United States v. City National Bank & Trust Co.
| Decision Date | 02 November 1972 |
| Docket Number | No. 19878-1.,19878-1. |
| Citation | 349 F. Supp. 1188 |
| Court | U.S. District Court — Western District of Missouri |
| Parties | UNITED STATES of America, Plaintiff, v. CITY NATIONAL BANK & TRUST COMPANY, Defendant and Third-Party Plaintiff, v. GRAND AVENUE BANK & TRUST COMPANY, Third-Party Defendant. |
Bert C. Hurn, U. S. Atty., C. J. Poirier, Asst. U. S. Atty., Kansas City, Mo., for plaintiff.
Bernard L. Balkin, Kansas City, Mo., for defendant.
This is an action by the United States against the City National Bank and Trust Company to recover the proceeds of seventy-two checks presented by the Bank to the plaintiff as drawer and drawee of the checks. The complaint alleges that when the government agency that issued the checks, the Army Financial Center, Retired Pay Division, determined that the payee's signatures were forgeries the Bank became obligated for the amount of the checks by reason of its express and implied warranties of prior endorsements. The Bank filed a third party claim against the Grand Avenue National Bank and Trust Company, which initially received the checks from the forger. That claim has been dismissed upon application of the Bank and the third party defendant.
The parties waived jury trial and the case now pends determination pursuant to the full factual stipulation of the parties. The following facts are undisputed. Fletcher Davis, a retired soldier, received disability payments from the United States from November 30, 1946. Davis died February 27, 1954 in the Veteran's Administration Hospital in Wadsworth, Kansas. Notice of his death was given to the Central Office of the Veteran's Administration in Washington, D. C. on March 5, 1954. Application for burial allowance was made to the Veteran's Administration and an award was made. No actual notice of Davis' death, however, was given or otherwise received by the Department of the Army Financial Center, Retired Pay Division, either by the Veteran's Administration or Davis' family.
After his death, the Department of the Army continued to issue treasury checks payable to Fletcher Davis. Each of these checks was cashed at the Grand Avenue Bank by Georgia Mae Davis, Davis' "common-law" wife. Mrs. Davis later admitted to endorsing Fletcher Davis' name on the checks, entered a plea of guilty to a charge filed in this Court, and was sentenced to serve 90 days in prison; she is unable to repay the amount of the checks.
The Grand Avenue Bank endorsed the checks to the defendant, City National Bank and Trust Company, who in turn presented the checks to the United States Treasury Department for payment. Each endorsement bore the written guarantee of all prior endorsements by the Grand Avenue Bank and in turn by the defendant Bank. Defendant Bank acted solely as a cashing and collecting bank in endorsing and negotiating the checks.
On February 16, 1967, the Veteran's Administration received by an anonymous telephone call information that Davis was dead and that Georgia Mae Davis was cashing the treasury checks. After investigation, this information was communicated to the Department of the Army Retired Pay Division on March 10, 1967. On April 20, 1967 the Treasury was requested to stop payment on the checks. The Treasurer thereupon made three sets of reclamation demands upon City National Bank. When the demands were not honored the United States brought this action to recover the $34,389.53 amount, which constituted the proceeds of the seventy-two checks.
The question presented is whether the government is barred from recovering on the Bank's express and implied warranties because of one government agency's negligence in not communicating the information it had concerning Davis' death to the agency that issued the checks.
Defendant Bank argues that because the Veterans Administration had knowledge of Davis' death, the Department of the Army, Retired Pay Division, had presumptive knowledge of that event, and, therefore, the United States is barred from recovering the amount paid out on the fraudulently endorsed checks. Defendant relies on Clearfield Trust Company v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), to support its argument that the United States is barred from recovery as drawer-drawee of a check "if it is shown that the drawee on learning of the forgery did not give prompt notice of it and that damage resulted . . . ." 318 U.S. 363, 369, 63 S.Ct. 573, 576. Reliance is also placed on United States v. First National Bank of Chicago, 138 F.2d 681 (7th Cir., 1943), a case which involved a factual situation almost identical to the one here, for more specific authority. That case, which relied upon defendant's third cited case, United States v. National Rockland Bank, 35 F. Supp. 912 (D.C.Mass., 1940), held that the United States is barred from recovering on forged Treasury checks when one agency of the government has knowledge of the payee's death and the checks are nevertheless issued by another agency.
Defendant's latter two cases, however, cannot be followed in light of the Supreme Court's decision in National Metropolitan Bank v. United States, 323 U. S. 454, 65 S.Ct. 354, 89...
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United States v. City National Bank & Trust Co.
...the United States upon presentment by the Bank with prior endorsements guaranteed. The decision of the trial court is reported at 349 F.Supp. 1188 (W.D.Mo.1972). The following facts are undisputed. Fletcher Davis, a retired soldier, received disability payments from the United States commen......