American Express Co. v. City Nat. Bank of Galveston , 1928 Tex. App. LEXIS 600 ( 1928 )

The statement we make of the cause is an adaption from recitations in the several briefs of the parties, without acknowledgment of what in most instances is a substantial quotation:

This is a suit by City National Bank against American Express Company and Joe Varnell on a number of "travelers' checks," alleged to be negotiable instruments within the meaning of the Negotiable Instruments Act, title 98, Revised Statutes of Texas. The Express Company was sued as drawer, drawee, and acceptor, Joe Varnell as warrantor of the title and validity thereof under section 65 of the act; it being alleged that he negotiated the checks to the bank by delivery and without indorsing them. The following copy of the body of one of the checks shows the form they were in when offered in evidence:

"U.S. Dollar Travelers' Cheque, when countersigned below with this signature: W. L. Hines.

"A3,035,440 "Three Cipher Three Five Four Cipher

"Jun 11, 1923.

"American Express Company at Its Paying Agencies:

"Pay this cheque from our balance to the order of City National Bank, Galveston, Tex. $10.00. In United States ten dollars. In all other countries at current buying rate.

"For bankers' cheques on New York.

"Jas. F. Fargo, Treasurer.

"Countersign here is presence of person cashing. W. L. Hines.

"This cheque is redeemable only at the company's offices and bankers in United States."

Other data on the checks showed the principal offices of the company abroad. On the margin is this:

"Guard your travelers' cheques as you would money. When cashing fill out cheque completely and countersign."

Varnell answered the petition of the bank as follows:

"Comes defendant, Joe Varnell, and admits and adopts the allegations in plaintiff's petition, and prays that he have judgment over against the defendant, American Express Company."

Defendant further alleges that he paid face value for the checks without notice of any defenses thereto.

The express company answered by way of general denial, and then for special answer alleged in substance:

First. That the plaintiff bank did not acquire any title to the checks, and had no title to the same auhorizing it to maintain a suit upon the same because the checks were in form negotiable instruments payable to order within the meaning of Vernon's Ann.Civ.St. Supp. 1922, article 6001 — 8 and article 6001 — 9, defining negotiable instruments payable to order and negotiable instruments payable to bearer, and such instruments were not negotiated to the plaintiff by indorsement, as is required by article 6001 — 30 for the transfer of negotiable instruments payable to order so as to pass title thereto.

Second. That the plaintiff bank is not entitled to and ought not to recover against defendant express company because the bank is not a holder in due course of these checks, because, at the time of the alleged cashing of the same, if such cashing in law amounts to a transfer of the same to plaintiff, so as to vest the plaintiff with title to the same, the checks were not complete and regular upon their face, as required by article 6001 — 52, in that there was no payee named in the checks in the blank space for the name of the payee, and because the instruments were in form payable to order, and were and have not been transferred to plaintiff by indorsement; and that the defendant has good and valid defenses to the suit upon the checks, and is not liable thereon, for the reason that the same were stolen from the First National Bank of Barnsdall, Okla., on the 9th day of May, 1923, by bank robbers in an incomplete and blank form, and had been filed up, completed, and delivered without authority of the express company, and that they never became, and are not, valid obligations of the defendant express company, and that they were stolen in an incomplete form and are forgeries, and are wholly without consideration, and that the plaintiff bank is not a holder of such instruments in due course for the reasons aforesaid, and did not acquire the checks from a bona fide holder in due course, for that the defendant Varnell received these checks in consideration for the illegal sale and delivery by Varnell to one Frank Nash, alias W. L. Hines, of whisky in violation of law.

Third. That the defendant express company is not liable on the checks because the same did not constitute valid obligations against it, for the reason that the same had been placed with the First National Bank of Barnsdall, Old., as its agent, in an incompleted form, with only the printed facsimile signature of the defendant's treasurer appended thereto, and the checks were nothing more than incomplete blank forms, and had been placed in such form with the bank with the understanding between the bank and the defendant express company that the bank was to hold the checks as this defendant's agent and trustee, and was only to complete and deliver same, or any of them, for this defendant, upon a sale of the same to a purchaser making written application therefor, and upon the purchaser signing his name in the blank space therefor on the incomplete and blank travelers' checks; and, while the checks were in the possession of the First National Bank of Barnsdall, Okla., in such incomplete and blank form, and under the arrangement aforesaid, the same were taken forcibly from the bank by robbers on May 9, 1923, and, after having been so taken by force and without the consent of the defendant American Express Company, and without any consideration having passed therefor, were completed without authority of this defendant by filling in the aforesaid blank spaces, and that, if the same were negotiated to the plaintiff bank, they were negotiated without the authority of this defendant, and are not valid contracts as against the defendant express company, by virtue of the provision of article 6001 — 15 of Vernon's Ann.Civ.St. Supp. 1922 of Texas.

