(concurring in part and dissenting in part)—
1. I concur that the trial court's granting of defendant banks' motion for summary judgment against all plaintiffs be set aside.
2. I concur in reversing and remanding for trial the case of Vant Zelfde v. Security Savings and Loan Association. However, on retrial, I would limit inquiry to the sole issue of the validity of the Vant Zelfde "release."
3. I dissent in the majority's failure to grant plaintiffs' judgment on their motions for summary judgment in the consolidated cases of Giambattista and Titus v. Rainier National Bank.
Although the consolidated records of these three cases are somewhat lengthy and complex, we need only concern ourselves with two issues.
Issue 1: By accepting the services of a free lawyer in bringing these lawsuits, are plaintiffs guilty of violating the public policy of the State of Washington against "maintenance" and, consequently do our Washington courts lack jurisdiction in these lawsuits?
Issue 2: Where banks on receiving certified checks made payable to themselves with instructions to purchase certificates of deposit in plaintiffs' names fail to do this but on the request of the party presenting the checks endorse and negotiate such checks and place the proceeds not as instructed but in another party's account without checking back with the makers as to further instructions and such *743funds are subsequently misappropriated, are such banks liable to the makers of such CD's?
Facts
Plaintiffs are New York residents who in 1970 and 1971 collectively invested through Share Brothers, a money broker8 in Syracuse, New York, directing them to purchase certificates of deposit issued by unspecified savings and loan associations in the state of Washington.
Beginning in January 1970 the maximum rate of interest any federally insured financial institution could pay on any certificate of deposit (CD) or passbook account was uniformly limited throughout the country by the various federal regulatory agencies. Money brokers such as Share Brothers and North American International were, nevertheless, able to bring together various investors such as the *744plaintiffs seeking a greater return on their money on the one hand, and substandard lending institutions on the other, which directly or through substandard borrowers, were willing to pay more than the maximum permissible rate of interest.
The undisputed evidence shows that plaintiffs, in response to various advertisements of Share Brothers in New York to the effect that they would be able to invest in FDIC insured deposits and receive "bonus" interest, contacted Share Brothers for the purpose of buying certificates of deposit. In 1971 plaintiffs collectively placed $70,000 with Share Brothers for the purchase of these certificates of deposit to be issued by unspecified savings and loan associations in the state of Washington. Share Brothers in turn placed plaintiffs' funds with North American for delivery to those savings and loan associations. These funds were transferred from New York to Washington and were ultimately misappropriated in Seattle, Washington.
During the early 1970's Martin Brandenfels, a businessman residing in Seattle, Washington, proposed to North American that North American should attempt to collect funds in amounts determined by Brandenfels which would be used to purchase CD's for clients in various savings and loan associations in the state of Washington. In return for North American's services, Brandenfels would pay a commission based on a percentage (3 percent) of the funds forwarded.
North American, in turn, negotiated with Share Brothers to obtain funds from its Share Brothers customers for investment in CD's.
In consideration of funds received from plaintiffs in causes Nos. 774828 and 780285 (i.e., all plaintiffs except the Vant Zelfdes), North American drew certified checks on its own account made payable to Rainier. Each such check included the instruction on its face — "for purchase C.D. [name of plaintiff]," or similar language. In May 1971 those checks were delivered to Brandenfels in Seattle, Washington, for presentation to defendant Rainier.
*745Rainier was well aware, at the time the North American checks were presented, that they were payable to Rainier, not Brandenfels. It also knew that this new method was a change from the previous course of dealing whereby Bran-denfels had deposited checks payable to himself, not to Rainier. Rainier permitted Brandenfels to deposit these North American checks payable to Rainier to either personal accounts of his own or corporate accounts to which he had the power of withdrawal. Before doing so, Rainier made no attempt to communicate with North American, the maker of the checks. A Mr. Harber, an official of Rainier, testified that he authorized Brandenfels' action even though he knew " that was not proper."
