Fidelity & Deposit Co. of Md. v. Peoples Exchange Bank of Thorp
| Citation | 71 N.W.2d 290,270 Wis. 415 |
| Parties | FIDELITY & DEPOSIT CO. OF MARYLAND, a foreign corporation, Plaintiff, v. PEOPLES EXCHANGE BANK OF THORP, a banking corporation, Appellant, State Bank of Elkhorn, a banking corporation, Interpleaded Defendant and Respondent. |
| Decision Date | 28 June 1955 |
| Court | Wisconsin Supreme Court |
This action was commenced by plaintiff Fidelity & Deposit Company of Maryland, a foreign corporation, against defendant Peoples Exchange Bank of Thorp, Wisconsin, for the recovery of $3,500 paid by plaintiff under a broker's blanket bond to Thorp Finance Corporation on a check of the Finance Corporation forged by one of its employees who was covered by said bond. The check was cashed by the State Bank of Elkhorn and sent to the defendant, the drawee bank, which honored it and charged the proceeds against the account of the Finance Corporation. Defendant interpleaded and cross-complained against the State Bank of Elkhorn. Prior to trial plaintiff settled with the defendant Thorp bank and assigned its cause of action to said bank against the interpleaded defendant. From a judgment dismissing the cross-complaint, the Peoples Exchange Bank of Thorp appeals.
On December 15, 1950 Wallace O. Lieding, an employee of the Thorp Finance Corporation, filled out a company check for $3,500 payable to one William E. Harrison and forged thereon the signature of Bruce B. Young, manager of the company's Elkhorn office. He then forged the indorsement of William E. Harrison on the check, indorsed his own name 'W. O. Lieding' and cashed it at the State Bank of Elkhorn. The check was drawn on the Peoples Exchange Bank of Thorp. The Elkhorn bank stamped the check with its own indorsement as follows:
'Pay First Wisconsin National Bank of Milwaukee, or Order
'All Prior Endorsements Guaranteed
'State Bank of Elkhorn
'79-313 Elkhorn, Wis. 79-313
'Walter T. Glowe, Cashier'
Upon receipt by the Peoples Exchange Bank it paid the check to the First Wisconsin National Bank of Milwaukee and charged the account of the Finance Corporation. Upon settlement between the drawee Thorp bank and the plaintiff bonding company, the drawee sought to recover from the Elkhorn bank and the trial court denied such recovery.
Willis E. Donley, R. F. Muza, Menomonie, for appellant.
H. G. Haight, Neillsville, for respondent.
Appellant relies on Evenson v. Waukesha Nat. Bank, 1926, 189 Wis. 170, 207 N.W. 415. In that case two certificates of deposit issued to Evenson were stolen, indorsed by the thief and deposited to his account in the defendant Waukesha National Bank. Plaintiff, the true owner of the certificates, brought action against the defendant bank, which interpleaded the two issuing banks. It was held that as to the plaintiff, defendant had no defense since it unlawfully converted his certificates to its own use. As to the issuing banks, it was held that the defendant became a guarantor of the indorsement and even if there was negligence on the part of the issuing banks, the negligence of the defendant in accepting the forged indorsement without any proof of identity was first in point of time and more culpable.
It is appellant's argument that the Elkhorn bank is in the same position as the Waukesha bank in that case. We cannot agree. The certificates in the Evenson Case were genuine instruments. It was the guaranty of the indorsement that the issuing banks relied upon in cashing them. The check here was complete and regular on its face and, so far as the Elkhorn bank was concerned, it had no notice of any infirmity in it or any defect in the title of the person cashing it, and took it in the usual course of business. But since the check was in fact a spurious instrument, the guaranty of the indorsements thereon could not be relied upon by the drawee bank as vouching for the genuineness of the check itself--a fact which the drawee was best able to determine.
The general rule is:
'In determining the liability of a collecting bank to refund money collected...
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