8

collected by the bank of the trust company on every day, and nothing occurred during in the usual course of business. Whether its course to put the other parties on their Ashley and Rogers were the same person, or guard. On discovering the fraud which had different persons who had conspired to de- been practised upon it, the trust company fraud the trust company, and had opened an notified the bank, and demanded the return account with the bank as a means to that of the money paid on the check, and, on the end, or whether Rogers was a person who refusal of the bank, brought this suit. At was innocent in the matter, did not appear the trial a verdict was directed for the at the trial. Dr. Bissey had no knowledge plaintiff. of the mortgage until called on six months later for the interest. All of the parties to the transaction, except Ashley, and possibly Rogers, if he were a different person, acted in good faith, and in that reliance on the good faith of others which is usual in such matters. Ashley by some means induced a well-known and reputable conveyancer to believe that he was Dr. Bissey. The business followed the usual routine by which hundreds of such transactions are carried the court said that the holder was not guilty | In that case an impostor had obtained possesof negligence in failing to inquire as to the indorsement, and that, since the indorsement was made by the person to whom the check was given, and to whom it was intended to be given, the bank should pay it, although the name was fictitious.

In addition to the foregoing cases in which the doctrine was expressly applied, it was recognized in First Nat. Bank v. Farmers' & M. Bank, 56 Neb. 149, 76 N. W. 430, infra, although its application was denied. In that case the local correspondent of a trust company forwarded to it an application for a loan purporting to be made by the owner of certain property. The trust company accepted the application, and sent to its correspondent a check in which the payee was described by the name of the owner of the property. The check was presented to the bank, indorsed in the name of the payee, and also in the name of the correspondent. It proved that the owner did not sign, or authorize anyone to sign, the application for him. The drawee bank, after learning of the supposed forgery, credited the amount of the check back to the drawer, and brought suit against bauks which had indorsed it before it was paid. It is apparent that, if the impostor's indorsement could be deemed a genuine indorsement, the plaintiff must fail in the action. The decision was in favor of the plaintiff (the drawee), but was placed upon the ground that it showed that the forgery of the application was by the correspondent of the drawer, and that the check also was forged by him, and that there was no third party concerned in the transaction. The court, however, said, in sustaining a charge of the trial court, that if someone other than the correspondent, or even someone in collusion with him, had falsely pretended to own the land, executed the bond and mortgage, and indorsed the check, the indorsement would not be forged; it would be by the person to whom the check was in terms payable; the fa se representation of ownership of the land, and the assumption of a false name, would be merely steps in defrauding the trust company, but the crime would not be forgery; if the correspondent himself executed the previous papers and indorsed the check, the indorsement was a forgery because he was not the one intended as the payee, nor was he described as such. This case illustrates the fact already alluded to, that a very slight change of circumstances renders the doctrine inapplicable. The doctrine seems also to be recognized by Dodge v. National Exch. Bank, 30 Ohio St. 1.

The case, as presented by the plaintiff's declaration, is that of the payment by the plaintiff of a check drawn on it by a depositor to the order of a third person, whose indorsement was forged; the payment having been made in reliance upon the subsequent indorsement of the defendant; the ground of liability being that the defendant, by its indorsement and presentation, warranted the genuineness of the indorsement of the payee, Herman S. Bissey. While by this

sion of a certificate of indebtedness due from the United States, and presented it to a paymaster, who delivered him a check in which the payee was described by the name of the person to whose order the certificate was payable. The action was by the true owner of the certificate against the bank on which the check was drawn, and which paid the same. The court said that "the defendant had a right to show, if it could, that the person to whom the check was delivered was, in fact, the person whom the drawer intended to designate by the name" used in the check; and held that, for that purpose, it might show the circumstances under which the check was drawn, the representations of the party to whom the check was delivered, and the action of the drawer thereupon, with his accompanying declarations; but also held that the trial court erred in excluding the portion of a statement of facts tending to show that the check was delivered to the impostor only on his promise and assurance that he could, and would, identify himself at the bank as the person whose name was given in the check. The opinion in this case seems to put the court in the extraordinary position of holding that if the drawer is completely deceived the bank will be protected, upon the theory that in paying the check it has merely carried out his intention, while, if he is not completely deceived, but intends to devolve the duty upon the bank of seeing that the check is paid to the proper person, the bank must bear the loss, at least unless the loss can be thrown upon the drawer, because of his negligence. Upon a previous appeal in that case, however, a majority of the court held that, as it was competent for the drawer to make his check payable to the order of the owner of the certificate, and devolve the duty upon the bank of paying only on his genuine order, the liability of the bank could not be affected or discharged by any act or omission of the drawer in issuing the check, of which the banks had no notice and which in no way influenced its conduct; citing Robarts v. Tucker, 16 Q. B. 560, 3 English Ruling Cases. 680, infra.

