Court Opinion

ID: 5307936
Source: CourtListenerOpinion
Date Created: 2022-01-08 03:37:06.909535+00
Date Added: 2024-06-11T08:29:09.961474
License: Public Domain

Finch, J.
(dissenting). This action was brought by a depositor of the defendant bank to recover an amount alleged to have been paid out of its account by the bank in checks of the depositor upon forged indorsements of the payees. As a defense to the action, the defendant answered that any payment of forged checks was because of lack of care on the part of the plaintiff to discover and prevent the forgery in failing reasonably to examine the statements returned from the bank with the canceled checks. At the close of the entire case the court directed a verdict for the depositor and denied the motion of the bank to go to the jury.
The only question involved in this appeal is whether or not upon the facts there should have been a submission of the case to the jury upon the issue of negligence by the depositor.
The facts, in brief, are as follows: Plaintiff is engaged in business in the city of New York selling honey sent on consignment by farmers scattered throughout the up-State country. When the honey is sold and the price received, the plaintiff deducts its com*550mission and remits the balance to the consignors by check. In maintaining its account with the defendant, plaintiff authorized an employee to take charge of the making of deposits, the cashing of checks, the procuring of loans and the signing of checks jointly with the secretary of the plaintiff. Further, the bank was ■ expressly authorized, by resolution of the plaintiff, to pay drafts, etc., signed by its secretary and said employee jointly, “ and also to receive the same for the credit of or in payment from the payee or any other holder, when so signed, without inquiry as to the circumstances of their issue or the disposition of their proceeds, whether drawn to the individual order of, or tendered in payment of individual obligations of the officers above named, or other officers of this corporation, or otherwise.” The monthly statements of account and returned vouchers were also turned over to this employee for checking and verification. It is also stipulated that the depositor had in its possession the genuine signatures of all payees of checks, and that the bank had no knowledge of such signatures.
The employee of the depositor devised and executed a plan of preparing fictitious statements, showing there was due to various customers of the plaintiff certain amounts. He then drew and signed checks for these amounts, obtained the countersignatures of the secretary of the depositor, destroyed the statements, forged the indorsement of the payees, added his own indorsement beneath, and presented the checks for payment at the bank. The checks so presented were paid by the bank and across the face of the check was stamped the word “ Cashed.” The employee, in this manner, cashed at least one check and more often two, on a forged indorsement, each month from September, 1924, down to and including May, 1925.
Upon the foregoing facts we are of the opinion that there were issues for the jury, both upon the question of whether there was any negligence upon the part of the plaintiff in faffing to discover the forged indorsements, and upon the part of the defendant in paying the checks. In the latter event, the defendant could not set up negligence of the plaintiff as a defense to the action, for, as pointed out by Judge Cullen, in Critten v. Chemical Nat. Bank (171 N. Y. 219, 232): “ That Davis was able to successfully continue from this time to his arrest a series of forgeries is as fairly attributable to the folly of the bank in paying to a clerk a check of his employers which had plainly been altered without making inquiry as to the reason or authority for the alteration, as it was to any carelessness of the plaintiffs in faffing to detect the alteration when the checks were returned to them from the bank. Since we *551have held that the question in the case was not one of ratification or estoppel, but that the liability of the plaintiffs to the bank was solely for the loss caused by their negligence, it is a complete answer to the defendant’s claim that its own negligence contributed to the loss. The learned counsel for the appellant contends that the plaintiffs’ cause of action is not based on negligence and that the plaintiffs cannot sue on contract and recover in tort. This claim is without force. The action unquestionably was brought on contract, but it remains such. The plaintiffs sue for a debt to which the defendant answers: We have paid the money, true, not according to your directions, but in compliance with what we believed to be your directions, and your negligent conduct in your duty towards us led us into that error. To which the plaintiffs rejoin: Your own negligence contributed to the loss. All this may be true, yet the plaintiffs recover not in tort but on contract, for the allegation of negligence on the part of the defendant is used only to defeat its claim for relief on account of the plaintiffs’ negligence.”
The issue as to the negligence of the depositor is whether it had exercised due diligence in the checking of the returned checks. It is settled that where a depositor has in its possession the means of ascertaining' whether the indorsement of a check is genuine, and there are circumstances calling for an inquiry, it becomes the duty of the depositor to verify the indorsement. As was said by Judge Chase, in Prudential Ins. Co. v. Nat. Bank of Commerce (227 N. Y. 510, 522, 523):
“ The reason given for not extending the rule to include an examination of indorsements for the purpose of determining whether they are genuine is that the depositor has no greater knowledge on the subject of the genuineness of the signature of the payee than the bank. In the case now before us the plaintiff had in its possession the genuine signatures of each of the payees in the several checks whose names were forged by Eaton. * * *.
“We think in this case that it was at least a question of fact upon the evidence before the court, a brief statement of which we have given, whether the plaintiff was negligent in failing to examine the indorsements on the checks which had been returned to it by the defendant and other banks with the genuine signatures of the payees in its possession prior to the payment of the Phipps and Wade checks and whether such negligence and the consequent failure of the plaintiff to notify the defendant of the information that it would have obtained by such examination contributed to the payment of said checks by the defendant bank.
“ It is permitted to a bank to escape liability for repayment of *552amount paid out on forged checks by estabhshing that the depositor has been guilty of negligence which contributed to such payment and that it has been free from any negligence. [Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 218.] ”
In the case at bar, as hereinbefore noted, the plaintiff had in its possession the genuine signatures of the payees of all these checks, whereas the defendant was without any such information. Also from the fact that the employee with regularity indorsed the checks following the supposed signatures of the payees and perhaps also from the stamp of “ Cashed ” across the face of the checks showing that the payees of these small checks were apparently accustomed to come to New York from comparatively long distances and obtain the money in person, there would be present some evidence of unusual occurrences which a jury might find sufficient to put the depositor upon inquiry. Under the authority above cited, it was incumbent upon the plaintiff to examine the returned vouchers and to verify the indorsements if the facts were such as to put it upon inquiry. It is no answer that the plaintiff relied upon a dishonest employee to make this inspection of the vouchers, whose interest it was to conceal from the plaintiff his knowledge of his own fraudulent acts. A party under a duty to inspect is chargeable with knowledge of any facts which an inspection would reveal, irrespective of by whom made. (Critten v. Chemical Nat. Bank, 171 N. Y. 219.) It, therefore, was error to direct a verdict for the plaintiff arid to deny the motion to submit the issues to the jury.
It follows that the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event.
O’Malley, J., concurs.
Judgment affirmed, with costs.