Source: https://law.justia.com/cases/federal/appellate-courts/F2/251/666/297120/
Timestamp: 2019-04-25 21:54:26+00:00

Document:
"Torrance National Bank, a corporate citizen of the State of California, instituted this action against The Aetna Casualty & Surety Company, a corporate citizen of the State of Connecticut, in the Superior Court of the State of California. Defendant procured removal to this Court pursuant to Title 28 U.S.C.A. § 1441(a) (Diversity of citizenship).
"Enesco Federal Credit Union, a depositor of plaintiff Bank, had since 1949 employed one Joseph Alden as its Treasurer. By both the Act2 under which Enesco was incorporated and a Resolution of its Board of Directors (a copy of which was furnished to plaintiff), Alden was authorized to sign all the checks of the corporation. In addition to managing the affairs of Enesco, Alden during this period operated a paycheck cashing service upon his employer's premises for his own profit. In order to obtain the necessary funds for this personal business, Alden had a long-standing arrangement with the responsible officers of plaintiff Bank whereby on each Thursday he would leave with the Bank teller an unnumbered check, dated the following day, drawn upon the account of his employer and signed by himself as Enesco's Treasurer. Alden would receive in exchange from the Bank, after the close of banking hours, a briefcase containing a substantial sum of money to be used by him the next day in cashing paychecks. The practice was that the check would be held in the teller's cash drawer without entering it in the Bank's records in order to give Alden time to cash paychecks, deposit them in the Bank in another account, and exchange his check on the other account for the Enesco check held by the Bank. Under this procedure no entry of the transaction would appear upon Enesco's monthly bank statement, which was subject to the scrutiny of both the members of Enesco's Board of Directors and the Federal Bank Examiner.
"For this special service to Alden the Bank charged him a small weekly fee.
"Although the Bank's officials knew the purpose for which Alden intended to use the money so obtained, they were unaware that Alden had no authority from Enesco's Board of Directors to sign corporate checks for his own check cashing business. At least in part because of the irregular routing of these Thursday checks by the Bank, the Directors of Enesco knew nothing of these weekly transactions between their Treasurer and the Bank.
"On Thursday, April 2, 1953, this weekly system suffered a blow. Alden left with the Bank teller a check for $30,000 drawn upon the Enesco account and signed by himself as Treasurer. On that date Enesco's account with the Bank was only slightly in excess of $10,000. On his way from the Bank to the offices of Enesco with the $30,000 received from plaintiff, Alden was robbed of the money.
"The Bank thereafter attempted to charge the check against the Enesco account and to collect the $19,516.93 deficiency by suit. In Torrance National Bank v. Enesco Federal Credit Union, 1955, 134 Cal. App. 2d 316, 285 P.2d 737, the California District Court of Appeal decided that the check was not authorized either actually or ostensibly by Enesco, and that the Bank must bear the loss.
"The Bank now seeks indemnification under that portion of the bond issued to it by defendant which insures against loss sustained upon `forged' instruments.
"Plaintiff contends that the unauthorized signing by an agent of his own name as agent constitutes a `forgery'. If this contention is valid, plaintiff's suit correctly seeks indemnification for its loss.
"As early as 1896, in People v. Bendit, 1896, 111 Cal. 274, 43 P. 901, 31 L.R.A. 831, the Supreme Court of California unequivocally articulated the law to be that an instrument signed by the one purporting to have executed it is not a `forgery'. Plaintiff asserts that this Court should not follow the Bendit decision. He has cited a group of adjudicated cases4 which he contends will by analogy lead this Court to declare that under the modern rule, Bendit would be decided differently.5 Counsel's argument that other cases foretell a different result when California again adjudicates the problem directly falls when a survey of recent cases discloses that in 1955, after considering the very authorities here cited by plaintiff, a California Appellate Court followed Bendit in holding that a genuinely made instrument is not a forgery.6 Hearing was denied by the Supreme Court of the State.
"In the Bendit case, the California Supreme Court declared a rule which forecloses plaintiff from recovery. A District Court of Appeal in California has recently reaffirmed the doctrine of that case, and the California Supreme Court refused to review that decision. The voice of the sovereign to which this Court hearkens in a diversity case has been adequately articulate. * * *"
"Quick Service Box Co. v. St. Paul Mercury Indemnity Co., 7 Cir., 1938, 95 F.2d 15. (The decision there supports plaintiff's theory here.) However, in Fitzgibbons Boiler Co. v. Employers' Liability Assur. Corp., 2 Cir., 1939, 105 F.2d 893; Augustus Hand, J., states that the Quick Service Box Co. case represents a minority view.
"Pasadena Investment Co. v. Peerless Casualty Company, 1955, 132 Cal. App. 2d 328, 282 P.2d 124 [52 A.L.R.2d 203]. This decision on local law by a highly respected intermediate court of appeal must be accorded great weight. West v. American Telephone & Telegraph Co., 1940, 311 U.S. 223, 61 S. Ct. 179, 85 L. Ed. 139."

References: § 1441
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