Smith v. Mechanics' & T. Bank, 6 La. Ann. 610, carries the theory of actual intent further than any of the foregoing cases. In that case a broker discounted for a stranger, without inquiry, a bill purporting to be accepted by a firm well known to him. He delivered a check to the stranger, but evidently for the purpose of making it necessary for him to obtain their indorsement, before cashing the

where a check has been lost or stolen and holder of a check will exercise care to prethe payee's name has afterwards been serve it from loss or theft, which are the orforged; but it does not protect a depositor dinary risks. There is thrown upon the who is in fault, as in intrusting a check to bank the risk of antecedent fraud practised one who he has reason to suppose will make upon the drawer of the check, of which it a fraudulent use of it, or in so carelessly has neither knowledge nor means of knowlfilling up a check that it may readily be al-edge. Secondly. Because in such a case tered, or in issuing a check to a fictitious the intention with which the drawer issued person. It is confined to cases in which the the check has been carried out. The person depositor has done nothing to increase the has been paid to whom he intended payrisk of the bank. It should not apply when ment should be made. There has been no the check is issued to one whom the drawer mistake of fact, except the mistake which intends to designate as the payee: First. he made when he issued the check, and the Because in such a case the risk is not the or- loss is due, not to the bank's error in faildinary risk assumed by the bank in its im-ing to carry out his intention, but primarily plied contract with its depositor, but a large- to his own error, into which he was led by ly-increased risk, as it follows that a check the deception previously practised upon him. thus fraudulently obtained will be fraudent- It is somewhat surprising that the quesly used. The bank is deprived of the pro- tion presented by this case has not arisen tection afforded by the fact that a bona fide' more frequently. There are but few decianother person who accompanied the latter to increased risk when it paid the bill without the bank and signed his name in the signature verifying the purported indorsement of the book apparently as his own, the bank was jus- payee. tified in paying the same to him upon his indorsing the name. The court said that the question was: With whom did the bank deal, and who was intended as the payee?

A bank, which, under general authority to pay its customer's accepted bills, pays a bill bearing the forged indorsement of the payee accepted by the customer, cannot charge the same up against the latter, although the indorsement was on the bill when it was accepted, and notwithstanding that the acceptor was accustomed to take precautions, before accepting bills, to verify the indorsements, where that custom was never communicated to the banker, and there is no evidence, direct or indirect, of any communication to the banker from which an authority to pay the bill without examination could be inferred. Robarts v. Tucker, 16 Q. B. 560, 3 English Ruling Cases, 680.

The facts involved in this case are so different from those involved in the cases previously cited, that it cannot be considered as a direct authority against the theory of actual intent adopted by them; but the case does seem somewhat analogous, since the acceptance of the bill, in view of the arrangement with the bank, was not unlike drawing a check on the bank for the amount of the bill, payable to the person who held the bill under the forged indorsements. In this case, the bill was presented for acceptance by a subsequent indorsee, and not by the person who forged the indorsement. The analogy would be closer if the latter had presented the bill.

In Bank of England v. Vagliano Bros. [1891] A. C. 107-172, 60 L. J. Q. B. N. S. 145, 173, 3 English Ruling Cases, 695, a clerk forged the name of a correspondent of his employers to a bill purporting to be drawn on them by the correspondent, and payable to the order of a firm with which they had dealings, but which had no connection with the transaction, and sent it to the firm, which accepted it. He afterwards obtained possession of it, and procured the money on it at the acceptor's bank. The court denied the right of the acceptor to recover from the bank, distinguishing the case from Robarts v. Tucker, 16 Q. B. 560, 3 English Ruling Cases, 680, supra, upon the ground that while the acceptors did not guarantee the genuineness of the indorsement, they did guarantee the genuineness of the drawer's signature, and, by reason thereof, the bank took an

The case of Palm v. Watt, 7 Hun, 317, infra, does not seem to deny the doctrine that attributes to the drawer of a check who issues it to the wrong person an intent to make such person the payee. It will be observed that the court in that case took the view that, though the check was mailed in pursuance of a request by the impostor, and was received from him through the mail, it was not sent to him, but to the person whose name he had assumed ; and that there was no delivery of, nor intention to deliver, the check to him.

