Opinion
No. 40289.
June 14, 1948. Motion for Rehearing or to Transfer to Banc Overruled, September 13, 1948.
1. ACTIONS: Money Had and Received: Unjust Enrichment. One whose property has enriched another through the wrongful acts of a third person and without any consideration moving from the recipient may enforce restitution by an action at law for money had and received.
2. ACTIONS: Equity: Unjust Enrichment: Proceeds of Forged Check. The action for money had and received based on unjust enrichment is equitable in nature. When defendant bondholders' committee received credit in their bank account for the amount of a forged check and later paid out such amount to the bondholders, they were not a mere conduit and were unjustly enriched.
3. AGENCY: Equity: Bills and Notes: Acceptance of Proceeds of Forged Check: Ratification of Agent's Act. By accepting the proceeds of the forged check deposited to their account by their agent, defendants will be held to have ratified the act of said agent. And defendants cannot in good conscience retain the proceeds of the wrongful act of their agent.
4. ELECTION OF REMEDIES: Bills and Notes: Banks and Banking: Forged Check Charged Against Account: Right to Follow Proceeds. When a forged check is charged against the account of a depositor, the latter is not required to proceed against the bank, but may elect to follow the proceeds of the forgery.
5. ELECTION OF REMEDIES: Principal and Surety: Bills and Notes: Forged Check: Loan by Surety Company: Not Inconsistent Election of Remedy. When plaintiff was loaned by its surety company the amount of its loss through a forged check, this was not an election of an inconsistent remedy and will not prevent an action to recover the proceeds of the forgery.
6. BILLS AND NOTES: Agency: No Title to Forged Check: No Credit Against Agent's Debt. Neither defendants nor their agent obtained a valid title to the forged check which was credited to defendants' bank account. So they could not credit the amount of the forged check against their agent's debt.
7. BILLS AND NOTES: Corporations: Forged Check of Corporation: Defendants Charged With Knowledge. Defendants can claim no rights under Sec. 3225 R.S. 1939, as they had knowledge of the forgery through their agent.
8. PRINCIPAL AND SURETY: Insurance: Contracts: Forged Check: Loan Agreement Valid. A loan agreement whereby a surety company advances the amount of a forged check and the insured prosecutes an action for recovery of the amount of the forgery is not against public policy.
9. EQUITY: Bills and Notes: Actions: Interest: Forged Check: Unjust Enrichment: Recovery for Money Had and Received: Remedy Adequate. Plaintiff is entitled to recover from defendants in an action for money had and received through unjust enrichment from the proceeds of a forged check. And interest may also be recovered. This remedy is adequate and the question of a constructive trust or equitable lien need not be considered.
On Motion for Rehearing or to Transfer to Banc.10. BILLS AND NOTES: Corporations: Agency: Forged Check of Corporation: Knowledge of Agent. The knowledge of the agent who committed the forgery is charged to defendants and Sec. 3225 R.S. 1939 does not give them the right to retain the proceeds of a forged corporation check.
11. BILLS AND NOTES: Corporations: Forged Check of Corporation: Statute Not Applicable. Sec. 3225 R.S. 1939, making corporations liable under some circumstances for unauthorized checks, has no application to a forged check.
Appeal from Circuit Court of City of St. Louis. — Hon. Robert J. Kirkwood, Judge.
REVERSED AND REMANDED ( with directions).
Igoe, Carroll, Keefe Coburn and Richmond C. Coburn for appellants.
(1) Where money or property is obtained by an innocent person through the fraudulent practices of another without any consideration moving from the recipient, the latter is required to make restitution to the person defrauded. Restitution may be enforced by an action at law for money had and received or a proceeding in equity to impose a trust upon the property in the hands of the recipient, Third Natl. Bank of St. Louis v. St. Charles Sav's. Bank, 244 Mo. 554, 149 S.W. 495; Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 262, 94 S.W. 527; Universal Carloading Dist. Co. v. South Side Bank, 224 Mo. App. 873, 27 S.W.2d 768; St. Charles Savs. Bank v. Orthwein Inv. Co., 160 Mo. App. 369, 140 S.W. 921; St. Louis Union Society v. Mitchell, 26 Mo. App. 206; Ditty v. Dominion Natl. Bank of Bristol, 75 F. 769; City of Lowell v. Stiles, 232 Mass. 341, 122 N.E. 412; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496; Grand Lodge v. Towne, 136 Minn. 72, 161 N.W. 403, L.R.A. 1917 E, p. 344; Rio Grande Fire Ins. Co. v. Concordia Fire Ins. Co., 199 S.W. 824; Knobley Mountain Orchard Co. v. People's Bank of Keyser, 99 W. Va. 438, 129 S.E. 474, 48 A.L.R. 459. (2) The defendants' contention that they received the $7000 check of plaintiff Newco Land Company as bona fide purchasers for value because it was given to them by their debtor in discharge of his debt to them is not supported by the facts and the law of the case. The burden of proving that they were bona fide purchasers for value is on the defendants. Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 262, 94 S.W. 527. (3) Torrence's guilty knowledge that the Newco check had been deposited in the defendants' bank account must be imputed to the defendants. Although the guilty knowledge of an agent will not be imputed to his principal where the agent is engaged in an independent fraud for his own benefit, yet if the agent is the sole representative of his principal in the transaction in question (as Torrence was of the defendants in the instant case), his knowledge must necessarily be deemed the knowledge of his principal. Bartlett v. McCallister, 316 Mo. 129, 289 S.W. 814; Third Natl. Bank v. St. Charles Savings Bank, 244 Mo. 554, 149 S.W. 495; Musgrove v. Macon County Bank, 187 Mo. App. 483, 174 S.W. 171; St. Louis Union Society v. Mitchell, 26 Mo. App. 206; Ditty v. Dominion Natl. Bank of Bristol, 75 F. 769; Knobley Mountain Orchard Co. v. People's Bank of Keyser, 99 W. Va. 438, 129 S.E. 474, 48 A.L.R. 459. (4) A principal cannot ratify some of an agent's unauthorized acts by retaining the benefits thereof, and at the same time repudiate his actions in other respects. If the defendants are to retain the funds embezzled by Torrence, they must also assume the guilty knowledge which he had at the time of his abstractions. Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496; Third Natl. Bank v. St. Charles Savs. Bank, 244 Mo. 554, 149 S.W. 495; Musgrove v. Macon County Bank, 187 Mo. App. 483, 174 S.W. 171. (5) The element of payment to the defendants is absent in this case. Payment requires an intention on the part of the debtor to pay and an intention on the part of the creditor to receive payment. 48 C.J., p. 586; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496; Thompson v. Kellogg, 23 Mo. 281; Mercantile-Commerce Bank Trust Co. v. Meletio, 84 S.W.2d 655; Union Biscuit Co. v. Springfield Grocer Co., 143 Mo. App. 300, 126 S.W. 996. (6) If any payment is considered to have been made, it was not made by Torrence but by the plaintiff Newco Land Company, which owed the defendants nothing. Easton Food Center, Inc., v. Beatrice Creamery Co., 119 S.W.2d 987. (7) Torrence was not a debtor of the defendants. A debt must arise from some contractual relationship between the parties. 11 Words Phrases, p. 241; Finlay v. Bryson, 84 Mo. 664; Cable v. McCune, 26 Mo. 371; Ryles-Wilson Co. v. Shelley Mfg. Co., 93 Mo. App. 178. (8) The Current Fund Doctrine has been held in Missouri to apply only to the passage of currency and not to checks. Easton Food Center, Inc. v. Beatrice Creamery Co., 119 S.W.2d 987. (9) But even if the defendants were bona fide purchasers, they still must make restitution. By Section 3039, R.S. 1939, the forged endorsement of a payee's name is wholly inoperative and a subsequent bona fide holder for value without notice of the forgery would acquire no title to the instrument, no right to enforce payment, and no right to the proceeds. First Natl. Bank of Kansas City, v. Produce Exchange Bank of Kansas City, 338 Mo. 91, 89 S.W.2d 33; Borserine v. Maryland Casualty Co., 112 F.2d 409. (10) An identical statute has been similarly construed in other jurisdictions. Seaboard Natl. Bank v. Bank of America, 193 N.Y. 26, 85 N.E. 829; Real Estate Land Title Trust Co. v. United Sec. Trust Co., 303 Pa. 213, 154 A. 593. (11) Since the defendants' signatures on blank checks facilitated Torrence's embezzlements, as between two innocent parties, the defendants must suffer the loss caused by their own carelessness. Clifford Banking Co. v. Donovan Commission Co., 195 Mo. 262, 94 S.W. 527; The International Bank v. The German Bank, 71 Mo. 183; Capital Bank v. Armstrong, 62 Mo. 59. (12) The plaintiffs' remedies are in nowise prejudiced by the fact that after Newco's check had been deposited in the defendants' bank account, virtually all of the money on deposit in the defendants' accounts were checked out. Missouri follows the Swollen Assets Doctrine and a constructive trust may be impressed upon the assets generally of the defendant, and the plaintiff is not required to trace his property into the hands of the defendant. Orr v. St. Louis Union Trust Co., 291 Mo. 383, 236 S.W. 642; Tiernan's Executor v. Security Bldg. Loan Assn., 152 Mo. 135, 53 S.W. 1072; Nelson v. McClean's Estate, 236 Mo. App. 718, 161 S.W.2d 676; Johnston v. McCluney, 80 S.W.2d 898. (13) Nor is the fact that virtually all of the money on deposit in defendants' bank accounts was drawn out by the defendants before they knew that the $7000 check of Newco had been deposited in their account any defense to the plaintiffs' action for money had and received. St. Charles Savs. Bank v. Orthwein Inv. Co., 160 Mo. App. 369, 140 S.W. 921. (14) The agreement entered into between the plaintiff Hartford Accident Indemnity Company and the plaintiff Newco Land Company was a loan, was valid, and the relief sought against the defendants should be granted the plaintiff Newco Land Company and not the plaintiff Hartford Accident Indemnity Company. Kossmehl v. Millers Natl. Ins. Co., 185 S.W.2d 293; Luckenbach v. W.J. McCahan Sugar Refining Co., 248 U.S. 139, 39 S.Ct. 53; Phillips v. Clinton Mfg. Co., 204 S.C. 496, 30 S.E.2d 146, 157 A.L.R. 1255. Jacob M. Lashly, and Lashly, Lashly, Miller Clifford for respondents.
(1) Where, as here, there is only a general finding the trial court must be presumed to have found in favor of respondents every fact warranted by the evidence and necessary to sustain its judgment and the appellate court will not set aside the judgment unless it is shown by appellants to be clearly erroneous. R.S. 1939, Ann., 847.114 (d); Peters v. Jamison's Estate, 202 S.W.2d 879; Heller v. Jentzsch, 303 Mo. 440, 260 S.W. 979; Tebeau v. Globe Rutgers Fire Ins. Co., 271 Mo. 626, 197 S.W. 130; Weber v. Interstate, 205 S.W.2d 291. (2) And in determining whether appellants have shown that the trial court's judgment is "clearly erroneous" the appellate court must consider the evidence in a light most favorable to the respondents, giving due regard to the opportunity of the trial court to judge the credibility of the witnesses. The appellate court will usually defer to the findings and judgment of the trial court when based on conflicting evidence or when conflicting inferences may be drawn from the evidence. Laws 1943, p. 388, sec. 114 (d); Peters v. Jamison's Estate, 202 S.W.2d 879; State v. Bradshaw, 313 Mo. 334, 281 S.W. 946; Bell v. Barrett, 76 S.W.2d 394; Bokata v. Ill. Bankers Life Ins. Co., 195 S.W.2d 888; Dell-Wood Tires, Inc., v. Riss Co., 198 S.W.2d 347; Lambert v. Rodier, 194 S.W.2d 934. (3) No action will lie for money had and received or to raise a constructive trust against persons (respondents here) who have received the proceeds of a check wrongfully drawn on the depositor's account, where, as here, such persons acting as a "conduit" received the money in good faith and paid it over to another without collusion or prior knowledge of claimant's (Newco Land Company) claim to the money. The recipient (respondents here) of the money in such a case has not been "enriched." Ford-Davis Mfg. Co. v. Maggee, 233 S.W. 267; Brink v. Kansas City, 198 S.W.2d 710; Propst v. Sheppard, 174 S.W.2d 359; Burbank v. Farnham, 220 Mass. 514, 108 N.E. 492; Marine Co. v. Milwaukee, 151 Wis. 239, 138 N.W. 640. (4) Where