Court Opinion

ID: 9653998
Source: CourtListenerOpinion
Date Created: 2023-08-23 18:01:27.60778+00
Date Added: 2024-06-11T09:19:32.416267
License: Public Domain

SYMES, District Judge.
The Midland Savings & Loan Company, plaintiff appellant, hereafter called the plaintiff, is a Colorado building and loan association with headquarters in Denver, and was at all times mentioned making loans secured by real estate in Arkansas, Oklahoma, and elsewhere. The Tradesmen’s National Bank of Oklahoma City, Okl., defendant appellee, hereafter ref erred to as the defendant, was a national bank, with its principal place of business at Oklahoma City, Okl. The plaintiff company was a customer and depositor of the defendant hank.
One Dan Dewberry had been the designated agent of the plaintiff for Arkansas, with offices at Texarkana, Ark., a border city, partly in Texas and partly in Arkansas, and was authorized to solicit and close loans for the Midland Company, taking his commissions from the borrowers, collected payments due on loans, and remitted to his principal in the regular course of business. About the 1st of April, 1927, Dewberry disappeared. An investigation disclosed that he had been unfaithful ; that numerous checks sent him by the plaintiff company, payable to himself and various borrowers jointly, had been cashed without being indorsed by the borrowers.
It is established by litigation in the state court that each of the 19 checks which formed the basis of the 19 separate causes of action set out in the amended petition were in each instance drawn by the plaintiff on the defendant bank, to the order of the respective borrowers — -in some instances two parties — and “Dan Dewberry, Agent,” as joint payees; that, the said cheeks had been forwarded to Dewberry by the Midland Company, with a letter of instructions in each case to close each particular loan in the manner set out therein.
It is also undisputed that Dewberry forged the indorsements of the payees on each check, oilier than himself, indorsed his own name, “Dan Dewberry, Agont” thereon, and deposited them to his own credit in an account in another bank, the Texarkana National Bank, designated “Dun Dewberry, Agent;” and that this had been his custom during his connection with the plaintiff company.
Dewberry was likewise loan agent for another company known as the Home Savings & Loan Association of Ft. Smith, Ark., and handled their business in a similar manner. 'Whenever Dewberry received, or purported to have received, an application for a loan, he would forward a written form application to the plaintiff company in Denver, together with an abstract, or purported abstract of title, to the property offered as security for the loan. The abstract would then be examined by the plaintiff company, together with whatever report was made as to the desirability of the loan, and, in each of the 19 transactions made the basis of this suit, the Midland Company would prepare a bond and mortgage covering the security offered, and forward the same, together with a check made out as above to Dewberry. The written instructions that went with each set of loan papers stated “in closing this loan, you act as our agent,” followed by other directions as are customary in such transactions, varied in some details to suit each particular case. The plaintiff seeks to recover from the defendant bank the amount of these checks so paid by defendant and charged to its account.
The first cause of action, of the amended petition was dismissed without prejudice, and the ease went to trial on the other 18.
The second cause of action — typical of all - -is as follows: “That on the 11th day of August, 1926, this plaintiff drew its cheek in writing, of said date, whereby it ordered and directed the defendant to pay to the order of R. M. Pinchin and Bonnie Bessie Pinehin, and Dan Dewberry, agent, the sum of Twenty-five Hundred Dollars ($2,500.00); said cheek was numbered 14603, and was presented for payment to the Tradesmen’s National Bank on the 35th day of August, 1926, and the plaintiff then and there having money on deposit to the credit of this plaintiff in said bank, sufficient to pay said check, the same *688was paid by the defendant and charged to the account of this plaintiff, and thet amount of said check deducted from the amount this plaintiff then and there had on .deposit.”
