Court Opinion

ID: 9732647
Source: CourtListenerOpinion
Date Created: 2023-08-26 16:29:41.310817+00
Date Added: 2024-06-11T15:23:25.252416
License: Public Domain

ROTH, P. J.
I dissent. The record demonstrates that Brown, a trusted employee acting within the scope of his authority, was charged with the sole responsibility of preparing check orders which were required to be initialed or signed by two other trusted employees. Brown forged the initials and signature of the other employees and presented the check orders to a clerk who operated a cheek-writing machine. Thus, the checks in question, bearing facsimile signatures of officers authorized to sign for Credit Managers Association, were completed. The payee of the checks, was the Security First National Bank (Security). The record shows without contradiction that Security had no interest whatsoever in the checks; that Brown was a regular depositor of Security and known to it as an employee of Credit Managers Association; and, further, that Brown, who prepared the check orders, presented the checks severally to Security with deposit slips for his account with Security and that he intended to retain the proceeds thereof, and actually did.
The procedure for issuance of checks by facsimile signatures upon check orders so prepared, initialed or signed and presented to a clerk in charge of a check-writing machine, does, as a pragmatic business practice, make the facsimile signers mere automatons and appoints the persons who are in complete charge of preparing and issuing the checks, the ones who actually draw the checks for the Credit Managers Association. Brown’s preparation of check orders and his forgery of the initials and signature on the same was equivalent to the issuance of valid checks with facsimile signatures. The persons. whose facsimile signatures were used never saw the cheeks in question, and it is fair to assume from the record, *103meager though it is (which meagerness may be calculated on the part of appellant), that the persons whose facsimile signatures were produced by a check-writing machine, did not see or seldom saw any of the checks which were validly issued by Credit Managers Association at any time.
In these circumstances, the cheeks here in question were bearer checks.
An almost similar situation was decided to the contrary in Los Angeles Investment Co. v. Home Savings Bank of Los Angeles, 180 Cal. 601 [182 P. 293, 5 A.L.R 1193]. The situation at bench, however, differs from Some in a pivotal and sensitive area. In Some, a check requisition would be prepared in one of a number of departments. “This requisition was then transmitted to the accounting department, where it was examined and, if found correct, approved and entered on the plaintiff’s books. A check in accordance with the demand was then prepared and presented with the approved demand to the officers authorized to sign checks. Upon being signed, it was returned to the insurance department for delivery to the party to whom payment was to be made.” (Italics added; Some, supra, page 603.)
At bench, all orders for checks were prepared by Brown and a check was complete when all three of the employees participated in the procedure outlined. In these circumstances, the intent of any of the three, even though one of them imposed on the other two, was the intent of the drawer of the check. Analysis of the Some case supra, and a factually similar situation is made in Goodyear Tire & Rubber Co. of California v. Wells Fargo Bank etc. Co., 1 Cal.App.2d 694 [37 P.2d 483], followed in Union Bank & Trust Co. v. Security-First National Bank, 8 Cal.2d 303 [65 P.2d 355], It may be contended at bench predicated upon analogy to the factual situation in Some that the two employees who were called on to initial or sign orders prepared by Brown, were the drawers of the check, to the exclusion of Brown, who merely prepared the orders, and that only one or the other of the persons who signed or initialed the order, could fix an intent as to a fictitious payee. However, no person accepting any check drawn by Credit Managers Association, ever knew who the persons were who signed the orders prepared by Brown or ever saw their respective initials or signatures. Security did not and no teller of Security who ever received a check of Credit Managers from Brown for deposit to his personal account, ever *104saw the signature or initial of the employees who signed Brown’s cheek orders. The named and authorized signatures for the cheeks of Credit Managers Association, were represented by facsimile signatures. Since the signatures of the persons who theoretically drew the checks were facsimiles, and completed checks could be obtained by presenting initialed check orders to a clerk in charge of a check-wiring machine, the pragmatic business routine of Credit Managers Association required all three to draw the checks. Credit Managers had therefore, by process of automation, legally transferred all responsibility for drawing of checks from the facsimile signers to Brown and the two employees who initialed cheek orders prepared by him.
The failure of respondent’s teller to place the checks here scrutinized in the large item bin, when deposited by Brown to his account, is irrelevant. This procedure was for the protection of the receiving bank, to wit: Security. It is not unusual for depositors to make substantial deposits by checks which are not “money good” and for the depositor to immediately thereafter draw against such deposits. The large item bin is designed to permit an officer of the receiving bank to authorize a “hold” against withdrawal of moneys predicated on the fact that the check is “money good”.
