Uriola v. Twin Falls Bank & Trust Co.

• Decision Date: 02 June 1923
• Court: Idaho Supreme Court
• Parties: JOHN URIOLA, Appellant, v. TWIN FALLS BANK & TRUST COMPANY, a Corporation, Respondent

215 P. 1080

37 Idaho 332

JOHN URIOLA, Appellant, v. TWIN FALLS BANK & TRUST COMPANY, a Corporation, Respondent

Supreme Court of Idaho

June 2, 1923

NEGOTIABLE INSTRUMENTS-INTENT OF DRAWER-LIABILITY OF INDORSER-INNOCENT HOLDERS-IMPOSTOR AS PAYEE-NEGLIGENCE OF DRAWER-LIABILITY.

1. Where a party purchases a draft from a bank made payable to a designated payee, the intent of the purchaser as to the payee becomes the intent of the bank.

2. A bank is not liable for the payment of a draft on a forged indorsement, where the person committing the forgery and receiving the money was in fact the person to whom the drawer delivered the instrument, whom he believed to be the payee named, and who was the individual intended to receive the same.

3. Where the drawer of a check delivers it, for a consideration which turns out to be fraudulent, to an impostor 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 who paid the imposter upon his indorsement 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 indorse it and receive the money, and that the drawer made no inquiry concerning the identity or credit of the named payee, who was unknown to the drawer.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. Wm. A. Babcock, Judge.

Action by plaintiff to recover money charged against his account by defendant bank. From judgment for defendant, plaintiff appeals. Reversed and remanded, with instructions.

Reversed and remanded, with instructions. Costs awarded to appellant.

E. M Wolfe and J. F. Martin, for Appellant.

When a draft is made payable, and delivered to an impostor by the drawer of such draft, and the draft comes into the hands of an innocent purchaser for value and without notice, the drawer must stand the loss as between it and the innocent purchaser. (Hoffman v. American Exchange Nat. Bank, 2 Neb. (Unof.) 217, 96 N.W. 112; Montgomery Garage Co v. Manufacturers' Liability Co., 94 N.J.L. 152, 109 A. 296, 22 A. L. R. 1224, and cases cited; Robertson v. Coleman, 141 Mass. 231, 55 Am. Rep. 471, 4 N.E. 619; McHenry v. Old Citizens' Nat. Bank, 85 Ohio St. 203, 97 N.E. 395, 38 L. R. A., N. S., 1111; see notes, 50 L. R. A. 75; 17 L. R. A., N. S., 514; 38 L. R. A., N. S., 1111; Brannon's Negotiable Instrument Law, 3d ed., pp. 87-89, 468-471, 498-504.)

The indorsement of an impostor upon a check passes good title to the check to an innocent purchaser. (Robertson v. Coleman, supra; Land Title & Trust Co. v. Northwestern Nat. Bank, 196 Pa. 230, 79 Am. St. 717, 46 A. 420, 50 L. R. A. 75, and cases cited.)

Frank L. Stephan, for Respondent.

Respondent bank had the right as a matter of law to cancel the credit and charge back to the account of the appellant the amount of its loss. (3 R. C. L. 522; 7 C. J. 633; Bailie v. Augusta Savings Bank, 95 Ga. 277, 51 Am. St. 74, 21 S.E. 717; Blake v. Hamilton Dime Sav. Bank Co., 79 Ohio St. 189, 128 Am. St. 684, 16 Ann. Cas. 210, 87 N.E. 73, 20 L. R. A., N. S., 290; National Gold Bank & Trust Co. v. McDonald, 51 Cal. 64, 21 Am. Rep. 697; Ocean Park Bank v. Rogers, 6 Cal.App. 678, 92 P. 879; Lyon County State Bank v. Schaffer, 102 Kan. 868, 171 P. 1159; Belsheim v. First Nat. Bank of White Salmon, 77 Wash. 552, 137 P. 1055.)

Appellant's right to recover the credit given him by respondent bank is defeated by the forged indorsement of the payee's name. (C. S., sec. 5890; 7 C. J. 636; 5 R. C. L. 564; Crawford on Negotiable Instruments, p. 57; First Nat. Bank of Chicago v. Northwestern Nat. Bank, 152 Ill. 276, 43 Am. St. 247, 38 N.E. 739, 26 L. R. A. 289; People's Bank v. Franklin Bank, 88 Tenn. 299, 17 Am. St. 884, 12 S.W. 716, 6 L. R. A. 724; 3 R. C. L. 1296.)

As between appellant and respondent, appellant was the less diligent and should bear the loss resulting from his negligence. (Heim v. Neubert, 48 Wash. 587, 94 P. 104; People's Bank v. Franklin Bank, supra.)

