First Nat. Bank v. Wood County

• Decision Date: 13 April 1927
• Docket Number: (No. 3368.)
• Citation: 294 S.W. 324
• Parties: FIRST NAT. BANK OF QUITMAN v. WOOD COUNTY et al.
• Court: Texas Court of Appeals

294 S.W. 324

FIRST NAT. BANK OF QUITMAN v. WOOD COUNTY et al.

(No. 3368.)

Court of Civil Appeals of Texas. Texarkana.

April 13, 1927.

Rehearing Denied April 28, 1927.

Appeal from District Court, Wood County; J. R. Warren, Judge.

Suit by Wood County against the First National Bank of Quitman, wherein defendant by cross-action impleaded Don Roberts, County Treasurer, and others. Judgment for plaintiff against defendant and denying recovery in cross-action, and defendant appeals. Modified, and, as modified, affirmed.

Wood county, by authority and direction of the commissioners' court, brought the suit against the First National Bank of Quitman to recover a judgment for $790.54 deposited with it and payment refused after demand. The First National Bank of Quitman was the duly appointed depository for the funds of Wood county, and had received on deposit the various funds of the county in sums largely in excess of $790.54. The suit involves forged checks paid by the bank and charged up against the account of the county treasurer. The First National Bank of Quitman pleaded a general denial to the claim of the county, and by a cross-action impleaded Don Roberts the county treasurer, the First National Bank of Mineola, the First State Bank of Alba, the Alba National Bank, the First National Bank of Winnsboro, and the Merchants' & Planters' State Bank of Winnsboro, to recover against them proportionally the aggregate sum of $790.54. The cross-action, as against the banks, is to recover back the money paid to their use as holders of the forged checks, upon the ground, in effect, that they negligently caused the drawee bank to take and make payment of the forged checks as genuine. The banks pleaded, in effect, that they were innocent holders in good faith of the checks for value, and were entitled to retain the money paid to them by the drawee bank. The action against the treasurer was based upon negligence in failing to give timely notice of certain of the forgeries after receiving the bank's statement. There was a nonjury trial, resulting in a judgment against the First National Bank of Quitman in favor of Wood county, and in denial of recovery in the cross-action of the bank.

Don Roberts qualified as county treasurer of Wood county on January 12, 1925. Then and prior thereto the county funds of Wood county were on deposit in the First National Bank of Quitman, the regular county depository. Shortly before January 12, 1925, the county commissioners' court had allowed claims against the county in favor of ten persons, in amounts ranging from $25 to $152, aggregating $790.54. Don Roberts, the county treasurer, drew a check on the First National Bank of Quitman in favor of each of the persons having such claims, for the amount thereof, and delivered them; and such persons presented the checks and received the money thereon. All of the checks were not issued on the same date. Three of them were issued on January 12, 1925; four were issued on February 9, 1925; one was issued on February 14, 1925; one was issued on March 9, 1925; and one was issued on March 10, 1925. Subsequently, as appears, ten checks were issued duplicating the above-mentioned ten checks in all respects, as to dates, persons, and amounts. Such checks were drawn on the "First National Bank of Quitman" and signed by "Don Roberts, County Treasurer." These latter ten checks were forgeries in entirety, committed by a third party whose name is given in the record. And such person presented these forged checks to and had them cashed by the several banks, parties defendant. The purported names of the payees in indorsement were forgeries. All of the notes are set out in the evidence. It is sufficient to set out of the following, which is a copy of one of them:

                "Quitman, Texas. 3-10, 1925.        No. 6356
                 "The First National Bank of Quitman
                                                  88 — 1249
                

"Pay to the order of Mineola Machine Shop $145.15 one hundred forty-five 15/100 dollars.

                          "Don Roberts, County Treasurer
                

"Charge to bond for ________."

Indorsed on back: "Mineola Machine Shop, Grover Smith."

Stamped on back: "Pay to the order of any bank, banker, or trust company. All prior indorsements guaranteed. Mar. 26, 1925. Merchants' & Planters' State Bank. 88 — 486. Winnsboro, Texas, 88 — 486, O. W. Craddock, Cashier."

Perforated: "Paid 3-30-25."

The court made findings of fact substantially as follows: That the First National Bank of Mineola, in due course of business, acquired two of the notes and forwarded them to the First National Bank of Quitman for collection, and was by said bank paid on February 17, 1925. The Alba National Bank in due course of business acquired one of the notes and forwarded it for collection, and same was paid by the First National Bank of Quitman on February 20, 1925. The First State Bank of Alba, Tex., acquired one of the notes in due course of business and forwarded it for collection to the First National Bank of Quitman, Tex., and was paid by said last-named bank on February 20, 1925. The Merchants' & Planters' State Bank of Winnsboro acquired three of the notes in due course of business and timely forwarded them for collection to the First National Bank of Quitman, and was timely paid by said bank on, respectively, March 3, March 12, and March 30, 1925. The First National Bank of Winnsboro acquired three of the notes in due course of business and timely forwarded them for collection to the First National Bank of Quitman, and was by it timely paid on, respectively, March 12, March 13, and April 20, 1925. The court made the further finding:

"(17) I find that the forgeries in each instance were very clever and artistic and hard to detect, either by an experienced banker or the drawer of the check, and that the receiving banks in each instance acquired said checks on the faith of the signature of the county treasurer, without investigation as to the party who presented the same; that each of the receiving banks cashed the checks so received by them at the time said checks were received by paying to the party or parties who presented same the amounts thereof, respectively, without knowing or identifying the persons to whom the same were paid. I find that the First National Bank of Quitman paid each of said forged checks in good faith, believing the same to be genuine, and was not negligent in so doing.

"It was customary, and the usual mode of transacting business which was followed during these transactions, for the county depository to pay checks drawn by the county treasurer, and at the end of each month said bank would make a report to the county treasurer, which consisted of a statement of the checks it had paid the previous month, giving a list of the checks, with the checks attached to the statement, and it was the custom of the county treasurer to check over said statement and ascertain the correctness thereof; that quarterly the county treasurer would make a quarterly statement to the commissioners' court, embracing in his report the names and amounts and for what purpose the checks were given; that the first report he made was on the 1st of February, 1925, and the second report was made on the 1st of May, 1925; that in making up his report the 1st of May, 1925, he for the first time discovered the forgery of the checks in question, none of which, however, were embraced in his February report, and, on discovery of the forgeries, he notified each of the banks in question. I do not find the county treasurer was negligent in failing to discover the forgeries earlier than he did or in reporting said discovery to the county depository.

"On each of said checks there is an indorsement purported to be the indorsement of the payee in the check, and also a rubber stamp indorsement by the bank receiving same `Prior Indorsements Guaranteed,' and each of said checks had such indorsement thereon at the time the same was paid by the First National Bank of Quitman, Tex., and I find that no notice was given the receiving banks by the First National Bank of Quitman, Tex., of such forgeries until after May 1, 1925, and that no notice was given to the First National Bank of Quitman, Tex., by the county treasurer of the forgeries in either instance until about May 1, 1925.

"I find that the First National Bank of Quitman, Tex., upon the payment of said forged checks, charged same to the account of Wood county, taking same from the funds of Wood county on deposit with it, and has refused to reimburse said county for the amount so paid on said checks, and that each of the receiving banks, or banks which acquired said checks in the first instance, have refused to pay or reimburse the First National Bank of...