Tellers are not expected to be lawyers and when a depositor offers a check for deposit payable to the receiving bank, together with a deposit slip in his name, such procedure is equivalent to endorsing the check. The depositor, to wit: the person who received the money, is always known to the bank. The natural assumption of a reasonably intelligent or even sophisticated bank teller would be that it was presented for deposit and drawn to the bank, rather than to cash, out of an excess of caution to make it more difficult in the event of loss of the check for a non-entitled person to obtain the proceeds.
The notations in the upper left-hand corner of the checks here involved are commonly placed on checks and constitute the reasons for making the checks. The writing on the cheek is for the convenience of the maker. Such memoranda do not render the check conditional in a negotiable sense. The check with or without memoranda, from a standpoint of negotiability, is an unconditional order to pay within the meaning of section 3084 of the California Civil Code, as it existed prior to January 1, 1965, or within the meaning of section 3105 of the Uniform Commercial Code which superseded the Civil Code section.
*105If the cheeks were bearer checks, the question of negligence is not pertinent. However, if this case turns on negligence, the record shows that the trial judge on ample uncontradicted evidence and proper inferences drawn therefrom, specifically-found the facts against appellant and in favor of respondent.1
The transactions here in question were, at the time they were consummated, governed by section 3090, subdivision (3) of the Civil Code as it existed prior to January 1,1965.
Effective January 1, 1965, the Civil Code section referred to was superseded by the enactment of the Uniform Commercial Code and was assimilated into sections 3111 and 3405 of the Uniform Commercial Code. I express no opinion as to whether the checks would be bearer paper under the sections of the Uniform Commercial Code referred to, although the quotations by the majority from the official comments in respect of said sections fortify my tentative belief that nothing in the Uniform Commercial Code changes the construction required by section 3090, subdivision (3) of the Civil Code, as it existed prior to January 1,1965.
Finally, there is a real question as to appellant’s right of subrogation.
An excellent treatise on the law of subrogation against banks on forged checks including a table of the jurisdictions which have decided the issue is contained in 51 Cornell Law Quarterly 441 (1966). In Meyers v. Bank of America, 11 Cal. 2d 92, the court said at page 102 [77 P.2d 1084]:
“Thus, it may be observed that there are two lines of cases governing the questions here presented, each wholly at variance with the other. We think the great weight of authority rests with the group last referred to, and that the principles *106there announced, in good conscience ought to be applied to the circumstances of this ease. As stated hereinbefore, the right to maintain an action of this kind and to a recovery thereunder involves a consideration of, and must necessarily depend upon the respective equities of the parties.[2] Here, the indemnitor has discharged its primary contract liability. It has paid what it contracted to pay, and has retained to its own use the premiums and benefits of such contract. It now seeks to recover from the bank the amount thus paid. It must be conceded that the bank is an innocent third party, whose duty to the employer was based upon an entirely different theory of contract, with which the indemnitor was not in privity. Neither the indemnitor nor the bank was the wrongdoer, but by independent contract obligation each was liable to the employer. In equity, it cannot be said that the satisfaction by the bonding company of its primary liability should entitle it to recover against a bank upon a totally different liability. The bank, not being a wrongdoer, but in the ordinary course of banking business, paid money upon these checks, the genuineness of which it had no reason to doubt, and from which it received no benefits. The primary cause of the loss was the forgeries committed by the employee, whose integrity was at least impliedly vouched for by his employer to the bank. We cannot say that as between the bank and the paid indemnitor, the bank should stand the loss. Under the facts of this case, as is stated in Northern Trust Co. v. Consolidated Elevator Co., 142 Minn. 132 [171 N.W. 265, 4 A.L.B, 510] : ‘The right to recover from a third person does not stand on the same footing as the right to recover from the principal.’ (Italics added.)
‘ ‘ Our conclusion, as hereinbefore has appeared, is that since the bonding company had no superior equities, it was not entitled to be subrogated to any claim plaintiff might have had against the bank.” (Traner v. Crocker Anglo National Bank, 173 Cal.App.2d 779 at pp. 781-782 [343 P.2d 974].) See also, Fidelity & Deposit Co. of Maryland v. De Strajman, 215 Cal.App.2d 10, 12 [29 Cal.Rptr. 855].)
I would affirm.

“ Defendant was innocent in any wrongdoing with respect to the things and transactions alleged in the complaint, and for that reason plaintiff is not subrogated to any rights of Credit Managers Association of Southern California as against defendant, and plaintiff is not entitled to maintain the within action.
“As between defendant and Credit Managers Association of Southern California, the two parties were not equally innocent, and said Credit Managers Association of Southern California placed Nolan B. Brown, by virtue of his employment, in a position where he was able to perpetrate the embezzlement hereinbefore described. For that reason neither Credit Managers Association of Southern California nor plaintiff is entitled to maintain the within action against defendant.
‘ ‘ Credit Managers Association of Southern California was negligent in its office practices and procedures and such negligence was the proximate cause of the embezzlement and misappropriation of funds by Nolan B. Brown as herein-before set forth. ’ ’

See findings of trial judge, note 1, supra.