East St. Louis Cotton Oil Co. v. Bank of Steele
| Decision Date | 25 June 1918 |
| Citation | 205 S.W. 96,200 Mo.App. 180 |
| Parties | EAST ST. LOUIS COTTON OIL COMPANY, a Corporation, Respondent, v. BANK OF STEELE, a Corporation, Appellant |
| Court | Missouri Court of Appeals |
Appeal from Pemiscot Circuit Court.--Hon. Sterling H. McCarty Judge.
AFFIRMED.
Judgment affirmed.
Jere S Gossom and H. E. Doerner for appellant.
Ward & Reeves for respondent.
Plaintiff brought suit to recover $ 864.32 being the amount of seven forged checks. The cause was tried before the court and a jury; plaintiff recovered, and defendant appealed.
Plaintiff, among other things, is engaged in buying, ginning and selling cotton. Its main office is in East St. Louis, and it has a branch office in Caruthersville, Mo., which is operated under the name of the Caruthersville Cotton Oil Company. Also plaintiff has gins at various places, and one at Micola, Mo., in Pemiscot county. Plaintiff made arrangements with defendant whereby defendant was to cash all checks drawn by plaintiff's manager at Micola for matters pertaining to its business there. W. M. Barnes was plaintiff's manager at Micola, and his signature was furnished defendant. For this service defendant received ten cents on the one hundred dollars it paid out on checks so drawn. Plaintiff kept no deposit of consequence with defendant, although the checks were drawn as though plaintiff were a depositor. At the close of business each day defendant took plaintiff's checks that day paid, totaled them, and enclosed them in a sealed envelope, called a "draft envelope," and mailed to the Third National Bank, its correspondent in St. Louis. Upon the outside of the draft envelope was a blank draft. This the defendant filled out, designating the checks within, amount, etc., and when completed it was a draft drawn by defendant upon plaintiff for the amount of the checks within. Upon receipt of the draft envelope the Third National Bank gave defendant credit for the amount shown in the draft, and presented the draft to the Mechanics American National Bank of St. Louis, which paid it, and charged to the account of plaintiff. The draft envelope, containing the checks, was then mailed to plaintiff's main office in East St. Louis. From there it was mailed to the Caruthersville office where the account of the Micola gin was kept, and the draft envelope was there opened for the first time after it left defendant at Steele. When the draft envelope was opened at the Caruthersville office the forgeries were discovered, and defendant notified.
One of the forged checks was dated September 15, two September 16; two September 18; and two September 19th; all in 1916. All were cashed, just whet date is not shown, by some of the banks in Caruthersville, but were paid by defendant on September 22, and 23rd. Just which ones were paid on the respective days does not appear. The checks in question and two others were cut out of the check book furnished Barnes in advance of where he was using, and he did not miss them until about September 26, at which time he called defendant by telephone, and advised it about the missing checks, giving the numbers missing, and asked if any of them had showed up. Defendant examined its books, and advised Barnes that none of them had showed up; but in this defendant concedes that it was mistaken and that in making a hurried examination while Barnes was waiting for an answer, it overlooked the fact that it had cashed the checks some three or four days previous. It does not appear just what day plaintiff received the checks at its Caruthersville office, but it was subsequent to September 27, because on that day plaintiff from its Caruthersville office wrote defendant, advising it of the missing checks, giving it the same information that Barnes had on the day previous.
Plaintiff bottomed its petition upon the principle of law that a bank must know the signature of its customer, and set out the facts in form. The defendant filed demurrer based on the ground that plaintiff had pleaded no act of negligence on the part of defendant. Demurrer was overruled, and defendant answered by a general denial, and that plaintiff was precluded from recovery because of its negligence in permitting its check book to be exposed to the public at its scale house in Micola and that plaintiff's manager, Barnes, had carelessly signed checks in blank and had given orders for others to sign his name to checks drawn on defendant. There was no reply filed, but the case was tried as though a general denial had been filed as a reply, and no point is made in that respect. The plaintiff as stated, bottomed its case upon the principle of law that a bank must know the signature of its customer, or in other words plaintiff proceeded on the theory that the relation between bank and customer existed between plaintiff and defendant. Defendant contended that no such relation existed; but that defendant merely bought the checks in due course, and that plaintiff having honored its draft in payment for the checks, could not recover back; that plaintiff by its negligent conduct in leaving its check book at its scale house so exposed that it was the direct cause of the forgery.