“That there was endorsed on the back of said cheek the following names: ‘R. M. Pin-chin, Bonnie Bessie Pinehin’, and ‘Dan Dewberry, agt.’; that the signatures of the said R. M. Pinehin and Bonnie Bessie Pinehin, were forged thereon, and were not the true and genuine signatures of the said R. M. Pin-ehin and Bonnie Bessie Pinehin, or either of them, hut their names were* fraudulently signed to said cheek by some person unknown to this plaintiff; that neither the plaintiff, the said R. M. Pinehin nor the said Bonnie Bessie Pinehin, gave any authority to any person to sign their names thereto.”
Plaintiff further alleged that there was no general contract of agency between the plaintiff and Dewberry.
The remaining causes of action, from the third to the nineteenth, inclusive, are substantially identical with the above, except as to the dates, names of payees, and the amounts of said checks. It was further alleged that each of the cheeks was presented to, and paid by, the defendant bank, after they had been paid by the Texarkana National Bank, and that the indorsement of the latter, together with that of the Federal Reserve Bank of Oklahoma City, guaranteeing prior indorse-ments, were on the cheeks when they were presented to, and paid by, the defendant bank.
The answer of the defendant consisted, first, of a general denial; then the allegation that Dewberry was the agent and representative of the Midland Company in Arkansas and Texas, was authorized to handle its loan business in that vicinity, to complete loans, disburse funds in making, completing, and protecting loans made by it; that at the times mentioned, and for a long time prior, it- was the custom of Dewberry, as agent and representative aforesaid, to carry in the Texarkana National Bank of Texarkana, Tex., an account for and in behalf of the appellant, in the name of “Dan Dewberry, Agent”; that the instructions sent Dewberry for dosing each of the loans contained the following language : “In closing this loan, you act as our agent.” Also that Dewberry should not pay out any money to the borrowers from the proceeds of the cheeks until he had paid all taxes, obtained receipts, paid off liens, secured necessary releases, had all papers recorded, and the abstract brought down to date, showing the Midland Company’s mortgage to be a first lien on the property in question.
It is then alleged that it was the custom ■and intent of the Midland Company in drawing the cheeks as aforesaid to make Dewberry its agent, to hold¡ and cash the checks as its agent, and to deposit the proceeds as agent in his agency account in the Texarkana National Bank in Texarkana, Tex.; so that he could carry out their instructions in closing the loan, “all of which was known to the Texar-kana National Bank to be the system of appellant, and under which circumstances the Texarkana National Bank was induced to pay checks * * * aforesaid.”
It is further alleged in the answer that the proceeds of each cheek were paid to and received by the person intended to receive, hold, and disburse the same, to wit, “Dan Dewberry, Agent,” for the plaintiff company, because of which, plaintiff is not entitled to recover; that,-by reason of the above facts, the plaintiff company represented to all persons dealing with Dewberry that he was its agent, with authority to indorse the cheeks, collect the money, and apply the proceeds in accordance with his instructions, and that the in-dorsees of each cheek, other than the payees named, accepted each cheek on the face of such repi*esentations, and but for such representations would not have accepted the same without making inquiries as to the genuineness or necessity of the signature of each payee; that, by reason of holding out Dewberry as agent, and by such representations, plaintiff company is now estopped to assert any indebtedness of the hank to it in any amount upon any of the several causes of action.
It is also a fact that some of the bonds and mortgages purported to have been signed by the borrowers were forged, and that some of the prior incumbrances on the properties on which the Midland Company loans had been placed had not been paid off, and that false certificates from abstracters had been put out.
•The parties are in substantial agreement on the facts as set forth above, as distinguished from the legal conclusions pleaded. The plaintiff eomp-any, upon being -apprized that signatures of the borrowers — the mortgagees — had been forged on the cheeks, notified the bank of the facts, and that it could proceed to protect itself against loss on account of these forged instruments.
Many of the borrowers sued the Midland Company in the chancery court of Miller county, Ark. where their properties were situated, to get relief from the mortgages of record, alleging they had not signed them; *689others who had signed mortgages alleged they had not received the money, and in some cases on the ground that prior mortgages had not been paid and released. Each of these suits involved a different set of facts, but were all of the same general character.
