Germania Bank v. Boutell
| Decision Date | 01 February 1895 |
| Docket Number | No. 9052.,9052. |
| Citation | 60 Minn. 189 |
| Parties | GERMANIA BANK OF MINNEAPOLIS v. WILLIAM T. BOUTELL and Others.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
Action against William T. Boutell and another doing business as Boutell Brothers, the firm of Boutell Brothers, and the Washington Bank. Appeal by plaintiff from an order of the municipal court of Minneapolis, Holt, J., sustaining separate demurrers to the amended complaint. Affirmed.
Chas. G. Laybourn, for appellant.
John M. Miller, for respondents Boutell Brothers.
A. Ueland, for respondent Washington Bank.
This action was brought to recover money paid on a forged check. To the complaint the defendants separately demurred, on the ground that it did not state a cause of action. This appeal is from an order sustaining these demurrers. The complaint is very prolix, but the substance of its allegations is as follows: Osborne & Clark, lumber dealers in Minneapolis, were customers of the plaintiff bank, with which they kept a large deposit. They had in their employ a man named Seymour, at a salary of $7 per week, "a man of limited means and small personal resources," which facts were known to Boutell Bros. Boutell Bros. had sold Seymour some goods on credit on the instalment plan, upon which there was due an instalment of $10. During business hours of April 11, Seymour went to Boutell Bros.' place of business in Minneapolis, with a check for $457.90, payable to his own order, purporting to be drawn by his employers, Osborne & Clark, on plaintiff bank; whereupon Seymour and Boutell Bros. both indorsed the check for the purpose of giving it credit and putting it in circulation, and to enable Seymour to pay the $10, and then went over to the defendant bank, and presented the check thus indorsed (Boutell Bros. identifying Seymour), and requested the bank to cash it, which it did, paying the money to Seymour and Boutell Bros. Although the places of business of both Osborne & Clark and of plaintiff were within a few blocks, and of ready access, Boutell Bros. made no inquiry to ascertain the genuineness of the check, and the defendant bank took no means to assure itself of the fact, except the identification of Seymour by Boutell Bros. and the indorsement of the check by the latter. The next day the defendant bank presented the check to the plaintiff, which, after examining the signature and believing it to be genuine, induced thereto by its apparent genuineness (it not being possible by ordinary care to detect the forgery), and by the financial standing and integrity of the defendant bank, which presented it, and of Boutell Bros., who had indorsed it, "in the exercise of due care and caution," paid the check.
It is also alleged that it was the custom and practice among all the banks in Minneapolis, well known to the defendants, for the bank upon which any check purports to be drawn to pay it when presented by any other bank (provided the drawer has sufficient funds), relying upon the genuineness of the check and of all prior indorsements; also not to pay a check "of any considerable size" purporting to be drawn by one of its depositors unless the party presenting it is identified, "save when indorsements of responsible parties known to the drawee bank are indorsed thereon." On April 24 plaintiff discovered that the signature of Osborne & Clark was a forgery, and immediately notified the defendants of the fact, tendered back the check, and demanded payment of the amount, which was refused. The signature of Osborne & Clark had been forged by Seymour, who absconded April 12, the same day on which plaintiff paid the check, but whether before or after is not alleged. His whereabouts is still unknown.
These facts present the question, upon which so much has of late years been said and written, whether the drawer of a bill of exchange, or the banker upon whom a check has been drawn, who has paid a bill or check upon which the drawer's signature has been forged, can, upon discovery of the forgery, recover back the amount from the holder, and, if so, under what circumstances he may thus recover. It is a well-settled rule of law that money paid under a mistake of fact may be recovered back, however negligent the party paying may have been in making the mistake, unless the payment has caused such a change in the position of the other party that it would be unjust to require him to refund. And the tendency of the modern authorities is to extend rather than to curtail the operation of this rule. One generally received exception to the rule is that where the drawee of a bill of exchange, or the banker upon whom a check has been drawn, pays a bill or check upon which the drawer's signature has been forged, he must stand the loss, and cannot recover back the amount, if the party to whom he paid it was a bona fide holder.
This doctrine was established in England in 1762, in the leading case of Price v. Neal, 3 Burrows, 1355, in which Lord Mansfield stopped defendant's counsel, saying the case was one that could not be made plainer by argument; that it was incumbent upon the plaintiff (the drawee) to be satisfied that the bill drawn upon him was in the drawer's hand before he accepted or paid it. The same doctrine was firmly established in the commercial law of this country in Bank of U. S. v. Bank of Georgia, 10 Wheat. 333, in which Mr. Justice Story, referring to Price v. Neal, said: "After some research, we have not been able to find a single case in which the general doctrine thus asserted has been shaken or even doubted." And, so far as we have been able to discover, this general doctrine is recognized as the law by the courts of every state in the Union except Pennsylvania, where the rule has been changed by statute. The doctrine was announced and applied by this court as early as Bernheimer v. Marshall, 2 Minn. 61 (78). That was a case of a forged draft, but the doctrine is equally applicable to a forged check. Indeed, if there is any difference in the cases, the reasons upon which the doctrine rests apply with more force to the latter than the former, for not only do checks pass from hand to hand as money more frequently and rapidly than do drafts or ordinary bills of exchange, but a banker is "even more bound" to know a customer's handwriting than a drawee of a bill of exchange is bound to know the drawer's.
Many modern text writers, some of them of learning and ability, have assailed the correctness of this doctrine, contending that the general rule as to money paid under mistake of fact should apply, and that the law ought to be that the bank, although at fault in not discovering the forgery of its customer's signature, can recover even from an innocent holder, if he will then be in no worse condition than if the bank had refused to pay the draft or check. See 2 Pars. Notes & B. 80; Morse, Banks, c. 33; Daniel, Neg. Inst. c. 42; also, Am. Law Rev. April, 1875, p. 411, and note to People's Bank v. Franklin Bank, 17 Am. St. Rep. 889 (88 Tenn. 299, 12 S. W. 716). We shall not enter upon a consideration of the soundness of the argument against the doctrine, or as to which rule we would adopt if the question was res integra, because we do not feel at liberty to overrule or disregard a doctrine so well established and so firmly rooted in the commercial law of the country. If the rule is incorrect or works badly in practice, its change must be left to the legislature. We may say, however, that the opponents of the doctrine seem to have found no followers among the courts. We may also suggest that perhaps the courts themselves have given the opponents of the doctrine an unnecessary vantage ground, by frequently placing it exclusively on the narrow ground of actual negligence on part of the drawee in not discovering the forgery, because he was bound to know the signature of his own customer or correspondent. It is undoubtedly true that he is in better position than a stranger to know his customer's signature, and that men have a right to deal with checks and drafts on that assumption; but it does not seem to us that the...
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