Court Opinion

ID: 7182901
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:49:53.529886+00
Date Added: 2024-06-11T16:15:58.464205
License: Public Domain

Same Case — On a Re-Hearing.
THE judgment of the court, on a re-hearing, was pronounced by
Rost, J.
In the petition for re-hearing in this case, numerous precedents are cited, defining the duties and obligations of a bank towards its customers, and the learned counsel attribute their want of success to the neglect, on their part, to give us the benefit of them in the original argument. They do themselves great injustice; the court is familiar with those precedents and acknowledges their authority; but the court is aware also, that the contract of bank deposit is, to some extent, one of mutual benefit, and that the duties and obligations it creates are not all on the side of the bank. It imposes some duties on the depositor, and the first of those duties is, that his dealings with the bank, be direct and and founded on truth. The violation of this duty by the plaintiff in this case, would alone have been sufficient to defeat his action, on the ground that he cannot increase the obligations of the bank, by creating a state of things which would not have existed, if no indirection had been resorted to by him.
Had Payne and Harrison been the real payees, the negligence of the bank might have brought the case within the rule invoked in behalf of the plaintiff It is the circumstance of his buying a forged bill from a person unknown, without inquiry, and giving him in payment a check made payable to the order of a third party, who had no interest in the transaction which distinguish this case from those cited, and bring it within the operation of otherand adverse principles. As the opinion of the court has been greatly misunderstood, it may be well to make this distinction more obvious by an example.
It is customary, in this place, when merchant’s or tradesmen’s bills are presented by a person unknown to the debtor, to give checks to the order of the creditor, upon an acquittance of the bill; as long as the banks submit to that custom, they take upon themselves towards the payee, the risk that the money Bhall reach him, and if it does not, there may be such gross neglect on the part of the bank, as would render it liable also to the drawer of the check, if he should have to pay the debt a second time. The reason is that, in all such cases, the party named in the check, is the real payee, and the drawer has merely exercised his right as depositor; here the nominal was not the real payee; the check was given in payment to the creditor, though in the name of another person, and the bank paid that creditor. Taking the facts as they were before us, and limiting the decision to the case in hand, we held, that as it was no part of the contract between the plaintiff and the bank, that he should have the right to draw checks in that form. The bank might go behind the check, and justify the payment, by showing that it had been made to the creditor whom the plaintiff intended to pay.
If the law had been with the plaintiff, it would at least have been incumbent upon him, to make it appear that the loss for which he claims indemnity, was tbe result of the neglect of the defendant, and could not have occurred, if the *627bill had been presented to Payne and Harrison, .for their signature. He has entiroly failed to establish that fact. ,
The plaintiff cannot avail himself of the prosumption, that Payne and liarrison, who were without interest in the matter, would use greater diligence than he did, in ascertaining who the holder of the check was. A person, such as tho plaintiff describes him to have been, might easily have found some plausible reason for the check being in that form. Payne and Harrison, thorough men of business as they are known to be, would then have told him, that they would ascertain whether the bank would pay the check and collect it, if it was good ; but tliat this would give them some trouble, for which they must be indemnified by a small commission for their endorsement. All this would have been mercantile and fair; and yet, who would, in that case, have indemnified the plaintiff for his loss ? Not the bank, surely! It would have paid, agreeably to order, not Payne and Harrison: they would have complied with his wishes, and simply trusted the man, whom he himself had first trusted, and sent to them; to any complaints on his part, on the ground of negligence, they might well answer, that they did not understand his endorsement, as conferring upon them the police of his broker’s shop; and that, if it was so intended, it should have apprized them, that they were to take 'care that his customer was not a forger and a thief.
Suppose that the holder had purchased goods from Payne and Harrison, and offered them, in payment, a check of the plaintiff to their order; they, undoubtedly would have taken it, after ascertaining that it would be paid. Suppose, that after ascertaining that the check would be paid, Payne and Harrison had told the payer of the bank, to let the holder write their name on the back of it, for the sake of form, and then pay it; had the name accordingly been written as we find it, and the check paid, it cannot be doubted that the authorization of Payne and Harrison would have been sufficient to protect the bank. What difference is there, in a legal point of view, between an authorization thus previously given, and the tacit ratification by these parties, of the payment, after it was made ? None that we can perceive. The plaintiff, in his anxiety to socure himself, lost sight of the fact, that the additional security obtained by making checks payable to order, is real only when the party to whom tho check is payable, is the payee in interest, and that it became illusory when he is not. '
The decision of the court places the plaintiff where he would be if he had kept his money in his drawer, instead of keeping it in the bank; and it is repugnant to all ideas of justice, that he should have a claim against the bank, for paying the party whom ho would have paid himself, had he been his own banker.
