Commercial & Farmers' Nat. Bank v. First Nat. Bank

• Decision Date: 08 January 1869
• Citation: 30 Md. 11
• Parties: THE COMMERCIAL AND FARMERS' NATIONAL BANK OF BALTIMORE v. THE FIRST NATIONAL BANK OF BALTIMORE.
• Court: Maryland Court of Appeals

30 Md. 11

THE COMMERCIAL AND FARMERS' NATIONAL BANK OF BALTIMORE v. THE FIRST NATIONAL BANK OF BALTIMORE.

Court of Appeals of Maryland

Jan. 8, 1869

APPEAL from the Superior Court of Baltimore City.

The facts in this case are stated with great fulness and clearness in the opinion of the Court, and need not be repeated. Three prayers were presented by the plaintiff and six by the defendant. The Court (MARTIN, J.) granted the plaintiff's first prayer with a qualification, and rejected its second and third, as also the prayers of the defendant.

The Court's instruction was to the effect, that upon the facts the plaintiff was entitled to recover, unless the jury should find that it did not use reasonable diligence to ascertain whether the check in question was genuine before it paid it, or if the plaintiff, by the exercise of reasonable diligence, could have discovered the forgery in time to have enabled the defendant, upon receiving notice thereof, to protect itself from loss by withholding from its depositor the payment of the $4,500.

The six prayers of the defendant presented, in somewhat different forms, the general proposition that the defendant, having been induced to pay to Hillan the $4,500 by the failure whether negligent or not, of the plaintiff to detect the forgery of the signature of its well known customer, Horace Abbott, and having paid the same in good faith and without notice of the forgery, was entitled upon the principles of equity, applicable to an action for money had and received to retain such sum, and the loss should fall where the course or accident of the transaction had left it.

To the instruction as granted and to the rejection of its prayers by the Court the defendant excepted, and the verdict and judgment being against it, the present appeal was taken.

The cause was argued before BARTOL, C.J., GRASON, MILLER and ALVEY, J.

John P. Poe and Fielder C. Slingluff, for the appellant:

The appellant was guilty of no negligence in sending the check to the appellee in the usual and customary way, through the clearing house; and on the 22nd of December, it had a right to assume that the check had been honored, and was accordingly justified in paying the $4,500 to its depositor Hillan, on that day.

The appellant having in the first instance been merely an agent for collection, known as such to the appellee, and not an endorser of the forged check, and having collected it in the usual and customary way, in good faith, without negligence and without notice of any defect or infirmity, and having, in reliance upon the recognition and payment of it by the appellee as a genuine check, changed its position to its prejudice by the payment of the $4,500 on the 22nd of December, was, after such payment, a bona fide holder for value as to such $4,500, and was consequently entitled to retain the same.

In an action such as this, for money had and received, the law will leave the parties where the transaction left them, and both being equally innocent morally, will not require the appellant to repay money to which its equitable title is at least equal to that of the appellee. The Merchants Bank vs. The Marine Bank, 3 Gill, 96-126; Fulton Bank vs. Ph nix Bank, 1 Hall, 570; Price vs. Neal, 3 Burrows, 1355; Smith vs. Mercer, 6 Taunton, 76; Cocks vs. Masterman, 9 Barn. & Cress., 902; Gloucester Bank vs. Salem Bank, 17 Mass., 33; Bank of St. Albans vs. Farmers and Mech's Bank, 10 Vermont, 141; Levy vs. Bank of United States, 1 Binney, 27; Bank of United States vs. Bank of Georgia, 10 Wheaton, 344; Lancaster vs. Baltzell, 7 G. & J., 473; Bernheimer vs. Marshall, 2 Minn., 78; Alexander vs. Walter, 8 Gill, 247; Joice vs. Taylor, 6 G. & J., 54.

William Daniel and I. Nevett Steele, for the appellee:

No title can be acquired through a forged endorsement, and an acceptor who pays thereon, may recover back the money so paid. The acceptor is bound only to know the hand writing of the drawer, and the endorsee is bound to know that of his endorser. Reasonable diligence only is required in detecting and giving notice of such a forgery. 2 Par. on Notes and Bills, 284, 285, 591, 595, 596 and 601; Canal Bank vs. Bank of Albany, 1 Hill, 293; Bank of Commerce vs. Union Bank, 3 Comstock, 177; Graves vs. The Am. Ex. Bank, 17 N. Y., 205; Cabot Bank vs. Morton, et al., 4 Gray, 156; Merchants' Bank vs. Marine Bank, 3 Gill, 96; Lancaster vs. Baltzell, 7 G. & J., 468; Key vs. Knott and Wife, 9 G. & J., 342; Hortsman vs. Henshaw, 11 How., 177; Sims vs. Clark, 11 Ill., 141; Chitty on Bills, 430; Williams vs. Drexel, 14 Md., 566; Robinson vs. Yarrow, 7 Taunton, 455; Dick vs. Leverich, 11 Louis. 573; Merchants' Bank of New York vs. Exch. Bank of New Orleans, 16 Louis. 457; Kelly vs. Solari, 9 M. & W., 58.

