Opinion
No. 7,330.
Submitted February 1, 1935.
Decided February 26, 1935.
Banks and Banking — Indefinite Letter of Instructions Accompanying Check Sent to Bank — Negligence of Bank in Delivering Check to Payee Instead of Holding It as Deposit — Writing Construed Against Sender. Banks and Banking — Indefinite Instructions Sent by Correspondent Relative to Disposition of Check Mailed — Language Construed as Business Man Would Construe It. 1. A letter of instructions written by the president of a corporation engaged in business in Alaska to a bank in this state relative to the disposition of an inclosed check relative to a business transaction, leaving the mind of the reader in doubt as to its meaning, must be construed as an ordinary business man would view it under the circumstances, and in light of the rule that language therein must be construed most strongly against the person using it. Same — Case at Bar — Letter of Instructions Accompanying Check Made to Business Concern for "Deposit" Held Susceptible of Interpretation as First Payment on Purchase Price of Goods. 2. A fur corporation engaged in business in Alaska in a letter to a bank in Montana inclosing a $1,000 check on a foreign bank payable to a concern engaged in raising muskrats in the vicinity of the Montana bank, advised the latter bank that the check was intended as a deposit on the purchase price of 500 pairs of muskrats at $11 per pair, and that if the payee accepted the order, the sender would mail the balance of the purchase price to be delivered to the payee on surrender of express receipt for shipment of the animals. The bank delivered the check at once to the payee named in the letter. In an action by the drawer of the check against the Montana bank for its negligent delivery to the payee, plaintiff had judgment. Held, that the letter in stating that the check was intended as a "deposit" was susceptible to the reasonable interpretation that it was intended as a first payment on the purchase price of the animals, and that judgment for plaintiff was erroneous.
Appeal from District Court, Flathead County; J.E. Rockwood, Judge.
Messrs. Foot, Aronson Foot, for Appellant, submitted a brief; Mr. A.T. Aronson argued the cause orally.
Messrs. Logan Child, for Respondent, submitted a brief; Mr. E.M. Child argued the cause orally.
If we assume, for the sake of argument, that the letter of instructions is not clear and unambiguous, but is susceptible of the two meanings contended for by the respective parties hereto, then we submit that it should be construed in favor of appellant. It is a general rule that where an instrument is uncertain or ambiguous and for such reason requires interpretation, it will, and, as stated by some courts, must be construed most strongly against the party preparing it. (Sec. 7545, Rev. Codes 1921; 13 C.J. 545; Orient Mut. Ins. Co. v. Wright, 1 Wall. 456, 17 L.Ed. 505; Ries v. Pacific Fruit etc. Co., 50 Idaho, 140, 294 P. 366; Weil v. California Bank, 219 Cal. 538, 27 P.2d 904; Payne v. Neuval, 155 Cal. 46, 99 P. 476; United States Bldg. Loan Assn. v. Gardiner, 87 Mont. 586, 289 P. 555; Weir v. Ryan, 68 Mont. 336, 218 P. 947; Fitzpatrick v. Broadshaw, 171 Wn. 335, 17 P.2d 894; Platte Valley etc. Co. v. Lallier Construction etc. Co., 91 Colo. 317, 14 P.2d 1079.)
The foregoing rule is applicable in cases of agency where the principal's instructions are ambiguous and the agent in good faith acts upon his own understanding of them. "When one gives his agent ambiguous instructions which the latter executes in good faith, according to a reasonable interpretation of them, the principal is estopped to say that he intended them to be construed otherwise." ( Anderson v. First Nat. Bank, 4 N.D. 182, 59 N.W. 1029; Kirwan v. Van Camp Pack. Co., 12 Ind. App. 1, 39 N.E. 536; Oxford Lake Line v. First Nat. Bank, 40 Fla. 349, 24 So. 480; Falsken v. Falls City State Bank, 71 Neb. 29, 98 N.W. 425; Craighead v. Peterson, 72 N.Y. 279, 284, 28 Am. Rep. 150; Minnesota Linseed Oil Co. v. Montague, 65 Iowa, 67, 21 N.W. 184; Halff v. O'Connor, 14 Tex. Civ. App. 191, 37 S.W. 238.)
