National Bank of Rolla v. First National Bank of Salem
| Decision Date | 07 February 1910 |
| Citation | 125 S.W. 513,141 Mo.App. 719 |
| Parties | NATIONAL BANK OF ROLLA, Appellant, v. FIRST NATIONAL BANK OF SALEM, Respondent |
| Court | Missouri Court of Appeals |
Appeal from Dent Circuit Court.--Hon. L. B. Woodside, Judge.
Judgment affirmed.
Watson & Holmes for appellants.
(1) "A bank which pays a forged check drawn upon it in the name of a depositor may, if it acts within a reasonable time recover the amount thereof from the bank which took the check in course of business, and negligently paid the money upon the endorsement of the check by the payee named, without inquiry into its genuineness, or without requiring any identification of the person presenting such check for payment, or any showing that he was lawfully the holder thereof." Bank v. Bingham, 30 Wash. 484; Bank v. Bank, 22 Neb. 769; Bank v. Bank, 15 N.D. 489; Bank v. Bank, 152 Ill. 296; Espy v Bank, 18 Wal. (U.S.) 604; Bank v. Allen, 59 Mo 311; Morse on Banks and Banking (4 Ed.), 464. (2) "A party who pays a forged check does so at his peril; and if by means of his endorsement and use of the same he thereby obtains money from another, he is liable for the money so received." Bank v. Bank, 30 N.E. 7; 51 A. S. R. 221; Ellis v. Insurance Co., 4 Ohio 682; 64 Am. Dec. 610; Bank v. Franklin, 17 A. S. R. 884; Bank v. Boutelle, 62 N.W. 327; Bank v. Bank, 36 N.W. 289; Sauvant v. Bank, 63 Tex. 610; Bank v. Ricker, 71 Ill. 439; 22 A. R. 104; Bowles on Banks, sec. 189; 2 Parsons on Notes, sec. 80, note 17 A. S. R. 890.
W. P. Elmer and G. C. Dalton for respondent.
(1) When the holder of a check procures it to be accepted or certified, the drawer and all of the endorsers are discharged from liability thereon. Laws of 1905, 264, Mo. Ann. Stat., vol. I, 191, sec. 463; Bank v. Bank, 107 Mo. 402. (2) The endorser of negotiable paper does not warrant to the drawee the genuineness of the signature of the drawer, but such warranty extends only to subsequent holders in due course. When the drawee passes upon, accepts and pays the check, it sets at rest all questions as to its genuineness. Bank v. Bank, 88 S.W. 939. (3) The drawee is not a holder in due course. He is a guarantor if he accepts or pays the checks. Laws 1905, 250, Ann. Stat., vol. I, 531, sec. 57; Bank v. Bank (Tenn.), 88 S.W. 939; Bank v. Butler (Tenn.), 83 S.W. 656. (4) The endorsement on this check, "Pay to any national or State bank or order," was a restricted endorsement, and was an endorsement for collection and not a transfer of the title of the check. Bank v. Bank, 110 Mo.App. 62; Bank v. Bank, 107 Mo. 402. (5) The plaintiff, drawee, was bound to know the handwriting of its customer, the drawer, and if it paid a check into the hands of a bona fide holder for value, it is concluded by that act, although the check turns out to be a forgery. Bank v. Bank, 107 Mo. 410; Bank v. Bank (Tenn.), 88 S.W. 939. (6) It is true that money paid by mistake may often be recovered back, but in this case the plaintiff knew that the check was not signed by its customer. The payment was purely voluntary and cannot be recovered back. Savings Assn. v. Kehlor, 7 Mo.App. 158; Teasdale v. Stroller, 133 Mo. 645; Needles v. Burks, 81 Mo. 573; Clowdis v. Railroad, 71 Mo. 510; Heathcock v. Crawford Co., 200 Mo. 177.
