First Nat. Bank of Jackson v. Deposit Guaranty Bank & Trust Co.

• Decision Date: 21 October 1963
• Docket Number: No. 42755,42755
• Citation: 156 So.2d 814,247 Miss. 765
• Court: Mississippi Supreme Court
• Parties: FIRST NATIONAL BANK OF JACKSON, Mississippi v. DEPOSIT GUARANTY BANK & TRUST COMPANY.

Page 814

156 So.2d 814

247 Miss. 765

FIRST NATIONAL BANK OF JACKSON, Mississippi v. DEPOSIT GUARANTY BANK & TRUST COMPANY.

No. 42755.

Supreme Court of Mississippi.

Oct. 21, 1963.

Watkins & Eager, Jackson, for appellant.

Marvin A. Cohen, Watkins, Pyle, Edwards & Ludlam, Jackson, for appellee.

RODGERS, Justice.

This suit originated in the Circuit Court of the First Judicial District of Hinds County, Mississippi, in which the Deposit Guaranty Bank & Trust Company filed a declaration against the First National Bank of Jackson, Mississippi.

The declaration is in two counts and is based upon the claim for the recovery of money paid to First National Bank of Jackson (hereafter called First National), on two forged checks drawn on Deposit Guaranty Bank & Trust Company (hereafter called Deposit Guaranty). The answer filed by First National set out distinct defenses, including estoppel to sue after payment.

Issue was joined by plaintiff on the defenses set out in the answer. A motion to strike certain parts of the answer was overruled. A jury trial was waived, testimony was introduced, and when both sides had rested, the trial judge dictated his opinion and entered a judgment in favor of plaintiff, Deposit Guaranty on Count One of the declaration for the recovery of payment of the check in the sum of $4,200. He found in favor of defendant, First National, on Count Two of the declaration for the loss of $3,200 on the second forged check.

The declaration in both counts and the testimony show that there were two distinct transactions growing out of the negotiation of two forged checks under the following circumstances:

On March 2, 1960, a 'presentable looking' man, 'clean and decently clad,' drove an automobile up to the 'drive-in teller' cage in the garage area of the First National, and presented Miss Mary Dell Miller, the teller, a printed check of Hyde Construction Company. It was dated February 29, 1960, and was payable to the order of J. C. McBeath. The check was drawn on Deposit Guaranty Bank & Trust Company for $12,761.32, and apparently signed by Rex Carter, which was written under the printed name of Hyde Construction Company. The name of the payee, J. C. McBeath, was also written on the back of the check in the form of an endorsement at the time the check was presented to the teller. A deposit slip was already made out in the name of McBeath, Inc., 'Less cash of $4,200,' making a net amount of $8,561.32 to be deposited to the account of McBeath, Inc. The teller questioned the person presenting the deposit, slip, but did not require proof of his identity although she did not personally know J. C. McBeath. She knew about the McBeath account in the First National and she knew about the business of J. C. McBeath. She disbursed $4,200 cash to the person presenting the check. Thereafter, this check passed through the Jackson Clearing House and was paid by the drawee bank, Deposit Guaranty. These forgeries were not discovered until shortly after the bank statements were mailed out on March 31, 1960. Mr. J. C. McBeath notified Deposit Guaranty that the foregoing and hereafter described checks were forgeries.

On March 21, 1960, the above-described George M. Brown again appeared at the same teller's cage and presented a check, purportedly drawn by Hyde Construction Company by Rex Carter on Deposit Guaranty, payable to J. C. McBeath, dated March 15, 1960, in the amount of $8,609.21. A deposit slip, already made out, was also presented to the teller indicating a deposit of $5,409.21 to the account of McBeath, Inc., less $3,200 cash. This sum was disbursed to the man later discovered to be George M. Brown. The check was also a forgery, not only of the name of the maker but also the endorsement of the payee. This check also cleared through the Jackson Clearing House and was paid by the Deposit Guaranty, and was charged to the account of Hyde Construction Company. The second check constituted an overdraft on the Hyde Construction Company's account, and was approved for payment by an officer of the bank before it was paid.

It was admitted that both checks were received and paid by the Deposit Guaranty; both checks were forgeries, and that the First National endorsed both checks with a rubber stamp which read as follows: 'Pay to order of any bank or trust company, prior endorsements guaranteed. First National Bank of Jackson, Jackson, Mississippi.' The money deposited to the account of J. C. McBeath in the sum of $13,970.53 in the First National Bank was returned to Deposit Guaranty by agreement of J. C. McBeath on April 7, 1960.

Appellant argues on appeal that the issue here involved has been settled in its favor in Railway Express Agency v. Bank of Philadelphia, 168 Miss. 279, 150 So. 525.

