Appeal
from Common Pleas Circuit Court of Orangeburg County
Dantzler, Judge.
JONES
J.
The
appeal in this case is from an order of Judge Dantzler
sustaining a demurrer to the complaint with leave to amend.
The complaint, omitting formal parts, states the following
facts: "(3) That on 6th January 1904, the defendant
through the usual channels in the course of banking
presented to plaintiff for payment a draft for $50, dated
Neeces, S. C., January 4, 1904, and purporting to be drawn by
H. L. J. Blume on the plaintiffs, payable to the order of Joe
Shannahan, indorsed 'Joe Shannahan' and by the
defendant, of the tenor following, to wit: 'Pay to the
order of Joe Shannahan fifty dollars, value received and
charge the same to account of H. L. J. Blume. To B. B. Ford & Co., Columbia, S.C. No. 68.' (4) That the plaintiff paid
the said draft upon presentation, upon the faith and credit
of the indorsement of the said defendant, supposing said
draft to be a genuine draft of H. L. J. Blume, and the money
therefor was received by the defendant. (5) That the said
draft was not the genuine draft of the said H. L. J. Blume
but on the contrary his name thereto is a forgery, and upon
the discovery of the same the plaintiffs, on 11th January,
1904, notified the defendant thereof, and demanded the return
of the said $50 so paid by the plaintiffs to defendant as
aforesaid, but the said defendant refused and still refuses
to pay the same."
Judge
Dantzler in sustaining the demurrer for insufficiency
assigned the following reasons: "There is no authority
in this state decisive of the question presented by the
demurrer. The case cited by counsel for plaintiff (Glenn
v. Shannon, 12 S.C. 570) is inapplicable. The rule, as
settled by the great weight of authority in other states, is
that, 'As between parties equally innocent, the loss must
remain where the course of business has placed
it. 5 A. & E. Ency. (2d Ed.) 1072. That is to say, a drawee
becomes chargeable with the knowledge of the signature of the
drawer, where a check or draft, upon which the signature of
the drawer has been forged, is paid by the drawee, the drawee
must bear the loss unless the payee is negligent or at fault.
The text-writers are not in accord with this doctrine, but it
seems to be 'firmly rooted in the commercial law of the
country.' Germania Bank v. Boutell, 60 Minn.
189, 62 N.W. 327, 27 L. R. A. 635, 51 Am. St. Rep. 521. The
rule in relation to forged indorsements is different. A. & E.
Ency. Law, vol. 5 (2d Ed.) 1079. The plaintiffs allege, inter
alia, that the draft in question was presented to the
plaintiffs by the defendants ' through the usual
channels in
the course of banking.' (Italics mine.) The
draft was placed in the usual course of business, with the
plaintiffs, and they, as drawees, paid the money to the
defendant; the defendant is not liable, therefore, to the
plaintiffs for the money so received, unless negligent or at
fault. The demurrer must therefore be sustained, with leave
to the plaintiffs to amend their complaint, if so advised, by
incorporating therein, as they may be advised, any alleged
act or acts of negligence or fault on the part of the
defendant respecting the draft in question."
Both
sides appeal. The plaintiff contends that the demurrer should
not have been sustained, as the case should be governed by
the principle announced in Glenn v. Shannon, 12 S.C.
570, which is: "Where money is paid under a mistake of
fact to a person who has no ground in conscience to claim it,
the person paying it may recover it back." The plaintiff
also contends that if the question of defendant's
negligence is involved the complaint alleges such negligence
by stating in effect that the defendant indorsed a forged
draft on plaintiff and presented the same so indorsed,
through the usual channels of banking, and that said draft
was paid by plaintiff upon the faith and credit of such
indorsement, supposing the draft to be genuine.
The defendant contends that the demurrer should have been
sustained absolutely without leave to amend, under the
commercial rule that the drawee of a bill of exchange or
check is presumed to know the signature of the drawer and
cannot recover back the money paid thereon to a bona fide
holder. The defendant contends that such presumption is
conclusive in this case, as the complaint shows that
defendant was a bona fide holder.
1. The
rule which protects a bona fide holder in his right to retain
money paid by the drawee upon a bill or check to which the
drawer's signature is afterwards discovered to be forged
was first announced by Lord Mansfield in Price v. Neal, 3
Burr, 1355, decided in 1762, was followed by Justice
Story in Bank of United States v. Bank of Georgia
10 Wheat. 333, 6 L.Ed. 334, decided in 1825, and has...