Thereafter Brandenfels drew checks on one or more of these personal or corporate accounts in favor of the savings and loan associations which were to issue the CD's. As those checks were received, the CD's were issued and forwarded to plaintiffs in causes Nos. 774828 and 780285 (Court of Appeals, Division One 5006-1) (all plaintiffs except the Vant Zelfdes). However, the checks drawn by Brandenfels for the purchase of these CD's for plaintiffs proved to be nsf. In due course these CD's which had been issued in exchange for nsf checks were declared void by the issuing institutions.
These transactions were initiated by Brandenfels' sending 3 percent of the funds to be received to North American who, in turn, kept 1 1/2 percent and transmitted the remaining 1 1/2 percent to Share Brothers who, in turn, kept 1/2 percent and promised and/or paid the other 1 percent to the plaintiff investors. In effect, the investors would be receiving a certificate of deposit providing for 5 1/2 percent interest plus a bonus of 1 percent. The record is silent as to who supplied the 3 percent to Brandenfels. Share Brothers, in turn, would then receive the money from the investors and transmit the money to North American who would then give a certified check on its own account made payable to Rainier which they transmitted for delivery to Brandenfels.
*746Plaintiff Vant Zelfde Facts
The facts involving Vant Zelfde v. Security are basically the same as those of plaintiffs Giambattista and Titus v. Rainier, with minor exceptions. However, in Vant Zelfde, she executed a release to Security for passbook deposit No. 5503 where plaintiff's money was deposited. Security claims although it might have originally been liable for conversion and/or money had and received, that the Vant Zelfde release exonerates it. However, Security received no release from North American. Vant Zelfde in her release reserved any claim that North American might have against Security.
Brandenfels' misappropriation of designed CD funds led to Share Brothers financing litigation of plaintiffs against defendants Rainier and Security.
During the summer of 1971 North American discovered that some of its checks made payable to Rainier had been endorsed by Brandenfels for purchase of King County property. This prompted North American's formal demand of Rainier that Rainier account for the lost funds caused by its failure to comply with North American's instructions typed on the face of North American's checks to "purchase CD's" for particular named customers.
Share Brothers, recognizing that it was subject to claims by plaintiffs, obtained legal counsel to initiate action against North American, Rainier and Security. Share Brothers first sent letters to plaintiffs indicating its intent to bring actions in the name of and at no cost to plaintiffs. Share Brothers agreed to pay all legal fees incurred.
Sometime in late November or early December 1973, the plaintiffs received a communication from Washington attorney, Joseph C. McKinnon, dated November 26, 1973, bearing the title "Report to Clients and Prospective Clients Re Claims Against National Bank of Commerce and Security Savings and Loan Association." In relating the history of this dispute the report set forth the following facts:
*7471. Share Bros, offered to retain the law firm of Segal, Rivo & Loonsk to represent plaintiffs and pay all legal expenses in suits to recover against potential defendants.
2. Segal, Rivo & Loonsk brought suits on behalf of three plaintiffs against North American, Brandenfels, Security and Rainier in the New York Federal Court.
3. In the spring of 1973 these actions were transferred to Seattle, Washington.
4. Share Bros, then retained Joseph C. McKinnon, a Seattle attorney, to represent plaintiffs in the transferred cases.
5. Mr. Loonsk of Segal, Rivo & Loonsk had suggested that "potential New York state defendants" would probably waive the statute of limitations if the aggrieved customers would postpone action against Share Bros, pending conclusion of efforts at collection from the "Seattle banking organizations."
This report concluded with the following paragraph:
If satisfactory assignments are received from North American, I am willing to represent any of you who ask me to bring a Washington state court suit in your name on your own claim and on the assigned claim of North American against N.B. of C. or Security Savings. Share Brothers have advised that they are willing to pay my fees for representation of you in such suits. Please write and advise if you wish me to file such a suit for you.
Subsequently in December of 1973 each of the plaintiffs obtained from North American an assignment of the latter's claim against the defendant banks. Thereupon McKinnon commenced these state court proceedings on behalf of plaintiffs against the banks.
On January 23, 1975, the Seattle law firm of Jones, Grey & Bayley was substituted for McKinnon as counsel for plaintiffs. Each of the agreements of the plaintiffs that they signed with Share Brothers obligates the signatory plaintiffs as follows:
[T]o prosecute in good faith the pending action against the National Bank of Commerce in Seattle [Rainier] in the State of Washington to final conclusion. . . .
