Birmingham National Bank v. Bradley , 103 Ala. 109 ( 1893 )

OOLEMAN, J.

This was an action brought by the plaintiff bank to recover money paid to the defendant Bradley, upon a check. We think the pleadings unnecessarily prolix, and tended to hide the real issue involved in the case. The facts upon which the plaintiff relied, for a recovery may be summarized as follows : On the 23d of February, 1892, The Gate City National Bank, of Atlanta, Ga., drew a check payable to the order of James Fix for the sum of two dollars on the National Park Bank of New York. After this check was issued, without the knowledge or consent of the drawer, the name of the payee was changed to John G. Bradley, the defendant, and the amount changed from two dollars to 'four thousand dollars. One Gelliam carried the check to Birmingham', where Bradley resided— who was well known to the plaintiff bank, and who was considered reliable and responsible by the bank. Bradley endorsed the check to the plaintiff bank and received from it the full amount of four thousand dollars in cash. The plaintiff bank forwarded the check immediately to the drawee bank in New York endorsed “ for collection.” The check reached New York on the 27th of February, and on the same day the drawee telegraphed to the plaintiff that the check was paid, which information was immediately communicated to Bradley. On the 29th of February, Bradley having his suspicions aroused, had the plaintiff to telegraph to the drawee bank to examine closely the check. In consequence of this telegram, the National Park Bank on the same day telegraphed to the Gate City Bank, the drawer, from which it learned that the check had been altered as above stated. Thereupon, on the next day, March 1st, the National Park Bank, the drawne and to. which the check had been forwarded for collection, telegraphed to the plaintiff bank as follows : “The four thousand dollar Gate City National Bank check has been altered from two dollars. We charge it back, and return to you today.” The contents of this telegram were at once made known to Bradley. • There was no question as to the genuineness of the signature of the drawer. This is plaintiff’s case.

The case for the defense is substantially as follows : First, that there had been no alteration of the check,but that it was drawn originally in his favor for four thousand dollars. Second, that if the check was raised from two dollars to four thousand dollars, and his name substituted for the original payee, that he was deceived and imposed upon-by Gelham and induced to receive the check believing it to be genuine, and without fault on his part, received the money for it from the plaintiff, that he applied about five hundred dollars to the payment of a debt due himself from Gelham, that he retained about eight hundred dollars, at Gelham’s request, for another creditor of Gelham, and the balance was paid over to Gelham, that the drawee, the National Park Bank, had been negligent in not detecting the forgery within a reasonable time and informing the defendant of the forgery, that in consequence of this neglect of the National Park Bank the defendant had been injured, in this, that Gelham was in the city of Birmingham on the 27th of February, on which day, if the defendant had been duly notified of the forgery, he would have arrested Gelham and recovered back the money. And, third, that the check was paid by the National Park Bank to the plaintiff bank, and, therefore, the plaintiff bank has no cause of action against the defendant.

The principles of law which govern this case are well settled.

Bradley was the payee of the check. When he endorsed it to the plaintiff bank and received the money on it, he warranted to the' endorsee bank the genuineness of the check, both as to the drawer’s signature as well as the amount expressed in the check. As to him there is no obligation upon tbe plaintiff bank to know or to discover that the drawer’s signature was forged or the amount raised. The drawee bank is held'to a knowledge of the signature of the drawer, but the payee indorser is held to a knowledge of all other facts.

The discounting bank and the drawee bank in such a case have the right to rely upon the endorsement of the payee, and as to him are not required to exercise any diligence to discover the fact that the check had been raised. These facts are conclusively presumed to be within the knowledge of the payee. Under such circumstances the money paid can be recovered back in assumpsit, unless possibly from some subsequent arrangement, or cause, the right is lost. Certainly the fact, that the payee, who received the money as payee and ostensible owner, has disposed of it according to his own will can not in any way affect this right. The authorities cited by appellee to the proposition, that if a bank pays a forged check to a holder without fault, who in ignorance of the fraud pays value for it, the money cannot be recovered back, are not applicable to the case at bar. Bradley was the payee, and by his indorsement obtained the money. He parted with nothing to get possession of the check. Its genuineness is conclusive as to him, and as endorser he guaranteed it to be genuine for the amount expressed in the check. — Carpenter v. Nat. Bank, 123 Mass. 66; Nat. Park Bank v. Seaboard Bank, 114 New York 28 ; 11 Amer. St. Rep. 612 ; White v. Bank, 64 New York 316; Susquehanna Bank v. Loomis, 85 New York 207.

The check was forwarded by the • plaintiff to the National Park Bank for collection. The amount of the check was credited to the plaintiff on the day received, and the plaintiff notified that it was paid. As soon as the forgery was discovered, which was within three days after its reception, the National Park Bank charged the amount back to the plaintiff and returned the check. If the money in fact had been remitted to plaintiff, we do not doubt, under the facts disclosed in the record, the National Park Bank could have recovered the money in assumpsit. The check was forwarded “for collection.” Funds of the drawer on deposit with the drawee were applied to its payment, by crediting the amount to the forwarding bank, and if the check had been altered, the credit was without legal authority from the drawer, and under a mistake of facts for which, as between the drawee bank, if the money had been remitted, or the forwarding bank, which had paid the money, and the payee — endorser—the latter would be responsible, in an action for money had and received. — Young & Son v. Lehman, Durr & Co., 63 Ala. 519 ; 114 New York, supra; U. S. Bank v. Nat. Park Bank, 29 N. E. Rep. 1028. The payee of a forged check, who endorses it, and receives the money, acquires no title as against the party or the owner of the money. It would seem unnecessary to cite additional authorities to this proposition — 114 New York, supra ; U. S. Bank v. Nat. Park Bank, 29 N. E. Rep. 1028.

The respective rights of the drawer and drawee, and their corresponding duties and liabilities to each other, and private rules existing between them for their mutual protection do not arise in this case. Not having remitted the money, but simply having credited the amount to the plaintiff, the drawee bank had the right to charge it back. The undisputed proof establishes the fact that the demand has not been paid to the plaintiff by the defendant Bradley.

The case cited by appellee, Clews v. Bank of New York, 114 N. Y. p. 70, is not applicable. In the authority cited, . Clews, before purchasing the certified check, enquired of the certifying bank, if the certificate of the check was good, and, being assured that “the bill was correct in every particular,” pai’ted with valuable consideration for it. The check had been raised. The suit was maintained, not upon the ground that the certifying bank had been negligent, but upon the contract of certification. If Bradley had been so assured by the drawee bank, that the check was correct in every particular, and upon this assurance had parted with value to obtain the check, the case would be more in point. The relative obligation of the parties in the case at bar are the reverse. The drawee bank was assured by Bradley’s endorsement, and by the plaintiff bank, that the amount expressed in the check was the real amount for which it was given.

We have held that the plaintiff owed the defendant no duty to discover the fraud and forgery, and the evidence is without contradiction that both the plaintiff and the National Park Bank acted with all due diligence, after the discovery of the alleged fraud and forgery. Under the facts of the record before us there is but one open question, and that is, whether the check was in fact altered, after it was i'ssued'by the Gate City Bank, and before it was endorsed by the defendant Bradley. The statement of the principles of law applying to the case, will enable the parties to shape the issues properly on another trial.

Reversed and remanded.