Bergman v. Ave. State Bank

• Decision Date: 23 April 1936
• Docket Number: Gen. No. 38288.
• Citation: 284 Ill.App. 516,1 N.E.2d 432
• Parties: BERGMAN v. AVENUE STATE BANK.
• Court: United States Appellate Court of Illinois

284 Ill.App. 516

1 N.E.2d 432

BERGMAN

v.AVENUE STATE BANK.

Gen. No. 38288.

Appellate Court of Illinois, First District, Second Division.

April 7, 1936.

Rehearing Denied April 23, 1936.

Appeal from Circuit Court, Cook County; Daniel P. Trude, Judge.

Action by Maude Bamber Bergman against the Avenue State Bank, an Illinois banking corporation. From a judgment for plaintiff, defendant appeals.

Reversed and judgment entered for defendant against plaintiff for costs. Herrick, Vette & Peregrine, of Chicago, for appellant.

Harris F. Williams and Sydney L. Blankstein, both of Chicago, for appellee.

FRIEND, Justice.

Defendant appeals from a judgment rendered in favor of plaintiff for $973.35 and interest. There is substantially no dispute as to the following facts:

Norris & Kenly, a stock and bond brokerage firm, in payment for some stock standing in the name of William E. Bache, which one Sutherland had brought to them for sale for the account of Bache, issued and delivered to Sutherland a check for $973.35, drawn on Guaranty Trust Company of New York, bearing date November 29, 1930, and payable to the order of William E. Bache. Bache died September 29, 1930, but Norris & Kenly had no knowledge of his death when the check was issued.

The check was brought to Harry A. Bergman, plaintiff's husband, by one S. M. McCormick, who resided at the hotel where Bergman was employed as clerk. The check bore an indorsement “William E. Bache,” and McCormick, on delivering the check to Bergman, also indorsed it in blank, with the understanding that Bergman would put the check through his wife's account for collection and out of the proceeds retain $250 which McCormick owed him and turn the balance over to McCormick.

Plaintiff, a depositor in defendant bank, indorsed the check and delivered it to defendant December 1, 1930, for collection and credit to her account, and asked to be advised when it had cleared in order that she might draw against it. Defendant bank indorsed and forwarded the check to Continental Illinois Bank & Trust Company, its collecting agent, for collection, and was credited therewith. The Continental Bank indorsed and forwarded the check to Chase National Bank, in New York, for collection and credit to its account, and December 4, 1930, the Chase Bank received payment from the drawee, Guaranty Trust Company of New York, through the clearing house and credited the Continental Bank with the proceeds.

December 5, 1930, plaintiff was advised by defendant bank that her check had cleared and that she could draw against it, but the bank was not informed that plaintiff proposed to pay the proceeds or any part thereof to McCormick. On the same day plaintiff, by several checks, withdrew all but $250 of the proceeds of the $973.35 check, and turned over to McCormick the amounts so withdrawn, some by check and some in cash. Thereafter McCormick disappeared.

December 13, 1930, Egbert Robertson, attorney for Norris & Kenly, notified defendant bank that the indorsement of the payee was a forgery, and on the same day defendant, and also Mr. Robertson, so notified plaintiff. Norris & Kenly demanded that the drawee, Guaranty Trust Company, recredit their account to the extent of the amount paid Bergman on the check, Guaranty Trust Company demanded that Chase National Bank reimburse it and Chase National Bank demanded reimbursement from the Continental Bank, which in turn demanded reimbursement from the defendant bank, the check being returned in each instance. Thereafter the defendant bank demanded reimbursement from plaintiff, and on January 15, 1931, charged the amount against plaintiff's account and shortly thereafter surrendered the check to her.

Prior to January 14, 1931, defendant bank held plaintiff's note for $300 and certain stock as collateral thereto. January 13, 1931, the bank wrote plaintiff that unless settlement was made the stock would be sold and her account charged. Plaintiff thereupon called at the bank and authorized sale of the stock. Plaintiff then knew of the demand by the Continental Bank for reimbursement from defendant bank. After selling the stock and charging plaintiff's account, defendant reimbursed the Continental Bank. Plaintiff continued to carry her account with defendant bank until November, 1931. Monthly statements and vouchers were given her, for which receipts were taken with an agreement on her part to notify the bank of any error or irregularity within ten days. No written notice was given by plaintiff, although she says she objected verbally, but defendant bank contends that no such objection was made. September 17, 1934, plaintiff filed suit, claiming that defendant, by making the charge against her account, converted her money. The court rendered judgment in plaintiff's favor for $973.35, from which defendant appeals.