*748Signatory plaintiffs further agreed:
[N]ot to institute any legal action against Shares [Share Brothers] or attempt to enforce any alleged claims for damages against Shares, arising out of the alleged transaction unless and until the said pending action [against NBofC and Security Savings & Loan in Washington] is brought to a final determination.
In return, Share Brothers agreed that the statute of limitations on any claim of the plaintiffs against Share Brothers would be tolled until "final determination" of the Washington action, as well as agreeing to pay all of plaintiffs' legal expenses.
Decision Regarding Consolidated Appeals of Giambattista, et al, and William R.
Titus, No. 5006-1
Issue 1: Maintenance
I feel it would be helpful at this juncture to define such terms as "maintenance" and "champerty."
"Maintenance" is defined as "A layman's furnishing money to permit a lawyer to provide, in part, costs and expenses in carrying on litigation for a third party". Black's Law Dictionary 1106 (4th ed. 1951).
"Champerty" is defined as "A bargain by a stranger with a party to a suit, by which such third person undertakes to carry on a litigation at his own cost and risk, in consideration of receiving, if successful, a part of the proceeds or subject sought to be recovered." Black's Law Dictionary 292 (4th ed. 1951).
In Weed v. Foster, 58 Wash. 675, 678, 109 P. 123, 124 (1910), by way of dictum it was stated:
The common law doctrine of maintenance, like that of champerty, "has never obtained a foothold" in the State of Washington. Even if it has, it most probably has been abrogated by enactment of Washington's barratry statute, Rem. & Bal. Code & 2370, now RCW § 9.12.010.
I believe and specifically hold that maintenance and cham-perty is abrogated in the state of Washington pursuant to RCW 9.12.010.
*749However, even if the doctrine of maintenance were still in existence in the state, the alleged contract of maintenance can be relied upon as a defense only by the parties to the contract in an action for enforcement of the contract. Weed v. Foster, supra. The defense of maintenance cannot be raised to avoid liability on a cause of action unaffected by the alleged contract of maintenance itself.
Even if defendant banks could have properly raised the issue of maintenance as a defense, they were not entitled to the relief granted. "Maintenance" occurs only when a person having no interest in the subject matter of the lawsuit agrees to support that litigation. Joseph Mazzini Soc'y v. Corgiat, 63 Wash. 273, 275-76, 115 P. 93, 94 (1911). In the subject case Share Brothers was a potential defendant in the event plaintiffs were unsuccessful in securing back their invested funds from the defendant banks and would, therefore, have a clear and tangible interest in the subject matter of the litigation. Share Brothers had every right to financially support the payment of attorneys' fees for plaintiffs' actions against the banks.
The defendant banks rely heavily upon Monjay v. Evergreen School Dist. 114, 13 Wn. App. 654, 661, 537 P.2d 825, 830 (1975). The Monjay case was an action for personal injuries sustained by plaintiff school girl Monjay when struck by the defendant school bus. Prior to trial plaintiff entered into a covenant not to sue General Motors Corporation and Ed Randall Chevrolet, the manufacturer and dealer of the school bus respectively. Pursuant to that covenant, General Motors and Ed Randall Chevrolet agreed to pay the plaintiff $33,333. At the conclusion of the trial against the defendant school district, plaintiff agreed to dismiss the covenanting defendants from the action and agreed further that should she obtain a judgment against the school district, she would reimburse General Motors and Ed Randall Chevrolet in the amount recovered by her from the school district to a maximum of $33,333.
*750The appellate court in Monjay found the loan agreement to be totally repugnant to the principle of pro tanto reduction attendant to the covenant not to sue and against public policy. The court reasoned as follows at page 661:
There is yet an additional feature of the subject covenant which we find disturbing. It amounts to nothing more than an agreement between two concurrent tort-feasors to conditionally pay an injured plaintiff a stated sum if he pursues his claim against a third concurrent tort-feasor. It is not merely a covenant by the plaintiff not to sue the two defendant covenantors, but it affirmatively requires plaintiff to sue the defendant school district alone. No payment is to be made until the conclusion of the trial against the school district. It is our opinion that this agreement contains strong overtones of champerty which we cannot sanction.
