Russell v. Second Nat. Bank Of Paterson.

Decision Date21 October 1947
Docket NumberNo. 7.,7.
PartiesRUSSELL v. SECOND NAT. BANK OF PATERSON.
CourtNew Jersey Supreme Court

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

Appeal from Supreme Court.

Action by Grace L. Russell against the Second National Bank of Paterson to recover funds paid out of plaintiff's bank account by defendant on checks fraudulently obtained, but drawn by plaintiff against her account in bank. Judgment for the plaintiff, and the defendant appeals.

Judgment modified.

The CHANCELLOR, BODINE, HEHER, and DONGES, Justices, and McLEAN, Judge, dissenting.

Randal B. Lewis, of Paterson, for plaintiff-respondent.

John P. Nugent and Frederick M. Rollenhagen, both of Jersey City, for defendant-appellant.

CASE, Chief Justice.

Miss Russell, a retired schoolteacher, suffered material losses as a result of a fraud practiced upon her by Fred Baron, alias Fred Bloom, and Ernest T. Brasch, alias Henry Williams. Baron and Brasch were indicted for the fraud, entered pleas of non vult, and are serving sentences thereunder in the State Prison. The appellant bank honored the checks which had been fraudulently obtained but which, drawn and signed by Miss Russell against her account in that bank, came to it in the course of business from a correspondent bank. Judgment, here under appeal, was entered against the bank for the total amount of the checks, $22,170.00, plus $4,887.86 interest calculated from the several dates when the checks were charged to Miss Russell's account.

The method by which the fraud was accomplished was that Baron, one of the swindlers, called Miss Russell by telephone, represented himself to be a man well known locally, asked for contributions toward some worthy cause, and induced Miss Russell, not only to make numerous gifts, but to draw the checks to a fictitious name and deliver them to a caller.

In early June of 1942 Miss Russell was addressed on the telephone by a voice which said that the speaker was Herman Geller. A prominent resident of Paterson bore that name. He was not known to Miss Russell personally but was by reputation. The speaker said that he was interested in a project for the rehabilitation of disabled soldiers, that he would like Miss Russell to help, that he did not want his name to appear and that he would like the contributions to be made by check payable to his secretary, Henry Williams, who would call for the same. Shortly thereafter a man called at Miss Russell's home, said that he was Henry Williams, asked for and received Miss Russell's check which, dated June 15, 1942, in the amount of $500.00, drawn on the defendant bank to the order of Henry Williams, was delivered to him by Miss Russell in person. The telephone voice was that of Fred Baron. The caller at the house was Ernest T. Brasch. There was no one answering to the name Henry Williams except Brasch, who assumed it for the purposes of the fraud. Brasch delivered the check to Baron who endorsed it Henry Williams'. The check was then further endorsed by Brasch in his own name and either cashed or deposited at a bank other than the defendant. That performance was repeated without material variation on seventeen other occasions until September 28, 1944, and in amounts varying from $100.00 to $500.00. The checks were all cleared through banking channels. As to the six remaining payments in the Williams series there was a variation in that after the endorsement of the Williams name by Baron the checks were cashed without further endorsement by Brasch.

At about the same time Miss Russell received a telephone message from a man who said he was John Grimshaw. Mr. Grimshaw was a well known lawyer of Paterson. He had for a long time been acquainted with Miss Russell, although he had not been seen by her for several years. The impersonator stated that Miss Russell's help was wanted for a boys' camp but that he did not want any publicity for himself and would like Miss Russell to make payments by checks drawn to the order of his secretary, whose name was given as George Wilson. So started a line of thirty-four checks by Miss Russell to the order of George Wilson, the first dated June 29, 1942, in the amount of $650.00 and the last drawn and delivered the latter part of August, 1944, in the amount of $200.00. The person speaking as John Grimshaw was Fred Baron. Baron, in giving the name George Wilson as the payee on the check, knew there was no person bearing that name and planned to sign, as he actually did sign, the name by way of endorsement. The modus operandi was that Miss Russell would receive a telephone request from a man (Baron) who said he was John Grimshaw; she would then draw a check to the order of George Wilson, place it in an envelope addressed to John Grimshaw and deliver it at her door, either in person or by her housekeeper, to a messenger, a boy about fifteen years of age, who called and asked for ‘the letter for Mr. Grimshaw’. Baron then endorsed the name George Wilson, and, in most instances, Brasch endorsed beneath with his own genuine signature and the check was cashed or deposited at a bank.