The Midland Company appeared in these suits as a defendant, asserted the validity of their mortgages, and sought to foreclose. The borrowers, however, obtained the relief prayed for, and the mortgages were canceled, except that in a few cases they were held liable for money they had actually received on account of their loans.
Thereafter this action came on for trial before the court below and a jury. At the end of all the evidence, a motion for a directed verdict in favor of the defendant was granted on the grounds: First, that by defending in the state court there had been an election of remedies by plaintiff, the court sustaining the defendant’s contention that this suit was brought upon the theory that the money of tho plaintiff represented by the cheeks was still in the defendant’s bank, while in the suits in the state courts, growing out of the same transactions, the plaintiff here had defended on tho theory that the money had lawfully been paid by the bank on the forged checks, and had passed to the borrowers; that thereby the Midland Company made an election of remedies, and was estopped to bring this action. Secondly, the lower court further found, in granting the motion, that the loss of the Midland Company did not result from tho payment of the forged checks by the defendant bank, but that the proximate cause of the loss was the defalcation of Dan Dewberry as its agent; that, by the course of conduct and its instructions to Mm, the plaintiff clearly intended that the money sued on was intended to, and actually did, reach Dewberry, plaintiff’s agent, and was distributed by him as intended; that therefore it made no difference whether the borrowers’ indorsements on the several checks were false or genuine.
The correctness of this ruling is the question raised by this appeal.
This detailed statement of fact is necessary to an understanding of the pertinent law of negotiable instruments.
The relation of a hank and its depositors is stated in Leather Manufacturers’ Bank v. Merchants’ Bank, 128 U. S. 26 at page 34, 9 S. Ct. 3, 4, 32 L. Ed. 342, as follows: “Its obligation to the depositor is only to pay out an equal amount upon his demand' or order; and proof of refusal or neglect to pay upon such demand or order is necessary to sustain an action by the depositor -against the hank. The bank cannot discharge its liability to account with the depositor to the extent of the deposit, except by payment to him, or to the holder of a written order from him, usually in the form of a check. If the bank pays out money to the holder of a cheek upon which tho name of the depositor, or of a payee- or indorsee, is forged, it is simply no payment as between the bank and the depositor; and the legal state of the account between them, and the legal liability of the bank to him, remain just as if the pretended payment had not been made.” See, also, United States v. National Bank of Commerce (C. C. A.) 205 F. 433.
The next issue of law raised by the record is how far the parties had the right to rely upon Dewberry’s acts as plaintiff’s agent. On this phase of the ease it may be said that a well-defined exception exists in respect to- negotiable instalments, it being generally held that an undisclosed principal is not liable upon a bill or note drawn, accepted, signed, or indorsed by the agent in bis own name, although the agent was acting in tho course of his employment, and within the scope of his authority. 2 C. J. 843, § 525. See, also, 7 Cye. 549.
The power of an agent to execute or indorse commercial paper is strictly limited, and will never be “lightly inferred,” but must be conferred expressly, 2 C. J. 630, § 280, and cannot be based upon prior, customary acts, where it does not appear that the indorsee ever knew of any instance of the payee having ratified an, unauthorized indorsement by such agent. 2 C. J. 636, note 21d, Utah Banking Co. v. Newman, 44 Utah, 194, 138 P. 1146, and “the courts are even mora insistent that one dealing with an agent shall inquire whether ho has sufficient authority, when such agent assumes to make or endorse negotiable par-per.” 2 C. J. 564, and cases cited.
To same effeet is Strawn Farmers’ Elevator Company v. James E. Bennett & Co., 168 Ill. App. 428. And power to deal in a certain way with commercial paper is not to he enlarged by construction to permit the doing of other, although somewhat similar, tilings. 2 C. J. 640, § 283; Fay v. Slaughter, 194 Ill. 157, 62 N. E. 592, 56 L. R. A. 564, 88 Am. St. Rep. 148.