For the reasons thus given, we are compelled to hold that the conditional repayment clause in this covenant is void and of no effect.
(Italics mine.)
The court in Monjay did not set the covenant not to sue agreement aside. It merely provided that the repayment agreement of the minor plaintiff was invalid and gave plaintiff the option to rescind the whole agreement or to waive the contribution provision.
Monjay is clearly distinguishable on the facts.
1. The trial court in the subject case held that the payment of the attorney's fee by Share Brothers was maintenance and in violation of the public policy of the State of Washington. The Monjay case based its decision on cham-perty alone.
2. In Monjay there was an agreement between two of the three joint tort-feasors to contribute a fixed sum to plaintiff on the condition they covenant not to sue. In the subject case Share Brothers did not secure a covenant not to sue but merely reached an agreement with plaintiffs that it would underwrite the costs of a lawsuit against the defendant banks if plaintiffs would agree to prosecute in good faith the pending action to final conclusion, and they would *751not institute any legal action against Share Brothers unless and until the pending actions against the banks were brought to a final determination. A "final determination" could be effectuated by either a verdict or settlement. In return, Share Brothers agreed to waive the statute of limitations that might apply against it because of the delay in suing it directly.
3. There was no provision for reimbursement of Share Brothers for having advanced the costs and litigation fees so obviously this could not be champerty. Nor can it be maintenance for although Share Brothers was financing the cost of the litigation in the state of Washington, it had a very real and substantial interest in the litigation for in the event plaintiffs were unsuccessful against the banks, undoubtedly they would have sued Share Brothers and North American directly for return of their funds based on a theory of money had and received and/or breach of contract in failing to produce a valid certificate of deposit from a savings and loan bank in Washington. There is nothing in the subject case factually even if maintenance and cham-perty were still to exist in the state of Washington which would make it a violation or would make it against the public policy of this state. The assignment of North American's cause of action against the defendant banks to the plaintiffs was entirely proper as it had been the recipient of plaintiffs' funds which they had transmitted in certified checks to the banks through Brandenfels.
Again, Monjay can also be distinguished by the fact that Share Brothers and North American were not joint tort-feasors with the banks which caused the loss. Factually it is clear that the conversion (misappropriation) was caused by the negligence of the banks in not issuing checks to the savings and loan companies in accordance with the plain language on the face of the checks, and it had no authority to give the proceeds on the cashing of such checks to a third party like Brandenfels without checking back with the maker of the instrument which in this case would have *752been North American. Certainly the defendant banks cannot contend that Share Brothers or North American had anything to do with their negligence, which caused plaintiffs' loss of some $70,000.
We hold that the summary judgment of dismissal of plaintiffs' consolidated lawsuits should be set aside.
Issue 2:
Question: Are defendant banks liable to plaintiff investors as a matter of law? (Should plaintiffs' motions for summary judgment be granted?)
Answer: Yes.
In Federal Ins. Co. v. Groveland State Bank, 44 App. Div. 2d 182, 354 N.Y.S.2d 220 (1974), the plaintiff insurance company, as subrogee by virtue of payment under an employee's fidelity bond, sought to recover monies received by defendant bank (Groveland) when Groveland cashed checks drawn to its order by plaintiff's assignor. Groveland credited the proceeds of those checks to an account of one of its depositors, one of the assignor's employees. That employee had fraudulently arranged for issuance of the checks in the name of Groveland and had then persuaded Groveland to deposit them to his account. The court granted summary judgment to the plaintiff holding that Groveland had a clear duty to inquire of the drawer of the checks before disbursing the funds to the possessor.
In Federal Sav. & Loan Ins. Corp. v. Kearney Trust Co., 151 F.2d 720 (8th Cir. 1945), the president of a savings and loan institution presented checks drawn by the savings and loan in favor of Kearney Trust Co. When the checks were received by the trust company, it wrongfully credited them on its books to the president of the association paid out on his order for use in his personal business. There the appellate court upheld the jury award in favor of the plaintiffs, holding that where the bank had knowledge that- Federal Savings and Loan's president had directed that the association's checks payable to the order of the bank be credited to the president's personal account, that bank failed to *753make inquiry regarding the president's authority and the ownership of funds was apparent from the face of the checks. The bank was liable to the savings and loan association of assignee for the amount of the checks.