A third phase of the fraud was a check for $350.00, properly in the George Wilson series, which, on September 11, 1943, Miss Russell inadvertently drew to the order of John Grimshaw instead of to the order of George Wilson. That check was endorsed by Fred Baron with the name, wrongfully purporting to be the signature, of John Grimshaw, and also was endorsed by Brasch. In the usual course of bank clearances the check was forwarded to the defendant bank and charged against Miss Russell's account. The Grimshaw endorsement is conceded to be a forgery, and the appeal is abandoned as to it except for the interest addition.

The disclosure came in October of 1944 when Miss Russell, having received simultaneous requests from both fraudulent sources, unintentionally placed the Henry Williams' check in the envelope which was intended for the George Wilson payment and was addressed to John Grimshaw. Shortly thereafter Miss Russell met Mr. Grimshaw and apologized for the supposed error, whereupon she learned the beginning of the truth. On October 23, 1944, she made demand upon the defendant bank for reimbursement, was refused and thereafter brought this suit.

The suit for recovery is upon the ground that the bank had unlawfully paid the checks out of plaintiff's checking account. The case was tried by the court without a jury. Verdict went in favor of the plaintiff for the total amount of the claim.

Miss Russell did not know that the name Henry Williams' was fictitious. To her it designated the man whose real name was Ernest T. Brasch. She drew the checks in the belief that the named payee was the person was was physically in her presence and to whom she personally delivered the checks. It was he who, by her purpose and expectation, was to endorse the checks with the name Henry Williams'.

A leading case with pertinent reasoning is Montgomery Garage Co. v. Manufacturers' Liability Insurance Company, 94 N.J.L. 152, 109 A. 296, 297, 22 A.L.R. 1224, wherein Mr. Justice Trenchard, holding the opinion for this court said:

‘Where, as here, the drawer of a check delivers it, for a consideration which turns out to be fraudulent, to an imposter under the belief that he is the person whose name he has assumed and to whose order the check is made payable, a bona fide holder for a valuable consideration, paid to the imposter upon his endorsement of the payee's name, is entitled to recover from the drawer; it appearing that the person to whom the check was delivered was the very person whom the drawer intended should endorse it and receive the money, and that the drawer made no inquiry before issuing the check concerning the identity or credit for the named payee who was unknown to the drawer. United States v. National Bank, (C.C.) 45 F. 163; Meyer v. Indiana Bank, 27 Ind.App. 354, 61 N.E. 596; Emporia Bank v. Shotwell, 35 Kan. 360, 11 P. 141, 57 Am.Rep. 171; Robertson v. Coleman, 141 Mass. 231, 4 N.E. 619, 55 Am.Rep. 471; First Nat. Bank v. American Exchange Nat. Bank, 49 App. Div. 349, 63 N.Y.S. 58; Merch. Bank v. Metropolis Bank, 7 Daly (N.Y.) 137; Land Title & Trust Co. v. N.W. Bank, 196 Pa. 230, 46 A. 420, 50 L.R.A. 75, 79 Am.St.Rep. 717; Metzger v. Franklin Bank, 119 Ind. 359, 21 N.E. 973.

And see Meridian Bank v. First Bank, 7 Ind.App. 322, 33 N.E. 247, 34 N.E. 608, 52 Am.St.Rep. 450; Elliott v. Smitherman, (19 N.C.) 338; Forbes v. Espy, 21 Ohio St. 474, in which, though the name adopted by the swindler appears to have been really fictitious, the loss is thrown on the drawer for the same reason.

‘In the present case the plaintiff has merely carried out the drawer's intent. In other cases of fraudulent impersonation the drawer is sometimes said to have a double intent: First, to make the check payable to the person before him; and, secondly, to make it payable to the person whom he believes the stranger to be. But the courts have almost unanimously held that the first is the controlling intent, except where the named payee was already known to the drawer, as in Cundy v. Lindsay, [1878], 3 A.C. 459, and Rossi v. Nat. Bank, 71 Mo.App. 150, or was more particularly identified in some manner; e.g., by some designation, description, or title, as in the case of Mercantile Nat. Bank v. Silverman, 148 App.Div. 1, 132 N.Y.S. 1017, none of which factors are present in the case at bar. A man's name is the verbal designation by which he is known, but the man's visible presence is a surer means of identification. In the case at bar, if the plaintiff, before cashing the check, had sent for and asked the drawer whether or not the person presenting the check was the person to whom it was intended to be paid, the answer would have been in the affirmative. Of course the drawer was deceived as to the name of the man it was dealing with, but it dealt with, and intended to deal with, the visible man who stood before it,...

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