JACKSON V. BANK.

[92 TENNESSEE, 154.]

BANKING.-ACCEPTANCE BY A BANK OF A CHECK and a promise to pay it according to its terms should be inferred from the receipt and the retention of the check and charging its amount to the account of the drawer, who has sufficient funds on deposit to meet it, if he subsequently recognizes the check in a settlement with the bank, though it was presented to the bank by an unauthorized person and paid to him on his unauthorized indorsement.

A BANK PAYINg a Check on a Forged IndorSEMENT of the names of the payees is answerable to them for the amount thereof.

USAGE OR CUSTOM.-A person cannot by proof establish a usage or custom which, in his own interest, contravenes an established rule of commercial law.

PRINCIPAL AND AGENT-NO AUTHORITY WILL BE IMPLIED FROM AN EXPRESS AUTHORITY.

PRINCIPAL AND AGENT.-AUTHORITY TO INDORSE COMMERCIAL PAPER AS AGENT OF THE OWNER will not be implied from some other express authority unless shown to be strictly necessary to the complete execution of the express power.

PRINCIPAL AND AGENT.-POWER TO INDORSE AND COLLECT A NEGOTIABLE INSTRUMENT is not implied from the possession of such instrument by one claiming to be agent of the payee.

BANK PAYING A CHECK TO PERSON OTHER THAN THE PERSON to whose order it is made payable does so at its peril. It must see that the check is paid to him upon his genuine indorsement.

PRINCIPAL AND AGENT.-AUTHORITY TO RECEIVE CHECKS IN LIEU OF CASH, in payment of bills in the hands of an agent for collection, does not authorize the agent to indorse and collect the checks. PRINCIPAL AND Agent.-A DRUMMER OR COMMERCIAL TRAVELER employed to sell and take orders for goods, to collect accounts, and to receive moneys and checks payable to the order of his principal, is not by im. plication authorized to indorse such principal's name to such checks. T. C. Lind, and Smith and Dickinson, for the plaintiff. Murray and Fairbanks, for the defendant.

155 J. H. HOLMAN, S. J. The complainants were wholesale grocery merchants in the city of Nashville, and had in their employ, as a traveling salesman or drummer, one Gibson. Gibson's duty, under his employment, was to travel through the country, take orders from retail merchants for goods, and collect the bills as they became due.

For complainants, Gibson sold a bill of goods, amounting to two hundred and twenty-eight dollars and ninety cents, to J. J. Meadows, of Warren county. On October 12, 1891, before Meadows' bill became due, and while Gibson was still in the service of complainants, he proposed to Meadows that, if he would then pay the bill, he would be allowed a discount

AM. ST. REP., VOL. XXXVL-6

of two per cent. To this Meadows agreed, and gave to Gibson his check on 156 the defendant for two hundred and twenty-four dollars and thirty-nine cents, payable to the order of Jackson, Mathews, and Harris. In the face of the check was inserted the statement that it was “in full of account to date."

Upon the back of the check Gibson indorsed the names of complainants, "Jackson, Mathews, and Harris, by Gibson," and presented it to the defendant bank, where it was paid to him by the cashier, and charged against the deposit account of Meadows. Gibson failed to pay over or account to complainants for this money.

Complainants, having learned that Gibson had collected other money due them, and failed to account for it, ordered him in, and discharged him. Gibson absconded. Subsequently, complainants sent to J. J. Meadows a statement of bis account, requesting payment. Meadows replied that he had paid the account to Gibson by giving him a check on the defendant bank, and had settled with the bank, and took up the check. Complainants demanded of defendant payment to them of the check, which was refused.

Complainants filed their bill to hold the bank liable, and to recover the amount of the check, alleging that Gibson had no right to indorse complainants' name, and that the payment of the check to him was unauthorized.

The defendant answered, stating, in substance, that Gibson was authorized to indorse complainants' name to checks and secure the money thereon; that, if not expressly empowered, he was by implication 157 authorized so to do; that Gibson, while in complainants' service, had frequently received checks payable to complainants, indorsed complainants' name, and secured the money thereon, and that these acts of Gibson were known to and had been ratified by the complainants; that they were estopped from denying his authority; and that it was inequitable for complainants to undertake to visit the consequences of their own negligence and misplaced confidence upon respondent.

The chancellor was of opinion that it would be inequitable to visit the loss of the Meadows check upon the defendant, and dismissed the bill. Complainants have appealed.

In the brief of counsel for the defendant it is insisted that there is no such privity between the complainants and the defendant as will authorize the bringing of this suit; that

where a check is made payable to the order of one person, and, upon the faith of a forged indorsement, the bank pays to another, this is not such an acceptance by the bank as will make it liable to the payee, because the bank did not accept the check for the payee, nor promise him to pay it, but, on the contrary, refused to do so. To sustain this position, the case of First Nat. Bank v. Whitman, 94 U. S. 343, is referred to. It is true that the court, in that case, held that a pay ment to a stranger upon an unauthorized indorsement doe not operate as an acceptance of the check so as to authorize an action by the real owner to recover its amount as upon an accepted 158 check. But the case of First Nat. Bank v. Whitman, 94 U. S. 343, on this point, has been expressly dissented from by this court, and we do not now regard this as an open question in this state.

In the case of Pickle v. Muse, 88 Tenn. 380, 17 Am. St. Rep. 900, it was decided, in the opinion of a majority of the court, that acceptance of a bank check, and promise to pay it in accordance with its directions, will be inferred where the drawee bank receives and retains the check, and charges it to the account of the drawer, who had sufficient funds on deposit to meet it, and subsequently lifted the check on settlement with. the bank, although the check may have been presented to the bank by, and the money paid on it to, an unauthorized per

son.

