Opinion ID: 307865
Heading Depth: 2
Heading Rank: 2

Heading: Effect of Columbian's Reacquisition of Its Checks.

Text: 40 Columbian was liable to each grower who delivered his peanuts to Pelham Peanut Company on the faith of Pelham's own check, because the peanuts were delivered to Columbian's commission agent and ultimately either the same peanuts or peanuts of like quality and quantity were delivered to Columbian. Columbian's check intended for the grower was forged by Frosteg instead of being delivered to the grower. As between Columbian and the grower, Columbian's check did not become a completed contract, though it did constitute evidence of Columbian's liability to pay for the peanuts purchased. 41 In paying each grower, Columbian received his affidavit that he had not endorsed Columbian's check, had never given anyone authority to endorse it for him, and had not received its proceeds. Columbian also had each grower sign on the back of its check already in its possession an endorsement reading, Pay to the order of Columbian Peanut Company. 42 The checks were delivered by the banks to Columbian when it reimbursed the banks for their payment. Each bank had in its customary routine stamped its endorsement on each check reading, Pay to Any Bank, Banker or Trust Company. All Prior Endorsements Guaranteed. 43 Under Georgia Code 109A-4-201, such an endorsement runs only to a bank, banker or trust company. Consequently, Columbian cannot base its right to recover from the bank on the guarantee contained in the endorsement. In effect, that endorsement coupled with the delivery of the check to Columbian destroyed its negotiability. The responsibility of the banks to Columbian is based on a claim that the banks wrongfully paid Columbian's checks bearing forged endorsements, and not on the terms of the banks' endorsements of the checks. 44 The district court held that Columbian reacquired the checks by paying the original grower-payees whose names were fraudulently endorsed and thereby gained physical possession of the checks. [App. 518.] After such reacquisition, according to the district court's holding, Columbian was barred from any recovery against the banks by Georgia Code sections 109A-3-208 1 and 109A-3-601(3). 2 45 We do not agree. Columbian got possession of the checks when the banks were reimbursed, not at the later time when Columbian paid the original grower-payees. Further, those sections of the Uniform Commercial Code should not have the effect of penalizing Columbian for paying the growers of the peanuts which (or the equivalent of which) it had received. By getting the grower-payee to endorse the check already in Columbian's possession, and which had ceased to be a negotiable instrument, Columbian did not relinquish its claim against the bank for wrongfully paying the check bearing a forged endorsement. Precisely to the contrary, Columbian's conduct went to prove the damage which Columbian suffered from the bank's paying to another its check intended for the grower, but of which the grower never became a holder. Sections 109A-3-208 and 109A-3-601(3) are intended to serve another and unrelated purpose of eliminating circuity in the order of responsibility. Otherwise construed, the sections would have the effect of radically depleting the rule of strict responsibility of a bank for paying a check upon a forged endorsement. 46