Central Trust Co. v. Backsman

This case is presented to this court on error to the Court of Common Pleas of Hamilton county. The Central Trust Company was defendant in the trial court and judgment was rendered against it. Elizabeth Backsman was the plaintiff in the trial court. The parties will be identified in this opinion by their titles in that court.

There is no substantial issue of fact in this case and we adopt the statement of facts contained in the brief of plaintiff in error, as follows:

"Elizabeth Backsman had had dealings with Bohn Company, Inc., brokers in Covington, Kentucky, through their agent, Wallace Graham, who had sold securities to her. On April 29, 1932, she delivered to Bohn Company, Inc., a certificate, in her name, for one hundred shares of Procter Gamble Common Stock, to be used as collateral in opening a margin account, and received from Wallace Graham, to whom the certificate was delivered, a written receipt for such stock, signed by him with the name of his principal, acknowledging the deposit of the stock as collateral. She endorsed the stock in blank for transfer at the request of Graham. Thereupon, without her knowledge or consent, Graham sold the stock through Alfred Hill Company, who delivered to Graham a check on The Fifth-Third Union Trust Company to the order of Elizabeth Backsman, in the sum of $2,983.00 on May 2nd, 1932. Graham deposited the check with The Central Trust Company, with forged endorsement of the name of Elizabeth Backsman and his own signature, and drew out the proceeds.

"Graham was not authorized to sell the stock. Mrs. Backsman did not know of the sale or the check until May 12th, 1932. The bank account opened by Graham was exhausted on May 7th, 1932. Mrs. Backsman had no knowledge of The Central Trust Company Bank Account, and never had any dealings with The Central Trust Company.

"On May 11th, 1932, Mrs. Backsman called Bohn Company, Inc., and then employed an attorney to recover her stock. He demanded return of the stock May 11th, 1932. A few days later, the transaction was traced to Alfred Hill Company. Previous to the discovery of the sale, Mr. Bohn had agreed to return the stock. The conversation with Mr. Bohn was on May 11th, 1932, at his office, when he undertook to get the stock back for her. At the time she delivered the stock, she expected it to be returned. Wallace Graham never at any time was an agent of Mrs. Backsman. She dealt with him only as agent for Bohn Company, Inc."

It will be seen from this statement that the plaintiff was the payee on this check, and that she recovered a judgment for the full amount of it with interest against the defendant, who had obtained possession of it through a forged endorsement of her signature and had then obtained the amount from the drawee bank.

As we construe the defendant's contentions they really constitute a denial of liability of an intermediate holder to the payee. And we think it is clear that there is no such liability on the check. The check carried no contract creating such a liability under any circumstances. But a check is property, the ownership and possession of which are safeguarded by the general laws to the same extent as other classes of property.

The claim of the plaintiff, in substance, is that the defendant without right took possession of this check and exercised dominion over it to her detriment and damage. Using the nomenclature of the law, her claim is that the defendant committed a tort, that is, a trespass, to her damage. Under the old form of pleading, the form of remedy was an action in trover. It was only at a later date that the legal fiction of implying a promise was resorted to so that the owner could waive the tort and recover from the tort-feasor the value of the property appropriated, which he was treated as having received for the use and benefit of the owner of the property; and where the subject-matter was a check, its amount, even before it was cashed, would be prima facie its value, and, after the money was actually received on it, of course that would be its value and the measure of the implied promise. Brannan on Negotiable Instruments (5th Ed.), page 293. It is only in that remedial sense, if at all, that the defendant can be said to be bound by contract.

Now did the defendant violate the rights of the plaintiff? It is said that the plaintiff did not own this check. It is certain that through the actual wrong of Graham, for which Bohn Company were legally answerable, she lost title to the Procter Gamble stock. Graham obtained possession of, but not the title to, this check through that wrong. Hill Company treated Graham as the plaintiff's agent, and made the check payable to her order. She could, on plain principles, ratify this wrongful assumption of authority. His pretense of representing the plaintiff ended there. When he delivered the check to the defendant he did not assume to act in a representative capacity. Although he had no title, he, in effect, represented himself to be the owner. To give to his possession of the check the appearance of ownership he had in the meantime forged the plaintiff's name. It, however, was just an appearance. It conferred no title on him or his indorsee. That being true, it follows that when the defendant took possession of this check, presented it for payment, and received from the drawee the money, it tortiously exercised dominion over it inconsistent with the ownership of the plaintiff. It converted the plaintiff's property to its own use. Pursuing her remedy against the defendant bears no resemblance to a ratification of an unauthorized act of an agent.

The case of Shaffer v. McKee, 19 Ohio St. 526, bears a strong resemblance to the case at bar. The trial court sustained a demurrer to the payee's petition against an indorsee, through a forged indorsement of the payee's signature, who had collected from the drawee. The Supreme Court reversed the judgment for the defendant in an opinion which was confined to a quotation of the allegations of the petition and an announcement of the reversal of the judgment sustaining the demurrer thereto. The syllabus of that case is:

"A debtor of the plaintiff enclosed and mailed to her a draft on a bank in New York, payable to her order. The draft was stolen from the mail, and the thief, having placed a forged indorsement of the plaintiff's name thereon, sold the same to the defendant, who drew from the bank, the money, and appropriated to his own use. Held: on this state of facts the plaintiff was entitled to recover the amount of the draft from the defendant."

The decision in Shaffer v. McKee, supra, that a payee whose endorsement has been forged can recover against one who obtains possession of the check and collects from the drawee, is sustained by the overwhelming weight of the authorities. The cases are collected in the annotations to the cases of MerchantsBank of Washington, D.C., v. National Capital Press, Inc., 288 F., 265, 31 A.L.R., 1066, at 1068 et seq., and California StuccoCo. of Washington v. Marine National Bank, 148 Wn. 341,268 P. 891, 67 A.L.R., 1531, at 1535 et seq. The highest courts of twenty states and the District of Columbia Court are in accord and only two are opposed. Of one of these cases, M. Feitel HouseWrecking Co., Inc., v. Citizen's Bank Trust Co., 159 La. 752,106 So. 292, it is said in Brannan on Negotiable Instruments (5th Ed.), at page 1073: "The case seems clearly wrong on this point." The author then refers to the numerous cases to the contrary. However, it seems to us that the debatable question in these cases, and which the majority decided in favor of the payee, is not presented by the facts in this case. The question there was whether a payee to whom the check had not been delivered could recover. In the case at bar Hill Company intended to deliver this check to Graham as the payee's agent, and Graham accepted it in that capacity, although he may have at that time entertained a secret plan to defraud. When his act in receiving the check was ratified, delivery to the payee was complete.

We find no error in the record prejudicial to the plaintiff in error. The judgment of the Court of Common Pleas is affirmed.

Judgment affirmed.

ROSS, P.J., and HAMILTON, J., concur.