#### MARY E. HOLLOWAY v. J. W. BARBEE, VIRGINIA FIRE AND MARINE INSURANCE COMPANY AND CITIZENS NATIONAL BANK OF DURHAM, NORTH CAROLINA.

(Filed 21 December, 1932.)

Bills and Notes O a — Bank endorsing draft with guaranty of prior endorsements held not liable for want of authority of prior endorser.

Where a fire insurance company draws a draft on itself payable to the insured to cover loss sustained by the insured on a policy of fire insurance, and the insurer stipulates that if the draft is endorsed for the insured by his agent or attorney that properly certified evidence of authority must be filed with the insurer, and the draft is delivered by the insurer’s agent to an attorney who endorses the draft and attaches thereto a certificate of a deputy clerk of the Superior Court that he is the attorney for the insured, and deposits the draft for collection in a bank which endorses it with guaranty of all prior endorsements, and the draft is paid by the insurer after it had examined the endorsements and passed thereon, and the proceeds remitted to the collecting bank and drawn out by the attorney' by checks without paying any part thereof to the insured, and it is made to appear as a fact that the attorney was without power to endorse the draft or receive the proceeds thereof: *Sold,*the loss was sustained by reason of want of authority by the attorney to endorse and not by want of genuineness in the endorsement, and the bank guaranteeing-prior endorsements and furnishing the insurer in good faith evidence of the attorney’s authority, is not liable to the insurer on its endorsement, the insurer expressly reserving the right in itself to pass upon the attorney’s endorsement.

Appeal by defendant, Virginia Fire and Marine Insurance Company, from *Miclyette, J.,*at January Term, 1932, of Durham.

Affirmed.

Tbe defendant, J. W. Earbee, is primarily, and bis codefendants are secondarily liable to tbe plaintiff on tbe cause of action alleged in tbe complaint in this action. Each of said codefendants, however, alleges in its answer that the other defendant is liable to it for such sum as tbe plaintiff may recover in this action of said defendant.

Judgment was rendered by default that tbe plaintiff recover of tbe defendant, J. W. Barbee, tbe sum of $4,118.50, this sum being double tbe amount of damages which tbe plaintiff is entitled to recover of said defendant on the cause of action alleged against him. O. S., 202. No sum has been paid on this judgment. It was admitted by both his co-defendants that tbe said J. W. Barbee is insolvent, and that no sum caii be collected by execution on said judgment.

While tbe action was pending in tbe Superior Court of Durham County, and after tbe judgment by default bad been rendered in her favor and against tbe defendant, J. W. Barbee, tbe plaintiff agreed with the defendants, Virginia Fire and Marine Insurance Company, and *714Citizens National Bank of Durham, N. C., that she would accept the sum of $1,500, in full settlement and discharge of the liability of both said .defendants to her in this action. It was thereupon agreed by and between said defendants, that the defendant, Citizens National Bank of Durham, N. C., should pay said sum of $1,500 to the plaintiff, in full settlement and discharge of the liability of both said defendants to her, and that such payment by said defendant should be without prejudice to its contention that the defendant, Virginia Eire and Marine Insurance Company was primarily liable to plaintiff for said sum, and that for that reason, the defendant, Citizens National Bank of Durham, N. C., having paid said sum to the plaintiff, was entitled to recover of the defendant, Virginia Eire and Marine Insurance Company, in this action, the sum of $1,500. Both these contentions were denied by the defendant, Virginia Eire and Marine Insurance Company.

At the trial of the issue raised by these opposing contentions, on the facts agreed by the defendants, it was ordered, considered, and adjudged by the court that the defendant, Citizens National Bank of Durham, N. C., recover of the defendant, Virginia Eire and Marine Insurance Company, the sum of $1,500, with interest and costs.

From this judgment, the defendant, Virginia Eire and Marine Insurance Company, appealed to the Supreme Court.

*Fuller, Beade & Fuller for defendant, Virginia Fire and Marine Insurance Company.*

*McLendon & Bedriclc for defendant, Citizens National BanJc of Durham, N. C.*

Connor, J.

On 9 March, 1929, the defendant, Virginia Eire and Marine Insurance Company, of Richmond, Va., caused its general manager, J. M. Leake, to draw a draft on said company, for the sum of $2,054.25. This draft was drawn at Richmond, Va., and was payable, at sight, to the order of Mary E. Holloway, administratrix of W. P. Holloway, when presented for payment to the State-Planters Bank and Trust Company, Richmond, Va. On its face there is a recital to the effect that payment of the draft, when properly endorsed, would constitute full satisfaction of all claims and demands for loss and damage by fire which occurred on 12 November, 1928, to property described in policy No. 25338, which was issued by said company through its local agent at Durham, N. O. On the back of the draft, there was a notice in words as follows:

> “Notice: If endorsement of draft is made by an attorney or other representative, properly certified evidence of authority must be filed with this company.”