The learned counsel complain that wrong has been done their client, by bringing his negligence in a transaction with a third party, in which the defendant had no interest or concern whatever, to bear upon a contract between the plaintiff and defendant of a totally different nature ; and the execution of which, in no manner depended upon any circumstances that might attend the other. • They overlook the fact vital to their cause, that it is the connection between those two contracts, which alone gives the plaintiff, the semblance of a right of action.
Suppose that the bill discounted was genuine, and that in the absence of Payne and Harrison from the city, the holder had forged their signature to avoid delay, tho plaintiff' would have received the stipulated consideration of his check. The check would have been paid to the owner of it, and Payne and Hariison are satisfied on that hypothesis. Where is the injury resulting from the alleged gross neglect of the bank? And who has any right of action against it? It cannot be fairly *628maintained that the payment itself caused any injury to the plaintiff; his loss was the consequence of his taking a forged bill; and unless ho connects this 'transaction with-his contract as depositor, he has nothing whatever to stand upon. With this connection he has little more, as either in law or in good conscience, the bank cannot be charged with the consequences of his own neglect.
The true principle on which the decision is based, is one which the nature of the business before our courts has rendered more familiar to the profession, than any other in jurisprudence. It need only be named to be recognized and assented to.
Whatever object the plaintiff may have had, in making the check payable to Payne and Harrsson, as they were not the real payees, the insertion of their name was, between the parties to the contract, a simulation. The bank who was not a party to this simulation, has paid the party for whose benefit the check was given, and claims to be a creditor of the plaintiff for t.he amount. The principle of the decision is, that being thus situated, the bank may show the simulation of any act by which the plaintiff attempts to frustrate its just rights; that it may remove the cloud which conceals the contract between the plaintiff and the holder of the check, and justify the payment, by showing that it was made to the real creditor.
The law abhors simulation; and if there is a point settled by our jurisprudence, more conclusively than any other, it is, that except between the parties to it, it has no existence, and that any third person having an interest, may at all times and in all forms of action, call upon the court to disregard it, and adjudge his rights according to the truth which it disguises. In the very first case of simulation, which came before this court after its organization, we held, contrary to the opionion of our predecessors, that property held under simulated contracts may bte seized by the creditor of the vendor, as if the simulated conveyance did not exist. We have adhered to this rule in many cases sinco, and we are satisfied that no other decisions made by us, have been productive of more good, or more generally approved ; on the ground of simulation, the case is clear against the plaintiff. Bernard v. Auguste, 1st Ann. 69. Camnack v. Watson, Ib. 132.
The fact that the signature of Payne and Harrison on the check, is a manifest forgery, is immaterial; if thele had been no endorsement at all, the bank, after payment, would not have b%en debarred of the right of proving the simulation, and of "showing that the payment was made to the ri^il creStor. We have examined the case on the supposition, that the check was paid to the party who received it from the plaintiff. It would perhaps be more favorable to the defendant, if the check had been transferred to a third person, in good faith.
It is said that the decision is calculated to encourage forgery; believing it strictly legal, we would not be responsible for the consequences, if it was; but we rejoice in the belief, that its effect must be directly the reverse. We cannot but know as men, if not as judges, that it is not the first time, that forged paper has been discounted by brokers in this market, and we could devise no surer means of encouraging the practice, than making a decision which would, in all cases, place the banks between the discounter and the danger arising from forgery. The moral tendency of the decision cannot be questioned; it puts down indirection, vindicates the cause of truth, and is in furtherence of the principle too often overlooked : that the law of commerce is the law of honor.
The re-hearing refused.
*629Preston, J.
The plaintiff insists, in his petition for a re-hearing, that his negligence, in a transaction with other parties, should have no influence on his claim against the bank, for gross negligence in paying out his money without his order. I was not, and am not satisfied "by the testimony, that there was gross negligence on behalf of the bank. A partner in the house of Payne and Harrison, whose signature was forged, states it was a bad forgery. It may have appeared so to him, being the forgery of his own signature, but not to others. The testimony makes out a case of ordinary negligence; and as Smith is proved to be a very careful man, his negligence in being deceived by the same forgery, was alluded to, as tending to excuse the defendants for less negligence with regard to the forgery of the same signatnre, than that of which he was guilty himself.
