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Dalton & Marberry, P.C. v. Nationsbank

February 03, 1998

DALTON & MARBERRY, P.C., APPELLANT-RESPONDENT,
v.
NATIONSBANK, N.A., RESPONDENT-APPELLANT.



Appeal From: Circuit Court of Boone County, Hon. Gene Hamilton

Opinion Vote: Reversed. Hanna and Ellis, J.j., concur.

The opinion of the court was delivered by: Opinion Author: Robert G. Ulrich, Chief Judge, Presiding Judge

Opinion Summary:

Nations Bank f/k/a Boatmen's Bank of Mid-Missouri (Boatmen's) appeals from the $130,337.00 judgment in favor of Dalton & Marberry, P.C. Boatmen's was found to have been negligent in allowing a Dalton & Marberry employee, Janet Hollandsworth, to embezzle $130,334.00 from a Dalton & Marberry account maintained at Boatmen's. Boatmen's raises five points on appeal. Boatmen's contends the trial court erred by (1) denying Boatmen's motions for directed verdict and judgment n.o.v. on Dalton & Marberry's claim that Boatmen's was negligent where Boatmen's was a holder in due course, and hence, not subject to claims of negligence; (2) denying Boatmen's motions for directed verdict and judgment n.o.v. on Dalton & Marberry's claim that Boatmen's was negligent where Dalton & Marberry cloaked Ms. Hollandsworth with apparent authority to cash checks drawn from the account and Boatmen's relied on that authority; (3) excluding Boatmen's defenses of contributory negligence and estoppel where Dalton & Marberry's negligence allowed Ms. Hollandsworth to embezzle the funds; (4) denying Boatmen's motions for directed verdict and judgment n.o.v. on Dalton & Marberry's claim that Boatmen's was negligent where there was no evidence that Boatmen's knew the check proceeds were being used for Ms. Hollandsworth's personal benefit; and (5) failing to give Boatmen's credit against the judgment for the $37,084.57 that Ms. Hollandsworth paid in restitution to Dalton & Marberry. Dalton & Marberry also raises one issue on appeal: that the trial court erred in denying its request for pre-judgment interest under section 408.040, RSMo 1994.

REVERSED.

Division IV holds: 1. Where Boatmen's qualifies as a holder because the misappropriated checks were payable to Boatmen's and Boatmen's was in possession of the checks; where Boatmen's gave value for the misappropriated checks because it accepted the checks in exchange for cashier's checks or money orders; where Boatmen's took the misappropriated checks in good faith because the checks were regular on their face and the signature card on file authorized Ms. Hollandsworth to exchange the checks for money orders or cashier's checks; and where Boatmen's took the checks without notice of any defect in or adverse claims to the checks because Boatmen's lacked actual knowledge of Ms. Hollandsworth's embezzlement and because under the circumstances it had no duty to inquire as to Ms. Hollandworth's authority to exchange the checks for cashier's checks or money orders, Boatmen's qualifies as a holder in due course under section 400.3-302, RSMo 1994 and, therefore, under section 400.3-305, RSMo 1994, takes free of all of Dalton & Marberry's claims regarding the misappropriated checks. Further, Boatmen's holder in due course status is not limited to the checks written after 1992 because the former section 400.3-305 protects Boatmen's, as a holder in due course, from "all claims" to each instrument, and, therefore, Dalton & Marberry's claims to the instruments before 1992 are also barred under section 400.3-305. Because Boatmen's qualifies as a holder in due course and takes free of all Dalton & Marberry claims to the misappropriated checks, the trial court erred in failing to grant Boatmen's motions for directed verdict and for judgment n.o.v.