On September 23, 1907, one Martin L. Chambers, representing himself to be one J. B. Ragan, presented to defendant a check for the sum of $ 42, purporting to have been drawn on plaintiff in favor of said J. B. Ragan, by one H. W. Lenox, depositor of the plaintiff. The bookkeeper of defendant did not know any of these parties personally, but cashed the check without requiring any identification of Chambers. The defendant then sent the check to its correspondent, the Third National Bank of St. Louis, and through that bank presented the same to plaintiff for payment. When the check was presented to the plaintiff, the cashier thereof, knew that the signature thereto was not the signature of H. W. Lenox, but knowing Ragan and Lenox, and knowing that they dealt a great deal in live stock together, and noticing that the defendant had guaranteed the endorsement thereon to be the endorsement of Ragan, concluded that the check was genuine, and remitted the amount thereof to the Third National Bank of St. Louis, and the same was placed by that bank to the credit of the defendant. Soon after the 1st of October, the plaintiff's cashier sent to Lenox his paid checks for the month of September, included among which was this check. Lenox discovered that this check was a forgery, and returned same to plaintiff with notice of that fact, and he was given credit for the amount of this check. The plaintiff then wrote defendant that this check was a forgery, and that inasmuch as plaintiff had honored the same on the strength of defendant's endorsement and guaranty that the endorsement of Ragan was genuine, the defendant should refund the amount of said check to the plaintiff. After several days' delay, defendant notified the plaintiff that the amount of the check would not be refunded, for the reason that it considered it was not liable.
Plaintiff brought this action before a justice of the peace to recover the amount of the check. The plaintiff appealed from the judgment of the justice, and on the 29th day of October, 1908, the cause was tried in the circuit court of Dent county, and judgment was rendered for defendant, and plaintiff appealed to this court.
The plaintiff's petition alleges that both parties, at the dates mentioned in the petition, were banking corporations, and on the 26th day of September, 1907, defendant, through its correspondent, presented to plaintiff for payment, a check for the sum of $ 42, purporting to be drawn on the plaintiff by one H. W. Lenox, in favor of one J. B. Ragan, and purporting to be endorsed by the said Ragan, and which said check had been duly endorsed by the defendant, and previous endorsements thereon in writing, guaranteed by the defendant, and relying upon the endorsement of said check by the defendant and defendant's said guaranty, and believing that by reason thereof, it was genuine, cashed said check and paid the amount thereof to the defendant; that after it had cashed said check and paid the proceeds to defendant, it discovered that the said check was forged and thereupon it caused due notice to be given to defendant in writing, and demanded of it the payment of the amount of said check, and that defendant refused to pay the same, and asked for judgment for the amount of $ 42.
It will be noticed, that no allegation of negligence on the part of the defendant in cashing the check for Ragan, is made in the petition, and the instruction asked by the plaintiff and refused by the court, presented the issue as alleged in the petition. In other words, the question of the negligence of the defendant in cashing the check for Ragan, was not submitted either in the petition or the instruction. There are but two reasons alleged for a reversal of the judgment, and they are: Because the court erred in refusing an instruction asked by the plaintiff; and, because under all the evidence in the case, the judgment should have been for the plaintiff.
The question presented here may be submitted in the following language: If B representing himself to be A, presents to C's bank, a check purporting to be signed by D, payable to A and drawn on E's bank, of which D is a customer, and C's bank cashes the check and sends it for collection to E, who, when it is presented, pays the same and charges it to D's account, and at the time of said payment E has reason to believe that the signature to the check is not D's, can E sue C for the amount of the check, upon learning that D's name was forged to the check, and showing that C had sent the check for collection, and that the money paid by E at the time it cashed the check had been received by C?
The question has been answered in the negative many times in the courts of this country. Since the case of Price v. Neal, 3 Burrows, decided by Lord MANSFIELD in 1762, the general rule has been that when the drawee of a check or bill pays the same to a bona fide holder, such drawee cannot recover the money back upon discovering such check or bill to be a forgery. Many of the text writers on negotiable instruments declare that when a bank, upon which a check is drawn, pays it upon the forged signature of the drawer, the money can be recovered as paid under mistake of fact. [Story on Promissory Notes, secs. 379-529; 2 Parsons on Notes and Bills, 80.] Others, while recognizing a different rule, incline to the opinion that the one just cited is the most equitable. [2 Daniels on Negotiable Instruments, chapter 48, sec. 13.] Whatever the text-writers may think and declare the law to be, a long line of cases sustain the proposition that as between the drawee and the holder of a check, the drawee bank is to be deemed the place of final settlement where all prior mistakes and forgeries can be corrected and settled at once, henceforth and forever more; and if overlooked and payment is made, the chapter is closed and there can be no recovery over. [Price v. Neal, 3 Burrows 1355; Redington v. Woods, 45 Cal. 406; Bank v. Ricker, 71 Ill. 439; Bank v. Bank, 152 Ill. 296, 30 N.E. 739; Bank v. Bank, 46 N.Y. 77; Ellis v. Trust Co., 4 Ohio St. 628.]
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