St. Louis Charcoal Co. v. Lewis

ELLISON, J.

The plaintiff is a corporation in St. Louis, Missouri, apd its president was G. E. Smith, who by the by-laws of the corporation had authority to draw checks in its business. Smith, in his individual capacity, owed $463 to the Peterie Drug Company, a partnership doing business at Tuscumbia, Missouri, more than one hundred miles from St. Louis. Defendant Lewis is administrator of the drug company partnership estate. Smith drew a check in favor of defendant Lewis on the bank in St. Louis, where the plaintiff corporation did business, for the amount of his indebtedness and signed it “St. Louis Charcoal Company, per G. E. Smith, president.” Lewis received the check, cashed it through a local bank at Tuscumbia and it was afterwards, in due course, honored by the bank in St. Louis and paid out of the plaintiffs account. Defendant ubed the money by paying it out to the creditors of the drug company. Afterwards plaintiff discovered the misuse of its funds by Smith in paying his individual debts and brought this action against defendant, as administrator of the partnership, for the amount. The only notice defendant had of the misuse was by the face of the check itself.,

The judgment in the trial court was for the defendant.

On the foregoing facts we think the judgment was rendered for the wrong party. No one has a right to pay his debt with another’s check, unless he shows that the other has given him such authority. This may not be true in case of the use of money which overpowering necessity requires shall be allowed to pass current from *551 hand to hand without making inquiry from whence it came.

In this case the check was drawn on the account of the corporation by the president for the payment of his individual debt. The face of it carried notice of its irregular and illegal character, and if used by the creditor he runs “the risk of being called upon to restore it.” [Rochester Co. v. Paviour, 164 N. Y. 281 .] That case says there is “a shadow” on such checks and that they cannot, in good faith, be accepted by the creditor' and that “the checks themselves give notice of a suspicious fact and invite inquiry in relation thereto.” In Ihl v. Bank of St. Joseph, 26 Mo. App. 129 , we held, in an opinion by Hai,l, J., that where a depositor in a bank seek to pay his own debt with funds to his credit in the • bank in a fiduciary character, the bank is charged with notice of the unlawfulness of the transaction and may be compelled to refund. And to the same effect is Johnson v. Payne & W. Bank, 56 Mo. App. 257 .

In Lee v. Smith, 84 Mo. 304 , it is said that “The law will not permit an agent’s private interest to come between himself and his principal. Its actual presence always disables the agent from binding his principal in the transaction;” and if shown upon the face of the instrument used, notice of the disability arises.

The argument of defendant as to plaintiff’s lack of diligence in discovering Smith’s misconduct has not impressed us.

The judgment will be reversed and the cause remanded with directions to render judgment for the plaintiff.

All concur.