Citation:

Opinion:

Nations Bank f/k/a Boatmen's Bank of Mid-Missouri (Boatmen's) appeals from the $130,337.00 judgment in favor of Dalton & Marberry, P.C. Boatmen's was found to have been negligent in allowing a Dalton & Marberry employee, Janet Hollandsworth, to embezzle $130,334.00 from a Dalton & Marberry account maintained at Boatmen's. Boatmen's raises five points on appeal. Boatmen's contends the trial court erred by (1) denying Boatmen's motions for directed verdict and judgment n.o.v. on Dalton & Marberry's claim that Boatmen's was negligent where Boatmen's was a holder in due course, and hence, not subject to claims of negligence; (2) denying Boatmen's motions for directed verdict and judgment n.o.v. on Dalton & Marberry's claim that Boatmen's was negligent where Dalton & Marberry cloaked Ms. Hollandsworth with apparent authority to cash checks drawn from the account and Boatmen's relied on that authority; (3) excluding Boatmen's defenses of contributory negligence and estoppel where Dalton & Marberry's negligence allowed Ms. Hollandsworth to embezzle the funds; (4) denying Boatmen's motions for directed verdict and judgment n.o.v. on Dalton & Marberry's claim that Boatmen's was negligent where there was no evidence that Boatmen's knew the check proceeds were being used for Ms. Hollandsworth's personal benefit; and (5) failing to give Boatmen's credit against the judgment for the $37,084.57 that Ms. Hollandsworth paid in restitution to Dalton & Marberry. Dalton & Marberry also raises one issue on appeal: that the trial court erred in denying its request for pre-judgment interest under section 408.040, RSMo 1994. The decision of the trial court is reversed.FACTSDalton & Marberry maintained an account at Boatmen's bank to perform payroll services for its clients from which a former Dalton & Marberry staff accountant, Janet Hollandsworth, misappropriated $130,334,00. Dalton & Marberry wrote payroll checks for its clients on the Boatmen's account and its clients gave Dalton & Marberry checks to deposit into the account to cover the payroll amounts and payroll taxes.

In performing payroll services, Dalton & Marberry prepared Form 8109 Tax Coupons to make quarterly tax payments to the federal government and to pay Missouri withholding taxes and the Division of Employment Security. The 8109 tax coupon provided written instructions to Boatmen's and the IRS as to which client tax account to credit. Boatmen's could not process payroll tax payments without completed tax coupons. The checks that accompanied tax coupons contained a red endorsement which stated, "Deposit to The Credit of Treasury Tax and Loan Account Boatmen's Bank of Mid-Missouri Columbia, MO". Checks not utilized for payroll tax payments did not display this endorsement. Each month, the canceled checks and a monthly bank statement were forwarded by Boatmen's to Dalton & Marberry for review.

Dalton & Marberry had on file with Boatmen's a Corporate Resolution signed in May of 1989 that stated: "Boatmen's is authorized to honor and pay all checks, drafts and orders when so signed or indorsed including those drawn or indorsed to the individual order of any such person listed on Schedule A." The signatories on the Schedule included principals Jimmy Marberry and David Dalton and the office manager, Margaret Kirby. Ms. Kirby was formerly employed by Boatmen's.

As staff accountant at Dalton & Marberry, Ms. Hollandsworth was responsible for preparing the computations and documents directing payroll tax deposits and payments. Ms. Hollandsworth's responsibilities at Dalton & Marberry also included acting as staff accountant, recording accounting transactions, income and expenses, preparing monthly financial statements, preparing income tax deposit vouchers, computing payroll taxes and reconciling client bank accounts and Dalton & Marberry's bank accounts. Ms. Hollandsworth, however, was not authorized to withdraw funds from any Dalton & Marberry accounts.

In misappropriating Dalton & Marberry funds, Ms. Hollandsworth effectuated a scheme over time that included advising Ms. Kirby that she had forgotten to prepare a tax coupon for a client and that the payment needed to go to Boatmen's that day. Ms. Hollandsworth would hand-write a check payable to Boatmen's in Ms. Kirby's presence from the Dalton & Marberry account with Boatmen's, have Ms. Kirby sign the check and then offer to take the checks and tax coupons to Boatmen's. Ms. Hollandsworth would then take the check to Boatmen's and exchange it for either blank money orders or a cashier's check. All of the canceled checks representing funds that were misappropriated by Ms. Hollandsworth bore an endorsement reflecting that they had been used to purchase money orders. Boatmen's had no knowledge that Ms. Hollandsworth was not conducting legitimate banking transactions at Boatmen's for Dalton & Marberry's clients.

Twice a month Ms. Kirby would also present checks to Boatmen's in exchange for blank money orders. Ms. Kirby obtained the money orders for Mr. Marberry so that he could pay his child support payments. The checks were drawn from Dalton & Marberry's general account ...


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