Railway Express Agency v. Bank of Philadelphia

Decision Date30 October 1933
Docket Number30708
Citation150 So. 525,168 Miss. 279
CourtMississippi Supreme Court
PartiesRAILWAY EXPRESS AGENCY v. BANK OF PHILADELPHIA

APPEAL from circuit court of Neshoba county, HON. D. M. ANDERSON Judge.

Suit by the Bank of Philadelphia against the Railway Express Agency. Judgment for plaintiff, and defendant appeals. Reversed, and suit dismissed.

Reversed and dismissed.

Watkins Watkins & Eager, of Jackson, for appellant.

When the drawee of a forged check pays the amount to a holder in due course who is himself without fault he cannot recover the money from the person to whom payment was made.

Price v. Neal, 3 Burr. 1354; U. S. v. Bank of Georgia, 6 L.Ed. 334; U. S. v. Bank of New York, C. C. A. 2, 219 F. 648; U. S. v. Nat. Ex. Bank, C. C. A. 4, 1 F.2d 888; Cooke v. United States, 91 U.S. 389, 23 L.Ed. 237; U. S. v. Chase Nat. Bank, 252 U.S. 485, 64 L.Ed. 675; Hoffman v. Bank of Milwaukee, 79 U.S. 181, 20 L.Ed. 366; 7 Rose's Notes 391; Annotation, 12 A. L. R. 1089; Bernheimer v. Marshall (Minn.), 72 Am. Dec. 79; First Nat. Bank v. U. S. Nat. Bank (Ore.), 14 A. L. R. 479; State Bank v. First Nat. Bank (Neb.), 29 L. R. A. (N. S.) 100, 127 N.W. 244; State Bank v. Cum. S. & T. Co. (N. C.), 1915 L. R. A. 1138; S. Nat. Bank v. Bank of Magdalena, N. M., L. R. A. 1916E, 1296; 4 Har. Law Review 297, F. B. Ames; F. Nat. Bank v. F. Nat. Bank (Tex.), 37 S.W.2d 802; N. Y. etc. Bank v. Twelth Ward Bank, 119 N.Y.S. 988; Branna, Negotiable Instruments Law, 694; Dedham Nat. Bank v. Everett Bank (Mass.), 59 N.E. 62.

The State Negotiable Instrument Law reenacts the principles of Price v. Neal, 3 Burr 1354, and makes the drawee bank admit as to the holder for value in due course to whom it paid the check the genuineness of the signature of the drawer.

8 C. J. 47; Fed. C. & W. Co. v. Coleman, 143 Miss. 591; Sec. 2718, Miss. 1930 Code; Brannan's Neg. Inst. Law, par. 62; U. S. v. Bank of N. Y., C. C. A. 2, 219, Fed. 648; Figuers v. Fly (Tenn.), 193 S.W. 117; Nat. Bank of Rolla v. F. Nat. Bank (Mo.), 125 S.W. 512; State Nat. Bank v. Bank of Magdalena (N. M.), 157 P. 498; Title Guar., etc. Co. v. Haven, 111 N.Y.S. 303; First Nat. Bank v. Bank of College Grove (Ore.), 117 P. 293; First Nat. Bank v. U. S. Nat. Bank (Or.), 197 P. 547, 14 A. L. R. 479.

Flowers, Brown & Hester, of Jackson, for appellee.

We would not argue a fallacy to this court and we do not take the position that the general rule so strongly urged by counsel for appellant is at fault. That is the law. But we do take the position that it must be applied to each case in the light of its own facts. We therefore submit that the facts attending the case at bar do not warrant the application of the general rule.

To entitle the holder of a forged check or draft to retain money paid him thereon, he must be able truthfully to assert that the mistake cannot now be corrected without now placing him in a worse position than he would have been in had payment been refused.

Ellis v. Ohio Life Insurance & Trust Company, 4 Ohio St. 628, 64 Am. Dec. 610; Iron City National Bank v. Peyton, 39 S.W. 223; 5 R. C. L. 559, sec. 82; American Express Company v. State National Bank, 113 P. 711, 33 L. R. A. (N. S.) 188.

To enable a holder to retain money paid to him on forged paper, he must put the bank alone in the negligence, and be able to say that the mistake of the bank cannot now be corrected without placing the holder in a worse position than though payment had been refused. If he cannot say this, and especially if the failure to detect the forgery can be traced to his disregard of duty in negligently omitting some precaution he had undertaken to perform, he fails to establish a superior equity of the money, and cannot with good conscience retain it.

Canadian Bank of Commerce Case, 30 Wash. 484, 60 L. R. A. 955, 71 P. 43; First Nat. Bank v. First Nat. Bank, 151 Mass. 280, 21 Am. St. Rep. 450, 24 N.E. 44; First Nat. Bank v. Ricker, 71 Ill. 439, 22 Am. Rep. 104; First Nat. Bank v. State Bank, 22 Neb. 769, 3 Am. St. Rep. 294, 36 N.W. 289; First Nat. Bank v. Bank of Wyndmere, 15 N.D. 299, 10 L. R. A. (N. S.) 49, 125 Am. St. Rep. 588, 108 N.W. 546; Lisbon v. Bank of Wyndmere, 108 N.W. 546, 10 L. R. A. (N. S.) 49.

Most of the courts now agree that one who purchases a check or draft is bound to satisfy himself that the paper is genuine; and that, by indorssing it, or presenting it for payment, or putting it into circulation before presentation, he impliedly asserts that he has performed this duty.

