Opinion ID: 1507556
Heading Depth: 1
Heading Rank: 2

Heading: The Asserted Negligence of Oak Cliff

Text: It is conceded by the parties that under a contract of deposit, a bank obligates itself to pay funds to such persons or entities as the depositor may direct and to no others; that a depository bank which pays out money upon a forged endorsement may not legally charge the amount so paid out to the depositor's account in the absence of unusual conditions, and that ordinarily the bank paying out funds upon a forged endorsement must stand the loss. The Wichita Falls bank paid out the funds in the case now before us and now contends that the American bank (Oak Cliff depository bank) had a good defense against the demand of Oak Cliff for the return of the money paid out on the forged endorsement which it (the Wichita Falls bank) is entitled to assert in this suit. Seemingly, it is also asserted that there are special circumstances existing between Oak Cliff and the Wichita Falls bank which would render it unfair or inequitable for the bank to be charged with the loss occasioned by Fredda Grisham's fraudulent conduct. This position is stated by Mr. Cummings, the Wichita Falls bank official, in his affidavit as follows: Had we been placed on notice of any kind by Oak Cliff Savings & Loan Association that the purported signature of Flora Grisham, their own depositor, was not the true signature of Flora Grisham, the subject money would not have been delivered to Mrs. Perry Grisham, we would not have guaranteed her endorsement and we would have required additional verification of such signature before clearing such check. The Wichita Falls bank attempts to raise some species of estoppel which would prevent the enforcement of the general rule that the loss falls upon the party who pays out money upon a forged endorsement. In our opinion the position of the Wichita Falls bank cannot be sustained either upon the premise that such bank stood in the shoes of the Oak Cliff depository bank (American) or upon the theory that Oak Cliff misled the Wichita Falls bank and thus caused them to cash the check and deliver the proceeds to a forger. The check drawn by Oak Cliff was an order to pay Flora Grisham, Independent Executrix of the Estate of I. T. Grisham the sum of $5,669.05, and unless such sum was paid to the named payee, it could not lawfully be charged against the Oak Cliff account. This legal situation is not modified nor the liability of the Wichita Falls bank avoided because Oak Cliff, at the time American paid the check, had no signature card in its files signed by Flora Grisham or the circumstance that it held in its files a letter signed by the genuine Flora Grisham, as well as the purported draft signed by the spurious Flora Grisham. It is not customary for banks to make inquiry of depositor's files before ascertaining the identity of persons presenting checks for payment as payees. If inquiry as to identity had been made, we might have a different situation, but a depositor is not required to volunteer information nor to anticipate that its depository will pay out funds upon forgeries. We agree with respondent that petitioner's arguments might have some application to the duty owned to one investing or depositing money with Oak Cliff, but the lack of a signature card in Oak Cliff's files does not lessen the duty which the American bank (and hence the Wichita Falls bank) owed to Oak Cliff. The facts of Liberty State Bank v. Guardian Savings & Loan Association, 127 Tex. 311, 94 S.W.2d 133 (1936) go far beyond the facts of this case in that there an estoppel was sought to be urged upon a failure to promptly notify the bank that money had been paid out upon a forged endorsement, which delay allegedly operated to prejudice the bank's attempts to recover such money. It was not a case in which an estoppel was sought to be raised because of some action taken by a depositor in causing payment to be made upon a forgery. However, a forged endorsement was involved and a depositor's duty with reference thereto was discussed. This Court said: A bank paid the check of its depositor upon a forged indorsement of the payee. The jury found the depositor negligent in not sooner discovering the forgery. The Court of Civil Appeals held that the depositor owned no duty to examine the indorsement, and could not therefore be charged with negligence for failure to do so. There was no question but that the depositor promptly notified the bank upon learning that the indorsement was forged. In rendering judgment for the depositor, the court merely reannounced and followed a rule of general acceptation, stated in 3 R.C.L. p. 535, § 165, in this language: `The duty imposed upon the depositor to examine his pass book and vouchers does not extend to an examination of the signatures of the payees on the returned vouchers, as it is the duty of the bank to determine the genuineness of a payee's indorsement, and the depositor is not expected to know his signature, and the fact that an agent in the employ of the depositor has forged the payee's indorsement does not affect the rule.' In addition to the authorities cited in the opinion of the Court of Civil Appeals, we cite the following: 6 Tex.Jur. p. 308, § 159; 7 C.J. p. 608, § 415; Texas Bank & Trust Co. of Sweetwater v. Withers (Tex.Civ.App.) 60 S.W.(2d) 1061; case notes in 15 A.L.R. 166, and 28 A.L.R. 1437. Liberty Mutual Ins. Co. v. First National Bank in Dallas, 151 Tex. 12, 245 S.W.2d 237 (1952) presented a state of facts which in some respects are similar to those disclosed by the present record. It was held that the circumstance that an employee of Liberty Mutual Insurance Company had issued a number of fraudulent checks payable to fictitious payees did not excuse the bank in paying out the insurance company's funds on faked endorsements. Liberty State Bank v. Guardian Savings & Loan Association was said to set at rest the duty of a depositor to examine the endorsement upon checks written by it.