Again, in New Jersey Nat'l Bank & Trust Co. v. Sachs, 91 F.2d 533, 534 (3d Cir. 1937), the president of a car dealership persuaded a bank to credit his account with a check drawn in the bank's favor by a finance company. In fact, the check originally had attached to it a stub instructing the bank that the proceeds were only to be applied against sight draft and bills of lading for certain automobiles. The court held, at page 534:
[T]here was a plain legal duty upon the bank, in view of the fact that the check was made payable to its order, to communicate with the discount company for exact instructions concerning the disposition of the fund.
By failing to do so, the bank became liable to the finance company for its loss when the auto dealer received the funds without restriction.
In each case discussed above, as in the subject case, the bank had a plain legal duty to contact the drawer of the check before it disbursed the fund.
In the subject case the bank's duty is even more obvious because in this case each check bore instructions such as "purchase CD for [plaintiff's individual name]." I hold that Rainier, by failing to make any inquiry of the maker of the CD's under the circumstances set forth herein, became liable to plaintiffs as a matter of law. The only remaining issues are whether Rainier's affirmative defenses negate that liability. Let us now examine such defenses:
1. First Affirmative Defense: Plaintiffs' claims are barred since their assignor, North American ratified or is estopped from denying Brandenfels' agency relationship with North American and, therefore, they are estopped to deny the authority of Martin Brandenfels to deposit checks to his own account.
Brandenfels was not the agent of North American for the record shows that Brandenfels approached North American *754on behalf of Northwest Savings and Loan. North American did not hire Brandenfels. North American did not compensate Brandenfels nor did it care how he was compensated, but in fact Brandenfels paid North American its 3 percent fee. Assuming, however, that Brandenfels was the agent of North American with respect to these transactions, there is no evidence that he was authorized by North American to deposit such checks in his personal account. The checks themselves were drawn to the order of Rainier and inscribed with a further designation "purchase of CD [designating a certain party]". North American at no time intended that Brandenfels had authority to deposit checks to his own personal account.
Restatement (Second) of Agency § 177 (1958) states:
A disclosed or partially disclosed principal who entrusts an agent with the possession of a negotiable instrument not payable to bearer or endorsed to the agent is not thereby subject to the loss of his interests therein by the collection of the claim or the transfer of the document by the agent.
I believe this rule means, in the context of this case, that:
Possession alone of a negotiable instrument neither payable to bearer nor endorsed without restriction is not an indication of authority to discharge the payee's [or maker's] interest.
Owens v. Wood, 43 Ala. App. 366, 374, 190 So. 2d 734, 741 (1966). Without any other proof of authority, one who gives value for the instrument is liable to the maker or the payee. In the cited case, an employee of the payee on a check persuaded a store owner to cash the check for him [the agent] personally. The store owner was held liable to the payee employer since, other than the possession of the check, there was no other proof that the employee had authority to cash the employer's checks. Cases like Owens v. Wood, supra, are based upon the well established rule that "authority to execute negotiable instruments will be strictly construed. ..."
*755This contention was raised in Federal Sav. & Loan Ins. Corp. v. Kearney Trust Co., supra, wherein the court held the trust company liable where the president of a savings and loan institution directed the bank to cash checks made out to the bank and put the proceeds in his personal account. See other cases, New Jersey Nat'l Bank & Trust Co. v. Sachs, supra; People ex rel. Nelson v. Peoples Loan & Trust Co., 285 Ill. App. 552, 2 N.E.2d 763 (1936).
I find Rainier's first affirmative defense to be without merit.
2. Second Affirmative Defense: That plaintiffs are estopped to deny the authority of Martin Brandenfels to deposit checks to his own account.
Rainier argues that by sending the checks to Branden-fels, North American cannot now argue that he had no power to deposit them. Rainier further contends that by failing to immediately inspect the endorsements on its checks and notify it of the impropriety of Brandenfels' endorsement, North American and, therefore, its assignees were estopped from contesting the validity of the endorsement and Rainier's handling of the checks.
