Great American Insurance v. Holiday Motors of High Point, Inc.

142 S.E.2d 13 (1965) 264 N.C. 444

GREAT AMERICAN INSURANCE COMPANY
v.
HOLIDAY MOTORS OF HIGH POINT, INC., and Robert Bishop.

No. 437.

Supreme Court of North Carolina.

May 19, 1965.

Bencini, Wyatt & Tate, High Point, for defendant appellant.

Womble, Carlyle, Sandridge & Rice, by Allan R. Gitter, Winston-Salem, for plaintiff appellees.

RODMAN, Justice.

Defendant's failure to demand a jury trial, as provided by G.S. § 1-539.5, constituted a waiver of that right. The facts found by the court are amply supported by the evidence. They are conclusive and binding on us. Johnson v. Johnson, 262 N.C. 39, 136 S.E.2d 230. The exception to the judgment raises the question: Are the facts found sufficient to support the judgment? The answer is "yes." The rule of law applicable to the facts of this case is well stated in 10 Am.Jur.2d 573. It is there said:

"The responsibility of the drawee who pays a forged check, for the genuineness of the drawer's signature, is absolute only in favor of one who has not, by his own fault or negligence, contributed to the success of the fraud or misled the drawee; in other words, the presumption of negligence on the part of the drawee bank paying such forged check is operative to prevent its recovery of the money thus paid only when the one to whom the money is paid is not at fault. To entitle the one to whom payment was made to retain as against the drawee the money received, he must be able to show that the whole responsibility of determining the validity of the signature was upon the drawee, and that the negligence of such drawee was not lessened by any disregard of duty on the part of the holder, or by failure of any precaution which, from his implied assertion in presenting the check as a sufficient voucher, the drawee had the right to believe he had taken. In the absence of actual fault on the part of the drawee bank, its constructive fault in not knowing the signature of the drawer and detecting the forgery will not preclude its recovery from one who took the check under circumstances of suspicion, without proper precaution, where his conduct has been such as to mislead the drawee, or to induce it to pay the check without the usual security against fraud. If it appears that the one to whom payment was made was guilty of negligence in not doing something which plain duty demanded, and which, if done, would have avoided entailing loss on anyone, he is not entitled to retain the moneys paid through a mistake on the part of the drawee bank."

The Supreme Court of Massachusetts, in First National Bank of Danvers v. First National Bank of Salem, 151 Mass. 280, 24 N.E. 44, said:

"In the usual course of business, if a check purporting to be signed by one of its depositors is paid by a bank to one who, finding it in circulation, or receiving it from the payee by indorsement, took it in good faith for value, the money cannot be recovered back on the discovery that the check is a forgery. It is presumed that the bank knows the signature of its own customers, and therefore is not entitled to the benefit of the rule which, in cases of forgery permits a party to recover back money paid under a mistake of fact as to the character of the instrument by which the fraud has been effected. This presumption is conclusive only when the party receiving the money has in no way contributed to the success of the fraud or the mistake of fact under which the payment has been made. In the absence of actual fault on the part of the drawee, his constructive fault in not knowing the signature of the drawer, and detecting the forgery, will not preclude his recovery from one who took the check, under circumstances of suspicion without proper precaution, or whose conduct has been such as to mislead the drawee, or induce him to pay the check without the usual security against fraud. * * * To entitle the holder to retain money obtained by a forgery, he should be able to maintain that the whole responsibility of determining the validity of the signature was placed upon the drawee, and that the vigilance of the drawee was not lessened, and that he was not lulled into a false security by any disregard of duty on his own part, or by the failure of any precautions which, from his implied assertion in presenting the check as a sufficient voucher the drawee had a right to believe he had taken."

The statement of law by the Supreme Court of Massachusetts, as quoted above, was quoted approvingly by this Court in Wood-ward v. Trust Company, 178 N.C. 184, 100 S.E. 304. The language used in First National Bank of Danvers v. First National Bank of Salem, supra, was, in substance, the language of the Supreme Court of Massachusetts in National Bank of North America v. Bangs, 106 Mass. 441, 8 Am. Rep. 349. The Supreme Court of South Carolina, in Newberry Savings Bank v. Bank of Columbia, 91 S.C. 294, 74 S.E. 615, a case remarkably similar to the present case, quoted approvingly the language of the Supreme Court of Massachusetts, and permitted the payee bank to recover. See also Louisa Nat. Bank v. Kentucky Nat. Bank, 239 Ky. 302, 39 S.W.2d 497; American Express Co. v. State Nat. Bank, 113 P. 711; First Nat. Bank of Portland v. United States Nat. Bank, 100 Or. 264, 197 P. 547, 14 A.L.R. 479; Annotation: "Right of drawee of forged check or draft to recover money paid thereon," 12 A.L.R. 1089-1116, supplemented in 71 A.L.R. 337-345 and 121 A.L.R. 1056-1062.

Epitomized, the rule is that the failure of a bank to detect a forgery before paying a check drawn on it protects, against a subsequent demand for re-payment, those and only those, who are without fault in taking or negotiating the paper. This rule was stated in National Bank of Sanford v. Marshburn, 229 N.C. 104, 47 S.E.2d 793, although the facts of that case did not call for an application of the rule.

While there is a lack of unanimity in the decisions with respect to what facts suffice to impose on payee the duty of putting drawee on guard, there can, on the facts of this case, be no doubt with respect to Holiday's duty to inform Trust Company of Robert Bishop's explanation for using Logan's name. Payee knew it was dealing with one who had been drinking intoxicating beverages, one who had no account in his own name in the bank on which he proposed to give a check, and when that fact was called to his attention, made the glib explanation: "I deposited money under an assumed name to keep my wife from finding out about my financial condition." As soon as the general manager of Holiday ascertained that Logan E. Bishop, Jr's check for $500 would be paid, he had his secretary fill in a check on Trust Company for that amount, handed the check to Robert Bishop, who signed "Logan E. Bishop, Jr." Wells immediately dispatched the company's business manager to Trust Company to get the check certified, or the cash. Wells testified: "It is not clear to me exactly how long it took for this transaction on this afternoon—the check writing part and going to the bank and all of that was not over 15 minutes and there was some delay in putting the mirror on the car. I was standing there with Robert Bishop the whole time." As soon as Holiday got Trust Company's cashier's check and the mortgage securing the balance of the agreed price, Bishop was driven by Wells to Bishop's home in Archdale, a suburb of High Point. When Bishop reached his home, he was so intoxicated he could scarcely walk. It was necessary for his mother to help him into the house. Wells removed the license tags from the Mercury and left. The car had then been driven five miles. It was not thereafter driven until it was repossessed by the mortgagee.

Holiday argues that it ought not to be compelled to reimburse plaintiff because, as it says, it has been prejudiced by Trust Company's acceptance of the check. It sold the car to Bishop for $3,125. After repossessing, it sold the car for $2,750, thereby sustaining a loss of $375. In addition, it claims that it allowed a car salesman, who had nothing to do with the sale, a commission of $125 for making the sale to Bishop. The answer to this contention is that such loss as Holiday has sustained was occasioned by its own gullibility, and willingness to sell an automobile to one who had been consuming alcoholic beverages.

Since the facts found by the court support the judgment, we find

No error.