#### Max Kobre, Appellant, *v.*The Corn Exchange Bank, Respondent.

(Supreme Court, Appellate Term, First Department,

February, 1913.)

Banks — bills, notes and checks — recovery of bank deposit — last indorsement on note a forgery — payee of check not entitled to proceeds of discounted note.

Where, in an -action to recover a bank deposit, it -appears that on presentation of a note purporting to have been made by a corporation by its president, by one clothed with apparent authority from the last indorser to discount it, plaintiff’s cashier drew a check on plaintiff’s account in the defendant bank to the order of the last indorser of the note, its apparent owner, and the check is paid and charged to plaintiff’s account, but it -also appears that the last indorsement on the note was a forgery and that the payee of the check, -an existent firm, had neither indorsed nor authorized any other person to indorse it, -and -there is not a scintilla of evidence that plaintiff ever intended to deal with any other person than the payee firm, or ever delivered the check with intent to pass title except to said firm, a verdict is properly directed for plaintiff.

The fact that the person who presented the check for discount, or the president of the corporation, obtained possession of the check from plaintiff with intent to retain it was immaterial, as was also the fact that the payee was never actually entitled to the proceeds of the discounted note.

Appeal by the plaintiff from an order of the City Court of the city of ¡New York, setting aside a verdict rendered in favor of the plaintiff by direction of the court, in an action for refusal to pay over the amount of a deposit belonging to the plaintiff.

Feltenstein & Rosenstein (Moses Eelten-stein, of counsel), for appellant.

Katz & Sommerich (Otto 0. Sommerich and ¡L. E. Schlechter, of counsel), for respondent.

Lehman, J.

The plaintiff carries on business as a banker under the name of Max Kobre’s Bank. On March twenty-*213sixth his cashier issued a check in proper form drawn on plaintiff’s account in the defendant bank to the order of Miller & Bonime. This check was presented to the defendant bank through the Clearing House by the Metropolitan Bank. At that time it bore indorsements in the name of Miller & Bonime, S, Bonomowitz, Syrkin & Back, and the Metropolitan Bank. The check was paid by the defendant and the amount charged to plaintiff’s account. At the trial the plaintiff showed that the firm of Miller & Bonime was composed of Harris A. Miller and Abraham Bonime, and that they had never indorsed the check themselves nor authorized any other person to indorse it for them. “ The relation existing between a bank and a depositor being that of debtor and creditor, the bank can justify a payment on the depositor’s account only upon the actuaTdirection of the depositor.” Critten v. Chemical National Bank, 171 N. Y. 219. If it was necessary for Miller & Bonime to indorse the draft before it could be paid by the defendant for the plaintiff’s account, then the plaintiff has made out a complete cause of action because it is undisputed that their apparent indorsement was not made by them. If they were the actual payees of the check, then of course their pretended signature could give the subsequent purchasers no right to enforce payment of the check. Neg. Inst. Law, § 42. Since they were named as payees and their signature was forged, the defendant has failed to make payment according to the written direction of the plaintiff and cannot charge this payment to the plaintiff’s account unless it proves either that the payment was made to the payee actually intended to receive payment though improperly described, or that the conduct of the drawer of the instrument has been such as to impose a liability upon him beyond his intent. Gallo v. Brooklyn Savings Bank, 199 N. Y. 222. For this purpose the defendant has presented the following testimony. It shows that the plaintiff’s cashier who signed the check delivered it to a Mr. Vladower. The check was given in discount of a note for $500. This note purported to be made by the Metropolitan Novelty Company by Solomon Bonomowitz, president, to their own order and bore *214their indorsement in blank and also a blank indorsement in the name of Miller & Bonime. The latter indorsement was forged. Yladower gave plaintiff the note when he received the cheek. The plaintiff’s cashier did not know Solomon Bonomowitz. Apparently Vladówer delivered the check to Bonomowitz who forged the indorsement of Millér & Bonime and then discounted the check with Syrkin & Back.

I fail to see any theory upon which these facts prove any defense to plaintiff’s cause of action.

The defendant urges that the real question in the case is not “ whether the indorsement on ■ the check of' the alleged payee was a forgery, but rather was it intended that Miller & Bonime were to receive the proceeds of the check or Bonomowitz.” I can find absolutely no evidence that the plaintiff ever intended that Bonomowitz should receive the proceeds of the check. The plaintiff did not make the check payable to Bonomowitz but to Miller & Bonime. It is shown that Miller & Bonime were an actual firm and their name inserted as payee was not intended to be a fictitious name. In this respect the case differs from the case of Phillips v. Mercantile National Bank, 140 N. Y. 556. The plaintiff did not know Bonomowitz and did not intend to make a check payable to him. He did not intend to give that check in discount of a note of which Bonomowitz was the actual owner, but he made that check payable to the firm who appeared on the note as the holders and last indorsers and, therefore, the parties who had the right to transfer title to him. In this respect the case differs from the cases of Sherman v. Corn Exchange Bank, 91 App. Div. 84, and First National Bank v. American Exchange Bank, 170 N. Y. 88. In both of these cases the drawer of the check was actually dealing with the payee named in the check and described as payee, though as a matter of fact the drawer had been deceived into believing that it was dealing with another person. The courts there held that the bank having paid the money to the person actually designated as payee has carried out the drawer’s directions. In this case, however, the plaintiff not' only thought that he was dealing with Miller & Bonime but he directed payment to the párties with whom he thought that *215he was dealing and the bank has failed to obey these directions. Bonomowitz could not indorse the name of Miller & Bonime unless he was the owner of the check. Seaboard National Bank v. Bank of America, 193 N. Y. 26. Certainly the indorsement made by himself could pass no title to himself and his title must therefore be derived, if at all, directly from the plaintiff. • The plaintiff, however, had no dealings with any person except Vladower. Vladower appeared clothed with apparent authority from the firm of Miller & Bonime to discount a note. Plaintiff discounts the note and gives in payment a check made payable to the apparent owners. The payee was an existent firm, and there is not a scintilla of evidence that the plaintiff ever intended to deal with any other person except that firm or ever delivered the check with intent to pass title except to the persons named. The fact that Vladower or Bonomowitz obtained possession of the check from plaintiff with intent to retain it is immaterial, as is also the fact that Miller & Bonime were never actually entitled to the proceeds of the discounted note.

