Rhodes v. Jenkins , 18 Colo. 49 ( 1892 )

Chief Justice Hayt

delivered the opinion of the court.

It is admitted that at the time of the transaction which forms the basis of this action, and for many years prior thereto, one John H. Hall was a customer of and depositor with Railey & Bro., bankers, at Weston, Mo. The draft in question was issued for the balance remaining to the credit of this John H. Hall at this banking house at the time. It was made payable to his order and mailed to his Denver address. This draft did not reach the party for whom it was intended; on the contrary, it fell into the hands of another person calk ing himself John H. Hall, and this man by the aid of appellant’s indorsement secured payment upon the same. The bona fides of the transaction on the part of appellant under these circumstances is not material. The case may be determined upon the simple question of the liability of one who indorses a bill of exchange. It is a well established principle of commercial law that one who indorses and delivers commercial paper thereby becomes responsible for its genuineness and that of all previous indorsements. 1 Daniel on Neg. Inst., sec. 669a; Story on Bills of Ex., secs. 110-235.

It is not necessary for us to determine the rights of Railey & Bro., the drawers of this draft, had they paid the same to an innocent third party upon this forged- indorsement. It is sufficient to say that they did not pay it, are not here complaining, and are not parties to this action. The draft was paid to the German National Bank of Denver by the drawees, Donnell, Lawson & Simpson of New York, and the amount so paid turned over to appellant. The drawees in making this payment had a right to, and undoubtedly did, rely upon tlie indorsement of both the Denver bank and that of appellant. The Denver bank in turn had recourse upon the indorsement of appellant.

It is evident that the German National Bank in indorsing this draft was acting upon the guaranty growing out of appellant’s indorsement. It is not pretended that its cashier in indorsing the same was induced to do so by reason of having any knowledge of the handwriting or financial responsibility of the person who indorsed thereon the name of John H. Hall, other than that derived from the indorsement of Rhodes. If the facts were otherwise, the liability of appellant by reason of his indorsement would remain the same. This is not a case of a bank seeking to recover money paid by it on a forged check against the account of a depositor. As we have seen, Railey & Bro. did not pay this draft, and although it is well settled that banks are presumed to know the signatures of their customers, this presumption in no way aids appellant. There is no principle of law or of common sense that would extend this presumption to the officers of banks other than those with which such deposits are made. Upon the same principle when a drawee pays a forged bill of exchange to the holder thereof, he cannot recover back the money so paid._ The reason upon which this rule is based is the negligencé imputed to the drawee, who is supposed to know the handwriting of his correspondent much better than the holder- does. This rule has no application to this case. Here, the draft is admittedly genuine, the indorsement of Hall only being spurious. There is no principle upon which the drawee under the circumstances here disclosed can be held to be familiar with the handwriting of the payee. The reason upon which the rule is based failing, the rule cannot be held applicable. While, therefore, Railey & Bro. in a proper case might be estopped from setting up the forgery of the signature of one of their depositors to a check paid by them to an innocent third party, the drawees in New York, Donnell, Lawson & Simpson, with whom Hall is not shown to ever have transacted any business, are not so estopped.

It is contended that the German National Bank was but a mere agent to collect, and having collected the money and paid the same over to appellant, no liability rested upon the bank to refund the amount to the New York institution. This argument is plausible, but not sound. As to the question of the genuineness of the draft, each indorser in receiving and indorsing it was entitled to rely upon the credit of the previous indorsers. Appellant by his indorsement guaranteed the genuineness of the indorsement of Hall to him, and upon this guaranty the Denver bank was induced to give the paper the indorsement upon which it was paid by Donnell, Lawson & Simpson in New York. Under these circumstances, the New York institution had recourse upon the Denver bank, and the latter in turn upon appellant.

' The rule of law which makes appellant liable in this case places the loss where it properly belongs. Appellant lent his credit by indorsing the paper to a man confined under a charge of forgery. He transacted the business for him at the bank at a time when such person could not have perpetrated the fraud without assistance. Certainly as between the Denver bank and appellant, the greater negligence is chargeable upon the latter, he having first received the draft from the person who committed the forgery. Bank of Com. v. Union Bank, 3 Coms. 230.

The judgment of the superior court is right and must be

Affirmed.