an agent has done an unauthorized act or an act beyond the scope of his authority (as here) the knowledge of the agent is not imputed to the principal; and there is no ratification of an agent's unauthorized act where, as here, at the time it becomes known to the principal the latter has parted with the benefits resulting from it. Hunter v. Hunter, 327 Mo. 817, 39 S.W.2d 359; State ex rel. Continental Life Ins. Co. v. Allen, 303 Mo. 608, 262 S.W. 43; Winkelblack v. Natl. Exchange Bank, 155 Mo. App. 1, 136 S.W. 712; Wright v. Great Western Cas. Co., 229 S.W. 440; Stetson Press, Inc., v. Bunsel Oil Burner Corp., 285 Mass. 291, 189 N.E. 103; Restatement of the Law of Agency, American Law Institute, sec. 280, p. 622; Chismore v. Marion Sav. Bank, 221 Iowa 1256, 268 N.W. 137; Robie v. Holdahl, 180 Minn. 226, 230 N.W. 641; German-American State Bank v. Mutual Benefit Health Accident Assn., 107 Neb. 124, 185 N.W. 313; Connelly v. Special Road Bridge Dist., 99 Fla. 456, 126 So. 794; Edelstone v. Salmon Falls Mfg. Co., 84 N.H. 315, 150 A. 545; Alabama Western R. Co. v. Bush, 182 Ala. 113, 62 So. 90; Chicago, R.I. G. Ry. Co. v. Sears, 210 S.W. 684. (5) The equitable maxim that where one of two innocent persons must suffer by the acts of a third, he whose conduct or omission enabled such third person to occasion the loss must sustain it, has no application here, since the conduct or omission relied upon as warranting the imposition or liability under said maxim did not occur in the transaction in suit nor was it the proximate cause of the loss. Egan v. United Gas Improvement Co., 319 Pa. 7, 178 Atl., 683; Citizens Southern Bank v. Union Warehouse Compress Co., 157 Ga. 434, 122 S.E. 327; 31 C.J.S. 325. (6) Nor does said maxim apply where, as here, the wrong and resulting loss was accomplished through the instrumentality of a criminal act such as forgery. Home Indemnity Co. of New York v. State Bank, 23 Iowa 103, 8 N.W.2d 757. (7) Appellants are not entitled to a judgment imposing liability on respondents for money had and received or as constructive trustees for the proceeds of the forged check in question. Because respondents did not receive any money belonging to appellant Newco Land Company. When the Mississippi Valley Trust Company paid the forged check it made payment out of its own funds, not appellant Newco Land Company's funds. East St. Louis Cotton Oil Co. v. Bank of Steele, 200 Mo. App. 180, 205 S.W. 96. (8) The doctrine of election of remedies bars both appellants from obtaining any kind of relief against respondents. United States Fidelity Guaranty Co. v. Fidelity Natl. Bank Trust Co., 232 Mo. App. 412, 109 S.W.2d 47; Re Franz Estate, 344 Mo. 510, 127 S.W.2d 401. (9) Section 3225, R.S. Mo. 1939, precludes both appellants from obtaining any kind of relief against respondents. The statute shields any creditor of an officer or employee of a corporation from liability to the corporation where such creditor receives and collects a corporate check without actual knowledge that it was issued without authority. Goodbar v. Scruggs, 210 Mo. App. 112, 242 S.W. 129. (10) Torrence by surreptitiously depositing the seven thousand dollar Newco check in respondents' bank account gave said check in pro tanto "payment" of his debt to respondent. Nassau Bank v. Natl. Bank of Newburgh, 159 N.Y. 456, 54 N.E. 66; Fidelity Trust Co. v. Baker, 60 N.J. Eq. 170, 47 A. 8; (11) Torrence was a debtor of the respondents. Any legal obligation to pay a sum of money is a "debt" regardless of whether it arises by contract or is imposed by law. Nassau Bank v. Natl. Bank of Newburgh, 159 N.Y. 456, 54 N.E. 66; Indiana Refining Co. v. Taylor, 195 Ind. 223, 143 N.E. 682; Re Marathon Sav. Bank, 198 Iowa 692, 196 N.W. 729. (12) Only the lowest balance in a commingled fund or bank account of a person sought to be charged as trustee for the former owner of stolen funds is subject to the trust under the "swollen assets doctrine" as subsequent deposits in the commingled account do not replace trust funds withdrawn therefrom. Horrigan Realty Co. v. First National Bank, 221 Mo. App. 329, 273 S.W. 772; Conqueror Trust Co. v. Fidelity Deposit Co. of Maryland, 63 F.2d 833; Mercantile Trust Co. v. St. L. and S.F.R.R., 99 F. 485; Schuyler v. Littlefield, 232 U.S. 707, 58 L.Ed. 806; 3 Scott on Trusts, pp. 2483-2485; American Law Restatement of the Law of Restitution, sec. 212.
Action for money had and received. Newco Land Company, a corporation, hereinafter referred to as Newco, instituted the suit. The petition is in two counts, each based on the same cause of action, which arose out of an embezzlement of $7,000 of Newco's funds by an employee and its deposit in a bank to the credit of defendants to conceal abstractions therefrom. The first count seeks to impress a $7,000 equitable lien upon assets in the hands of William W. Martin, William S. Bedal, and George F. Hardie as the Bondholders' Protective Committee for Holders of Bonds of the St. Louis Joint Stock Land Bank of St. Louis, Missouri, in receivership, hereinafter referred to as the Committee. The second count seeks a judgment for $7,000 against defendants in said representative capacity, with interest. Defendants set up payment to Newco by the indemnity company and that Newco was not the real party in interest. Thereupon, the Hartford Accident and Indemnity Company, a corporation, hereinafter referred to as Hartford, was joined as a party-plaintiff, and each count was amended to seek relief in the alternative; i.e., either to Newco Land Company or Hartford Accident and Indemnity Company. There was a general finding by the trial court in favor of defendants. Plaintiffs appeal from the decree and judgment entered thereon.
The second count of plaintiffs' petition asked judgment in the sum of $7,000, with interest at the rate of six per cent per annum from November 15, 1943, the date of the institution of the action. The judgment was entered on October 7, 1946. The amount in dispute exceeded $7,500 at the time of judgment, vesting jurisdiction here.
Mo. Const. 1945, Art. V, Sec. 3; Sec. 2078, R.S. 1939; Sec. 2078; Mo. St. Ann.; Lackey v. Wilder (Mo. App.), 33 S.W.2d 1011, 1014[7]; Kimmie v. Terminal R.R. Ass'n of St. Louis, 344 Mo. 412, 415, 416, 126 S.W.2d 1197, 1198[2].
