,
263 App. Div. 418, 33 N.Y.S.2d 885, affirmed 290 N.Y. 624, 48 N.E.2d 711, and
Gilbert v. Chase National Bank (S.D.N.Y., 1952) 108 F. Supp. 229. The rule has been
recognized by us in other situations.
{*791}
In Jensen v. Allen,
63 N.M. 407, 409,
320 P.2d 1016, we quoted from 15 Am.
Jur. 388, § 3, as follows:
"To warrant the recovery of damages in any case, there
must be a right of action for a wrong inflicted by the plaintiff therefrom.
Wrong without damage, or damage without wrong does not constitute a cause of
action."
We then held that the jury had found no wrong and accordingly
the court had correctly determined there could be no recovery. See also, Clark v.
Cassetty, 71 N.M. 89, 376 P.2d 37. In the present case, although there was a
wrong, there was no damage as a result thereof and, likewise, under the quoted
rule, there can be no recovery. See 22 Am. Jur.2d 15, Damages, § 2, for a more
recent statement of the rule.
{10} This is not a case of
denial of damages for failure to establish the amount of loss with certainty,
as argued by plaintiff. The rule in such a circumstance is set forth in Frank
Bond & Son, Inc. v. Reserve Minerals Corporation,
65 N.M. 257,
335 P.2d
858. Rather, it is a case of no loss having been proved.
{11} Plaintiff argues that
although the money was placed back in its cash drawer, payment of the cash made
possible the covering up of embezzlements therefrom, and that if defendant had not
been guilty of the wrongful acts complained of, the defalcations would have
been discovered much sooner and the loss would have been much less. This may or
may not be true - as a matter of fact the method utilized by the party guilty
of embezzlement is not entirely clear - nevertheless, plaintiff received from
defendant every penny to which it was entitled and any loss suffered by it
resulted from the intervening misconduct of someone else. To hold as argued by
plaintiff would support liability of the defendant if Frances Burton were held
up by a robber and the money stolen while she was on her way back to the store,
or for loss a week later by burglary from the plaintiff's safe, on the theory
that if defendant had not paid out the cash on the checks it would not have
been available to a thief. The fallacy of the argument is apparent from the
mere statement of the foregoing possibilities. Compare Andrews v. Northwestern
Nat. Bank, supra. The trial court placed its decision directly upon the absence
of proof of damages resulting from defendant's conduct.
{12} Neither do we consider
that §§ 50A-1-201(14) and (25), N.M.S.A. 1953, or §§ 50A-3-206(3), 50A-3-304,
50A-3-406, 50A-3-407 and 50A-4-201, N.M.S.A. 1955, effective from and after
January 1, 1962, or §§ 48-9-2, 48-9-4, 50-1-37, 50-1-56, 50-2-55 and 50-2-56,
N.M.S.A. 1953, effective before that date, in any way alter or affect our
conclusion.
{*792} We find no
error in the judgment of the district court and accordingly affirm the same.
DAVID CHAVEZ, JR., J., M. E. NOBLE, J.