All the members of the complainants' firm testify that Gibson had not been empowered to indorse the firm's name on checks received in payment for goods.

Several drummers were examined as witnesses for defendant, to prove, and a majority of them say, with some qualification, that it is the usage and custom of traveling salesmen and drummers who are empowered to collect and receipt bills and accounts, to indorse the name of their principals to checks received in payment for goods, and it is insisted that by implication Gibson was authorized to indorse complainants' name to the check, and receive the money. We do not think this usage or custom sufficiently proven, nor do we intimate an opinion that such a power can be inferred from usage or by implication. A person cannot, by proof, establish a usage or custom which, in his own interest, contravenes the established commercial law: Vermilye v. Adams Express Co., 21 Wall. 139.

159

No authority will be implied from an express authority.

Whatever powers are strictly necessary to the effectual exercise of the express powers will be conceded to the agent by implication. In order, therefore, that the authority to make or draw, accept and indorse commercial paper as the agent of another may be implied from some other express authority, it must be shown to be strictly necessary to the complete execution of the express power. The rule is strictly enforced that the authority to execute and indorse bills and notes as agent will not be implied from an express authority to transact some other business, unless it is absolutely necessary to the exercise of express authority: Tiedeman on Commercial Paper, sec. 77. Possession of a check payable to order, by one claiming to be agent of the payee, is not prima facie proof of authority to demand payment in the name of the true owner: Tiedeman on Commercial Paper, sec. 312. A bank is obliged by custom to honor checks payable to order, and pays them at its peril to any other than the person to whose order they are made payable: Tiedeman on Commercial Paper, sec. 431. It must see that the check is paid to the payee therein named, upon his genuine indorsement, or it will remain responsible: Pickle v. Muse, 88 Tenn. 380; 17 Am. St. Rep. 900.

160 An authority to receive checks, in lieu of cash, in payment of bills placed in the hands of an agent for collection does not authorize the agent to indorse and collect the checks: Graham v. United States Sav. Inst., 46 Mo. 186; 1 Wait's Actions and Defences, 284; 1 Daniel on Negotiable Instruments, sec. 294.

The indorsement of the check was not a necessary incident to the collection of accounts: Graham v. United States Sav. Inst., 46 Mo. 186.

It follows that a drummer or commercial traveler, employed to sell and take orders for goods, to collect accounts, and receive money and checks payable to the order of his principal, is not, by implication, authorized to indorse such principal's name to such checks.

No equitable considerations can be invoked to soften seeming hardships in the enforcement of the laws and rules fixing liability on persons handling commercial paper. These laws are the growth of ages and the result of experience, having their origin in necessity. The inflexibility of these rules may occasionally make them seem severe, but in them is found general security.

The decree of the chancellor is reversed, and a decree in favor of complainants against the defendant will be entered here for the amount of the Meadows check, with interest from date of filing the bill, and the costs.

CUSTOM CANNOT Contravene AN ESTABLISHED RULE OF LAW: Columbus dc. Iron Co. v. Tucker, 48 Ohio St. 41; 29 Am. St. Rep. 528, and note with cases collected; Atkinson v. Truesdell, 127 N. Y. 230.

BANKS-PAYMENT of Forged CHECKS BY.-A bank paying a forged check does so at its own peril: Janin v. London etc. Bank, 92 Cal. 14; 27 Am. St. Rep. 82, and note, and see the extended note to People's Bank v. Franklin Bank, 17 Am. St. Rep. 889; and Freeman v. Savannah Bank etc. Co., 88 Ga. 252.

CHECKS-ACCEPTANCE BY BANK, WHEN IMPLIED.-The acceptance of a bank check and assent to the payment thereof may be inferred from proof of the fact that the bank received and retained it when presented, and subsequently charged the check to the account of the drawer: Pickle v. Muse, 88 Tenn. 380; 17 Am. St. Rep. 900, and note; Wasson v. Lamb, 120 Ind. 514; 16 Am. St. Rep. 342, and note; American Exchange Nat. Bank v. Gregg, 138 Ill. 596; 32 Am. St. Rep. 171, and note.

AGENCY-AUTHORITY TO RECEIVE A CHECK PAYABLE TO ORDER IMPLIES NO AUTHORITY TO INDORSE it in the name of the payee, or to collect it with. out such indorsement: Pickle v. Muse, 88 Tenn. 380; 17 Am. St. Rep. 900, and note; note to Bunk v. Beirne, 42 Am. Dec. 561. See also the extended note to Huntley v. Mathias, 47 Am. Rep. 520.

THOMPSON V. BAXTER.

[92 TENNESSEE, 305.]

MECHANIO'S LIEN Law, Construction of.-While a mechanic's lien law is favored and the remedial laws for its enforcement should be liberally construed, they should not be so construed as to include persons not enumerated in the statute.

MECHANIC'S LIEN.—A SUPERVISING ARCHITECT employed to draw plans and specifications, solicit bids for, and to supervise the construction of, a building is not entitled to a lien thereon under the statute conferring a right to a lien on all persons doing any portion of the work, or furnishing any portion of the material, in the construction of a house or other building.

Barthell and Keeble, for Thompson.

J. H. Acklen, for Baxter.

H. Parks, for the Insurance Company.

305 A. D. BRIGHT, S. J. The defendant, Baxter, the then owner of the lots described in the pleadings, employed plaintiff, Thompson, as supervising architect, to draw plans speci