There were further averments to the effect that: (1) Upon presentment of the checks to It for payment, the express company advised the bank it was not liable thereon because of the facts just alleged, and that, after having been so advised, the latter had negligently and willfully failed to collect the amount it was out on the checks from defendant Varnell, although at various times since such notification was given to it Varnell had had sufficient deposits with the bank to cover the same; (2) the express company, in event it should be held liable on the checks to the bank, should have judgment over against Varnell because the checks were invalid in his hands as having been the consideration for an illegal sale of whisky on his part to Nash, alias W. L. Hines, etc.

The plaintiff bank filed a supplemental petition alleging that, by reason of the facts alleged in plaintiff's original petition, the defendant is estopped from denying the validity of the instruments sued on, and is estopped from denying that they were completed instruments, and the defendant Joe Varnell for his part adopted this supplemental petition of the bank.

The chief evidence the trial court admitted was, in substance: The bank introduced the checks in evidence, and proved by Varnell that he delivered the checks to the bank and received from appellee $2,000, the face value of the checks. Varnell also deposed that he acquired the checks from a man introduced as W. L. Hines, paid him $2,000 cash therefor, and that such man countersigned the checks "W. L. Hines" in his presence at the time he acquired them. Varnell said further that Hines spent some three weeks in Galveston, and, while here, he cashed other American Express Company checks for him, and that the others were all right.

The defendant express company offered to prove:

That these checks were stolen on May 9, 1923, from the First National Bank of Barnsdall, Okla., by bank robbers, and that at that time the checks were in the possession of the bank among other checks in an incompleted form, that is to say, without being dated, and without having any name or signature in either the upper or lower left-hand corners, nor the name of the payee, where blanks were left for the purpose, and that these blank forms had been deposited with the First National Bank of Barnsdall, Okla., as trustee, and that, at the time of depositing the same with the bank, the bank by its cashier executed a trust receipt therefor in the following form (omitting a description of the checks):

"Received in trust from the American Express Company travelers' cheques of the American Express Company as follows: [Description of checks.]

"The undersigned hereby accepts responsibility for the safe-keeping of said cheques and the due issue thereof, and agrees to account to the American Express Company therefor and for the proceeds received from the sale thereof. The said cheques until sold and the proceeds thereof when sold shall at all times remain the property of the American Express Company.

"The First National Bank, Barnsdall. Okla.,

"H. O. McSpadden, Cashier."

That such checks, after having been so stolen by the robbers who took them from the bank, were delivered to W. L. Hines, alias Frank Nash, the party from whom the defendant Varnell received them, and that the same had been filled up and completed and negotiated without any authority and without consideration having been received therefor by the defendant Express Company, all of which evidence the court excluded upon the objection of the plaintiff bank and the defendant Varnell, upon the grounds that the checks had come into the hands of an innocent purchaser, and the defendant express company could not show facts as a defense.

It did appear, however, from the evidence which was admitted by the court, that the agents of the express company, before putting such checks in circulation, required the purchaser to sign his name in the upper left-hand corner, for the reason that that is the identifying feature of the travelers' checks, and that the express company required of the agents that issued such checks for them that they see to it that the purchaser should sign his name at the time of the issue of the checks in that place. There was also evidence submitted tending to show that Varnell had received these checks in payment for whisky, which he had sold Hines, alias Frank Nash, and that Varnell, according to the custom of the trade, had accompanied the truckload of whisky across the Causeway.

The court gave judgment in the bank's favor against both Varnell and the express company, with provision that, should such judgment be made out of the latter, it should have a like recovery over against Varnell.

On the appeal, the express company complains of the bank's judgment against it, while Varnell only assails the express company's recovery over against him, assigning no errors as against the bank.