So, also, authority to use paper with one-person or one bank implies no authority to deal with another person o-r another hank. 2 C. J. 640, § 283; Clement v. Dickey, 5 Fed. *690Cas. No. 2883; Sims, Ex’r, v. U. S. Trust Co., 103 N. Y. 472, 9 N. E. 605.
Mechero, on Agency says (section 969) that authority to make or indorse negotiable paper is not ordinarily to be included within the terms of general grants, and “the rule is abundantly established that it can exist only when it has been directly conferred, or is warranted by necessary implication.”
Section 971: “Authority to bind the principal by negotiable paper will only be implied where it is practically indispensable to accomplish the object.” See, also, section 977.
Section 998 states': “Asi many businesses may be, and constantly are, conducted without the exercise of this extraordinary power, the mere fact that one is authorized to manage a business, does not of itself alone imply that he may bind his principal by.making, accepting or endorsing negotiable paper.” .
So in the ease at bar it was not indispensable to the proper conduct ;of appellant’s business by Dewberry that he indorse these cheeks. Manifestly such authority had never been expressly granted. The most that defendant claims is that it necessarily followed, as an incident of the agency created by the letter of instructions that went to Dewberry with each loan. But, as appellee’s counsel state in their brief: “The bank, of course, never saw the letters until after this suit was filed.”
So it cannot be said that they were misled, or acted to their detriment in reliance upon the letters of instructions. These letters, it is true, made Dewberry the general agent of the company in closing these loans, but specifically state he will not indorse the draft — that is, the cheek — or pay out any money until the abstract shows that the proposed loan of the Midland was a first lien.
And, what is more important, we have the express notice given by the checks that the proceeds were intended for others besides Dewberry, and that the borrowers’ indorse-ments were required before they could lawfully be cashed.
The record discloses that, although Dewberry had been forging these indorsements over a considerable period of time, yet plaintiff and both banks were alike ignorant of the forgeries until Dewberry’s flight, so manifestly there could -have been no ratification.
The payees of these cheeks were various residents of Arkansas, and strangers to the plaintiff located in Denver. Plaintiff, as drawer, had the right to assume the cheeks bore the genuine indorsements of the payees when paid, and charged to its account by the defendant. The rule is very well settled that, in the absence of special circumstances, the depositor is not required to know the signa^ ture of the payees that he names in his checks. Leather Manufacturers’ Bank v. Morgan, 117 U. S. at page 107, 6 S. Ct. 657, 660, 29 L. Ed. 811, holds that, while the depositor is required to examine his pass book and vouchers when returned by the bank, and, if there appear to be any errors or omissions, to notify the bank, he is not bound to discover at his peril forgeries of the payee’s namej because, as the court says: “The drawer was not presumed to know the signature of the payee; his examination of the account would not necessarily have disclosed the forgery of the payee’s name; therefore his failure to discover that faet sooner than he did was not to be attributed to want of care.”
And 7 C. J. 687, § 415, says: “The duty of tlie depositor does not, however, extend to the examination of endorsements on his cheeks, a's he is justified in relying upon the bank’s observing proper precautions to see that payment is made only in accordance with his directions and he is not bound to know the signatures of the payee or other as endorsers;”
A good statement of the same rule is found in Shipman v. Bank of New York, 126 N. Y. 318, 27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821 — a much-quoted ease — holding the bank liable to its depositor for money it paid out on cheeks drawn by its depositor, the indorsements of which were forged; the bank having paid the cheeks without inquiry as to the genuineness of the indorsements, and that the bank was not relieved from liability, even though the checks were returned to the depositor with his pass book, and received without objection, in the absence of a showing of negligence ón the part of the depositor. In the very late ease of National Surety Company v. President and Directors of the Manhattan Company, 252 N. Y. 247, 169 N. E. 372, 67 A. L. R. 1113, the Court of Appeals of New York went even further and held the depositor was under no duty to examine indorsements on cheeks in order to discover whether signatures indorsed were genuine,, and failure to do so was not negligence.
