Dexter Horton Nat. Bank of Seattle v. U.S. Fidelity & Guar. Co.

• Decision Date: 09 October 1928
• Docket Number: 21231.
• Citation: 149 Wash. 343,270 P. 799
• Court: Washington Supreme Court
• Parties: DEXTER HORTON NAT. BANK OF SEATTLE v. UNITED STATES FIDELITY & GUARANTY CO.

270 P. 799

149 Wash. 343

DEXTER HORTON NAT. BANK OF SEATTLE v. UNITED STATES FIDELITY & GUARANTY CO.

No. 21231.

Supreme Court of Washington

October 9, 1928

Department 2.

Appeal from Superior Court, King County; Malcolm Douglas, Judge.

Action by the Dexter Horton National Bank of Seattle against the United States Fidelity & Guaranty Company. From a judgment of dismissal, plaintiff appeals. Affirmed.

Poe Falknor, Falknor & Emory, of Seattle, for appellant.

Bausman Oldham & Eggerman, of Seattle, for respondent.

BEALS J.

Plaintiff a national banking corporation, instituted this action against defendant upon a 'bankers' blanket forgery and alteration policy,' whereby defendant, for value, agreed to indemnify plaintiff against direct loss sustained by it, not exceeding the penalty of the bond, arising, inter alia, through payment by plaintiff of any check drawn upon it upon which the signature of any indorser shall have been forged, and also against direct loss sustained through the cashing by plaintiff of any check or draft, drawn upon any bank, which shall bear the forged signature of any depositor of plaintiff as indorser.

The facts which gave rise to this litigation are as follows: Crenshaw & Bloxom, a corporation, was a depositor in plaintiff's bank, and, prior to the cashing of the first of the checks hereinafter referred to, had delivered to plaintiff a resolution of its board of trustees, signed by its president and attested by its secretary, under the corporation seal, as follows:

'Resolved: That all checks drawn upon the Dexter Horton National Bank of Seattle, against the account of this corporation in said bank, shall be signed by Max Weinstein or W. M. Newmeyer and countersigned by Max Weinstein, I. M. Buxbaum, or D. S. Mason. The authority hereby conferred shall extend to and include the authority of the said persons above named in the above manner, to draw checks as aforesaid, payable to their own order or to bearer, and the said Dexter Horton National Bank of Seattle is hereby authorized to honor and pay any and all checks so drawn upon it against the account of this corporation, and also to pay all checks, payable to this corporation, as payee and indorsee, when indorsed and presented to it as above set forth.'

At or about the same time signature cards bearing the signatures of the officers referred to in the resolution, above quoted, were delivered to plaintiff. These cards bore the heading 'Crenshaw & Bloxom' and the words 'two signatures required,' stamped twice upon the face of each card. These words were also printed on the face of the cards, 'Below please find duly authorized signatures which you will recognize in the payment of funds or the transaction of other business on our account.' One H. N. Howe, who was in the employ of Crenshaw & Bloxom as its cashier, and as such officer had authority to indorse checks payable to his employer for deposit to its credit, indorsed certain checks payable to Crenshaw & Bloxom as follows: 'Crenshaw & Bloxom, H. N. Howe, Cashier'--presented these checks at plaintiff's bank, and from plaintiff's employees received the respective amounts, aggregating $1,989.22, for which the checks were drawn, and converted the money to his own use. Plaintiff contended that the loss it suffered through the acts of the dishonest employee of its depositor came within the terms of the bond written in its favor by defendant, which liability defendant denied. The trial court held that the facts disclosed by the testimony did not bring plaintiff's claim within the terms of the indemnity bond written by defendant, and entered judgment dismissing the action, from which judgment plaintiff appeals.

The sole question to be determined is, Do the words indorsed by Howe upon the checks drawn in favor of his employer constitute forgery within the terms of the bond sued upon? Such bonds are most strictly construed against the surety, Duke v. National Surety Co., 130 Wash. 276, 227 P. 2; Parker Lbr. & Box Co. v. AEtna Casualty Co., 140 Wash. 262, 248 P. 795; but at the same time the compensated surety has the right to stand upon the condition of his bond, and, where the liability sought to be enforced against it does not come within these obligations, the surety cannot be held responsible. Clarke v. Fidelity & Deposit Co., 73 Wash. 62, 131 P. 468; Stuht v. Maryland Motor Car Ins. Co., 90 Wash. 576, 156 P. 557; Van Vechten v. American Eagle Fire Ins. Co., 239 N.Y. 303, 146 N.E. 432, 38 A. L. R. 1115.

Appellant's liability to its depositor Crenshaw & Bloxom for the error of its employee in paying the checks to Howe upon his indorsement was admitted, and appellant promptly reimbursed its depositor by crediting its account with the amount which it had so paid. It now earnestly contends that Howe's indorsements constituted forgery within the terms and conditions of the bond, while respondent contends that Howe's indorsement was not a forgery, but simply a false pretense or representation on his part that he had authority to indorse his employer's name and receive the amount of the check so indorsed in cash.

It is true that the technical rules governing a criminal prosecution are not applicable to such a case as this. It is also true that, in order to hold the surety upon such a bond as is here sued upon, the claimant need not produce testimony which satisfies the court or jury beyond a reasonable doubt of the truth of the facts upon which his claim is based, and that words such as 'embezzlement' or 'forgery,' when contained in a bond like the one upon which this action is based, shall be deemed to have been used in their general and popular sense rather than with specific reference to some statutory definition. Mitchell Grain & Supply Co. v. Maryland Casualty Co., 108 Kan. 379, 195 P. 978, 16 A. L. R. 1488.

The New Standard Dictionary (edition of 1920) contains the following definition of the word 'forgery':

'The act of falsely making or materially altering, with intent to defraud, any writing which, if genuine, might be of legal efficacy or the foundation of a legal liability.'

This definition excludes a genuine writing; that is, a writing which is just exactly what it purports to be. It may be a false writing, in that it either directly or by inference states a lie, but it is at least what on its face it seems. So it is with the words indorsed by Howe upon Crenshaw & Bloxom's checks, these words inferentially state an untruth, in that they imply that Howe had authority to indorse his employer's name to the checks so indorsed and receive the proceeds thereof; but, while the indorsement thus inferentially contains a false statement of fact and was made for an unlawful purpose, still the writing, while false in the sense that it spoke a lie, was not falsely made, in that it purported to be anything different from what it actually was.

In our opinion the act of Howe in indorsing the words above quoted upon checks payable to his employer did not constitute forgery either within any technical definition of the word or its general or popular meaning. Appellant argues that because this court has held that such words as 'cashier' or 'president,' without words of procuration, following a signature, are merely descriptive of the person and do not denote agency, appellant was entitled to assume that the name 'Crenshaw & Bloxom' was written by some person who had authority to indorse that name, and that the name 'H. N. Howe, Cashier,' without any words denoting agency...