We think the trial court erred in excluding the testimony proffered by the express company, in that, if true, it would have constituted a complete defense for that appellant against the bank's suit; it would thus have been shown that these sued upon instruments, by the very initial requirement of the Negotiable Instruments Act (section 52 of R.S. 1925, article 5935) were so inchoate when they left the hands of the express company's agent, the Oklahoma bank, as not only not to be "complete and regular on their face," but to constitute merely waste paper — in other words, that they then lacked what the undisputed evidence that was received showed was their identifying feature before they could be put into circulation as an obligation of the express company, the signature of an actual purchaser thereof from an agent of the company, executed at the time and placed on the blank at the upper left-hand corner of the instrument. In such circumstances, therefore, the bank could not have been the holder of a negotiable instrument at all; hence there was nothing to which the other incidents of the statute might attach, despite the fact that it was in perfect good faith about the matter, and paid face value in cash. Cherbonnier v. Bank (Tex.Civ.App.)199 S.W. 307; Commercial Security Co. v. Hull (Tex.Civ.App.) 212 S.W. 986; 8 Corpus Juris, p. 208, § 338; Gross v. Arnold, 177 Ill. 575,52 N.E. 867; Linick v. Nutting, 140 A.D. 265, 125 N.Y.S. 93; Purviance v. Jones, 120 Ind. 162, 21 N.E. 1099, 16 Am. St. Rep. 319; Revised Statutes 1925, art. 5932, §§ 1, 8, 14, and 15; Revised Statutes 1925, art. 5934, § 30; 3 Ruling Case Law, p. 1025, § 233; Sabine v. Paine,166 A.D. 9, 151 N.Y.S. 735; Seay v. Bank of Tennessee, 3 Sneed (Tenn.) 558, 67 Am.Dec. 579; Tower v. Stanley, 220 Mass. 429, 107 N.E. 1010.

It must not be overlooked that there was entirely lacking here, under either pleading or proof, any element of negligence upon the part of the express company, or of its agent, the Oklahoma Bank — no suggestion of such a thing appearing — merely the unmet, albeit at the same time unreceived, offer to prove the intervention of a superior force, identical in practical effect with what is often denominated "the act of God or the public enemy," and that on that account alone these declared upon papers were, without its knowledge, consent, or any quid pro quo to it, purloined from the custody of appellant express company's agent or trustee, and fraudulently foisted upon an unsuspecting public, of which the appellee bank happened to be a member. That being true, and the documents being incomplete upon their face in the indispensable particulars referred to, the express company was not estopped to deny their validity in the hands of any holder. 3 Ruling Case Law, § 233; Linick v. Nutting, supra.

Herein, we think, lies the distinction between the line of authorities here applied and those cited as being contra by the appellee, most, if not all, of which have to do with negotiable instruments that had been allowed to get into circulation by some negligence of the maker himself or of some one whose acts in that regard were referable to him.

Furthermore, we think the facts alleged in that respect, if the opportunity had been afforded and the proof of them made, would have shown these papers to be forgeries within the meaning of our Penal Code 1925 (article 979), and on that account also wholly unenforceable in the bank's hands against the express company; there being nothing precluding it from setting up that defense. Section 23 of the Negotiable Instruments Act (R.S. 1925, article 5932). The essence of forgery seems to be the making of a false instrument with the intent to defraud, and, under the averments and tendered proof, that was done here in the fabrication of the signature of a real purchaser of these instruments through the placing by some other person of the name "W. L. Hines" thereon; since neither "W. L. Hines" nor Frank Nash, nor any other person, was such a purchaser of them, the instruments were all false ones, whether or not "Hines" and Nash were merely two names for the same person, or those of different persons. Neither would the fact that the same person may have signed the name "W. L. Hines" in both places upon each instrument lead to any different effect — in either instance the signature actually made was palmed off for that of another party; that is, a purchaser of the paper, for the fraudulent purpose of converting blank forms into negotiable instruments. Hocker v. State, 34 Tex. Crim. 359, 30 S.W. 783, 53 Am. St. Rep. 716; Commonwealth v. Costello, 120 Mass. 370.

Since these conclusions determine the merits of the appeal, further discussion is forborne as being unnecessary; under them neither other litigant could recover against the express company, wherefore the bank's judgment against it, as well as its own over against Varnell, must be reversed, and the cause remanded for another trial in respect thereto. The appellee's judgment against Varnell, not having been appealed from, is not before us. It has been so ordered.