*715Tbe draft was sent by tbe defendant, Virginia Fire and Marine Insurance Company, by mail, to its local agent at Durham, N. 0., witb instructions to deliver same to tbe payee named therein, Mary E. Holloway, administratrix of *W.*P. Holloway. Tbe local agent of said defendant received tbe said draft at Durham, N. C., and delivered tbe same to tbe defendant, J. *W.*Barbee, attorney for Mary E. Holloway, administratrix of *W.*P. Holloway. A few days thereafter, tbe said J. W. Barbee deposited said draft witb tbe defendant, Citizens National Bank of Durham, N. C., for collection. At tbe time of said deposit, tbe draft was endorsed in tbe handwriting of J. *W.*Barbee, as follows:

> “Mary E. Holloway, administratrix of *W.*P. Holloway, by J. W. Barbee, Atty.” “J. *W.*Barbee.”

Attached to tbe draft, when same was received by tbe defendant, Citizens National Bank of Durham, N. 0., for collection, was a certificate in words as follows:

> “To tbe Virginia Pire and Marine Insurance Company:

> This is to certify that J. *W.*Barbee is tbe acting attorney for Mary E. Holloway, administratrix of *W.*P. Holloway, deceased.

> Annie Bell High, deputy.”

Seal of tbe clerk of tbe Superior Court of Durham County.

Tbe defendant, Citizens National Bank of Durham, N. 0., thereupon endorsed tbe draft as follows :

> “Pay any bank or banker ox order, all prior endorsements guaranteed. 11 March, 1929. Citizens National Bank, Durham, N. 0.

> D. P. Campbell, cashier.”

Tbe defendant, Citizens National Bank of Durham, N. C., forwarded said draft, witb endorsements and certificate attached as aforesaid, by mail, to tbe State-Planters Bank and Trust Company, Richmond, Va., for presentment and payment. Upon its receipt of said draft, witb endorsements and certificate attached as aforesaid, tbe State-Planters Bank and Trust Company, duly presented same to the defendant, Virginia-Pire and Marine Insurance Company, and after said endorsements and certificate bad been examined and approved by said company, pursuant to tbe instruction of said company, charged the amount of said draft to the account of said defendant, and remitted said amount to tbe defendant, Citizens National Bank of Durham, N. C. The said defendant, *716upon its receipt of said amount, credited the defendant, J. W. Barbee, attorney, with said amount, and thereafter paid out the same upon checks drawn on it by the said J. W. Barbee, attorney. No part of said amount was paid by the said defendant, J. W. Barbee, to the plaintiff in this action, either as administratrix of W. P. Holloway, deceased, or individually.

It was admitted at the trial that the defendant, *J. W.*Barbee, had no authority, express or implied, to endorse the draft in the name of Mary E. Holloway, administratrix of *W.*P. Holloway, or to receive the proceeds of said draft, as her attorney. It was not denied, however, that the signatures on the back of said draft are in the genuine handwriting of the said I. *W.*Barbee.

On the foreg’oing facts agreed, there was no error in the judgment that the defendant, Citizens National Bank of Durham, N. C., recover of the defendant, Virginia Eire and Marine Insurance Company, the sum of $1,500, with interest and costs.

The defendant, Citizens National Bank of Durham, N. C., by its endorsement of the draft, and its guaranty of all prior endorsements, did not assume liability to the defendant, Virginia Eire and Marine Insurance Company, the drawee of the draft, for loss which the said company might sustain by payment of the draft to a subsequent holder, if such loss should be caused by the insufficiency of a prior endorsement to pass title to the draft, or to authorize payment by the drawee to a subsequent holder. In this case, the Virginia Fire and Marine Insurance Company by the notice which it had caused to be printed on the back of the draft before it was issued, had reserved the right to pass upon and determine the sufficiency of an endorsement when it appeared that such endorsement was made by an attorney for the payee, to pass title to the draft, and to authorize its payment when duly presented to the drawee. The defendant, Virginia Fire and Marine Insurance Company exercised this right at its own risk, and not at the risk of the defendant, Citizens National Bank of Durham, N. C. The last named defendant, as required by the notice printed on the back of the draft, in good faith, furnished to the Virginia Fire and Marine Insurance Company, evidence of the authority of J. *W.*Barbee to endorse the draft as attorney for the payee, and assumed liability for all loss which the drawee might sustain, should the endorsement of J. *W.*Barbee as attorney be not genuine. The loss sustained by the defendant, Virginia Fire and Marine Insurance Company was caused by the want of authority to endorse, and not by the want of genuineness in the endorsement. The judgment is supported by the decision of this Court in *Bank v. Trust Co.,*168 N. C., 605, 85 S. E., 5, and is

Affirmed.