The St. Louis Joint Stock Land Bank became insolvent and was in receivership. Bondholders, general creditors, and stockholders [508] were interested. In March, 1932, a committee designated "Bondholders' Protective Committee for Holders of Bonds of St. Louis Joint Stock Land Bank" was created under a deposit or trust agreement and approximately $14,000,000 of the $18,000,000 bonds outstanding were deposited under said agreement. The Committee, among other things, received "dividends" from the Land Bank Receiver on bonds deposited under the agreement and would remit the same to the depositing bondholders; and under authority conferred instituted class suits against stockholders of the Land Bank to enforce the "super-added" liability under the federal law of said stockholders and received remittances of recoveries therein. They collected $600,000 or more. The Committee maintained two bank accounts in the First National Bank of St. Louis. Dividends from the Receiver of the Land Bank were deposited in a "Dividend Account" and thence prorated to the depositing bondholders. The Committee's expense moneys and also collections on suits in foreign jurisdictions were kept in a "Regular Account" and in due time turned over to the registry of the United States District Court for distribution.
In the early 1930s there were a number of business failures and Humphrey-Jacques Company engaged in the business of assisting bondholding committees with clerical and other duties. In 1932 William R. Humphrey of Humphrey-Jacques Company was selected as Secretary of defendant Committee. Efforts at reorganizing the Land Bank failed and by 1939 the work of the Committee had been practically completed, its principal activity being to wait for the Receiver to complete the liquidation. Humphrey-Jacques Company was ready to quit business in 1940. Mr. Humphrey, about to accept employment taking him out of town, wanted to resign as Secretary, but the Committee, having paid him reasonably substantial sums while the work was active, thought he should continue until the remaining work was finished. Robert H. Torrence was bookkeeper for Humphrey-Jacques Company and in charge of the accounts of all committees represented by it. Humphrey-Jacques Company discontinued business as of January 31, 1940. Mr. Torrence was paid $500 to keep the records until Humphrey-Jacques Company could fully wind up its affairs. Mr. Humphrey agreed to remain as nominal Secretary of the Committee with the understanding Torrence would do the actual work. Mr. Humphrey received compensation from the Committee until January 1, 1940, the later payments being $25 monthly and all were payable to or turned over to Humphrey-Jacques Company. Mr. Humphrey testified the Bondholders' Committee was to "settle up" with Torrence for services rendered when the Committee was finally dissolved. On September 6, 1940, the Committee paid Torrence $80.97 for services. The liquidation of Humphrey-Jacques Company was completed August 31, 1940, and Torrence ceased to be in its employ. He maintained the books for the Committee until 1942, prepared checks for issuance and made deposits of remittances, including collections in suits against stockholders, in the bank accounts maintained by the Committee.
Unauthorized by and unknown to any of the parties interested, Torrence had been making withdrawals aggregating $16,882.63 by checks from the "Dividend Account" of the Committee. Checks drawn against the account had to carry the signatures of W.W. Martin and William R. Humphrey, Chairman and Secretary, respectively, of the Committee. Mr. Martin was of opinion his signature had not been forged to the checks. He testified that he usually was away and not available for about a month in the summer and he had signed a few checks in blank, delivering them to Mr. Humphrey, who was supposed to keep them under lock and key, and that possibly some of these checks were used by Torrence.
Mr. Torrence received four remittances of collections in stockholders' suits between January 17 and November 9, 1941, which totaled $7,789.47 and should have been deposited to the credit of the Committee's Regular Account, but he deposited them in the Dividend Account to cover abstractions therefrom. He received a request to pay $36,763.76 to the Clerk of the United States District Court of moneys recovered in stockholders' suits in connection with a [509] distribution to creditors in general of the Land Bank and on May 7, 1942, a check was issued for said amount against the Regular Account of the Committee payable to said United States District Clerk. Said Regular Account had to its credit only $30,350.57. Mr. Torrence was also Assistant Treasurer of Newco and as such had authority to sign checks of Newco when countersigned by the President. He testified he realized if the $36,763.76 check did not clear "everything was finished for me." This caused him to draw a check for $7,000 payable to the Committee against Newco's bank account in the Mississippi Valley Trust Company, forge the countersignature of the President of Newco thereto, and, also forging the Committee's endorsement, deposit the check to the credit of the Regular Account of the Committee. As a result, the Committee's $36,763.76 check to the Clerk of the District Court cleared on May 9, 1942, the $7,000 check was paid and charged against Newco's bank account, and no one, besides Torrence, was any wiser. Newco officials did not discover any abstraction from its funds until late in July, 1942. Newco made a demand upon the Committee for the repayment of the $7,000. This demand was rejected and suit followed.
One whose property has enriched another through the wrongful acts of a third person and without any consideration moving from the recipient may enforce restitution by an action at law for money had and received or a proceeding in equity to impose a trust upon the property in the hands of the recipient.
Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 262, 94 S.W. 527; Third Nat'l Bk. v. St. Charles Savs. Bk., 244 Mo. 554, 149 S.W. 495; Universal Carloading and Dist. Co. v. South Side Bk., 224 Mo. App. 876, 27 S.W.2d 768; Donovan v. Kansas City, 352 Mo. 430, 448, 175 S.W.2d 874, 884; 4 Am. Jur. 508, Sec. 20 et seq.; 41 C.J. 26; Restatement, Restitution, Introductory note; Woodward, Quasi-contracts; Keener, Quasi-contracts.
The Committee contends no action lies against a person who has received stolen money where he has paid the money over to another without collusion and prior to actual knowledge of the true owner's rights. They say they paid the $7,000 to the United States District Court for creditors of the St. Louis Joint Stock Land Bank prior to any knowledge of Torrence's wrong or Newco's rights and, therefore, they are not liable for Newco's loss, not having retained the fruits of Torrence's fraud or having Newco's money, and not having been "enriched."
Of course, the Committee did not receive money. It received a bill of exchange, a $7,000 check earmarked as being payable to the Committee out of Newco's funds in a bank. Money is currency, is not earmarked and passes from hand to hand. There is no obligation on a transferee to investigate a transferor's title or source of acquisition of money when accepted honestly and in good faith. One may give a bona fide transferee for value a better title to money than he himself has. Easton Food Center v. Beatrice Creamery Co. (Mo. App.), 119 S.W.2d 987, 990.