Impostor assuming to act as agent of payee.

In the following cases the fraudulent scheme was essentially the same as that involved in the cases previously cited, in which the loss was imposed upon the drawer, except that the impostor, to whom the check was delivered, assumed to be the agent of the person by whose name the payee was described in the check; and the courts held that, as between the drawer and drawee, the loss must fall upon the drawee : Atlanta Nat. Bank v. Burke, 81 Ga. 597, 2 L. R. A. 96, 7 S. E. 738; German Sav. Bank v. Citizens' Nat. Bank, 101 Iowa, 530, 70 N. W. 769; First Nat. Bank v. Pease, 168 Ill. 43, 48 N. E. 160, Affirming 68 Ill. App. 562; Mechanics' Nat. Bank v. Harter (N. J. L.) 44 Atl. 715: Armstrong v. National Bank, 46 Ohio St. 512. 6 L. R. A. 625, 22 N. E. 866; Kuhn v. Frank. 10 Am. L. Record, 622, 6 Ohio Dec. Reprint, 1142; Brixen v. Deseret Nat. Bank, 5 Utah, 504, 18 Pac. 43.

See also First Nat. Bank v. Farmers' & M. Bank, 56 Neb. 149, 76 N. W. 430, supra.

In this class of cases, i. e., when the impostor assumes to act as agent, as before remarked, the doctrine of actual intent does not apply, because the drawer did not regard the individual to whom he delivered the check as the payee, but merely as the agent of the payee. It would seem that the circumstances might be such that the delivery to an impostor assuming to act as agent of a real or fictitious person would constitute such negligence as to throw the loss upon the drawer; but there do not seem to be any cases that decide against the drawer on that ground when the check or draft was delivered to a purported agent. In Atlanta Nat. Bank v. Burke, 81 Ga. 597, 2 L. R. A. 96, 7 S. E. 738, nothing was said about negligence, but the court said that the fact that the drawer himself was deceived did not estop him.

sions upon it, and none in this state. But, ance of the draft, and, as the case differs the views which we have expressed are in en- from this in that important particular, it tire harmony with the principles which we cannot be cited as a precedent. But the have recognized as governing the decision opinions of the lords are instructive on of cases arising from the forgery of notes the questions involved in this case, and the and checks, and involving kindred questions. principles announced by them would settle Among the more recent of these is Iron City the contention in favor of the defendant. Nat. Bank v. Fort Pitt Nat. Bank, 159 Pa. Lord Selborne said: "It is not (as I un47, 23 L. R. A. 615, 28 Atl. 197, in which the derstand) disputed that there might, as becases are reviewed by our brother Mitchell, tween banker and customer, be circumstances and it is said by him: "It is always a good which would be an answer to the prima defense that the loss complained of is the facie case that the authority was only to pay result of the complainant's own fault or neg- to the order of the person named as payee lect; and it would require a statute in very upon the bill, and that the banker can only explicit terms to do away with so universal charge the customer with payments made a rule of law, founded on so incontestable a pursuant to that authority. Negligence on principle of justice." In Bank of England the customer's part might be one of those v. Vagliano Bros. [1891] A. C. 107, the bank circumstances; the fact that there was no had been induced to pay by notice from real payee might be another." There are, Vagliano Bros. of the drawing and accept- however, decisions in other states which are The court, in Brixen v. Deseret Nat. Bank, 5 Utah, 504, 18 Pac. 43, held that the drawer 38 not negligent in delivering the check, which represented the proceeds of a loan, to a real-estate agent, whose character was good, for the purpose of having it delivered to the payee named therein, whose name had been forged to an application for a loan and to the mortgage papers.

In Armstrong v. National Bank, 46 Ohio St. 512, 6 L. R. A. 625, 22 N. E. 866, it was found by the trial court that the drawer was not careless or negligent, but the appellate court said that, even though the circumstances were calculated to arouse suspicion on the plaintiff's part, that fact would not modify the duty required of the bank in the matter of paying or not paying the check. It was also found by the trial court that the bank made the usual inquiries respecting the identity of the person who presented the check, and in other respects was ordinarily careful and prudent; but the appellate court said that finding must be taken in connection with the further fact that he was not the payee of the check, and that his indorsement without the genuine indorsement of the payee could confer no title upon the holder of the check, or any interest in it as against the drawer.