This estoppel contention was raised in the New York case, Borrello v. Perera Co., 381 F. Supp. 1226, 1231 (S.D.N.Y. 1974), on nearly identical facts as here. The court stated at page 1231:
Under the laws of the State of New York a payee may not obtain rights to collect a check to a third party without first making inquiry of the maker. Federal Insurance Company v. Groveland State Bank, 44 A.D.2d 182, 354 N.Y.S.2d 220 (4th Dept. 1974); Arrow Builders Supply Corp. v. Royal National Bank, 21 N.Y.2d 428, 288 N.Y.S.2d 609, 235 N.E.2d 756 (1968); Sims v. United States Trust Company, 103 N.Y. 472, 9 N.E. 605 (1886).
Perera was required to inquire as to the purposes for the issuance of the checks. Fidelity & Casualty Co. of N. Y. v. Hellenic Bank Trust Co., 181 Misc. 40, 45 N.Y.S.2d 43 (1943), aff'd mem. 181 Misc. 44, 47 N.Y.S.2d 295 (App.Term, 1st Dept. 1943).
*756The defense of equitable estoppel has not been maintained.
Moreover, the defense of alleged failure to inspect the checks returned from the bank is no defense to this defendant. This principle applies only between depositors and the banks. Wagner Trading Co. v. Battery Park National Bank, 228 N.Y. 37, 126 N.E. 347 (1920); Federal Insurance Company v. Groveland State Bank, supra, 44 A.D.2d 182, 354 N.Y.S.2d 220 (4th Dept. 1974).
The Uniform Commercial Code, Section 4-406, sets out the duty to examine returned checks and that section specifically refers only to the relationship between a bank and its customer. There was no such relationship between plaintiff and defendant.
This is true of the facts in the subject case as there was no relationship between plaintiffs and North American and Rainier, as to constitute a bank and its customer. Consequently this defense has no validity.
3. Third Affirmative Defense: North American by its actions ratified the method of endorsement and collection of the checks.
In a recent case the Washington Court of Appeals quoted with approval the following language from 2 R. Anderson, Uniform Commercial Code § 3-404:7, at 924 (2d ed. 1971).
To constitute ratification of an unauthorized signature it must be shown that the person sought to be bound by the alleged ratification has full knowledge of all material facts and expressed an intent to ratify the unauthorized act.
Thieme v. Seattle-First Nat'l Bank, 7 Wn. App. 845, 848, 502 P.2d 1240 (1972).
In the subject case North American had no knowledge of the improper endorsement until it received word of the cancellation of the certificates of deposit. Upon learning of the improper endorsement, North American promptly notified Rainier. As North American had no knowledge of the nsf checks, it cannot be held that they ratified Brandenfels' endorsement.
Defendants were allowed to amend their answers to plead the additional defenses of (a) statute of limitations, and *757(b) the illegal activities of North American, as assignor, barred a suit by plaintiffs, as assignees.
4. First Additional Affirmative Defense: That the actions of the plaintiffs are barred by the statute of limitations.
The record indicates that the two actions brought against Rainier that are presently on appeal were commenced on December 28, 1973, and May 8, 1974, well within the 3-year statute of limitations.
5. Second Additional Affirmative Defense: Plaintiffs’ claims are barred by illegality on the part of North American in the following particulars: (a) in transacting business in the State of Washington without being legally qualified; (b) by evading certain federal banking laws and regulations;, and (c) unlawfully selling unregistered securities.
In reference to (a), North American was not transacting any business in the state of Washington but was engaged in interstate commerce and, therefore, was exempt from qualifying under our statute. Qualification statutes, by their nature, are regulatory and cannot constitutionally be imposed on corporations engaged exclusively in interstate commerce. Eli Lilly & Co. v. Sav-On-Drugs, Inc., 366 U.S. 276, 278-79, 6 L. Ed. 2d 288, 81 S. Ct. 1316 (1961); Nippert v. Richmond, 327 U.S. 416, 90 L. Ed. 760, 66 S. Ct. 586, 162 A.L.R. 844 (1946); Anglo-Chilean Nitrate Sales Corp. v. Alabama, 288 U.S. 218, 77 L. Ed. 710, 53 S. Ct. 373 (1933).