The first paragraph of the letter states that the check in question is "payable to the Flathead Fur Farm as a deposit on the purchase price," etc. We contend that a person of ordinary intelligence could only construe that as a direction to deliver the check to the payee without delay. The word "payable," when used in business transactions, means that which is to be paid. ( Swanson v. Spencer, 177 Mo. App. 124, 163 S.W. 285; Poppleton v. Jones, 42 Or. 24, 69 P. 919; Ingram v. Mandler, 56 F.2d 994, 997.) The check was to be applied as a "deposit." The word "deposit" in this connection had no banking signification, for the respondent was not a customer of the bank and was not making a deposit in the bank. The bank could not make a deposit of it for the check was not payable to the bank. The phrase "deposit on the purchase price" obviously means a down or initial payment. In the following cases either the agreements involved, or the language of the courts used, the word "deposit" as signifying part payments: Peloian v. Waldman, 54 Cal.App. 116, 201 P. 344; Alciatti v. Origlia, 49 Cal.App. 756, 194 P. 740; Harwell v. Reiniger, 123 Cal.App. 485, 11 P.2d 421; Dietz v. Rabe, 65 Mont. 500, 211 P. 343; Chamberlain v. Ft. Smith Lumber Co., (Mo.) 179 S.W. 740; Dooley v. Hillman, 170 Wn. 432, 16 P.2d 1050; Dickey v. Allen, 277 Mass. 344, 178 N.E. 544.
If, as respondent contends, it became the duty of the bank merely to hold the check, would such holding have constituted a down payment on the purchase price? No. A check is not money, and to constitute a payment as a down payment, there must be an actual transfer or delivery of the money or thing agreed to be given. ( Hinchman v. Lincoln, 124 U.S. 38, 8 Sup. Ct. 369, 31 L.Ed. 337; Groomer v. McMillan, 143 Mo. App. 612, 128 S.W. 285; Hewson v. Peterman Mfg. Co., 76 Wn. 600, 136 P. 1158, 51 L.R.A. (n.s.) 398.) The first paragraph of the letter seems to be a clear mandate to the bank to do just what it did — deliver the check. Instruments must be construed as a whole. Is the language of the second paragraph inconsistent with that of the first? We contend that it is not, although it is less clear in its meaning.
There was no doubt in the minds of the bank's officers as to the meaning of the instructions. There were no extraneous or suspicious circumstances to put the bank on inquiry. The Flathead Fur Farm was solvent. The bank considered it a solvent, going concern. If the court should find that the letter is ambiguous or susceptible of two interpretations, the general rule of construction invoked in the first division of this argument is controlling and will preclude the respondent from recovering. The negligence, if any, is its own, and it must bear the loss.
It is our contention that the letter plainly instructed the defendant bank how to handle the check and that the bank failed to follow instructions. It is apparent that the writer, Mr. A.W. Bennett, president of the plaintiff corporation, being so far from the Flathead Fur Farm, with whom he was dealing, wanted a safe and responsible intermediary through whom he could deal with the Flathead Fur Farm. It is natural that he should select a bank, since special deposit — deposits of escrow agreements, etc. — is one of its lines of business, and he had a right to assume that such an institution would act carefully and would use sound business judgment and would be careful to read his instructions and follow the same; or, if he found them ambiguous, would write or telegraph for clarifying instructions.
It will be conceded that the writer placed something of value — personal property — with the bank. The bank then became a depositary and, by the evidence a depositary for hire. Section 7661, Revised Codes 1921: "Degree of Care Required of Depositary for Hire: A depositary for hire must use at least ordinary care for the preservation of the thing deposited." It would seem, however, that in the case of a bank which makes it a business to receive special deposits and escrow agreements, a somewhat higher degree of care is required than in the case of an ordinary bailee who does not make this a special line of business, and the courts so hold and put the bank rather in the relation of a trustee for the benefit of a special depositor, as is the case here. ( Glendenning v. Slayton, 55 Mont. 586, 179 P. 817; Carlson v. Kies, 75 Wn. 171, 134 P. 808, 47 L.R.A. (n.s.) 317.)
