Rensselaer Valve Co. v. National Bank of Commerce of Seattle

Fullerton, J. (dissenting)

I am unable to concur in the foregoing opinion. The controlling facts of the case are in the main not in dispute, and are well stated in the majority opinion. I will, however, call attention to one matter on which I think the evidence does not justify the conclusion reached.

The majority, if I correctly interpret their opinion, conclude that there is competent evidence in the record showing that the appellant did not receive the proceeds of the checks upon which the action is founded. To my mind, this is far from demonstrated. It is true that the president of the appellant, as well as its general manager, on direct examination gave the testimony quoted m the opinion. But on their cross-examination, when required to state the sources of their information, it so conclusively appeared that these sources did not furnish them with knowledge of the fact, that the trial court on motion struck all of their evidence on the question. But, more than this, I think the testimony otherwise in the record shows that they not only did not know whether the asserted fact was true or false, but that it conclusively shows that there is now no known source from which the fact can be determined. The manner in which the business dealings between the appellant and its agent Hayner were conducted is but meagerly depicted in the record. But enough is shown to indicate that Hayner, when he made sales of the appellant’s manufactured products, sent to the appellant’s house at New York an itemized statement of the articles sold, and that subsequently he made remittances, specifying the particular items to which the remittances were to be credited as payment. Hayner at *265all times had a large individual account with the hank and many of these remittances were made from his individual account. Indeed, the bank statement in the record, introduced by the appellant, shows that Hayner made no deposits in the appellant’s name subsequent to November 20,1919, although it appears, and the appellant’s president testifies, that a number of remittances were made to the appellant subsequent to that time. As these remittances were made from the account into which the proceeds of the checks in suit were deposited, it seems to me manifest that no one can now know “absolutely that the Rensselaer Valve Company did not receive the proceeds from these checks.” It may be that the appellant did not receive remittances for credit upon the particular items of property for which the checks were given in payment, but this is not the fact to which the witnesses purported to testify, and is, of course, likewise not the fact the majority find to be proven. In my opinion, therefore, the trial court committed no error in striking the testimony, and it is incorrect to say that the “testimony still stands and was properly received. ’ ’

The action brought by the appellant against the bank, it will be remembered, is one at law for a conversion of the proceeds of the checks. In its evidence the appellant contented itself with a showing of the loss and the bank’s dereliction only. It did not show, nor did it attempt to show, that the dereliction in any way aided or abetted Hayner in perpetrating the fraud which occasioned the loss. In other language, the appellant conceived that it was sufficient for its purposes to show the dereliction and the loss, without showing that the one in any way contributed to the other.

I cannot agree with the majority that this is a sufficient showing to charge the bank with liability. In *266the opinion, the rule of liability is stated in the following language:

“It is unquestionably the duty of a bank to faithfully carry out any instructions given it by a depositor concerning’ his business. In this case the bank had explicit instructions that checks such as those involved here should be deposited by Hayner to the appellant’s account. When Hayner failed to make such deposit, but cashed the checks for his own uses, he was at once guilty of an unlawful conversion, and since the bank assisted him in obtaining the money, in direct violation of the instructions given it, though of course, without intent to do wrong, it would be liable to the appellant. The moment the bank cashed the checks and gave the money directly to Hayner, in violation of instructions, the wrong had been done and the unlawful conversion accomplished, and the bank’s liability established.”

• In my opinion, the rule stated is not accurate even with respect to Hayner. The mere wrongful misuse of another’s property with nothing more does not give rise to an action of conversion. The misuse must result in a loss of the property to the complainant before an action of conversion can be founded thereon. If this were not so, a recovery could be had as for a conversion of property even though the misappropriator subsequently accounted to the owner for the property. There is, of course, sufficient in the record to show a conversion of the appellant’s funds by Hayner, since it was shown that he had been intrusted with the funds and had failed to account for them, but my point is that the acts recited by the majority, on which their conclusion is made to rest, do not constitute actionable conversion.

The rule becomes important when we come to consider the bank’s participation therein. The bank, it must always be borne in mind, did not misappropriate the funds. On the contrary, it accounted fully either to Hayner or to the appellant for all of the appellant’s *267property intrusted to it. Its dereliction, and its sole dereliction, consisted in the fact that it did not follow strictly the appellant’s instructions as to the manner in which it was required to deal with the property. I concede, of course, that to constitute conversion there need not be a manucaption, an asportation, or an appropriation of the property of another by the one charged with the conversion, and that mere wrongful or unauthorized acts with respect to it may sometimes amount to a conversion. But I do most emphatically insist that such wrongful or unauthorized acts, to give arise to an action of conversion, must in themselves cause a loss of the property to the owner, or that they must in some way aid in or contribute to the loss. So in this instance, since it was Hayner and not the bank who misappropriated the funds, the bank cannot be held to answer for the misappropriation, unless its acts in relation thereto in some way aided Hayner in the misappropriation, or in some other way contributed to the appellant’s loss, and in the record I can find nothing that justifies the conclusion that its acts did so aid or contribute.

The burden was upon the plaintiff to show this fact. As stated in 38 Cyc. 2078:

“In trover the burden of proof is on the plaintiff, and it remains with him throughout as to traversed material averments of his declaration, petition, or complaint.”

It being, therefore, an essential element of the appellant’s proofs to show that the acts of the bank contributed to its loss, the appellant’s failure to prove the fact was a failure to prove its cause of action, and it follows that the trial court did not err in so concluding.

The cases cited by the majority I do not feel called upon to review. In the main, as I view them, they have no direct bearing on the question, and are not incon*268sistent with, the rule as I conceive it to be. The case from which the quotation is made is, I think, also without application to the facts here shown. The court was there dealing with a trust fund, whereas, in the present instance, there was no trust fund involved. Had the bank caused the checks to be deposited in the way directed, the relation of debtor and creditor would have existed between the bank and the appellant, and not that of trustee and cestui que trust. Its relation to the appellant is not different with respect to the fund, merely because it did not strictly follow instructions with regard to it. But if this be not sufficient to distinguish the cases, I cannot subscribe to the quoted doctrine as a rule of universal application. To say that one is responsible in conversion to another for disregarding instructions with relation to that other’s property, without a further showing that the disregard in some way caused or contributed to the loss of the property, is, to my mind, to lose sight of the legal principles upon which such actions are founded. There was, therefore, in my opinion, no error in the conclusion reached by the court, and its judgment should be affirmed.

Parker, J., concurs with Fullerton, J.