The learned trial judge was of the opinion that the case of the Railway Express Agency was applicable to the facts here involved, but declined to follow it, being impelled by the belief that the rule announced in that case should be reappraised. Appellant argues that no exception should be engrafted on the rule. On the other hand, appellee agrees with the rule but insists that there are certain exceptions under modern authorities which are applicable to the facts here. It is argued that the drawee bank may recover from the collecting bank or persons to whom payment is made when there is knowledge on the part of the holder that the instrument is a forgery before loss occurs; or when the holder has information which, if pursued, would lead to the discovery of the forgery before the forged check is purchased; or when negligence of purchasing holder contributed to the loss on the forged check.

In the instant case appellee insists that it should recover the loss from the collecting bank, appellant here, because the teller for First National was negligent in failing to ascertain and determine the identity of the person who presented the checks here involved. Further, that appellant did not require the unknown and unidentified person presenting the checks to endorse them, and that such bank was negligent in receiving funds for an account for which it was not endorsed.

I

In Railway Express Agency v. Bank of Philadelphia, supra, above referred to, this Court adopted the doctrine promulgated in Price v. Neal, 3 Burr. 354 (Eng.1762), 97 Eng. Reprint 871, 1 W.Bl. 390, 96 Eng. Reprint 221. In this ancient English case, one Lee forged the signature of one Sutton on two bills of exchange, and defendant Neal collected these drafts from the plaintiff. Price, acting innocently and without privity or suspicion, paid over the money to Neal. An action was brought to recover the money, as money paid under a mistake of facts. Lord Mansfield held that it was incumbent on the plaintiff to be satisfied that the bill drawn upon him was over the signature of the drawer before he accepted and paid it. The Court also held that it was not incumbent on defendant to inquire as to whether or not the signature on the bills was genuine, that if there were negligence or fraud, it was the negligence of the plaintiff and not of the defendant. The action was dismissed.

Thus, the doctrine was established that a bank which paid a check, apparently drawn on it by one of its depositors, but in fact a forgery as to the drawer's signature, may not as a general rule charge the amount of the check against the depositor's account but must in the first instance bear the loss itself. A bank is presumed to know the signature of its depositors. Zollmann, Bank and Banking, Sec. 4112 at p. 362; Citizens Bank of Hattiesburg v. Miller, 194 Miss. 557, 11 So.2d 457, Anno. 12 A.L.R. 1091. In accordance with this rule, this Court has held that a drawee bank which pays the forged check, pays it at its peril. Deer Island Fish & Oyster Company v. First Nat. Bank of Biloxi, 166 Miss. 162, 146 So. 116.

The courts of various jurisdictions have been persistently beseiged since Price v. Neal with the question as to the right of the bank to recover money paid out to the person to whom the payment was made.

In 1896, the National Conference of State Boards of Commissioners for promoting uniformity of legislation in the United States, drafted a bill for the use of the states, codifying 'The Negotiable Instruments Law'. The bill was based upon, and largely copied from, the English Bills of Exchange Act, adopted by Parliament in 1882 Section 62 of the Negotiable Instruments Law is a copy of Sec. 54 in the English Bills of Exchange Act. (Beutel's Brannan, Negotiable Instruments Law, 7th Edition, p. 913.) It has been repeatedly held that Sec. 62 of the Negotiable Instruments Law was intended to adopt the doctrine set out in the case of Price v. Neal, supra, and applied as well to a payment as to an acceptance by the drawee of a forged bill or check. National Bank of Rolla v. First Nat. Bank of Salem, 141 Mo.App. 719, 125 S.W. 513; National Bank of Commerce v. Mechanics' Am. Nat. Bank, 148 Mo.App. 1, 127 S.W. 429, accord; Missouri Lincoln Trust Company v. Third Nat. Bank, 154 Mo.App. 89, 133 S.W. 357 (semble); State Bank of Chicago v. First Nat. Bank, 87 Neb. 351, 127 N.W. 244, 29 L.R.A.,N.S., 100; National Bank of Commerce v. Farmers, etc., Bank, 87 Neb. 841, 128 N.W. 522; S.C. sec. 30; State Nat. Bank v. Bank of Magdalena, 21 N.M. 653, 157 P. 498, L.R.A.1916E; Bergstrom v. Ritz-Carlton Co., 171 App.Div. 776, 157 N.Y.S. 959; State Bank v. Cumberland Savings, etc. Company, 168 N.C. 605, 85 S.E. 5, L.R.A.1915D, 1138, not citing the N.I.L.; Cherokee Nat. Bank v. Union Trust Company, 33 Okla. 342, 125 P. 464; First Nat. Bank v. Bank of Cottage Grove, 59 Or. 388, 117 P. 293; Farmers' & Merchants Bank v. Bank of Rutherford, 115 Tenn. 64, 88 S.W. 939, 112 Am.St.Rep. 817, not citing Sec. 62; Figuers v. Fly, 137 Tenn. 358, 193 S.W. 117; S.C. Secs. 14, 66; United States v. Bank of New York, 2 Cir., 219 F. 648, 134 C.C.A. 579. Most of the law writers consider that Sec. 62 of the Negotiable...