The Committee cites cases like Ford-Davis Mfg. Co. v. Maggee (Mo. App.), 233 S.W. 267, 269, [4]. In that case the treasurer of plaintiff, who had authority to sign checks on its funds and endorse checks payable to its order, secured a cashier's check for $1,027 payable to the order of plaintiff and endorsed it: "Pay to the order of" defendant. Defendant deposited it to his credit and two days later returned the proceeds, without any information respecting plaintiff's rights and without collusion with the treasurer, by check payable to plaintiff's treasurer personally. There was no showing that the $1,027 belonged to plaintiff and not to its treasurer and, of course, plaintiff would not be entitled to recover without establishing its right to the property. The Ford-Davis Mfg. Co. case, as well as other cases wherein the defendant acted as an innocent conduit in the transfer of property and without receiving any benefit therefrom, are ruled correctly, but are not this case. See Burbank v. Farnham, 220 Mass. 514, 108 N.E. 492; Marine Co. v. City of Milwaukee, 15 Wis. 239, 138 N.W. 640, 642[2]. We would have a case more similar to the Committee's cases if the Committee, prior to notice of Newco's rights, had returned the $7,000 to Torrence; [510] or had the Committee received a $7,000 overpayment in one of the suits against stockholders through some mistake and innocently and in good faith in the discharge of its duties turned the $7,000 into the registry of the Court for distribution.
In the instant case the Committee was obligated to pay $7,000 it paid to the United States District Court for distribution, having received it from collections in stockholders' suits. When the Committee used $7,000 of Newco's funds therefor it received a $7,000 credit on its own obligation, was benefited thereby and, consequently, was enriched by Torrence's dishonest act. The Committee was more than a mere conduit. The action for money had and received is equitable in nature and may be maintained where one has received money or its equivalent, a benefit, belonging to another which in equity and good conscience, ex acquo et bono, he ought not to retain. 41 C.J. 31, Secs. 3-6; 4 Am. Jur. Assumpsit Secs. 20, 22 (appendix) 24.1; 46 Am. Jur. 99; Restatement, Restitution, Secs. 1, 123, 138; Woodward, Quasi Contracts (1913) Secs. 1, 7-9; Union Nat'l Bk. v. Lyons, 220 Mo. 538, 570 et seq., 119 S.W. 540 549; Third Nat'l Bk. v. St. Charles Savs. Bk., 244 Mo. 554, 588, 149 S.W. 495, 504.
Newco contends that if the Committee is to retain the benefits arising from the $7,000 deposit in their bank account, it must assume the guilty knowledge of Torrence at the time of the transaction.
In this litigation the Committee seeks to have the transaction stand as consummated by Torrence and retain the benefits resulting therefrom. As a general rule one who, with knowledge of the material facts, retains the benefits of a transaction consummated by another ratifies the acts of the other in connection therewith and assumes the burdens and liabilities of such acts. This applies when an agent exceeds his authority and particularly in instances where the principal claims the person consummating the transaction was not his agent; that is, was a volunteer or self-constituted agent. The principal by availing himself of the acts and retaining the benefits becomes bound and concluded by the transaction as though the acts had been performed by an agent pursuant to express authority and subject to the acts to his disadvantage. State ex inf. v. Koon, 256 Mo. 284, 201 S.W.2d 446, 455 [15, 16]; Fritsch v. National City Bk, (Mo. App.), 24 S.W.2d 1066, 1067 [1, 2]; Mechem on Agency, 2d Ed., Secs. 408, 410, 483; 2 Am. Jur. 177, Secs. 223, 226, 227; 2 C: J.S. 1097, Sec. 49.
The Committee contends the rule does not apply because it parted with the $7,000 on May 9, 1942, when its $36,763.76 check to the Clerk of the United States District Court was cashed and it never had knowledge of the unauthorized acts of Torrence until August, 1942, stating there is no ratification when the principal without fault has parted with the property at the time it becomes known that the agent exceeded his authority. We have pointed out that the Committee retains the benefit of Newco's $7,000. However, the cases stressed by the Committee are distinguishable. Winkelback v. National Exchange Bk., 155 Mo. App. 1, 13, 136 S.W. 712, 716, was an action to rescind a purchase and exchange of real estate between plaintiff and defendant. Plaintiff knew the agent was receiving a portion of the bank's property involved for his services. The court said: "The mere fact that the principal has received or enjoyed the benefits of an unauthorized act will not amount to a ratification if he did so in ignorance of the facts; nor will his retention of such benefits after knowledge of the facts amount to a ratification if at the time he acquires such knowledge and without his fault conditions are such that he cannot be placed in statu quo or repudiate the entire transaction without loss." The same principle from 2 C.J. 496, Sec. 116 (consult 2 C.J.S. 1097, Sec. 49), is stated but did not constitute the basis for the holding in Robie v. Holdahl, 180 Minn. 226, 230 N.W. 641, 643, 644, which is also distinguishable from the instant case on other grounds.
The instant case rests on the underlying equitable principle that the Committee has received property of Newco in circumstances which, in equity and good conscience, ought to be restored to plaintiffs although there exists no promise, expressed [511] or implied from facts, so to do. Newco has received no property of the Committee, is not seeking the rescission of an agreement or the enforcement of some affirmative contractual obligation assumed by defendants. Corpus Juris, supra, states: ". . . where the principal has suffered no prejudice and can make restitution, he should, when he is apprised of the facts, make his election, and if he decides not to ratify he should return the fruits of the unauthorized act, and if he does not do so within a reasonable time, but retains, uses, or disposes of what he has received, he will be held to have ratified the act of the agent, unless such restoration would be of no practical value to the other party."
There is this additional in the instant case: The effect of the Committee retaining the benefits of Torrence's act constitutes him their agent in the transaction as though he acted with express authority. It is well settled that the principal is chargeable with notice or knowledge received by his agent while acting within the scope of his authority concerning a matter within the scope of the agency. Restatement, Agency, Sec. 268, 2 Am. Jur. 286, Sec. 368; 3 C.J.S. 194, Sec. 262. There is an exception to this rule when the agent is acting adversely to the principal and entirely for his own or another's purpose. Restatement, Agency, Secs. 279, 282; 2 Am. Jur. 298, Sec. 379. But the stated exception is itself subject to an exception or qualification, which qualification, supported by the greater weight of authority, is to the effect that where the principal asserts or stands on the transaction either affirmatively or defensively, he is deprived of the benefit of the exception where the agent is his sole representative in the transaction, in which case the agents knowledge is imputed to the principal. Restatement, Agency, Sec. 282; 2 Am. Jur. 300, Sec. 380; 3 C.J.S. 202, Secs. 269, 270, and authorities infra. Torrence, as stated in our statement of the facts, was the sole actor in the transfer of the $7,000 from Newco's credit in the Mississippi Valley Trust Company to the credit of the Committee in the First National Bank. In these circumstances his knowledge was imputable to the Committee under the authorities.
Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N.E. 496, 9 Am. St. Rep. 698, is a leading case and presented issues similar to the instant case. The two corporation had been doing business with one another many years. Plaintiff sued defendant for a balance of $365,500. Defendant contended it was entitled to a set-off of $219,114. One Gray was treasurer for both companies. He had embezzled moneys from both and when accounts were made up he would transfer from one to the other the amount necessary to make his cash good, using checks drawn on one and payable to the other for that purpose. When exposed $219,114 more had been transferred from defendant to plaintiff than from plaintiff to defendant. The court held defendant was entitled to recover the money; that is, entitled to its set-off. The court said in part: "The doctrine is universal, and prevails alike at law and in equity, that a person, though innocent, cannot avail himself of an advantage obtained by the fraud of another, unless there is some consideration moving from himself. It was long ago declared by Lord Mansfield, that, `although a third person shall not be punished for the fraud of another, he shall not avail himself of it. There is no case in the law where that can be done.'" (L. c. 272.) ". . . in the very transaction of receiving them [the checks], the plaintiff was represented by Gray, and by him alone, and is bound by his knowledge. It is the same as if the plaintiff's directors had received the checks, knowing what he knew. For the purpose of accepting the checks, Gray stood in the place of the plaintiff, and was the plaintiff. . . . It is not as if Gray had stolen the money, and then called the directors of the plaintiff corporation together, and informed them of his indebtedness and of his desire to make a payment . . . and they had received it without knowledge or suspicion that it had been stolen, and given him credit for it as part payment. . . . the plaintiff must be deemed to have had knowledge of the true ownership, because in receiving the funds it acted solely through Gray's agency. It must be deemed to have known what he knew; and it cannot retain the benefit of his act, without accepting the [512] consequences of his knowledge. The plaintiff cannot obtain greater rights from his act than if it did the things itself, knowing what he knew." (L. c. s 273, 274.)
". . . The rule is general, that, if one who assumes to do an act which will be for the benefit of another, commits a fraud in so doing, and the person to whose benefit the fraud will inure seeks, after knowledge of the fraud, to avail himself of that act, and to retain the benefit of it, he must be held to adopt the whole act, fraud and all, and to be chargeable with the knowledge of it, so far at least as relates to his right to retain the benefit so secured." (L. c. 275.)
The principle of law stated in the Atlantic Cotton Mills case has been accepted as good law in Missouri to be applied in appropriate instances. See Third Nat'l Bk. v. St. Charles Savs. Bk., 244 Mo. 554, 584, 149 S.W. 495, 503; Bartlett v. McCallister, 316 Mo. 129, 139 (IV), 289 S.W. 814, 818[5-7] (stating: "We think the rule is supported by the overwhelming weight of authority"); Musgrove v. Macon County Bk., 187 Mo. App. 483, 493, 174 S.W. 171, 175[6]; Citizens Trust Co. v. Coppage (Mo. App.), 227 S.W. 1057, 1059 [2, 3]; Steam Stonecutter Co. v. Myers, 64 Mo. App. 527. See also Curtis, Collins Holbrook Co. v. United States, 262 U.S. 215, 222, 224, 43 S.Ct. 570, 67 L.Ed. 956; Aldrich v. Chemical Nat'l Bk., 176 U.S. 618, 634 et seq., 20 S.Ct. 498, 44 L.Ed. 611; Ditty v. Dominion Nat'l Bk., 75 F. 769, 771; Munroe v. Harriman, 85 F.2d 493, 111 A.L.R. 657, 662[1, 2] citing cases; First Nat'l Bk. v. Blake, 60 F. 78; Knobley Mountain Orchard Co. v. Peoples Bk., 99 W. Va. 438, 129 S.E. 474, 48 A.L.R. 459, 461, and Annotation, 464. Annotations, 2 L.R.A. (N.S.) 994 et seq.; 86 A.L.R. 537; 104 A.L.R. 1250 et seq.; 111 A.L.R. 665.
The Committee's contention that the rule is not applicable because it assumes that Torrence was the Committee's representative and, mainly, because it assumes Torrence was engaged in matters over which he had authority to act for the Committee cannot be sustained under the instant facts for the reason the Committee in retaining the benefits of Torrence's acts ratifies them and cures the want of previous authorization, ratification being a substitute for prior authority. Gaines v. Miller, 111 U.S. 395, 398, 4 S.Ct. 426, 28 L.Ed. 466; Menkens v. Watson, 27 Mo. 163, 166; Fritsch v. Nat'l City Bk. (Mo. App.), 24 S.W.2d 1066, 1068[4]. The Committee's cases, cited in the margin, involved a different factual situation. For instance, it is said in Hunter v. Hunter, see note 3: ". . . But where as here the knowledge was casually obtained by the agent and was not pertinent to the subject matter of any transaction which he was then or thereafter authorized to conduct, or did conduct, for his principal, there can be no reason for holding that such knowledge should be imputed to the principal."
Hunter v. Hunter, 327 Mo. 817, 830(II), 39 S.W.2d 359, 363(II); State ex rel. v. Allen, 303 Mo. 608, 616, 262 S.W. 43, 44[1]; Stetson Press, Inc. v. Bunsel Oil Burner Corp., 285 Mass. 291, 189 N.E. 103, 104.
We consider two points together. The Committee says that payment of the forged check was made out of funds of the Mississippi Valley Trust Company, the drawee bank (citing East St. Louis Cotton Oil Co. v. Bank of Steele, 200 Mo. App. 180, 185-187, 205 S.W. 96, 98), and also that the doctrine of election of remedies bars Newco and Hartford from obtaining any relief against the Committee (citing United States Fidelity Guaranty Co. v. Fidelity Nat'l Bk. Trs. Co., 232 Mo. App. 412, 415, 416, 109 S.W.2d 47, 49; Re Franz Estate, 344 Mo. 510, 523, 127 S.W.2d 401, 406.).
The holding in East St. Louis Cotton Oil Co. v. Bank of Steele is that a bank is prima facie liable to a depositor when it cashes a check on which the depositor's signature was forged, but the case explicitly states it does not follow that a depositor may recover from the bank in every instance no matter what the facts may be. As pointed out in the United States Fidelity Guaranty Company case, infra, Newco had an election of remedies and the East St. Louis Cotton Oil Company case does not rule the issue.
[513] Newco, in November, 1942, executed a "Loan Receipt" to Hartford, acknowledging a loan of $7,500, Hartford having agreed to indemnify Newco against loss through dishonest acts of its employees. The Committee says this constituted an election of remedies inconsistent with the instant action whether said transaction be considered a loan or a satisfaction and payment to Newco, stressing, however, the latter view, which is discussed separately hereinafter. The doctrine of election of remedies exists where inconsistent remedies are available to a litigant and he has the right to adopt one of the remedies with the effect of precluding a later resort to the other. The rule applies only "where an election has been made as between inconsistent remedies." The Franz Estate case, supra, citing the United States Fidelity Guaranty Company case, supra. See also 28 C.J.S. 1057, Secs. 1, 2; 18 Am. Jur. 132, Secs. 9, 11.