North American was a Delaware corporation and during the relevant time period it had no offices or employees in the state of Washington nor did it own or have any interest in real estate in Washington. North American simply mailed funds with instructions to Brandenfels via the United States mail in interstate commerce.
In reference to (b), alleging of evading certain federal banking laws and regulations, I find that North American is not an insured financial institution and is not subject to compliance with federal banking laws and regulations. The facts show that North American received a fee for placing *758certificates of deposit for their customers in the accounts of associates and there is nothing illegal in this transaction.
In reference to (c), North American's allegedly illegal sale of unregistered "securities" precludes the prosecution of these actions. I do not agree. Restatement of Torts § 889 (1939) states in relevant part:
A person is not barred from recovery for an interference with his legally protected interests merely because at the time of the interference he was committing a tort or a crime . . .
The Washington courts have consistently held that a plaintiffs violation of a permit or licensing requirement does not bar his action in tort. See, e.g., Hayes v. Brower, 39 Wn.2d 372, 390-92, 235 P.2d 482, 25 A.L.R.2d 1431 (1951); White v. Kline, 119 Wash. 45, 204 P. 796 (1922). The Washington decisions have adopted the reasoning that such violations by the plaintiff are not the proximate cause of plaintiff's injury and, therefore, cannot bar his action for recovery.
In the subject case there was no relationship between North American's allegedly unlawful failure to register "securities," and Rainier's conversion of North American's certified checks.
I would have granted summary judgment for plaintiffs against the National Bank of Commerce.
Decision: Vant Zelfde v. Security, No. 5007-1
The summary judgment of dismissal granted to defendant Security against Vant Zelfde must also be set aside for the same reasons as set forth herein, in setting aside the summary judgments of dismissal in Giambattista v. Rainier, and Titus v. Rainier, et al, unless we determine that Vant Zelfde's release given to Security exonerates Security from any action by Vant Zelfde and North American.
After Mrs. Vant Zelfde gave her check to Share made out to North American, Share Brothers transmitted the check to North American. North American then deposited the *759check in its account and issued its own check to "pay to the order of Security" with the designation "for purchase of CD, C. Vant Zelfde." North American's check was then transmitted to Brandenfels with instructions to buy a CD for C. Vant Zelfde. Somehow the check got into the hands of Agosto, then living at Yelm, Washington, and was then presented to Security for the purpose of purchasing a CD with the name "Agosto" inked in right after the name of Vant Zelfde. When Agosto gave the check to Security, he requested that the passbook be issued in the name of Scotti. Undoubtedly at that point North American had a good cause of action against Security for conversion and for money had and received, for it issued the passbook in a name other than what was on the face of the check, and without checking back with the maker as to his wishes on the matter. Security and its counsel became aware of the activities of North American and Share Brothers and was concerned' as to the possible double claim against bank account No. 5503. The attorney for Security wrote First Buffalo Corporation (a Share Brothers subsidiary corporation) as follows:
Our records indicate that this account was opened by a Mr. Joseph Agosto of Yelm, Washington, on May 28, 1971. The circumstances surrounding the opening of this account indicate to us that there may be conflicting claims to funds on deposit.
Prior to making any disbursement of the funds in this account, we will require that we have a release from Inez G. Scotti, C. Vant Zelfde, First Buffalo Corporation and North American International Companies, Inc. We will also require that the agents for Inez G. Scotti and C. Vant Zelfde, i.e., First Buffalo Corporation and North American International Companies, Inc. indemnify Security Savings and Loan Association and agree to hold it harmless from any conflicting claims made as to the proceeds of this account. . .
Security's attorney then received a release from Charlotte Vant Zelfde releasing any claim to account No. 5503 with Security.
*760On July 20, 1972, the attorney for North American wrote the attorney for Security:
As you are already aware this office represents North American International Companies, Inc. I have been advised by my client that it now agrees to indemnify and hold harmless Security Savings and Loan Association from any conflicting claims made against account No. 5503.
