City of Indianapolis v. Nat'l City Bank

• Decision Date: 30 October 1923
• Docket Number: No. 11473.,11473.
• Citation: 141 N.E. 249,80 Ind.App. 677
• Parties: CITY OF INDIANAPOLIS v. NATIONAL CITY BANK.
• Court: Indiana Appellate Court

80 Ind.App. 677

141 N.E. 249

CITY OF INDIANAPOLIS

v.NATIONAL CITY BANK.

No. 11473.^*

Appellate Court of Indiana, Division No. 2.

Oct. 30, 1923.

Appeal from Superior Court, Marion County.

On petition for rehearing. Rehearing denied.

For former opinion see 138 N. E. 791.

DAUSMAN, J.

[1] The opinion in Citizens' National Bank v. Reynolds, 72 Ind. App. 611, 126 N. E. 234, contains the following statement:

“The rule is well established that a bank on which a check is drawn must ascertain at its peril the identity of the person named therein as payee.”

Counsel for appellant insist that the rule there stated is applicable to the case at bar. The contention cannot be sustained. From the nature of the Reynolds Case, from the statement of the facts of that case, from the opinion itself when considered as an entirety, the clear implication is that the rule is limited to the class of cases wherein a check is presented for payment by a person who claims to be the payee. However, in order that no one may be misled, the rule above quoted is hereby expressly so limited.

[2][3][4][5] The general rule is that a bank may not have credit for money paid on its depositor's check unless the payment has been made strictly in accordance with the depositor's directions, as stated in the check itself. But to that rule there are some exceptions. A bank is bound to know the signature of its depositor; but it would be a strange and arbitrary rule that would require a bank to know the signature of every person to whom its depositor issues a check. In this age of industrial activity, bank checks pass freely from hand to hand. Where a check passes from hand to hand by successive indorsements, each indorser assumes a well-defined liability (article 5, Negotiable Instruments Law [Burns' Ann. St. 1914, §§ 9089h2 to 9089q2]); and where a check is presented for payment by an indorsee, the drawee is not bound to institute an investigation to determinethe genuineness of the signature which purports to be the payee's indorsement, but may rely upon the subsequent indorsements. If the drawee pays a check to a holder by indorsement, and it develops that the purported indorsement of the payee is in truth a forgery, the bank ordinarily may not have credit therefor against the account of its depositor; but in that case the depositor must have exercised due diligence in the matter of examining his canceled checks, and in giving the bank timely notice of the forgery, or he cannot...