Counsel cites several cases defining the word "payable" as "that which is to be paid." If he means by this that the use of the word "payable" here implies immediate payment, then it is an example of the strained construction which is necessary to make the letter mean what counsel desires it to mean. It is very apparent that the word "payable" is merely descriptive of the manner in which the check is drawn. It very evidently means "made out to" or "in the name of"; thus "we herewith enclose check for $1,000.00 made out to Flathead Fur Farm," etc. Counsel says, "the word `deposit' in this connection had no banking significance." We submit the very opposite is true, that it was not a natural word for an ordinary man to use unless he had the fact in mind that the word "deposit" has a special banking significance and used it deliberately, and the bank, upon reading that first paragraph, was warned by the use of the word "deposit" that the bank was not merely the means for passing this check on to a third party but that it was left with the bank to be delivered under certain conditions which the bank would expect to find further on in the letter.
Counsel has cited a number of cases to the effect that where the language of the instruction given an agent is ambiguous, and the agent in good faith, according to a reasonable interpretation, then acts upon it, the principal is estopped to say that he intended it to be construed otherwise. As a general proposition this is a correct statement of the rule. There are, however, certain qualifications as shown by the cases cited by counsel. Thus the language must be "fairly open to two interpretations." ( Belch v. Schott, 171 Mo. App. 357, 157 S.W. 658.) It must be "a reasonable interpretation of them." ( Anderson v. First Nat. Bank, 4 N.D. 182, 59 N.W. 1029.) Furthermore, the agent must use diligence. (2 C.J. 720; Vernier v. Knauth, 7 App. Div. 57, 39 N.Y. Supp. 784.) Again: "Ordinarily where unforeseen conditions arise, the agent should notify the principal and procure additional instructions, and the agent, so acting in good faith, will not be liable in case of loss occasioned by the delay; but in the case of a sudden emergency the agent may and should do whatever he deems best in the exercise of a sound discretion." (2 C.J. 718.) Here was no sudden emergency. There was ample time, if there had been any doubt in the mind of the bank, to have gotten further instructions and clarified the situation and it was negligence on its part not to do so.
This is an action for the recovery of the sum of $1,000 and interest, claimed by plaintiff for the negligent delivery of a check for $1,000 issued by the plaintiff to the Flathead Fur Farm, and delivered to the defendant under the instructions of a letter, as follows:
"Kodiak, Alaska Aug. 20th 1929
"First National Bank Kalispell Montana
"Gentlemen: We herewith enclose our check for $1,000.00 drawn on the Dextor Horton National Bank of Seattle Wash payable to The Flathead Fur Farm Kalispell Montana as a deposit on the purchase price of 500 pairs of Muskrats at $11.00 per pair crated F.O.B. Seattle Wash safe delivery to Seattle guaranteed and sex guaranteed. In the event that the Flathead Fur Farm accepts this order we will mail to the First National Bank of Kalispell Montana the balance $4,500.00 a total of $5,500.00 which the First National Bank of Kalispell Montana will deliver to the Flathead Fur Farm upon the surrender of the Express receipt for 500 pair of Muskrats prepaid to Seattle Wash
"Resp Yours "ALASKAN FUR CORPORATION "A.W. BENNETT President"
The question in issue is dependent upon the construction to be placed upon the letter. The court found in favor of the plaintiff, and rendered judgment for the full amount of the check and interest. Hence the appeal.
There was very little testimony in the case to give any light upon the proper construction to be placed upon the letter. If other communications passed between the parties, they are not in the record. The letter was construed by the bank to require the delivery of the check to the Flathead Fur Farm, and the bank obeyed that construction promptly by delivering the check and it was promptly cashed by the payee through another bank in the city of Kalispell.
The plaintiff alleged in paragraph 9 of the complaint that "on the 28th day of October, 1929, the plaintiff notified the defendant that the said Flathead Fur Farm had not fulfilled its contract and not to pay the $5,500 mentioned in Exhibit A under any conditions." (Exhibit A is the letter.) It is to be noted here that there is no allegation in the complaint, nor any testimony, to indicate that the additional $4,500 had been forwarded to the defendant, or who was at fault for failure to carry out the contract of sale.