First Nat. Bank v. First Nat. Bank, 151 Mass. 280, 21 Am. St. Rep. 450, 24 N.E. 44; Ellis v. Ohio Life Ins. & T. Co., 4 Ohio St. 628, 64 Am. Dec. 610; People's Bank v. Franklin Bank, 88 Tenn. 299, 6 L. R. A. 724, 17 Am. St. Rep. 884, 12 S.W. 716; Canadian Bank v. Bingham, 30 Wash. 484, 60 L. R. A. 955, 71 P. 43; First Nat. Bank v. State Bank, 22 Neb. 769, 3 Am. St. Rep. 294, 36 N.W. 289; First Nat. Bank v. First Natl. Bank, 4 Ind.App. 355, 51 Am. St. Rep. 221, 30 N.E. 808; McKleroy v. Southern Bank, 14 La. Ann. 462, 74 Am. Dec. 438.

Where the holder of a forged check has not suffered or may avoid loss, he ought not to be permitted to profit by the payment to him by drawee.

5 Michie on Banks and Banking, page 483.

To entitle the payee to the benefit of the rule of Price v. Neal, 3 Burr 1354, he must be innocent, he must be a bona fide holder for value.

All of the authorities cited by the appellant relate to the obligation of the payee bank to know the signature of its customers as against a bank not dealing with the drawer, but taking the check by indorsement from others. None of them, and none that we have been able to find, exempt a bank from liability to refund money which it has received on a forged check taken by it directly from the forger.

American Exp. Co. v. State Nat. Bank, 27 Okla. 82, 113 P. 711; Bank v. Bangs, 106 Mass. 441, 8 Am. Rep. 349; First National Bank of Portland v. U. S. National Bank of Portland, 197 P. 547, 14 A. L. R. 479, at pages 486 and 487.

A holder cannot profit by a mistake which his negligent disregard of duty has contributed to induce the drawee to commit.

Ellis v. Ohio Life Ins. & T. Co., 4 Ohio St. 628, 668, 64 Am. Dec. 610; Germania Bank v. Boutell, 60 Minn. 189, 194, 27 L. R. A. 635, 51 Am. St. Rep. 519, 62 N.W. 327; Deposit Bank v. Fayette Nat. Bank, 90 Ky. 10, 7 L. R. A. 849, 13, S.W. People's Bank v. Franklin Bank, 88 Tenn. 299, 6 L. R. A. 724, 17 Am. St. Rep. 884, 12 S.W. 716; First Nat. Bank v. First Nat. Bank, 151 Mass. 280, 21 Am. St. Rep. 450, 24 N.E. 44; Dedham Nat. Bank v. Everett Nat. Bank, 177 Mass. 392, 83 Am. St. Rep. 286, 59 N.E. 62; National Bank v. Bangs, 106 Mass. 441, 8 Am. Rep. 349; First Nat. Bank v. Marshalltown State Bank, 107 Iowa 327, 44 L. R. A. 131, 77 N.W. 1045; Neal v. Coburn, 92 Me. 139, 150, 69 Am. St. Rep. 495, 42 A. 348; Snodgrass v. Sweetser (1896), 15 Ind.App. 682, 44 N.E. 648; First Nat. Bank v. Ricker (1874), 71 Ill. 439, 22 Am. Rep. 104; Greenwald v. Ford (1906), 21 S.D. 28, 109 N.W. 516; Iron City Nat. Bank v. Peyton (1897), 15 Tex. Civ. App. 184, 39 S.W. 223, 1 Am. Neg. Rep. 695.

Ethridge, J., Griffith, J., dissenting. Cook, J., joins in this dissent.

OPINION

Ethridge, J.

The Bank of Philadelphia, Mississippi, brought suit against the Railway Express Agency, for the recovery of two hundred thirty-five dollars and one cent paid on a forged check payable to W. E. Therrell, and deposited in another bank to the credit of the Railway Express Agency, presented to the Bank of Philadelphia, and paid by it on the belief that the signature was that of one of its customers.

The defendant, the Railway Express Agency, demurred to the declaration, which demurrer was overruled. The defendant declined to plead further, and judgment was entered in favor of the plaintiff for the amount of the check with six per cent. interest from date. Thereafter, a general issue plea was filed, and an agreed statement of facts was also filed, and the cause was tried before the circuit judge without a jury, resulting in a judgment in favor of the bank against the Railway Express Agency for the amount of the check.

It does not appear that W. E. Therrell was served or that he appeared in court.

The declaration, in substance, alleges that on or about June 6, 1929, defendants, in the court below, deposited with the Citizens' Bank of Philadelphia, Mississippi, a check for two hundred thirty-five dollars and one cent purporting to have been drawn by one O. H. Rushing in favor of W. E. Therrell; that W. E. Therrell, on June 6, 1929, and for a long time prior thereto, was the officer and agent of the Railway Express Agency at Philadelphia, Mississippi, in charge of its affairs and acting as its officer and agent, and within the scope of his employment indorsed said check in the name of the Railway Express Agency; that said Express Agency received credit therefor in the ordinary course of business; that said Citizens' Bank, acting as agent for the defendants in the court below, and relying upon the genuineness of the signature to the check, paid it and charged same to the account of. O. H. Rushing, one of its depositors; and that the check remained in the bank marked paid until about July 1, 1929, when the bank sent to O. H. Rushing his canceled checks, when the forgery was discovered.

The agreed statement of facts reads as follows: "It is agreed and understood by and between Flowers, Brown and Hester, attorneys for the plaintiff, and Watkins, Watkins and Eager, attorneys for the defendant, that the above entitled cause be tried before the circuit judge without a jury, and that final judgment be rendered accordingly, upon an agreed statement of facts. It is further agreed that if witnesses were produced and allowed to testify for both ...

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