553 F.2d 398 (5th Cir. 1977), 75-2816, Perini Corp. v. First Nat. Bank of Habersham County, Georgia
|Docket Nº:||75-2816, 75-3402.|
|Citation:||553 F.2d 398|
|Party Name:||PERINI CORPORATION and Brown Brothers, Harriman and Company, Plaintiffs- Appellants, v. The FIRST NATIONAL BANK OF HABERSHAM COUNTY, GEORGIA, the Fulton National Bank of Atlanta, Georgia and Morgan Guaranty Trust Company of New York, New York, Defendants-Appellees. PERINI CORPORATION and Brown Brothers, Harriman and Company, Plaintiffs- Appellants,|
|Case Date:||June 02, 1977|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Rehearing and Rehearing En Banc Denied July 27, 1977.
Edward E. Dorsey, Frank Mays Hull, John T. Marshall, Atlanta, Ga., William F. Willier, Newton Center, Mass., Frederick M. Hart, Albuquerque, N. M., for plaintiffs-appellants.
Barry Phillips, Richard Cheatham, Atlanta, Ga., for Fulton.
King & Spalding, Atlanta, Ga., Charles H. Willard, Phillip C. Potter, Sheila McMeen, New York City, for Morgan Guaranty Trust Co. in No. 75-2816.
Charles H. Kirbo, Walter Driver, Atlanta, Ga., for Morgan Guaranty Trust Co. in Nos. 75-2816 and 75-3402.
Albert E. Phillips, Atlanta, Ga., for First Nat. Bank, etc. in Nos. 75-2816 and 75-3402.
J. Alexander Porter, Atlanta, Ga., Henry J. Bailey, III, Salem, Or., William D. Hawkland, Champaign, Ill., for First Nat. Bank, etc. in No. 75-3402.
Appeals from the United States District Court for the Northern District of Georgia.
Before GOLDBERG, MORGAN and HILL, Circuit Judges.
GOLDBERG, Circuit Judge:
This tale of intrigue offers a series of complex commercial paper conundrums. Seventeen forged checks bearing arguably ineffective indorsements plunge us into the debate over a centuries-old yet hardly refined distinction between cases of forged drawer's signatures and forged indorsements. This distinction the Uniform Commercial Code has carried forward somewhat uneasily, in only partial fulfillment of the drafters' professed desire to dissipate any clouds of potential liability as soon as possible after a check transaction's dawn.
A forger drew the checks before us to the order of two companies that were in all likelihood, though not certainly, fictitious. A man claiming a connection with the companies indorsed the checks, but did so in an individual rather than representative capacity. We shall ultimately conclude that the loss occasioned in these unusual circumstances must be viewed as a forged check loss, the label used in forged drawer's signature cases. Moreover, we find that the challenged indorsements not only failed to lead to liability in their own right, but also failed to work any change in the rules for determining forged check liability.
Upon these conclusions we will affirm the action of the district court. This disposition leaves appellant, which for its own reasons forfeited the law's chief protection against forged check losses, with only a narrowly circumscribed action against the depositary bank. Before we engage the hazards of further explanation, however, both factual and legal terrain merit a detailed survey.
I. Factual and Procedural Background
We commence by introducing the principal characters caught in the unfortunate and mysterious set of occurrences that spawned this dispute. Plaintiff Perini Corporation (hereinafter Perini) is a large construction company with offices located in Framingham, Massachusetts. At all times with which we are concerned, Perini maintained checking accounts with plaintiff Brown Brothers, Harriman & Company (hereinafter Brown Brothers) and with defendant Morgan Guaranty Trust Company of New York, New York (hereinafter Morgan), both large New York banking institutions. Brown Brothers and Morgan are the drawees of the checks here at issue.
Those checks were deposited in accounts at defendant First National Bank of Habersham County, Georgia (hereinafter Habersham). With $23 million total assets in 1971, Habersham was an institution of modest size on a national scale, but the largest bank serving the north Georgia mountain county.
The remaining party to this litigation is the defendant Fulton National Bank of Atlanta, Georgia (hereinafter Fulton). As Habersham's correspondent bank in Atlanta, Fulton received the nefarious drafts from Habersham and forwarded them along their heated trail to the New York bankers.