The governing fact in this case is that plaintiff delivered to Vladower a check which only Miller & Bonime were intended to use and which only Miller & Bonime could use, and no title to the check passed either to Vladower or Bonomowitz. In the case of Seaboard National Bank v. Bank of America, 193 N. Y. 26, an employee of a depositor known to the bank presented to the bank in Pittsburgh a forged check purporting to be drawn by the depositor, and requested the bank to give him a New York draft payable to the order of Carroll Brothers. Carroll Brothers were an actual firm with whom the depositor was doing business but to whom the depositor was not indebted. The bank gave the employee the draft as requested and the employee negotiated the draft,'forging Carroll Brothers’ signature. It was held that the bank making the check to Carroll Brothers could not be charged with the payment. The court there said: *“*The secret intention of a criminal contrary to his express intention and the avowed purpose for which he obtains possession of a draft does not give the criminal ownership of the draft *216or a legal right to change a draft payable to a real payee to one payable to bearer. There is no presumption arising from the facts proven that the name Carroll Bros, was intended 'as a fictitious or non-existing payee. Such intention to be effective must necessarily arise from knowledge and exist as an affirmative fact in the mind of the drawer of a draft at the time of its delivery.

*“*There is nothing in this case to estop the plaintiff from controverting the genuineness of the indorsement of the draft in controversy as in Coggill v. American Exchange Bank (1 N. Y. 113) where one of the members of a partnership, the makers of a draft, put it into circulation with the forged indorsement of the payee upon it, or as in Phillips v. Mercantile National Bank (140 N. Y. 556) where the person who forged the name of the payee was the cashier of the defendant empowered to bind the bank by his checks.” So in this case the secret intention of Bonomowitz by fraud to obtain possession of a check for his own benefit contrary to his apparent intention and avowed purpose that the check should belong to Miller & Bonime does not give him any ownership inconsistent with the form and tenor of the check, and there is no presumption that the' name Miller & Bonime was intended as a fictitious or non-existing payee. On the contrary, it affirmatively appears that the name Miller & Bonime was intended to describe an actual payee, and there is nothing in the case that estops the plaintiff from control verting the genuineness of the indorsement.

The defendant claims that it was negligence on the part of the plaintiff to put in the hands of Vladower a check drawn to Miller & Bonime without investigating whether the indorsement of' Miller & Bonime on the note which the plaintiff was discounting was genuine. Obviously, of course, this argument must be based upon the premise that the plaintiff actually intended that the check should be payable to' Miller & Bonime and not to any owner óf the note' or to bearer, and that only Miller & Bonime could legally transfer title to the check. This alleged negligence, however, is immaterial because no act of the defendant was induced by the acts, representations or admissions of the plain*217tiff. See Seaboard National Bank v. Bank of America, *supra. ■*Even if the plaintiff had been actually suspicious of Yladower’s right to receive a check payable to Miller *&*Bonime, he could have given Yladower a check payable to Miller *&*Bonime’s order confident in the knowledge that the diversion of the check could entail no loss upon him, for only Miller & Bonime could transfer title to it; unless, of course, the check was delivered under circumstances clearly charging the plaintiff with knowledge that Yladower was an imposter. In the case of Gallo v. Brooklyn Savings Bank, supra, a man representing himself as a depositor of a savings bank presented a bank-book and demanded payment of the deposit. The appearance of the alleged depositor was totally different from the description contained in the bankbook and the bank was not-satisfied with-his explanation of this fact. It, therefore, paid him by check drawn to the order of the depositor instead of in money. The check was thereafter paid and charged to the savings bank. The court there said, per Cullen, Ch. J.: “ I am not prepared to admit the proposition that when a bank or individual, not being satisfied of the rights or identity of the party claiming payment from it or him, declines to pay the party in money, but gives a check to the order of the known creditor, it or he is thereby necessarily guilty of negligence or fraud. It is the general rule of law in. this country, and such is the common law, that the drawee of a bill or check or persons purchasing it *1*take the. paper relying solely on the reputed responsibility of their transferers, and the other parties to it, and its apparent genuineness, and they, therefore, deal in it at their peril.’ (Crawford v. West Side Bank, 100 N. Y. 50.)”

It follows that the verdict directed for the plaintiff was correct and should be reinstated.

.Order reversed with costs and verdict reinstated with costs.

Seabuby and Page, JJ., concur.

Order reversed with costs and a verdict reinstated with costs.