It must be conceded that William E. Bache, the payee named in the check, had been dead for some time when the check was issued. Under section 1 of the Negotiable Instruments Act (Smith-Hurd Ann.St. c. 98, § 21; Ill.Rev.Stat.1935, c. 98, par. 21) an instrument payable in money, in order to be negotiable, “must be payable to the order of a specified person or to bearer,” and a “specified person,” in contemplation of law, must be an existing person capable of indorsing the instrument and of being a party to a contract. “Paper cannot be made payable to a dead man.” 8 Corpus Juris 172. Therefore, when an instrument is made payable to one not in existence, the instrument is void and no one can acquire any rights thereunder. It was so held in United States v. First National Bank of Coffeyville, 82 F. 410 (C.C.Kansas). In that case a pension check to Mary L. Beard was issued after her death. A grandson forged her indorsement, and, after indorsing the check himself, deposited it with the defendant bank, withdrawing part of the proceeds. The bank sent the check to another bank for collection, and through various collection banks it was finally presented to the government and the proceeds were remitted through collection channels to the bank of deposit. Some two years later the forgery of the payee's indorsement was discovered, and the United States instituted suit against defendant bank. The court allowed recovery, saying: (82 F. 410, at pages 411, 412)

“The issuance of the check to said Mary L. Beard after she was dead was an act utterly void, and the check itself was absolutely void, and no act of any one could breathe into it the breath of life, or make it of any value whatever. When the defendant bank took the check * * * it devolved upon it to know that he was the legal holder * * * and it paid the money out at its own risk, and peril. * * * The loss sustained is by reason of its own neglect in paying the check. It has received from the government * * * the amount demanded in this suit, and there is no reason in law or equity why it should not be held responsible and reimburse the government in the amount paid out.”

To the same effect was Wayman v. Torreyson, 4 Nev. 124. Under both of these decisions the instrument was held to be absolutely void. It would logically follow that no one can acquire any rights under a void instrument, and, having procured money without right, plaintiff in the instant case was liable to refund it.

Plaintiff takes the position, however, that after payment of the check by the drawee bank to the defendant, and by defendant to plaintiff, who in turn paid it out to a third person, the drawee bank was estopped to recover from defendant, and defendant bank was in turn estopped to recover from plaintiff. Several cases are cited to sustain this position. The first of these is the National Council of the Knights and Ladies of Security v. Hibernian Banking Ass'n, 137 Ill.App. 175, wherein plaintiff drew a death benefit draft to its own treasurer, payable “on presentation of Certificate No. 32004 * * * to James Kane properly released.” Kane, who was named in the draft as payee, was in fact one Regent, who by fraudulent means had induced plaintiff to issue a certificate insuring the life of James Kane, his alleged brother, and naming Frank Kane beneficiary. Thereafter Regent made proof of the death of James Kane and plaintiff issued the draft to Regent, believing he was Frank Kane. The defendant indorsed the draft and sent it to its correspondent, the First National Bank at Topeka, which presented it to the Central National Bank of Topeka, the drawee bank, which in turn presented it to the plaintiff, who paid it to the drawee bank, which in turn paid it to the First National Bank, which remitted it to the defendant collecting bank and the defendant collecting bank thereupon paid Regent, the person from whom it received the draft for collection. The maker sued the collecting bank and was allowed to recover, the court holding that before paying the draft it was its duty to satisfy itself as to the authenticity of all signatures.

In Bank of Williamson v. McDowell County Bank, 66 W.Va. 545, 66 S.E. 761, 36 L.R.A.(N.S.) 605, another case cited by plaintiff, the drawee bank had paid the check to the collecting bank, who thereupon paid the proceeds to its depositor, the plaintiff. The court held that the drawee plainly should have been estopped to recover because of causing the collection bank to change its position by its (drawee's) act.

In commenting upon Bank of Montreal v. Rex, 38 Canada, S.C. 258, a note in 12 A.L.R. 1107, 1111, contains the following:

“Since the bank was merely collecting agents and did not pay over the money (to its depositor) until it had received it (from drawee) the drawee was estopped to reclaim the money from it (the collecting bank). * * *

“Where the money is paid to a bank which took the paper for collection and paid over the money only after receiving it from the drawee, the drawee cannot recover back the money so paid, although the collecting bank had endorsed it * * * Commercial & Savings Bank Co. v. Citizens'...