Defendant (appellant) makes in substance three assignments of error: (1) That its demurrer to the petition should have been sustained; (2) that its peremptory instruction should have been given; (3) that the court erred in giving instructions for plaintiff and refusing instructions for defendant.
The attack upon the petition is grounded upon the absence therein of any charge of negligence on the part of the defendant in paying the checks. The law of liability upon the bank as between depositor and banker for the payment of forged checks we think is clearly applicable here. The defendant has cashed plaintiff's checks from its Micola gin the previous season and was thoroughly familiar with Barnes' signature and the manner of the business routine of the drafts drawn to reimburse it. Checks were drawn in the usual manner. Defendant was furnished with the signature of Barnes, and the only difference was in the manner of reimbursement. Had plaintiff had the necessary deposit account to take care of its checks, the difference would only have been in the manner of repayment or bookkeeping. In the regular way defendant would have charged the checks to plaintiff's account; in the way they pursued defendant drew daily, and received credit at its correspondent in St. Louis. From our conclusion as to the relation existing between plaintiff and defendant it follows that the case must be considered as though plaintiff was seeking to recover against defendant for charging to its account the amount of the forged checks. By the old rule so called in some of the books (2 Morse on Banks and Banking [5 Ed.], sec. 463) a banker is bound to know the handwriting of his customer; the drawee is bound to know the signature of his drawer. Having parted with his money because of his own culpable negligence he (the drawee) cannot be permitted to recover it back when he afterward discovers the error. This rule was first laid down in England in 1762 (Price v. Neal, 3 Burr 1355), and has been followed in many jurisdictions, and in others criticised, modified, and in some instances departed from and what is called the new rule has been invoked permitting the bank to recover of a holder to whom it has paid money upon a forged check, draft or bill of its customer. This new rule proceeds upon the theory that such payment is upon a mistake of fact, a rule denied in cases following Price v. Neal. [Bank v. Bank, 148 Mo.App. 1, 18, 127 S.W. 429.]
A number of cases following the old rule, and the new are compiled in First National Bank of Lisbon v. Bank of Wyndmere, 10 L. R. A. (N. S.) (N. Dak.) 49, to which reference is made for authorities supporting the respective rules. But according to the interpretation of our Negotiable Instrument Law the rule for Missouri has been settled by statute. Section 62, Laws 1905, page 251, now section 10032, Revised Statutes 1909, of our Negotiable Instrument Laws is as follows: "The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance, and admits: (1) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and (2) the existence of the payee and his capacity to indorse." This court in an able opinion by Judge GRAY in National Bank of Rolla v. First National Bank of Salem, 141 Mo.App. 719, 125 S.W. 513, held that our Negotiable Instrument Act adopted the law as declared in Price v. Neal. In that case this court quoted approvingly from the Title Guarantee & Trust Company v. Haven, 111 N.Y.S. 305, wherein the construction of section 62 of the Negotiable Instrument Law was under consideration as follows: "A bank which pays a check purporting to be drawn on it by one of its depositors, guarantees the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument, and, where such signature is forged, cannot recover back the amount from the person to whom it was paid, although the position of the parties to such person has not changed in any respect."
In Missouri Lincoln Trust Company v. Third National Bank, 154 Mo.App. 89, 133 S.W. 357, following First National Bank of Rolla v. National Bank of Salem, supra, and National Bank of Commerce v Mechanic's American National Bank, 148 Mo.App. 1, 127 S.W. 429, this observation is made: "The law is well settled that a bank is conclusively presumed and bound to know the signature of its customer, when that signature appears as drawer on a check, drawn upon that...
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