Chemical Workers Basic Union, Local No. 1744 v. Arnold Sav. Bank

Decision Date12 December 1966
Docket NumberNo. 52343,52343
Citation411 S.W.2d 159
PartiesCHEMICAL WORKERS BASIC UNION, LOCAL NO. 1744, Plaintiff-Appellant, v. ARNOLD SAVINGS BANK, a Corporation, Defendant-Respondent.
CourtMissouri Supreme Court

Isaac E. Young, Maplewood, for appellant.

John L. Anderson, Anderson, Anderson & Brooking, Hillsboro, for respondent.

HYDE, Judge.

Action to recover the amount paid by defendant on a check ($2517.98) payable to plaintiff on a forged or unauthorized endorsement. There was a jury verdict for defendant and plaintiff appealed to the St. Louis Court of Appeals from the judgment entered. The Court of Appeals affirmed the judgment and we transferred the case here on application of plaintiff under the provisions of Sec. 10, Art. V of the Constitution, V.A.M.S. Because of our view on a decisive issue, we do not reach issues discussed by the Court of Appeals.

The check was issued on December 20, 1955, by the General American Life Insurance Company payable to the order of Chemical Workers Basic Union Local 1744, drawn on the First National Bank of St. Louis. The check was cashed by defendant Bank on December 30, 1955, by paying the amount thereof to Morris Parker, who was at that time president of plaintiff union. The check was issued for dividends earned under a hospitalization insurance policy and had been delivered to Morris Parker. Plaintiff's petition alleged: 'That said Morris Parker came into possession of the above mentioned check and instead of depositing said check into the regular funds of the union, said Morris Parker did wrongfully and intentionally forge the name of the plaintiff, who was the payee on the check and present same at the defendant for payment.

'5. The defendant bank did thereafter cash the above mentioned check containing the forged signature of the plaintiff and pay the entire proceeds to said Morris Parker and did wrongfully and intentionally convert the proceeds of the check payable to the union and did instead pay them to Morris Parker.' (Emphasis ours.)

It was also alleged that 'defendant has received the money on this forged indorsement and did in fact guarantee all prior indorsements on the check.'

This action was commenced September 20, 1962, and defendant's answer alleged the action was barred by the five-year statute of limitations, Sec. 516.120 (statutory references are to RSMo and V.A.M.S.). Defendant also raised this issue by motions for directed verdict at the close of plaintiff's evidence and at the close of all the evidence. The applicability of this statute depends on what kind of action this is. Plaintiff contends it is an action upon a writing so that the ten-year statute, Sec. 516.110, would apply. Plaintiff's theory is that 'the defendant was being sued on the forged endorsement of the payee and the defendant bank after cashing the check did thereafter clear the check through the St. Louis Clearing House and did in fact, guarantee all prior endorsements on the check.' Defendant mainly relies on Borserine v. Maryland Casualty Co. (USCA 8th), 112 F.2d 409, and also on Home Insurance Co. v. Mercantile Trust Co., 219 Mo.App. 645, 284 S.W. 834. The fallacy of plaintiff's theory is that it is not an endorsee and there is no endorsement to it or under which it can claim any rights. It is not suing on and does not have a cause of action on an endorsement; instead it alleges a conversion of the proceeds of the check. We pointed out this distinction of the Borserine case in National Surety Co. v. Columbia National Bank of Kansas City, 348 Mo. 226, 153 S.W.2d 364, 370, saying: 'In that case * * * the plaintiff was subrogated to the rights of an endorser who had received the checks from a prior endorser, had became a holder in due course, and had thereafter endorsed and collected the checks from the drawee banks. When the maker of the checks discovered that the names of the payees had been forged, it called upon the drawee banks to restore its accounts and the drawee banks called upon plaintiff's insured to make good upon its endorsements. The plaintiff settled with the maker of the checks and the drawee banks and, having done so, was subrogated to the rights of its insured and brought suit on the endorsements of the defendant, who had originally received the checks and taken them on the forged endorsements of the payees and had, thereafter, negotiated them to plaintiff's insured.' See also 11 Am.Jur.2d, Bills and Notes, Secs. 611, 613, 616, 625. Thus plaintiff's action (as subrogee of an endorsee) was on the endorsement of Borserine, who had first received the check with a forged endorsement.

