Ames v. Great Southern Bank
672 S.W.2d 447 (Tex. 1984)
A bookkeeper allowed to renew a CD cashes it instead
- In one lineEn una línea
- Authority to renew a deposit is not authority to cash it; a bank that pays without checking the endorsement is liable for conversion.Facultad para renovar un depósito no es facultad para cobrarlo; el banco que paga sin verificar el endoso responde por conversión.
- RuleRegla
- Apparent authority needs a course of conduct by the principal, known to the third party, that would lead a reasonably prudent person to believe the agent held the authority exercised; an isolated earlier transaction is not enough. A bank that pays a certificate of deposit on an endorsement it never verified converts the instrument and owes its value to the owner.
- Why this case is herePor qué está aquí este caso
- The first case of the course: authority has edges. Permission to do one thing (renew a deposit) is not permission to do another (cash it out), and a bank that pays on an unverified endorsement converts the instrument. It also shows how little the agent's own conduct counts when the question is what the principal manifested.
- Procedural posturePostura procesal
- The depositor sued the bank for paying her certificate of deposit to her bookkeeper. The trial court ruled for the bank, the court of appeals affirmed on an apparent authority theory, and the Supreme Court of Texas reversed in part.
Facts
Nancy Ames kept personal and business accounts at Great Southern Bank and bought a $20,000 certificate of deposit. Her bookkeeper, Suzanne Dealy, mostly handled the business accounts; she had been allowed to roll the CD over into a new one at maturity. Later Dealy cashed the certificate without Ames’s consent. (Check the opinion for what happened to the proceeds and what the bank did to verify the endorsement.)
Procedural posture
Ames sued the bank for paying out her CD without authority. The trial court ruled for the bank; the court of appeals affirmed, reasoning that Dealy had apparent authority. The Supreme Court of Texas reversed in part and held the bank liable.
Issue
Did one earlier rollover give the bookkeeper apparent authority to cash the certificate, and could the bank pay without verifying the endorsement?
Holding
No on both. Apparent authority requires a pattern of conduct by the principal that a reasonable third party relied on; a single prior transaction of a different kind does not create it. The bank had to verify the endorsement before paying, and paying without doing so was conversion of the instrument, so the bank owed the full value of the CD. The bank’s request for attorney’s fees was properly denied because there was no evidence Ames sued in bad faith or to harass (verify the statutory basis).
Reasoning
Apparent authority flows from the principal’s manifestations to the third party, and those manifestations must be enough to make a prudent person believe the agent could do this act. Letting an employee renew a deposit is a narrow manifestation; it says nothing about taking the money. The bank was in the best position to protect the depositor by checking the endorsement and bore the loss for not doing so.
Rule (own words)
Measure apparent authority by what the principal let the third party see, act by act. Permission for a small act does not stretch to a larger one, and a bank that pays an instrument on an unverified endorsement converts it.
What-ifs
- If Dealy had cashed three earlier CDs with Ames’s knowledge and no objection, the pattern would support apparent authority (and ratification by acquiescence).
- If Ames had signed a signature card naming Dealy as an authorized signer on the personal account, the case becomes actual authority.
- If the bank had called Ames before paying and she said nothing, think estoppel.
Vocabulary to look up (the professor’s habit)
proceeds, certificate of deposit, endorsement, payee, maturity date, rollover, surrender, convert (conversion of an instrument), waiver, special issues (Texas jury questions), directed verdict, judgment n.o.v., indicia, authenticate, DTPA.
Say the answer out loud before revealing each part. Rate yourself honestly; the case comes back sooner when you miss.Di la respuesta en voz alta antes de revelar cada parte. Califícate con honestidad; el caso vuelve antes si fallas.
Panic kit: “Could you repeat the question, please?” · “Let me make sure I have the facts right: …” · “I'm not certain, but I'd argue … because …”Kit de pánico: “Could you repeat the question, please?” · “Let me make sure I have the facts right: …” · “I'm not certain, but I'd argue … because …”