Krinsky v. Pilgrim Trust Co.

• Citation: 337 Mass. 401,149 N.E.2d 665
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Decision Date: 16 April 1958
• Parties: Hyman KRINSKY v. PILGRIM TRUST CO.

Page 665

149 N.E.2d 665

337 Mass. 401

Hyman KRINSKY v. PILGRIM TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 6, 1958.

Decided April 16, 1958.

Benjamin Goldman, Boston, for plaintiff.

Francis T. Leahy, Boston, for defendant.

Before WILKINS, C. J., and RONAN, WILLIAMS, COUNIHAN and CUTTER, JJ.

RONAN, Justice.

This is an action of contract upon an account annexed for money had and received by the defendant to the plaintiff's use. The defendant's answer contains a general denial and an allegation of payment. The case is here upon exceptions to the denial of the plaintiff's motion for the direction of a verdict in his favor, to the allowance of the defendant's motion for the direction of a verdict, and to divers rulings.

The facts upon nearly all of the issues are supported by documentary evidence and are undisputed, leaving open for decision the principal issue whether the indorsements appearing on three checks payable to one Walker were forgeries.

There was evidence that one John Bready, a depositor in The National Shawmut Bank of Boston, on August 18, 1948, drew three checks on this bank to the order of Walker, who was an automobile dealer in Waltham, for the purchase price of three automobiles. Two checks were drawn for $1,835 each, in payment for two Plymouth automobiles, and a third check was drawn for $2,420 for a Chrysler automobile.

Bready delivered the three checks to one Healy, a municipal employee, who also engaged at times in the sale of automobiles, with instructions to give the checks to Walker and to bring back the automobiles to Boston. On the morning of August 19, 1948, Healy appeared at the office of the plaintiff, who was an attorney and moneylender, and tendered the Bready checks to him. Krinsky held Healy's checks amounting to $5,129.12 which had been dishonored for insufficient funds a few days before, and Healy asked Krinsky to accept the checks of Bready and give him the difference of $960.88. Krinsky examined the three checks and instructed Healy to have them certified by The National Shawmut Bank, hereinafter called the bank, which Healy did, and Healy returned to the plaintiff's office. A statement in the certification which was stamped on the face of the checks read as follows: 'Good only if unaltered since issuance and when properly endorsed.' On the back of each check appeared the typewritten words 'Pay to the order of Hyman Krinsky' underneath which appeared the written words 'Mark Walker.' After receiving the checks Krinsky gave Healy a check for $960.88. He accompanied Healy to the defendant trust company, told the teller to pay Healy, and deposited the three checks to his account, indorsing them 'Credit to Hyman Krinsky, Trustee.' The plaintiff subsequently received a credit of $6,090 to his account at the trust company. The trust company forwarded these checks through the Boston clearing house for collection and on August 20, 1948, it received this amount by way of credit or cash from the bank. The bank in turn cancelled and perforated the checks, charged Bready's account, and returned them to him.

Bready discovered the alleged forgeries in September, 1948, when he received his August statement and learned that the bank had charged him for the amount. Later he met Walker at the bank and saw him sign affidavits that the signatures of the payee were not his and that the indorsements were forgeries. The bank corrected Bready's account and on September 24, 1948, notified the defendant of the alleged forgeries and requested a refund of $6,090. The trust company sent a check to the bank for $6,090 and charged back the amount on Krinsky's account on October 26, 1948. Walker appeared as a witness and testified that the indorsements were forgeries. The plaintiff testified that he did not know Walker, and had no business dealings with him. He gave no reason why Walker should indorse the checks to his order. Healy did not appear at the trial.

There can be no doubt that if the trust company paid money to its customer upon checks bearing forged indorsements the former would have a valid claim based on unjust enrichment because of the mistake of fact. In Carpenter v. Northborough National Bank, 123 Mass. 66, at page 70, it was said, 'This is simply the payment of a note to a party who has no legal and no equitable interest in the promise of the maker * * *. The money having been paid by mistake to a person who had no right to demand it, the case is within the general rule, and the party may recover back the amount thus paid.' See also Young v. Adams, 6 Mass. 182. And in First National Bank v. City National Bank, 182 Mass. 130, 65 N.E. 24, which was an action at law by the drawee bank to recover money paid to a collecting bank on a check bearing a forged indorsement, it was held that the money paid under a mistake of fact could be recovered. See also Canal Bank v. Bank of Albany, 1 Hill, N.Y., 287. ¹

It was said in National Mahaiwe Bank v. Peck, 127 Mass. 298, at pages 300-301, by Gray, C. J., 'When he [the depositor] owes to the bank independent debts, already due and payable, the bank has the right to apply the balance of his general account to the satisfaction of any such debts of his.' The right of the bank to apply the balance of an account to the satisfaction of such a debt is in the nature of a set-off or of an application of payments rather than a banker's lien. Furber v. Dane, 203 Mass. 108, 117-118, 89 N.E. 227. Thus it was said in Forastiere v. Springfield Institution for Savings, 303 Mass. 101, 103, 20 N.E.2d 950, 951, quoting from Laighton v. Brookline Trust Co., 225 Mass. 458, 459-460, 114 N.E. 671, L.R.A.1917C, 129: 'It is well settled that funds on general deposit in a bank are the absolute property of the bank, that the relation between the parties is that of debtor and creditor, and that the bank is entitled to apply the balance of the account due the depositor to the satisfaction of a debt due the bank from the depositor.' We see no reason for a difference in result in the instant case where the depository trust company has refunded to the drawee bank the amount of a claim which arose from the payment by the latter on account of a forged instrument. Howard v. Barnstable County National Bank, 291 Mass. 131, 197 N.E. 40. See Clark v. Northampton National Bank, 160 Mass. 26, 35 N.E. 108. Compare Rossi Bros. Inc., v. Commissioner of Banks, 283 Mass. 114, 186 N.E. 234. See also Furber v. Dane, 203 Mass. 108, 117, 89 N.E. 227; Putnam v. United States Trust Co., 223 Mass. 199, 111 N.E. 969; Laighton v. Brookline Trust Co., 225 Mass. 458, 460, 114 N.E. 671, L.R.A.1917C, 129; Prudential Realty Co. v. Commissioner of Banks, 241 Mass. 277, 279, 135 N.E. 221, 25 A.L.R. 935; Forastiere v. Springfield Institution for Savings, 303 Mass. 101, 20 N.E.2d 950. The defendant has such right without the consent of the depositor (Howard v. Barnstable County National Bank, 291 Mass. 131, 138, 197 N.E. 40) and the form in which it is accomplished may be by direct method of bookkeeping. Putnam v. United States Trust Co., 223 Mass. 199, 203, 111 N.E. 969. It follows that where a charge back on the defendant's books has been made as in the instant case pursuant to its right to make an application of payments, the facts entitling it to set-off may be shown under a plea of payment. Durkee v. National Bank, 5 Cir., 102 F. 845. See also Adams v. First National Bank, 321 Mass. 693, 75 N.E.2d 502.

Many of the exceptions to the admission of evidence are based by the plaintiff on the defendant's answer. He contends that evidence of forgery is not within the scope of the answer. We think this evidence was admissible.

There was no error in the failure of the judge to grant the plaintiff's motion for a directed verdict at the close of the defendant's opening. Douglas v. Whittaker, 324 Mass. 398, 399-400, 86 N.E.2d 916; Perry v. Carter, 332 Mass. 508, 509, 125 N.E.2d 780.

There was no error in the admission of the letter of September 24, 1948, from the bank to the trust company enclosing the three Bready checks with...