Pennington County Bank v. First State Bank of Moorhead
| Decision Date | 04 March 1910 |
| Docket Number | 16,413 - (215) |
| Citation | 125 N.W. 119,110 Minn. 263 |
| Parties | PENNINGTON COUNTY BANK v. FIRST STATE BANK OF MOORHEAD |
| Court | Minnesota Supreme Court |
Action in the district court for Clay county to recover $1,200 alleged to have been paid by mistake upon a forged check. The facts are stated in the opinion. The complaint alleged that both James B. Calhoun and E. W. Davis were unknown to defendant, and in paying the check defendant was guilty of negligence in failing to have Davis identified in any manner in failing to make due investigation to determine whether Davis was the lawful owner of the check and to determine whether Calhoun actually indorsed it, all of which matters plaintiff assumed and rightly assumed defendant had carefully investigated. It also alleged that defendant was guilty of a lack of good faith in presenting the check to plaintiff without advising it of the circumstances, and in failing to inform plaintiff that the parties to the check were strangers to it. The answer alleged that plaintiff upon receiving the check, and after having had ample opportunity to examine it and satisfy itself as to the genuineness of the signature of the drawer, sent a draft to defendant in full payment. The case was tried before Baxter, J., who directed a verdict in favor of defendant. From an order denying plaintiff's motion for a new trial, it appealed. Affirmed.
Payment of Forged Check -- Recovery.
A bank which pays to a bona fide holder a forged check purporting to be drawn upon it by one of its depositors cannot recover the amount paid from the innocent holder.
Bona Fide Holder.
A bona fide holder is one who receives the instrument in the ordinary course of business, in good faith, and for a valuable consideration.
Bona Fide Holder.
The term "good faith" means, not only honesty of intention, but the absence of suspicious circumstances, or if such circumstances exist, then such inquiry as will satisfy a prudent man of the validity of the transaction.
Directed Verdict.
Evidence considered, and held to justify a directed verdict for defendant.
Sharp & Chapin, for appellant.
Nye & Dosland, for respondent.
In October, 1908, a stranger calling himself E. W. Davis, presented to the defendant bank at Moorhead, Minnesota, a check drawn upon the plaintiff bank at Rapid City, South Dakota, for $1,200, payable to the order of James B. Calhoun, and purporting to be a check of Joseph Jolly, a depositor of the plaintiff. The check was indorsed: "James B. Calhoun." "E. W. Davis." Without any information as to the check, except the statements made by Davis, the defendant took it for collection, stamped it: -- and forwarded it to the plaintiff in a letter on a printed form, to which was added the following:
"If honored, please wire payment under signature of cashier."
The Pennington Bank, after an examination of the check, concluded it was genuine, accepted it, and remitted the amount to the Moorhead Bank, which in turn paid it over to the man claiming to be Davis, the second indorser. The check was repudiated by Jolly as a forgery, but by this time Davis had disappeared, and has not since been found. There was no evidence as to the existence of Calhoun.
The plaintiff brought this action to recover back the amount so paid by it to the defendant. The court directed a verdict for defendant, and plaintiff now appeals from an order denying an alternative motion for a judgment or a new trial.
It is the contention of plaintiff that the defendant was negligent in accepting the check from a stranger without inquiry or investigation; that plaintiff was justified in accepting the check from defendant, a reputable bank, in reliance that it had acted prudently and upon sufficient investigation when receiving the check; that such an investigation would have revealed the fraud, and protected the plaintiff as well as the defendant; that the defendant was negligent, and by its negligence misled the plaintiff, who may, therefore, recover; also that the words "For collection," indorsed upon the check, together with the request for telegraphic advice if it was honored, conveyed no information to the plaintiff, and it might have properly assumed that the defendant was the owner.
The defendant contends that it received the check in good faith in the ordinary course of business, and occupied the position of a bona fide holder of negotiable paper; that the plaintiff is presumed to know the signature of its customers; and that the words "For collection," stamped upon the check, together with the request that it be advised by wire if the check was honored, were sufficient notice to plaintiff that it assumed no responsibility with reference to the genuineness of any of the signatures.
We find but one question...
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