Woods v. Colony Bank

• Decision Date: 06 February 1902
• Citation: 40 S.E. 720,114 Ga. 683
• Parties: WOODS et al. v. COLONY BANK.
• Court: Georgia Supreme Court

40 S.E. 720

114 Ga. 683

WOODS et al. v. COLONY BANK.

Supreme Court of Georgia

February 6, 1902

Syllabus by the Court.

1. Portions of a demurrer which are "speaking" should be overruled.

2. The rule that a drawee is presumed to know his drawer's signature, and hence cannot recover back money paid, through a mistake of fact, upon a bill to which the drawer's signature was forged, is not available in favor of a holder who by his own negligence contributed to the success of the fraud practiced, and whose conduct had a tendency to mislead the drawee, who was himself free from fault.

Error from superior court, Irwin county; D. M. Roberts, Judge.

Action by Woods & Malone against the Colony Bank. Judgment for defendant, and plaintiffs bring error. Reversed.

Hal Lawson and Eldridge Cutts, for plaintiffs in error.

J. H Martin and L. Kennedy, for defendant in error.

LEWIS J.

Woods & Malone brought suit against the Colony Bank, making in their petition substantially the following allegations: On a named day a draft for $150, payable to A. W. Hodge or bearer, and purporting to have been drawn by Jacob Dorminy upon petitioners, was cashed by the defendant, and transferred to it by the person then having it in possession. At the time of cashing the draft the defendant was guilty of negligence, in failing to require any identification of the person presenting it, and in failing to use any diligence to ascertain whether or not the signature of Jacob Dorminy was genuine. The defendant indorsed the draft, and in due time it was presented to petitioners for payment. Petitioners, in the exercise of all due diligence, and believing the paper to be genuine, paid it, and charged the amount to the account of Dorminy; the defendant receiving the sum thus paid. Subsequently the signature of Jacob Dorminy was discovered to have been forged, whereupon petitioners credited Dorminy's account with the amount with which it had been charged, and promptly notified the defendant that the paper was a forgery, and demanded the return of the money paid it by petitioners, which demand was refused. The payment of the amount of the draft by petitioners was made under a mistake of fact as to the genuineness of the signature of Jacob Dorminy, and petitioners were guilty of no negligence in the matter. They sued to recover back from the defendant the money paid on the draft, with interest. Attached to the petition as an exhibit was a copy of the draft, on the back of which was the indorsement, "A. W. Hodge," and the following indorsement by the defendant: "Pay to order of any bank or banker. The Colony Bank, Fitzgerald Ga., Wm. R. Bowen, Cashier." The defendant demurred generally, and also demurred specially on the grounds that the petition did not allege what person transferred the alleged draft to the defendant; that the petition shows that if the plaintiffs have sustained any loss, it was by their own neglect and carelessness, it appearing that Dorminy was a patron of the plaintiffs and not of the defendant, and, if the plaintiffs paid out money to take up the draft without knowing the signature of their patron, they did so at their peril; that the defendant had nothing to do with the draft, except to forward it for collection, and was consequently not liable to the plaintiffs if they paid it under the belief that it was genuine, when it was in fact a forgery; and that the petition did not allege that the defendant knew that Dorminy's signature to the draft was a forgery. The court sustained the demurrer and dismissed the petition, whereupon the plaintiffs excepted.

1. Those portions of the demurrer which allege that the bank had nothing to do with the alleged forged paper, except to forward it for collection, set up matter of defense, and not of demurrer, and should have been overruled as "speaking." See Beckner v. Beckner, 104 Ga. 219, 30 S.E. 622.

2. It is a rule of the common law that the drawee of a bill of exchange is presumed to know his drawer's signature, or at least is presumed to know it better than a stranger; and hence it was held that, if a drawee innocently pays a forged bill to one who has bought the paper bona fide, he cannot recover back the money so paid upon discovery of the forgery. The leading English case on this subject is Price v Neal, 3 Burrows, 1354, which has been cited approvingly and followed by many of the courts of this country. See Bank of U.S. v. Bank of Georgia, 10 Wheat. 333, 6 L.Ed. 334; Bank of Commerce v. Union Bank, 3 Comst. 230; Goddard v. Bank, 4 Comst. 147; National Park Bank v. Ninth Nat. Bank, 46 N.Y. 77; Bernheimer v. Marshall, 2 Minn. 78 (Gil. 61), 72 Am.Dec. 89; Bank of Boutell (Minn.) 62 N.W. 327, 27 L.R.A. 635, 51 Am.St.Rep. 519; Deposit Bank of Georgetown v. Second Nat. Bank of Lexington (Ky.) 13 S.W. 339, 7 L.R.A. 849; Bank of Belmont v. First Nat. Bank of Barnesville, 58 Ohio St. 207, 50 N.E. 723; Stout v. Benoist, 39 Mo. 277, 90 Am.Dec. 466; Bank of St. Albans v. Farmers' & Mechanics' Bank, 10 Vt. 141, 33 Am.Dec. 188; Commercial & Farmers' Nat. Bank v. First Nat. Bank of Baltimore, 30 Md. 11, 96 Am.Dec. 554; First Nat. Bank of Marshalltown v. Marshalltown State Bank (Iowa) 77 N.W. 1045, 44 L.R.A. 131. Allen, J., in the case of National Park Bank v. Ninth Nat. Bank, supra, asserts that "the rule extends as well to the case of a bill paid upon presentment as to one accepted and afterward paid," and adds, "A rule so well established, and so firmly rooted and grounded in the jurisprudence of the country, ought not to be overruled or disregarded;" while the Missouri case of Stout v. Benoist, supra, lays down as the reason of the rule that "where persons are equally innocent, and one is bound to know and act upon his knowledge, and the other has no means of knowledge, it would be unjust to burden the latter with a loss for the purpose of exonerating the former." Some of the cases cited carry the rule to its farthest limit, and hold that under no circumstances (except, of course, where the purchaser of the bill has participated in the fraud upon the drawee) will the drawee be allowed to recover back money paid under a mistake of fact upon a bill of exchange to which the name of the drawer has been forged. This doctrine, however, has been freely criticised by eminent authorities. See 2 Morse, Banks, §§ 463, 464; 2 Daniel, Neg. Inst. § 1361. Mr. Daniel says: "When the holder has received the bill after its acceptance, the acceptor stands towards him as a warrantor of its genuineness, and, receiving the bill upon faith in the acceptor's representation, there is obvious propriety in maintaining his right to hold the acceptor absolutely bound. Indeed, the acceptor, being the primary debtor, stands just as the maker of a genuine promissory note. But when the...