Midland Savings & Loan Co. v. Tradesmen's Nat. Bank of Oklahoma City , 57 F.2d 686 ( 1932 )

MeDERMOTT, Circuit Judge.

I concur in the opinion of Judge SYMES; I reach the same conclusion by a somewhat different method of approach, and perhaps place my emphasis in a different place.

When these checks were presented for payment, the bank was advised that there were two payees — “Dan Dewberry, Agent,” and the borrower. The Negotiable Instruments Law of Oklahoma provides: “Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing had authority to indorse for the others.” C. O. S. 1921, § 7711.

The hank knew, therefore, that it had no right to pay these checks unless (a) the borrowers had indorsed them, or (b) the borrowers had authorized Dewberry to indorse for them. There is not even a claim that the borrowers (except the “straw” men referred to by Judge Symes) authorized Dewberry to indorse. The plaintiff could not, of course, authorize Dewberry to sign a borrower’s name. The fact that the borrower was named as a payee was written, dear, and unequivocal notice to the bank that the plaintiff required the indorsement of the borrower before parting with its money. I therefore cannot see that the question of the scope of Dewberry’s powers as agent has any bearing; even if he were president and general manager, the plaintiff would still have a right to make a check payable jointly to him and another; and, when it does, it is notice to the world that, as to that check, the signatures of both payees are required.

It seems to me that this is the ordinary case of a bank paying on a forged indorsement. Counsel for the bank frankly and fairly accepts the law to be that a bank, paying on a forged indorsement, is liable "unless such payment is properly attributable to the negligence or other fault of the depositor or unless the money has actually reached the person whom the drawer intended should receive it, or the drawer himself. 7 C. J. 686, par. 414.” The ease before us is whether the facts bring this case within these exceptions; and, if not, whether the plaintiff is barred, in whole or part, by an election of remedies.

1. The first line of defense is that the plaintiff intended the funds to reach Dewberry’s exclusive, control; that, even if the borrower had indorsed the cheeks, Dewberry would have come into exclusive control of the money, and would have embezzled it just the same; that therefore the forgery was but an incident of, and not the cause of, the loss. I think the defense is not well taken for two reasons.

(a) T do not believe that an intention of plaintiff that Dewberry should have exclusive control after the borrower indorses • — which is the most that can be .made of the evidenee-rwill support a finding'that plaintiff intended the funds to come into his control without the borrower’s indorsement; if Dewberry came 'into exclusive control after the borrower indorsed, it could only be with the consent of the borrower; and certainly the legal relation of plaintiff and the borrower is not the same when his indorsement is genuine as when it is forged.

(b) I do not think the record- discloses any basis for a finding that the plaintiff intended this money to come into the exclusive control of Dewberry after the genuine indorsement of the borrower — much less that the evidence is so conclusive that it should be taken from the jury. The best evidence on the question of plaintiff’s intent is the cheeks. They are in writing, conceded, and unambiguous. By making the check payable jointly to Dewberry and the borrowers, I think the writing discloses a clear and unmistakable intent that the money should not reach the exclusive control of Dewberry, but should go to the joint control of Dewberry and the borrowers. Of course, the borrowers could, and many of them did, consent to Dewberry’s exclusive control; but such control conies then from the consent of the borrower, and not from the intent or direction of plaintiff. If the borrower consents to exclusive control, and embezzlement follows, the plaintiff’s rights against the borrower are vastly different from the case where the borrower does not indorse.

The reason checks are made payable to joint payees is to prevent any of the funds being used without consent of both. We cannot say that the plaintiff did not so intend. Defendant answers that it was impossible for Dewberry to comply with his instructions without such exclusive control; that he could not pay off taxes and prior liens without the use of the funds represented by the cheeks; that exclusive control was necessary, and the intent is implied from the necessity. But there is no such necessity, nor any evidence thereof. The distribution of the proceeds of a cheek payable to two or more payees can and is every day accomplished without either having exclusive control of the proceeds, either by checks of distribution being delivered simultaneously with the joint indorsement, or by placing the proceeds of' the joint cheek in a joint account. We eannot hold, as a matter of law or of faetj that it is necessary that an agent have exclusive custody of the proceeds of a joint cheek, in order to close a loan. To so hold would be to challenge the right of lenders to make checks payable jointly to their agents and their borrowers, a well-settled practice in the business world.

The plaintiff intended just what the cheeks said, and just what is universally intended when checks are issued to joint payees — that none of the proceeds should bo available until all had agreed on the distribution. I cannot agree with defendant that there is any evidence indicating a contrary intent. I agree that, where the proceeds of a cheek reach the person intended, no harm has been done; but I cannot agree that, when a drawer names two payees, he intends but one.

2. I find no evidence of negligence or es-toppel. The claim rests upon the proposition that the plaintiff did business through an agent, and authorized him to pay off prior liens and close loans. If insurance companies or other lenders are to do business away from their home office, as they do, agents must be utilized. In making loans, taxes, prior liens, abstract and recording fees must often be paid from the proceeds. I can see no negligence in appointing an agent for the purpose, nor in making the cheek payable to him and the borrower. Certainly it is the customary method; and, by the use of joint checks, assurance is given that a proper distribution is made only with the consent of the borrower. Nor is there any evidence of estoppel; the plaintiff held Dewberry out a,s its agent, and be was. There was therefore no misrepresentation; nor was there evidence of any reliance by appellee on any misrepresentation. The Oklahoma statutes provide: “Where a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party, against whom it is sought to enforce such right, is precluded from setting up the forgery or want of authority.” C. O. S. 1921, § 7693.

I find no evidence supporting the conclusion that the plaintiff is “precluded from setting up the forgery or want of authority.”

Some of the eases dealing with the liability of banks upon forged indorsements are: Crahe v. Mercantile Trust & Savings Bank, 295 Ill. 375, 129 N. E. 120, 12 A. L. R. 92, and note, page 211; Porges v. United States Mortg. & T. Co., 203 N. Y. 181, 96 N. E. 424; Brown v. People’s National Bank, 170 Mich. 416, 136 N. W. 506, 40 L. R. A. (N. S.) 657; People v. Bank, 75 N. Y. 547; United Workmen v. Bank, 92 Kan. 876, 142 P. 974, L. R. A. 1915B, 815; Crawford v. West Side Bank, 100 N. Y. 50, 2 N. E. 881, 53 Am. Rep. 152; Second Nat. Bank v. Trust & S. D. Co., 206 Pa. 616, 56 A. 72.