In Kuhn v. Frank, 10 Am. L. Record, 622, 6 Ohio Dec. Reprint, 1142, the court said that if the drawer, by any negligence or by any course of dealing between him and the drawee, had induced or contributed to the payment of the check, he would lose the right to recover from the latter; but held that, although the drawer was deceived by the impostor, he was not negligent.

Check or bill sent by mail.

It seems difficult to distinguish upon principle a case where the check or draft is mailed pursuant to communications from the impostor and delivered to him through the mails, from a case where the check is delivered to the impostor in person by the drawer, or the latter's agent.

And in Emporia Nat. Bank v. Shotwell, 35 Kan. 360, 57 Am. Rep. 171, 11 Pac. 141, supra, the drafts were sent in a letter addressed in the name the imposter had given (which was the name of the owner of the property), and the court held that, notwithstanding that fact, the plaintiff who had succeeded to the rights of the drawer of the drafts. must bear the loss rather than the drawee bank which paid it on the indorsement of the impostor.

Iu Palm v. Watt, 7 Hun, 317, however, the court took a contrary view. In that case an impostor assumed the name of a former companion, and by that name wrote letters to the relatives of the latter asking for assistance to enable him to return home. The impostor had learned from the man whose name he had assumed such particulars respecting his family as enabled him to deceive the latter with respect to his identity. Induced by the fraudulent statements in the letter, the mother of the person whose name was assumed purchased of the defendants a check payable to the order of her son, and mailed the same to him. The letter was taken from the post office by the impostor, who indorsed the check in his assumed name, and the check afterwards came into the hands of the plaintiff, a bona fide holder. Before the check was presented for payment the fraud had been discovered and payment stopped. The plaintiff sued the defendants (the drawers), but the court held that he could not recover because he acquired no title to the check, and because the defendants remained liable on the same to the real payee. The courts said that the criminal fraud of the impostor induced the defendants to send their check, not to him, but to the person whose name he assumed, and to whom it was made payable. There was no delivery of, or intention to deliver, the check to the impostor, and no authority conferred upon him to take the letter inclosing it from the postoffice, or make any disposition of the check. His act in receiving and opening the letter was in itself a criminal offense, and when he had, by the crime of false personation, obtained possession of the check, he acquired no authority to dispose of or indorse it. His act in indorsing it was a palpable forgery for which, upon the facts disclosed, he could without doubt have been convicted of that crime. The defendants were guilty of no negligence which led to the impostor's possession of the property. They did not deliver, nor intend to deliver, it to him. It is simply a case where, by criminal fraud committed by a stranger, the defendants were induced to send by letter, to the person whose name was assumed, addressed to him, a check payable to his order; and the guilty person who thus induced them to do that act got possession of the check by another crime, and then committed forgery by indorsing it. It was urged that the possession of the letter which inclosed the check, and which was addressed and written to the person whose name the impostor had assumed, enabled the latter more easily to personate the former, and thus deceive the person to whom he indorsed the

well intended the draft to be sent to the party executing the notes and mortgage, and intended it to be paid to the person to whom he sent it, and whom he designated by the name of Daniel Guernesy because that was the name he assumed in executing the notes and mortgages; and therefore the national bank is protected in paying the draft to the very person whom Shotwell intended to designate by the name of Daniel Guernesy." In Maloney v. Clark, 6 Kan. 82, the plaintiff was induced to send a draft drawn to the order of his brother to a stranger, who in the correspondence had personated his brother. The stranger indorsed the name of the plaintiff's brother on the draft, and sold it to the defendants, who were bankers. It was held that under these facts the plaintiff could not recover. In Robertson v. Coleman, 141

