Sims v. American National Bank , 98 Ark. 1 ( 1911 )

Kirby, J.,

(after stating the facts). Can the payee of a check or draft whose indorsement was forged, after payment Dy the bank upon which it was drawn upon such forged indorsement, maintain an action against the drawee to recover the amount of it?

The question is before this court for the first time. There are many authorities holding that the payee of a check, unaccepted, may bring suit against the drawee, upon the theory that it has the amount of the draft in its hands subject to the order of the drawer which is in effect by the check assigned to the payee, but the great weight of authority is against the proposition. Zane on Banks and Banking, § § 146, 147; Morse on Banks and Banking, § 493-

The precise question was answered in the .negative by the United States Supreme Court in First National Bank v. Whitner, 94 U. S. 343, 24 L. Ed. 230, the court saying: “We think it is clear, both upon principle and authority, that the payee of a check, unaccepted, cannot maintain an action upon it against the bank on which it was drawn;” and, continuing in answer to a like contention made there that such unauthorized payment constituted an acceptance, that court, said:

“It is further contended that such an acceptance of the check as creates a privity between the payee and the bank is established by the payment of the amount of this check-in the manner described. This argument is based upon the erroneous assumption that thq, bank has paid this check. If this were true, it would have discharged all of its duty, and there would be an end of the claim against it. The bank supposed that it had paid the check; but this was an error. The money it paid was upon a pretended and not a real indorsement of the name of the payee. The real indorsement of the payee -was as necessary to a valid payment as the real signature of the drawee; and in law the check remains unpaid. Its pretended payment did not diminish the funds of the drawer in the bank, or put money in the pocket of the person entitled to the payment. The state of the account was the same after the pretended payment as it was before.

“We cannot recognize the argument that a payment of the amount of a check or sight draft under such circumstances amounts to an acceptance, creating a privity of contract with the real owner. It is difficult to construe a payment as an acceptance under any circumstances. The two things are essentially different. One is a promise to' perform an act, the other an actual performance. A banker or an individual may be ready to make actual payment of a check or draft when presented, while unwilling to make a promise to pay at a future time. Many, on the other hand, are more ready to promise to pay than to meet the promise when required. The difference between the transactions is essential and inherent.”

In such matters it is important that uniformity should obtain in the different jurisdictions, and that but one rule should be applied to the business dealings of the citizens of the different States with each other, so closely interwoven is such business activity and association with the vast commercial life of the nation; and since the United States Supreme Court is the highest court of last resort, and does not follow the decisions of the State courts upon general banking and commercial questions, we will follow it. Exchange National Bank v. Coe, 94 Ark. 387.

We hold that there was no privity of contract between the holder of this draft, which had been paid by the drawee bank upon the forged indorsement of the payee, which would entitle him to bring suit against said drawee bank, and that its action in the payment of such draft did not constitute an acceptance thereof that would release the drawer tyom its payment. See, also, Bellows Falls Bank v. Rutland Co. Bank, 40 Vt. 377; Carr v. National Security Bank, 107 Mass. 45; Dana v. Third National Bank, 13 Allen, 445; Case v. Hendorsan, 23 La. Ann. 49; Aetna National Bank v. Fourth National Bank, 46 N. Y. 82; Bank of Republic v. Millard, 10 Wall. 152; Moses v. Franklin Bank, 34 Md. 574; Colorado Nat. Bank. v. Boettcher, 5 Col. 189; Grammel v. Carmer, 55 Mich. 203; Brennan v. Merchants’ & Manufacturers’ Nat. Bank, 62 Mich. 348; Cincinnati, H. & D. Rd. Co. v. Bank, 54 Ohio St. 68; Thomson v. Bank of British North America, 82 N. Y. 1; Pratt v. Union Nat. Bank, 75 Atl. 313; Merchants’ National Bank v. Coates, 79 Mo. 168; Dickinson v. Coates, 79 Mo. 251; Coates v. Doran, 83 Mo. 337.

The drawee ¡bank had no right to pay out the money of the drawer upon his draft upon the forged indorsement of the payee thereof, nor to charge such sum of money so wrongfully paid to the account of the drawer, and is, of course, liable to it for said amount.

There is nothing in the contention here that appellee had no notice of the refusal of the drawee bank to accept and pay this draft when it was presented by the payee, long after it had already been paid by said drawee bank upon the forged indorsement and returned as a voucher to the drawer bank, who had been notified before it was turned over after such receipt by it, to the payee, that the drawee had already paid said draft, and refused to allow the drawer any credit for same upon its demand therefor, on account of it having been paid upon the indorsement of a person not entitled to receive it. Appellee knew the payee’s indorsement had been forged; it knew that the drawee bank had wrongfully paid said draft upon such forged indorsement, and refused to repay the same to it, the drawer, and declined to give it credit therefor. Knowing all these things, a notice of its presentment afterwards, which was made by the payee in effect for the benefit of appellee, if not at its suggestion, was not required, and could have been of no benefit to it. Auten v. Manistee National Bank, 67 Ark. 249.

The appellee was liable to the payee of the draft for the amount of it, and, its drawee having failed and refused to pay it, it can only discharge such liability by the payment thereof itself. The facts being virtually undisputed, and there being no useful purpose to serve by remanding this cause, the judgment is reversed, and judgment will be rendered here in favor of appellants for the amount of the draft, $500, with interest.

It is so ordered.