A forged indorsement is wholly inoperative and does not convey title to the instrument. (Tolman v. American Nat. Bank, 22 R. I. 462, 84 Am. St. 850, 48 A. 480, 52 L. R. A. 877; Shipman v. Bank of State of New York, 126 N.Y. 318, 22 Am. St. 821, 27 N.E. 371, 12 L. R. A. 791; Armstrong v. Pomeroy Nat. Bank, 46 Ohio St. 512; Jordan Marsh Co. v. Shawmut Nat. Bank, 201 Mass. 397, 87 N.E. 740, 22 L. R. A., N. S., 250; First Nat. Bank of Chicago v. Pease, 168 Ill. 40, 48 N.E. 160; Seaboard Nat. Bank v. National Bank of America, 193 N.Y. 26, 85 N.E. 829, 22 L. R. A., N. S., 499.)

GIVENS, Commissioner. McCarthy and Wm. E. Lee, JJ., concur, Dunn, J., concurs in the conclusion.

OPINION

GIVENS, Commissioner.

This case was submitted upon stipulated facts found in the findings of fact and conclusions of law, as follows:

"That prior to the 20th day of August, 1920, J. Kawai stole from U. Watanabe, of Shoshone, Idaho, a certain time certificate of deposit, of the approximate value of $ 500. That thereafter the said J. Kawai assumed the name of U. Watanabe and held himself out as the owner of said certificate of deposit. That under such assumed name, he rented a room at the Plaintiff's rooming house, registering as U. Watanabe, and was known to the plaintiff by said name. That he rented a post-office box, number 298, at the Twin Falls Post Office under the said name of U. Watanabe, and received his mail through said post-office box under said name.

"That thereafter the said J. Kawai wrote one Henry Betsun, of Salt Lake City, Utah who was engaged in the business of loaning money, enclosing said certificate of deposit which he had stolen from U. Watanabe, and requesting a loan thereon, and signed the same 'U. Watanabe,' and sending for the return address the post office box number 298, which he had rented under said name at the Twin Falls Post Office. That the said Henry Betsun, answering said letter, addressing the same to the address as directed, as stated above, returned the said certificate of deposit, and also enclosed a blank application for a loan to be filled out by the applicant. That J. Kawai filled out said application and signed same 'U. Watanabe,' and returned it to the said Henry Betsun, in Salt Lake City, together with the said certificate of deposit; and upon receipt thereof the said Henry Betsun purchased from the Utah State National Bank, of Salt Lake City, Utah a Cashier's check made payable to U. Watanabe, for the sum of $ 400, a copy of which is attached to defendant's answer herein, and forwarded the same to the said J. Kawai by mail, addressed to U. Watanabe, in care of the said post office box rented by the said J. Kawai under the name of U. Watanabe.

"That after the said J. Kawai received the said cashier's check he endorsed thereon the name of U. Watanabe and delivered the same to the plaintiff. That thereafter the plaintiff endorsed said cashier's check and deposited the same with the defendant bank; that the same was paid on the 25th day of August, 1920, by the Utah State National Bank, of Salt Lake City, the maker thereof. That it was later discovered that the said J. Kawai was not the owner of said time certificate of deposit, but that he had stolen the same; whereupon, on the 24th day of September, 1920, the defendant bank charged the plaintiff's account with $ 400, without his consent and against his will. That the said bank immediately notified the said plaintiff of such charge.

"That neither the plaintiff nor the defendant had any notice or knowledge of any of the wrongful acts of the said J. Kawai, and that the plaintiff, Uriola, was an innocent purchaser of the said cashier's check. . . .

"That the said J. Kawai was charged with the crime of forgery, and more particularly, with forging the name of U. Watanabe upon the back of the said cashier's check, and was convicted of the said crime."

Plaintiff, appellant, sued the bank, respondent, for the $ 400 thus charged against his account. While it might appear from the stipulation that the issues were between appellant and respondent only, two innocent holders, nevertheless we must go further in order to find the facts upon which the bank based its right to charge the $ 400 against appellant's account.

The bank must have paid the $ 400 to the Utah State National Bank, the maker of the cashier's check in question, and the Salt Lake Bank must have in turn reimbursed Betsun for the $ 400 paid by him to the Salt Lake bank in the purchase of said check, before the respondent would have been in a position to demand the return of the money paid to appellant. If respondent has not thus repaid Betsun, it has sustained no loss and had no right to charge the $ 400 to appellant, and hence has no defense at all.

The return of the money through these channels to Betsun would be based upon the conclusion that the indorsement by Kawai, impersonating Watanabe, on the cashier's check sent Kawai by Betsun, payable to U. Watanabe, and cashed by appellant for Kawai, was a forgery. Unless Betsun had a valid claim against the Utah State National Bank for the return of his money, the Salt Lake bank had no valid claim against the Twin Falls bank, and the Twin Falls bank had no right to make a charge therefor against appellant's account. The rights of Betsun and Uriola are the determinative factors.

"Generally a bank is not bound to know the signature of the indorser of a check, and, if it pays a check on a forged indorsement, it can recover the money of the party to whom it was paid, if it proceeds promptly on discovery of the fraud. This is upon the principle that the indorsement of a check is an implied...