In the National Surety case, we held the action barred by the five-year statute of limitations. In it the plaintiff, drawer of checks, claimed its action was on endorsements of the defendant bank, which had cashed checks on bogus endorsements. As in this case, the checks were drawn on another bank and the defendant bank to collect them endorsed them and guaranteed the validity of the prior endorsements. The drawer's loss was paid by the plaintiff Surety Company which was subrogated to the drawer's rights and brought this suit. We pointed out (153 S.W.2d l.c. 368) that the drawer 'was not a subsequent endorser, it did not accept the checks from defendant bank or from any prior or subsequent endorsers, in reliance on said endorsements. * * * It paid out no cash or credit in reliance upon these endorsements. The checks were not dishonored, but in fact paid upon presentment to the drawee bank. * * * No subsequent holder or endorser subsequent to defendant bank has been compelled to pay them. * * * There is no suggestion in the pleadings or evidence that the drawee bank has suffered any loss or had to pay the checks from its own funds, or that plaintiff is subrogated to the rights of the drawee bank on the endorsements on these checks.' We held: 'The action is one for money had and received by defendant bank from Doherty and Company's account (drawer of the checks) and is governed by the five-year statute of limitations. * * * (T)he obligation of defendant to repay to Doherty and Company the money obtained by defendant on the checks was, under the facts stated, an obligation implied by law from the transaction alleged and was an obligation which would arise from the proof of the extrinsic facts alleged and was barred in five years.'

In this case, plaintiff is the payee of the check and not the drawer thereof nor a subrogee of anyone. In the Home Insurance Co. case (284 S.W. 834) plaintiff Insurance Company brought suit against two banks 'on their endorsements, in writing, on the back of a draft paid by plaintiff.' The draft had been paid by the St. Louis County Bank to an insurance agent, not authorized to collect the draft, who appropriated the money to his own use. In a suit by the payees named in its draft the Insurance Company was required to pay to them the amount of the draft. The suit of the Insurance Company was against the St. Louis County Bank which had paid the amount of the draft to the unauthorized agent, on his endorsement, and the Mercantile Trust Company which had received the amount of the draft from the Insurance Company's New York bank. Both of these forwarding banks had endorsed the draft guaranteeing all prior endorsements. The court held: '(T)his is an action based upon the warranty made by the indorsers of the genuiness of a previous indorsement, and is an action upon a writing for the payment of money, and therefore within the terms of the 10-year statute of limitations.' We do not have the same situation here and would have it only if the drawer of the check (General American) could have been required to make good the loss to the Union and was seeking to recover on this defendant's endorsement. In such a situation, if there could be conflict between the Home Insurance Co. case, 219 Mo.App. 645, 284 S.W. 834, and National Surety Co. v. Columbia National Bank, 348 Mo. 226, 153 S.W.2d 364, the latter is the controlling authority. For other cases concerning right of drawer of check against collecting bank see Annotation, 99 A.L.R.2d 637.

'(T)he general rule is that a collecting bank which accepts a check on a forged indorsement acquires no title and holds the proceeds of the check, when collected from the drawee bank, for the payee or rightful owner, who may recover from the collecting bank as for money had and received, even though it has fully paid over and accounted for the same to the forger without knowledge or suspicion of the forgery; such rule being based upon the theory of the payee's ratification of the collection of the check from the drawee. The rule applies to indorsements by a person bearing the same name as the payee, and to indorsements by the payee's agent without authority.' 5B Michie on Banks and Banking 96, Sec. 278. Forged or unauthorized signatures were placed on the same basis by Sec. 401.023.

It is said 6 Zollmann Banks and Banking 465, Sec. 4252, as to the rights of the payee of a check against a bank collecting from the bank on which the check was drawn: 'The money collected belongs to the payee the same as if it had been collected without any indorsement. The bank acquires no title to either the check or its proceeds, but holds such check or its proceeds for the payee, who may elect to ratify the collection and hold the discounting bank in an action for money had and received, or in an action in conversion.' It is also said: 'The theory underlying the above rule has been expressed in various ways, all of which may be summed up in the statement that the possession of the check on the forged or unauthorized indorsement is wrongful, and when the money has been collected on the check, the bank, or other person or corporation, can be held as for money had and received and the statute of limitations governing actions on implied contracts is applicable.' 10...

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