In the United States Fidelity Guaranty Company case, supra, Chaney, an employee of Continental Construction Company, added names of spurious employees to Continental's payroll. Continental issued checks accordingly. Chaney, forging the endorsement of the named payees, secured the cash at defendant bank. Plaintiff, Chaney's surety, indemnified Continental and, being subrogated to the rights of Continental, sued defendant bank. The court sustained defendant's contention that the surety had no greater rights than Continental, and the Continental at the outset had the choice of pursuing the embezzler and his surety or pursuing defendant; that the two remedies were inconsistent, and that the election to pursue the embezzler and his surety precluded any action against defendant. The court pointed out that the liability of defendant was "on the theory that when defendant paid the checks on forged endorsements of Chaney the bank paid out its own money and not that of the Continental. Since defendant had received Continental's money on deposit and had never been legally authorized to pay it out, it still had Continental's money and must account to Continental therefor. . . . [Citing cases.] Or it could have affirmed the act of the bank in paying out the money on a forged endorsement and, upon the theory that Chaney had its money, it could have pursued Chaney and sought and obtained the return of its money embezzled by him." See 9 C.J.S. 752, n 26.
The situation differs in the instant case. Newco and Hartford have maintained consistently that the Committee has Newco's property. Newco's action is to recover its property had and received by the Committee. Any adjustment of rights between Newco and Hartford proceeds upon the theory that Torrence and the Committee, Torrence's beneficiary, came into possession of Newco's (not Newco's bank's) property, and is consistent with a recovery from Torrence's beneficiary. There is no claim that the bank paid out the bank's funds. It may be more difficult for a plaintiff to make out a case against an embezzler or a transferee of the embezzler but the right exists under the authorities relied upon by the Committee.
The Committee says that Torrence, by reason of his abstraction of $16,882.63 of the Committee's funds, was indebted to the Committee, and that his "act in surreptitiously depositing the Newco check in respondents' bank account constitutes partial `payment' of Torrence's obligation" to the Committee. We think the contention may not be sustained for at least two reasons.
The signature of Newco's president and the endorsement of the payee named in the $7,000 check were forgeries and under the law of this State the instrument was inoperative. Section 3039, R.S. 1939 (Mo. St. Ann. Sec. 3039) of our Negotiable Instrument Act reads: "Where a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature . . ." Neither Torrence nor the Committee acquired any title to the instrument or any rights against Newco under the forged signature of Newco's president on the check and neither was entitled to payment out of Newco's funds or to retain the [514] funds received. Borserine v. Maryland Cas. Co., 8 Cir., 112 F.2d 409, 415[9], citing cases; First Nat'l Bk. v. Produce Exchange Bk., 338 Mo. 91, 98, 89 S.W.2d 33, 37[3], also citing cases; German-Am. Bk. v. Barnes (Mo. App.), 185 S.W. 1194, 1195[1, 2]; Seaboard Nat'l Bk. v. Bank of America, 193 N.Y. 26, 85 N.E. 829, 830; Real Estate-Land Title Trs. Co. v. United Security Trs. Co., 303 Pa. 273, 154 A. 593, 594[4].
The Committee relies on Sec. 3225, R.S. 1939 (Mo. St. Ann., Sec. 3225), which, so far as material, reads: "If any check . . . of any corporation . . . shall be given in payment of the debt of any officer, agent or employee of said corporation . . . the payee . . . collecting such check . . . shall not be liable to said corporation . . . therefor, unless it shall be shown that such payee . . . at the time of collecting same, had actual knowledge that said check . . . was issued without authority of said corporation . . ." Prior to the enactment of Sec. 3225 one accepting a corporation's check in payment of personal obligations of its employees took the risk of being required to restore the proceeds. Goodbar v. Scruggs, Vandervoort B.D.G. Co., 210 Mo. App. 112, 115, 242 S.W. 129, 130. We think, as stated in Fidelity Casualty Co. v. Planenscheck, 200 Wis. 304, 227 N.W. 387, 71 A.L.R. 331, 336: ". . . the Negotiable Instrument Act deals with the rights and liabilities of those who are legitimate parties to the instrument. It does not prohibit a bank from recovering from forgers, thieves, or from those who have no title to the instrument." See United States F. G. Co. v. Fidelity Nat'l Bk. Tr. Co., supra, and remarks in McClendon v. Bank of Advance, 188 Mo. App. 417, 427, 174 S.W. 203, 205. In addition, we have ruled the Committee is bound by Torrence's knowledge of the forgeries and his want of rights against Newco under the $7,000 check. It is the same as if the Committee had received the check knowing what Torrence knew.
On November 4, 1942, Newco executed a "Loan Receipt" to Hartford wherein it acknowledged receipt of $7,500 as a loan from Hartford, repayable only to the extent of any net recovery by Newco on account of loss occasioned by the dishonest acts of Torrence, and agreed to prosecute suit for such loss, the suit to be at the expense and under the control of Hartford, and pledged any recovery as security for repayment.
Torrence perpetrated a fraud upon Newco. By means of forgery he effected the transfer of Newco's funds to the Committee. The Committee, charged under the facts of this case with knowledge of these acts of Torrence, says the loan agreement is not what it purports to be but is a payment and Newco has received satisfaction. Such agreements effect a prompt turning over of money to the insured, and if a payment were effected the insurer would be subrogated to the rights of the insured. Newco was under no obligation to Torrence or the Committee to insure against embezzlements or forgeries by Torrence. If the insured and insurer thought their interests would be best served by making a loan subject to repayment to the extent of any recovery of funds wrongfully taken, they had a right to make such an agreement. No law or public policy is cited precluding such a contract in aid of the recovery of a loss occasioned by forgery. Whether a transfer of money operates as a payment or a loan is ordinarily a matter of intention of the parties to the transaction. The "Loan Receipt" states the money was "received . . . as a loan" and that it is "repayable" upon certain conditions. There is no transfer of Newco's claim to its property, but an expressed agreement that it will make claim thereto and prosecute suit for the recovery thereof. Like agreements have received the approval of the courts of the United States and of the States as meeting the needs of commerce and promoting justice. We think such decisions should be followed here. Luckenbach v. McCahan Sugar Ref. Co., 248 U.S. 139, 63 L.Ed. 170, 39 S.Ct. 53, 1 A.L.R. 1522, and Annotation 1528; First Nat'l Bk. v. Lloyds of London, 7 Cir., 116 F.2d 221, 132 A.L.R. 599, and Annotation 607; Kossmehl v. Millers Nat'l Ins. Co., 238 Mo. App. 671, 679, 185 S.W.2d 293, 295[5]; National Shawmut Bk. v. Johnson, 317 Mass. 485, 58 N.E.2d 849, 851[1]; Phillips v. Clifton Mfg. Co., 204 S.C. 496, 30 S.E.2d 146, 157 A.L.R. 1255, [515] and Annotation 1261. Merrimack Mfg. Co. v. Lowell Trucking Corp., 181 Misc. 947, 46 N.Y.S.2d 736; Morton Coal Co. v. Garcia, 57 N.Y.S.2d 67; 8 Couch on Insurance, Sec. 2004.