To complete this roster for the enlightenment and enjoyment of the commercial law fan, we must introduce a character who, while not a party to the litigation, appears at present to be its only real winner. Known to the treatises and commentaries as Malefactor, Wrongdoer, and the like, he chose in this case to be called Jesse Quisenberry. Like the parties to the litigation and the court below, we do not know whether that was actually his name, but for want of a more reliable moniker we shall employ it throughout this opinion. Eschewing the tommy gun and the Model T for more peaceable means of relieving others of their money, Quisenberry is the antiheroic fellow who deposited the checks at Habersham and withdrew the amounts in cash, thence to vanish. But for the telling of the story we must return to the corporate offices of Perini.
Perini's extensive construction activities require it to issue a voluminous amount of checks. Accordingly, it has long utilized a facsimile signature machine for writing many of those checks. The use of such machines is a widely encountered and accepted lubricant for the modern wheels of commerce.
That lubricant, however, does not come free. In June 1969 Perini adopted a corporate resolution authorizing and directing four banks, including Brown Brothers and Morgan,
to honor all checks, drafts or other orders of payment of money drawn in the name of Perini Corporation on its Regular Accounts . . . when bearing or purporting to bear the single facsimile signature of R. A. Munroe. . . . said banks shall be entitled to honor and charge Perini Corporation for all such checks, . . . regardless of by whom or by what means the actual or purported facsimile signature thereon may have been affixed thereto, if such facsimile signature resembles the facsimile specimen from time to time filed with said banks . . . .
In effect at all times relevant to this litigation, this assumption of risk was the price Perini undertook to pay, voluntarily and at arms length, for the convenience of the facsimile signature machine.
The precautions taken by Perini to safeguard against abuse of the machine are much in dispute. Pre-printed company checks may or may not have been left in an unlocked cabinet. Operation of the machine
itself required three different keys, but Perini may or may not have kept those keys in separate hands.
In any event, sometime prior to September 7, 1971, someone stole a number of pre-printed Perini checks and gained access to the signature machine or developed a perfect copy of the facsimile signature it produced. On September 7, Jesse Quisenberry, or his facsimile, appeared at Habersham and opened an account in the name of "Quisenberry Contracting Co." He signed "Jesse D. Quisenberry" on a signature card used for sole proprietorships, but no one at the bank then or later actually determined that Quisenberry Contracting Co. was a sole proprietorship.
From a period beginning that day and extending through September 16, Quisenberry deposited in this account eight checks in the total amount of $536,075.99. These were pre-printed Perini checks, drawn on Brown Brothers and payable to "Quisenberry Contracting Co." In the space for the drawer signature on each check was the facsimile signature of R. A. Munroe, indistinguishable from the specimen Perini had placed on file with its drawee banks. In a pen stroke responsible for if nothing else, the complexity of this opinion, Quisenberry indorsed the checks in a personal, not a representative, capacity, signing simply "Jesse D. Quisenberry."
Quisenberry shortly began to make large cash withdrawals from the account. Beginning with a $46,000 withdrawal on September 16, by September 19 he had extracted $533,707.90 in cash from the "Quisenberry Contracting Co." account, almost entirely depleting it.
During this period Quisenberry opened and made deposits in another account at Habersham in the name of "Southern Contracting Co." Again he signed his name on a sole proprietorship signature card, although it was never established that the company was a sole proprietorship. From September 18 to September 25, he deposited in this account nine pre-printed Perini checks in the aggregate sum of $593,156.30, drawn on Morgan and payable to "Southern Contracting Co." These checks too contained a facsimile signature of R. A. Munroe indistinguishable from that on file with Perini's drawee banks. Again Quisenberry indorsed the checks simply "Jesse D. Quisenberry." By October 1, Quisenberry's cash withdrawals had reduced this account to little over a thousand dollars.
As the checks were deposited, Habersham provisionally credited them to the accounts of the respective payees. On the back of each the bank stamped "P.E.G.", guaranteeing prior indorsements. 1 On ten of the checks Habersham also stamped "Credit to the Account of the Within Named Payee in Accordance with Payee's Instructions Absence of Endorsement Guaranteed."
Habersham forwarded each check to Fulton for collection. Fulton then sent each to the drawee bank, either directly or through the Federal Reserve. Upon presentment, Brown Brothers and Morgan paid the checks. In late October Perini received...
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