Every party who receives negotiable paper, under a written transfer, takes it at his peril. 1 Par. on Notes and Bills, 277, and 2 Par. on Notes and Bills, 279, 284 and 595.

Where a forged check is credited in a bank book as cash, it is payment. U.S. Bank vs. Bank of Georgia, 10 Wheat., 347 and 348; Levy vs. Bank U. S., 4 Dall., 234; 1 Bin., 27.

The signing of a fictitious name is, in law, a forgery. 2 East, P. Cr., 957; People vs. Fisher, 1 Wend., 198; Rex vs. Peacock, Russ. & Ryan, 282; 3 N.Y. Dig., (Abbott,) 182; United States vs. Turner, 7 Peters, 137.

Where no account is given of the man, the name is presumed to be fictitious. Smith vs. Mechanics and Traders' Bank, 6 La., Ann., 616, 617, &c.

A party receiving a check, payable to order, is bound to make due inquiry as to the identity of the payee, which the appellant in this case neglected or failed to do. 3 Comstock, 236; Chitty on Bills, 430; Van Bibber vs. Bank of La., 14 La. Ann., 482; Pringle vs. Phillip, 5 Sand., (N. Y.,) 157; Snow vs. Peacock, 3 Bingham, 406.

Where one of two innocent parties must suffer loss from the wrong of a third, it must fall on the one who enabled the third to commit it. Story on Agency, 72 and 321; Canal Bank vs. Bank of Albany, 1 Hill, 290; 3 Comstock, 236.

MILLER J., delivered the opinion of the Court.

This case presents questions of considerable interest to the public, and of importance to the banking institutions of the State. The material and undisputed facts, which must be stated somewhat in detail, are these: On the 20th of December, 1866, about 2 o'clock, P. M., an individual, well dressed and of respectable appearance, but a stranger unknown to any of its officers, came to the counter of the receiving teller of the Commercial and Farmers' National Bank, said he wished to open an account, and presented a check on the First National Bank of Baltimore for $4,600 15/100, purporting to be drawn by Horace Abbott, dated the 18th of December, and payable to the order of John S. Hillan. The teller, who knew Mr. Abbott's financial standing to be good, and had seen his checks before, produced the signature book in which the man put the name "John S. Hillan, No. 504 W. Fayette street," and endorsed the check at the counter in that name. The teller then gave him a customer's small bank book, in which the amount of the check was put to his credit as cash; but on the same day the teller was directed by the cashier not to allow the account to be drawn upon until the deposited check was known to be good or was paid. On the morning of the next day, the 21st, this with other checks was sent by the Commercial and Farmers' Bank to the clearing house, its amount being noted on the lists which were there balanced and settled. From thence it was taken to the First National Bank, where it was passed as genuine by the proper officers of that bank, charged to Mr. Abbott's account, and credited to the Commercial and Farmers' Bank. By the custom and usage of all the banks in the city of Baltimore, proved by all the witnesses, where a check is sent through the clearing house to the bank on which it is drawn, and is not heard from before eleven o'clock on the day on which it is so sent, the bank sending it has the right to assume it was good or had been paid, and to act accordingly. On the following day, the 22d, after the check had thus been accepted as genuine and paid by the First National Bank, the same person presented himself at the counter of the paying teller of the Commercial and Farmers' Bank with his bank book, and said he wanted to draw some money; a blank check was given him which he filled up for $4,500, payable to self or bearer, and signed the name ""John S. Hillan." The teller ascertained from the books the amount to his credit, and from the receiving teller his identity with the individual who had previously made the deposit, compared the signature of the check with that on the signature book, asked him how he wanted the money, and whether he was going to use it in Baltimore, with a view of endorsing the check good, if he wished to use it in the city among the merchants; but the man replied he wanted to take the money to Washington, and the teller then paid him the $4,500 in small notes of fives and tens, making quite a large bundle.

Mr Abbott was a large customer and depositor of the First National Bank, and was absent from Baltimore, from the 14th to the 22d of December. His account charged with this check was overdrawn by him on Monday the 24th, to the amount of $372 48/100, and the overdrawing continued during the week until Saturday the 29th, when his account was overdrawn $2,297, and after bank hours of that day, he was for the first time informed by the bank officers of such overdrawing. This information led to an immediate examination of his account and checks, when he discovered the check in question, pronounced it a forgery, and stated he never knew such a man as John S. Hillan, and had never drawn such a check. The forgery...