directly in point. In Emporia Nat. Bank | "The vital point in this case is that Shotv. Shotwell, 35 Kan. 360, 11 Atl. 141, the facts are almost identical with those in this case. An unknown person, who represented himself to be Guernesy, who was the owner of a quarter section of land, obtained from Shotwell a loan secured by mortgage on Guernesy's land, and received from Shotwell in payment a draft drawn to the order of Guernesy. He indorsed Guernesy's name on the draft, and sold it to the bank. In an action by Shotwell to recover of the bank the amount received by it on the draft, it was held that, although Shotwell was deceived in the transaction, the person with whom he dealt was the person intended by him as the payee of the draft, designated by the name he assumed in obtaining the loan, and that his indorsement was the indorsement of the payee named. It is said in the opinion: check. The court said that that was no more true than it would be in the case of any thief who had stolen a letter addressed to a third party inclosing a check to the order of such party, and who brought the check to a bank with such stolen letter as the evidence of his identity. In such a case very clearly the bank paying the check to the forger would be responsible for the genuineness of the indorsement, and any intermediate buyer occupies the same position. It was also held that the fact that the impostor had a short time before obtained by the same criminal process a check upon which he had forged the indorsement and obtained money thereon from the same person to whom he sold the check, and that the check on reaching the drawees had been paid, does not affect the case, because no knowledge of the fraud or forgery in the first check and its negotiation was brought home to the defendants before sending the check.

The foregoing case is almost identical in its facts with Maloney v. Clark, 6 Kan. 83, supra, except that in that case the drafts were sent to an attorney and by him delivered to the impostor. The court held that the attorney, in delivering the drafts, acted as the agent of the person who sent them.

The five cases next cited are distinguishable from Emporia Nat. Bank v. Shotwell, 35 Kan. 3C0, 57 Am. Rep. 171, 11 Pac. 141; Maloney v. Clark, 6 Kan. 83; and Palm v. Watt, 7 Hun, 317,-supra, by the fact that the letters inclosing the checks or bills were not sent in pursuance of communications from the impostor, as was the fact in those cases.

ter was addressed, although the letter was delivered to him from the other postoffice. A dissenting opinion takes the position that the payee occupied no better position than the drawer, and that, as between the drawer and the drawee bank, the loss ought to fall upon the former because of his mistake in misdirecting the letter.

In Indiana Nat. Bank v. Holtsclaw, 98 Ind. 85, a check had been mailed to plaintiff, but was misdirected, and came to the hands of another person of the same name, who forged the indorsement and sold it to a bank. The court held that the plaintiff might maintain an action against the latter bank, such bank having received the money upon it.

In Shaffer v. McKee, 19 Ohio St. 526, a draft payable to the order of plaintiff was mailed to her. It was stolen from the mails. and the indorsement forged, and the draft sold to defendant, who collected the amount. It was held that the plaintiff might recover from defendant as for money received for his use.

In Bank of Commerce v. Ginocchio, 27 Mo. App. 661, a New York draft indorsed by the payees to the order of a certain person, and inclosed in a letter addressed to him at Kansas City, Missouri, without any addition indicating his occupation, profession, residence, or place of business, was received by another person of the same name, and indorsed and negotiated by him for value, aud was finally purchased by plaintiff. The drawee, pursuant to instructions, refused the payment, and plaintiff brought an action for negligence against the payee, proceeding upon the theory that the draft was of no value whatever. The court decided against the plaintiff upon the ground that the defendant's negligence, if any, was not the proximate cause of the loss.

the

In Talbot v. Bank of Rochester, 1 Hill, 295, the owner of a certificate of deposit indorsed it to a certain firm, and, without their knowledge, mailed it to them. It was stolen from the mail, and the indorsement forged, and it was then acquired by a bona fide person, who collected it. The court held that the owner could maintain an action against the latter for conversion, or for money had and received.

Graves v. American Exch. Bank, 17 N. Y. 205, was an action by the payee of a bill of exchange against the drawee bank for the conversion of the bill. The payee had directed his debtor in another state to send him the amount of the debt by a check, or in any other safe way. The letter inclosing the draft was directed to the wrong postoffice, but the mistake was corrected, and it was sent to the proper postoffice, from which it was delivered to a person of the same name as the payee, but who had no right to the draft. This person indorsed the draft, and it was finally paid by the drawee bank after it had been indorsed by other persons. The decision was in favor of the plaintiff, and rests upon the ground that the draft, at least upon reaching the proper The rule that a check payable to a fictipostoffice, became the property of the person tious person is, in effect, payable to bearer. to whom it was directed, and for whom it was would ordinarily be sufficient to throw the loss intended. It appeared that the person to upon a drawer who issues a check to an imwhom the draft was delivered by the postoffice postor, at least where the payee named is ficauthorities was at the place to which the let-titious, but for the fact that it is generally

Applicability of rule as to fictitious payees.