The plaintiff’s counsel contends, that the bank had nothing to do with the transaction between Smith and the counterfeiter of the draft. Testimony and admissions were before the court in relation to the whole transaction. As Smith sués the bank for money, the defendants had a right to prove the whole transaction, if they could thereby show that Smith had disposed of his money by contract, and liad no longer an action against the bank on account of it. Had the draft and acceptance which he discounted been genuine, Smith clearly could not have recovered the amount of the check he gave for the proceeds, although the money had been drawn upon the forged endorsement of Payne and Harrison. The law cannot be different, because he discounted and gave his check for a forged acceptance. In the first case, he gives his check for its full value which ho has in hand, and has no action against the bank for its amount; in the last case, he gives his check for and in consideration of his negligence.. He has nothing in hand for it, but a draft, which is worthless. He must suffer the loss, and cannot throw it upon others. In both these cases, he gives out his check, and parts with his money by contract; and has no action to recover it back, except against the individual who defrauded him in the contract. He has no other rights than if he had paid with bank notes. The bank was undoubtedly his agent to pay out his money; but when, in consideration of a contract, he delivered a check for that money, it was no longer his; and the bank having paid his check, in defence to a suit for the money, had a right to show that he had parted with the money by contract, and that their agency for him had ceased, as to the money for which he delivered the check.
The case has been put of remitting a check, say to New York, to a creditor, or as a gift. I may make it payable to the order of my creditor or donee; and may sue the banker if it is paid without their order. The reason is, that the money remains mine, until the delivery of the check to my creditor or donee. If never delivered, my creditor is not paid, and my donee does not receive the benefit of my liberality. Therefore, I can sue, if the money is paid before the check comes to the hands of the real payee; for, until then, the creditor, or donee, has their claim upon me. But as soon as the check reaches the payee, it becomes his property. I have no longer any interest in it; the forgery of the endorsement is immaterial to me, and I cannot recover on account of the erroneous payment; but the payee can, because the check belonged to him.
So in this case, the check was delivered for the draft. The transaction was final as to Smith, and the ¡lerson with whom he dealt. The forged draft belonged to him ; the delivered check belonged to the holder. It was the business of the holder to obtain the endorsement of Payne and Harrison, and to get *630the money. Smith had nothing to do with that; and probably took no interest in it, until he ascertained, by its protest, that the draft was a forgery. It is said t0 a §enera^ custom here, to pay the clerks of merchants for produce or merchandise, in checks to the order of the merchants. If the clerk be unknown, it is a dangerous custom, and should be more honored in the breach than in the observance. But even then it has no bearing on the present case; for I make the check payable to the merchant, because I have had a real transaction with him, and am his debtor, and not the debtor of the unknown clerk. I have a right, therefore, to require of my banker to pay on the genuine endorsement of the merchant with whom I have the transaction, and of whom I am the debtor; and not to pay on a forgery by the pretended clerk. But here the case is exactly the contrary. Smith contracted with the swindler alone, and had no transaction whatsoever with tho merchants, Payne and Harrison. Therefore, the statement in the plaintiff’s application for a re-hearing, that the stranger represented to Smith that ho was sent with the draft on behalf of Payne and Harrison, would not avail him, even if proved. Smith was bound to know with whom he dealt; and if he dealt with an agent, to know that he was really the agent, and could not make Payne and Harrison his creditors, for the proceeds of the draft, without their consent. The stranger having no authority from them, Smith’s contract was with him.
It is said by the counsel of the plaintiff, in their petition for a re-hearing, that the almost unanimous opinion of merchants and lawyers, is adverse to the docision of the court. The negligence of their client, and of the defendants in this particular case, has given rise to a controversy that has rarely occurred before. It grows out of a paymont to a fraudulent creditor, by a check in favor of real persons, with whom neither tho debtor nor creditor had any transaction, and who disavow all interest and concern in the matter. It will probably hardly occur again. It requires more reflection on the case itself, to understand and decide it correctly, than persons, having no special interest in the result, can afford to bestow upon it. Further reflection on the application for a ro-hearing, has only confirmed me in the correctness of the original opinion of the court.