Yatesville Banking Co. v. Fourth Nat. Bank

• Decision Date: 07 November 1911
• Docket Number: 3,147.
• Parties: YATESVILLE BANKING CO. v. FOURTH NAT. BANK.
• Court: Georgia Court of Appeals

72 S.E. 528

10 Ga.App. 1

YATESVILLE BANKING CO. v. FOURTH NAT. BANK.

No. 3,147.

Court of Appeals of Georgia

November 7, 1911

Casemaker Note: Portions of this opinion were specifically rejected by a later court in 121 S.E.2d 706

Syllabus by the Court.

Where the drawee of a negotiable instrument pays it to a person holding it through and under a forged indorsement of the payee's name, he may (subject to certain limitations) recover back from the person receiving the money on the paper the sum so paid, either in an action in the nature of an action of money had and received, or in an action upon the warranty implied from the presentation of the instrument that the indorsements thereon are genuine, or in an action upon an express warranty that the indorsements are genuine, if such an express warranty has been made.

If the person presenting and receiving payment on a negotiable instrument bearing the forged indorsement of the payee is himself innocent of the forgery, it is incumbent on the person who has so paid to give to the person to whom the payment has been made notice of the forgery within a reasonable time after discovering it. If he fails in this duty, the person so paid may, when sued for reimbursement by the person who has done the paying, set up, as a defense to the action, any loss that has been occasioned to him by reason of the failure to give timely and reasonable notice. However, as lack of notice, followed by loss, is an affirmative defense, it is not necessary for the plaintiff to negative it in his petition.

The person paying a negotiable instrument upon the express warranty of the person presenting it that all prior indorsements are genuine (the warranty being written on the instrument itself) may recover from his warrantor, if it turns out that the indorsement of the payee is forged without showing that he has returned or tendered the instrument to him, notwithstanding some of the signatures on it may be genuine, and the instrument may not be worthless from a commercial standpoint. The person who has thus paid out the money on the instrument bearing the forged indorsement and the warranty may hold it as evidence until reimbursement has been made or tendered.

"The mere fact that a plaintiff in his pleadings declares his intention of suing for the use of a third person does not raise any question as to the liability, either of the plaintiff or of the defendant, to such third person. The words declaring an intention to use the recovery for the benefit of another are, as to the defendant, harmless surplusage. He is not concerned in what disposition is to be made of the recovery."

Error from City Court of Atlanta; H. M. Reid, Judge.

Action by the Yatesville Banking Company, for use, etc., against the Fourth National Bank. Judgment for defendant, and plaintiff brings error. Reversed.

The Yatesville Banking Company brought suit against the Fourth National Bank, and laid two counts in the petition. The substance of these counts may be stated thus: In the first count it is alleged that the plaintiff sues for the use of McNeice and certain other persons, whose names are set out and that the defendant is liable to the plaintiff in the sum of $3,612, because, on July 7, 1907, the plaintiff issued a certain cashier's check for that sum of money, payable to North Penn Iron Company. That on or about July 10, 1907, the defendant notified the plaintiff that it (defendant) had paid this cashier's check upon the order of the payee, and it was held as a demand against the plaintiff. That upon receipt of this notification the plaintiff paid to the defendant the sum of money above named, and received from the defendant the cashier's check, when, as a matter of fact, the defendant had not paid, and never has paid, the amount of the check to the payee or his order, the indorsement of the name of the payee being a forgery; also that the usees named "have jointly paid unto the petitioner the sum of three thousand six hundred twelve dollars ($3,612) to indemnify petitioner for the sum aforesaid paid defendant." That plaintiff has demanded of defendant the sum sued for, and payment thereof has been thereupon refused. In the second count it is alleged that the plaintiff sues for the use of the same persons. That the check was issued, the indorsement of the payee forged, and payment of it with this forged indorsement was requested by the defendant. That the plaintiff paid to the defendant the amount of $3,612, receiving from the defendant therefor the original check, together with the defendant's guaranty in the following words: "Pay to the order of any bank or banker. Prior endorsement guaranteed. Fourth National Bank of Atlanta, July 13, 1907. Chas. I. Ryan, Cashier." That, being induced by this guaranty and relying upon the same, the plaintiff paid the amount of the cashier's cheek to the defendant. That the guaranty has failed, and that the plaintiff has lost the sum of $3,612 thereby. That "the usees have jointly paid unto petitioner the three thousand six hundred twelve dollars ($3,612), to indemnify petitioner for said loss." A copy of the check is set forth as an exhibit, and it appears that in addition to the indorsement, "North Penn Iron Co.," there are two other indorsements prior to the indorsement of the Fourth National Bank--those of John A Stewart and Stewart & Davis. The defendant filed a general demurrer, which the court sustained; and to this judgment the plaintiff excepts.

Scott & Davis, for plaintiff in error.

Rossen & Brandon, for defendant in error.

POWELL, J. (after stating the facts as above).

The demurrer was general, but the defendant in error alleges the following grounds why it should have been sustained: (1) That it is not alleged that reasonable notice of the forgery was given to the plaintiff, and that reasonable demand for the return of the money was not made; (2) that the cashier's check turned over to the plaintiff was not returned or tendered to the defendant before the suit was brought; (3) that it appears that the money paid out by the Yatesville Banking Company was repaid by the usees named in the action, before this suit was brought, and that the voluntary payment by the usees furnishes no right of recovery for this use.

Certain propositions are undisputed: (1) That the cashier's check stands as if it were a negotiable promissory note of the bank by which it was issued; (2) that the issuing bank stands thereto in the dual relation of drawer and drawee.

It is also conceded (3) that ordinarily the bank issuing the cashier's check, and having paid it upon forged indorsement, would not be held chargeable with any notice that the indorsement was a forgery, and that ordinarily it could recover, from one to whom it had paid the money on the faith of the forged indorsement, the amount which it had thus improperly paid out on the check. The case before us, therefore, narrows to a decision upon the special points already mentioned.

2. As to the first point really in issue: The law is that, where a person has paid a negotiable paper to another on a forged indorsement, and the latter is innocent of the forgery, it is incumbent upon the person so paying to give notice of the forgery to the other person within a reasonable time after discovery of the fact; and he may lose his right of action for failure to give the notice, provided that his laches in this respect has subjected the other to loss. What is reasonable notice in such a case is generally a question for the jury.

After stating a somewhat contrary doctrine, asserted by some of ...