However, Security failed to get a general release from the various parties but secured only a release and indemnity agreement as against savings account No. 5503.
From an examination of the various letters exchanged between the parties, and in particular from reading Charlotte Vant Zelfde's deposition, I hold it is a question of fact as to whether the Vant Zelfde release to bank account No. 5503 released Security from any claim by Vant Zelfde and North American. Mrs. Vant Zelfde testified that she signed the release on being advised that it was a mere technicality to receive the $10,000 she had deposited with Security. The trial court will have to determine her credibility and the circumstances as to how the release was secured. In addition, the trial court must find whether the release pertained only to account No. 5503, or was broad enough to preclude plaintiff's action for conversion and/or for money had and received. The court must also determine whether the indemnity agreement of North American, as contained in its letter to Security under date of July 20, 1972, would estop them and their assigns from bringing this action. These are all factual issues which must be resolved by the trial court after testimony and not by summary judgment.
In summary, I would hold:
1. That in the consolidated cases of Giambattista, et al v. Rainier National Bank, King County cause No. 774828, and Titus v. Rainier National Bank, King County cause No. 780285, the summary judgments granted to defendant Rainier National Bank be set aside.
*7612. That plaintiffs in the consolidated cases of Giambat-tista, et al v. Rainier National Bank, King County cause No. 774828, and Titus v. Rainier National Bank, King County cause No. 780285, be granted summary judgment against Rainier National Bank, as follows:
Naureen M. Giambattista, in the amount of $5,000 with interest of 5 1/2 percent per annum from May 18, 1971, until paid;
Victor W. Haller, in the amount of $10,000 with interest of 5 1/2 percent per annum from May 17, 1971, until paid;
William P. Henry, in the amount of $10,000 with interest of 5 1/2 percent per annum from May 18, 1971, until paid;
Anthony J. and Roberta A. Murad, in the amount of $10,000-with interest of 5 1/2 percent per annum from May 14, 1971, until paid;
Kaiser and Miriam Murad, in the amount of $10,000 with interest of 5 1/2 percent per annum from May 23, 1971, until paid;
Rose Murad, in the amount of $15,000 with interest of 5 1/2 percent per annum from May 23, 1971, until paid.
3. That in Vant Zelfde v. Security Savings and Loan Association, cause No. 5007-1, the summary judgment of dismissal of defendant Security Savings and Loan Association against plaintiff Vant Zelfde be set aside, and such case be remanded to the trial court only on the validity of the Vant Zelfde "release."
Reconsideration denied March 23, 1979.
Review denied by Supreme Court June 15, 1979.
A money broker, as used herein, is one who, for a fee, obtains a higher rate of interest on time deposits (primarily certificates of deposit or passbook accounts) for its customers than those customers could obtain for themselves. The historical background of the money brokerage business, as North American engaged in it in 1970 and 1971, appears in SEC v. C.H. Wagner & Co., 373 F. Supp. 1214, at 1216 (D. Mass. 1974).
As set forth in the court's opinion, prior to January of 1970, savings institutions in western sections of the United States customarily paid a rate of interest on their deposits one or two percent higher than was paid in the northeast section of the country, and money brokers received fees for obtaining such higher interest rates. In January of 1970, Congress enacted legislation imposing a ceiling on the interest rates which might be paid by savings institutions, whatever their location. According to the court, Wagner
evolved a scheme whereby the legislative ceiling might be avoided and potential investors persuaded that interest rates higher than the maximum legally allowable might be obtained without sacrificing the insurance protection afforded by FDIC insurance.
The scheme involved the money broker locating
with or without a bank's cooperation ... a substandard potential borrower willing to pay higher-than-normal interest rates, e. g., a real estate speculator or underfinanced housing developer. It would be agreed among the [money broker] and the potential borrower and the bank that, if the [money broker] arranged for the deposit in the bank of the sum which the developer wished to borrow, the bank would loan the money deposited by the [money broker] to the particular substandard borrower, who would pay a substantial commission or finder's fee to the [money broker]. The portion of the commission paid by the [money broker] to its customer was called the "bonus interest" . . .
373 F. Supp. at 1216.