The measure of recovery in the circumstances of the instant case is the amount of money received by the Committee, with interest. In appropriate instances a constructive trust or an equitable lien may be enforced. Prior to the time of the disclosure of Torrence's embezzlements of Newco's $7,000 the deposits to the credit of the Committee had dropped to a balance of $133.41 in its Regular Account and to a balance, we understand, in its Dividend Account of $193.02. However, as of the date of trial the Committee's Dividend Account had a credit balance of $30,153.57. In these circumstances we think plaintiffs' count for money had and received will afford adequate relief, and we need not discuss any issue involving a constructive trust or equitable lien.
Restitution, Restatement, Secs. 150, 156, 41 C.J. 71, Secs. 80, 81; Rector v. Hamtramck, 1 Mo. *565; Benton v. Craig, 2 Mo. *127; Reed v. Foote, 36 Mo. App. 470.
Restitution, Restatement, Secs. 202 et seq.; Tierman v. Security Bldg. L. Ass'n, 152 Mo. 135, 53 S.W. 1072; Orr v. St. Louis Union Trs. Co., 291 Mo. 383, 236 S.W. 642.
Consult Restitution, Restatement, sec. 212; 3 Scott on Trusts 2483, sec. 518 et seq.; Horigan Realty Co. v. First Nat'l. Bk., 221 Mo. App. 329, 336, 273 S.W. 772, 776[9]; Mercantile Trs. Co. v. St. Louis S.F. Ry. Co., 99 F. 485; Schuyler v. Littlefield, 232 U.S. 707, 58 L.Ed. 806, 34 S.Ct. 466.
Other matters are mentioned but they are not of substance.
Accordingly, the judgment and decree is reversed and remanded with directions to find in favor of defendants in their representative capacity and against both plaintiffs on the first count of the petition and in favor of defendants and against Hartford Accident and Indemnity Company on the second count of the petition but in favor of Newco Land Company and against defendants in their representative capacity in the sum of $7,000, with interest thereon from November 15, 1943, the date of bringing suit, at the rate of six per cent per annum on said second count. Westhues and Barrett, CC., concur.
The foregoing opinion by BOHLING, C., is adopted as the opinion of the court. Leedy, J., and Ellison, J., concur; Tipton, P.J., not sitting.
ON MOTION FOR REHEARING OR TO TRANSFER TO COURT EN BANC.
The Committee has filed a motion for rehearing or, in the alternative, for transfer to Court en Banc, urging, among other things, that Sec. 3225 is controlling. Each of the two issues discussed below is essential to the Committee's case.
Section 3225 authorizes creditors to accept the check of a corporation, firm, or copartnership in payment of the debt of an officer, agent, or employee of the corporation, firm, or copartnership "unless . . . such payee or other person, at the time of collecting same, had actual knowledge that said check, draft or order was issued without authority of said corporation, firm or copartnership." The Committee says we overlooked that it did not have "actual knowledge" that Newco's check "was issued without authority," including Torrence's forgery of the signature of Newco's president thereon. Torrence acted for both parties. He had knowledge of all the facts, and no one but him had any knowledge of the facts. He collected the check, bringing the transaction within the exception stated in Sec. 3225. Direct personal knowledge is not required. It is a general rule of law that one may not lawfully use the funds of another to pay his individual debts; and prior to the enactment of now Sec. 3225 in 1917 (Laws 1917, p. 143) corporation checks when accepted in payment of the individual indebtedness of a corporate employee and [516] not in payment of the corporation's indebtedness were held to carry upon their face notice of their irregular and illegal character in the misappropriation of the corporate funds (an inference of fact) and the corporation could recover unless the party receiving payment established the employee's authority to issue the check in payment of his individual indebtedness. St. Louis Charcoal Co. v. Lewis, 154 Mo. App. 548, 551, 136 S.W. 716, 717; Reynolds v. Title Guaranty Trs. Co., 196 Mo. App. 21, 33(1), 189 S.W. 33, 36[1]; O'Bannon v. Moerschel, 204 Mo. App. 155, 157, 222 S.W. 1035, 1036[1]. The legislative intent was to change the rule that the face of the check imparted notice or knowledge of its illegality. The word "actual" was used to do away with the prior inference of misappropriation arising from the face of the check. Its purpose was not to change the principles of law which impute notice to or knowledge of an agent to his principal. Torrence had actual knowledge of the illegality of the check, and it is this actual knowledge that is charged in law to the Committee. Consult Livermore v. Blood, 40 Mo. 48. Colby v. Riggs Nat'l Bk., 92 F.2d 183, stressed by the Committee, is readily distinguished on the facts. No agent of said defendant had actual knowledge of the essential facts and as we read the case it implies that knowledge of an agent is to be imputed to the principal.
It is also claimed that Sec. 3225, being later, controls over Sec. 3039. Section 3039 makes a signature "forged or made without the authority" of the party wholly inoperative, but is specifically not applicable if said party be precluded from setting up the forgery or want of authority. We think Sec. 3225 applies to instances wherein the individual drawing the check is authorized so to do but exceeds his authority by misappropriating it to pay his personal debts, and that it does not embrace the forgery of another's signature when such signature is essential to the validity of the instrument. It is not within the language of Sec. 3225 that parties seeking to protect themselves against peculations by requiring more than one signature to a check are to be penalized when one authorized to join in the execution of the check forges other signatures to give the check seeming validity. Section 3039 relates to the making of a negotiable instrument while Sec. 3225 relates to the misapplication made of an instrument legally executed. Section 3225 was not enacted to sanction forgeries.
The other points mentioned by the Committee are sufficiently covered in the opinion.
The motion for rehearing or to transfer is overruled.