The language used in the above letter, as viewed carefully, [1] leaves some doubt in the mind of a reader as to just what was intended. We must construe it as an ordinary business man would view it under the circumstances. It is a familiar rule of construction that language used must be construed most strongly against the person using it. ( Read v. Forced Underfiring Corp., 82 Utah, 529, 26 P.2d 325; Clise Investment Co. v. Stone, 168 Wn. 617, 13 P.2d 9.) Further citations are unnecessary on this point. The rule is applicable in this case, and both parties concede that such is the proper rule of interpretation.
If we consider the check as merely an escrow, what would be [2] the purpose of sending it to the defendant? It was payable to the Fur Farm Company and could not be cashed without the indorsement of the payee. It was much like a postdated check. It could not be cashed without delivery and indorsement of the Fur Farm Company. It was subject to recall by the plaintiff at any time. The bank was merely the agent of the Alaskan Fur Company. The delivery of the check to the bank to be held until the express receipts were delivered would be of no effect whatever if either party chose to abandon the contract of sale, except to inform the Fur Farm Company of the name of the bank upon which the payment was to be made. Such information could very safely have been conveyed to the defendant by the Alaskan Company direct to the Fur Farm Company. On the other hand, if we regard the check as intended for immediate delivery and as a partial payment, it does have the effect of an earnest payment insuring the performance of the contract — that is to say, it is a down payment. The bank was justified in assuming that the plaintiff was not making an idle gesture.
Is it not more reasonable to construe the word "deposit" as meaning a deposit with the vendor, the Fur Farm Company, than a deposit with the bank? It certainly was not a deposit of money with the bank. It never did have in its hands any cash belonging to the plaintiff.
Counsel for respondent in its brief says: "Taking the nature of the transaction into consideration, the purpose is apparent. It is a guaranty of good faith. There would, then, be on deposit with the bank $1,000.00 as a protection to the Fur Farm if, after acceptance of the order and tender of express receipts, the plaintiff had not sufficient money on hand to pay the balance; it would cover any expense the Fur Farm would have been put to in case the plaintiff was unable to perform. Is not that more reasonable than to assume that the plaintiff, with headquarters in Alaska, dealing with the Fur Farm at long arm's length, would pay the $1,000.00 without a single iota of assurance that the Fur Farm would make good? The $1,000.00 deposit made the Fur Farm people secure if they made good. There was nothing to assure plaintiff that the Fur Farm would make good, which it did not, or to protect plaintiff if the Fur Farm failed to deliver the muskrats. The logic of the situation — the common sense, business way of doing business is against defendant's contention."
Where was the "guaranty of good faith" if the Fur Farm must first go to the expense of crating the muskrats and prepaying the express to Seattle before it could get a cent out of the transaction? What assurance did the Fur Farm Company have that the check, when finally delivered, would be honored at Seattle? The muskrats would probably travel as fast as the check, perhaps faster, and it might have been impossible to effect a "stoppage in transit" before the failure of the Seattle bank to honor the check became known to the Fur Farm Company. The latter company was entitled to protection in dealing "at arm's length" with the Alaskan Company. The transaction, if interpreted as respondent proposes, would have afforded the Fur Farm Company no protection. We venture the further query: Who would have suffered the loss if the defendant bank had held the check and the Seattle bank had failed in the meantime?
We think the only reasonable interpretation to be placed upon the letter is that the "deposit" was to be with the Flathead Fur Farm Company as a first payment, and the delivery of the $1,000 check by appellant was warranted by respondent's letter. Such interpretation is more in accordance with ordinary sale transactions.
Having reached this conclusion, the judgment must be reversed, but we see no reason for remanding the cause. The district court of Flathead county is directed to enter judgment of dismissal and assess the costs to plaintiff.
ASSOCIATE JUSTICES MATTHEWS, STEWART and ANDERSON concur.
MR. JUSTICE MORRIS, being absent on account of illness on date of submission of the cause, takes no part in this decision.
Rehearing denied March 14, 1935.