In Cosmopolitan State Bank v. Lake Shore Trust & Savings Bank, Supreme Court of Illinois (1931) 343 Ill. 347, 175 N. E. 583, the court follows this rule, stating the depositor has no greater knowledge of the genuineness of the signature of the payee than the bank. And in Atwell v, Mercantile Trust Company of California, 95 Cal. *691App. 338, 272 P. 799, 801, the Shipman Case, supra, is eited, the court saying: “But a depositor is not hound to examino the endorsements on returned eheelcs. * * * The drawer is not presumed to know, and in fact seldom does know, the signature of the payee. The hank must, at its own peril, determine that question.”
In First National Bank v. Whitman, 94 U. S. 343, 347, 24 L. Ed. 229, it is said: “The hank supposed that it had paid the check; hut this was an error. The money it paid was upon a pretended and not a real indorsement of the name of the payee. The real indorsement of the payee was as necessary to a valid payment as the real signature of the drawer; and in law the check remains unpaid. Its pretended payment did not diminish the funds of the drawer in the hank. * * * ” See, also, United States v. National Bank of Commerce (C. C. A.) 205 F. 433. Tho rule seems to be universal and obtains in Oklahoma. State Guaranty Bank v. Doerfler, 99 Okl. 258, 226 P. 1054.
Counsel for defendant argue that the posifion of the defendant bank is tho same as that of the Texarkana bank that cashed the checks. The Texarkana bank and the plaintiff company were strangers, and the relation of depositor did not exist between them as it did between the plaintiff and defendant. As shown, the defendant hank, upon presentation of these cheeks drawn by its depositor was bound at its peril to pay only on a genuine indorsement. The answer alleges that neither hank made any investiga.tion, and the record shows that defendant relied solely upon the indorsements of the Texarkana bank and the Federal Reserve Bank, from whom it received the checks for payment. Reasons that might have motivated tho Texarkana bank to cash the checks for Dewberry were not necessarily available as a defense to the defendant against the plaintiff company. The care the law requires it to exercise, and its liability, cannot bo affected thereby. It is quite apparent that, when it received the cheeks with forged indorsements guaranteed by the Texarkana bank and the Federal Reserve Bank, it chose to pay in reliance thereon — a very common practice among banks. Such was the exact situation in Jordan Marsh Company v. National Shawmut Bank, 201 Mass. 397, 87 N. E. 740, 22 L. R. A. (N. S.) 250, a well-considered ease often eited with approval. After reiterating the rule, the court said (page 741 of 87 N. E.): “This rule.of law applies as well to payments made by a hanker through the clearing house as to payments made over the counter.”
And that, if the hank on which the chock is drawn chose to pay on a guarantee of the indorsements of the payee’s name by another resjmnsible bank, this does not affect the duty of tho paying hank to its depositor. Page 741 of 87 N. E.: “It simply indicates a willingness of tho hank to disregard and neglect tho duty, upon the guaranty of a responsible party that the duty has already been perfectly performed for it by a preceding party from whom the check has been received.”
Except in the case of partners, where negotiable paper is payable to two or more persons jointly, all must join to transfer the title; that one of several payees has no authority to indorse the name of his co-payees (8 C. J. 340, § 516), and such is the provision of the Negotiable Instrument Law.
It is said that the money represented by these checks was in fact intended for Dewberry alone. Had the defendant had knowledge of the letter of instructions to Dewberry, it might be conceded that the record offers some support to this theory, but, except in instances later to be noted, there is no claim that the borrowers authorized Dewberry to indorse the cheeks for them, and the plaintiff, by making the borrowers joint payees, as well as Dewberry, gave direct notice to the contrary. The claim that the plaintiff authorized Dewberry to indorse the name of the borrowers is untenable for another reason: The plaintiff could not authorize-him to indorse as agent for the borrowers.
Three very pertinent eases on this phase of the discussion are Los Angeles Investment Company v. Home Savings Bank, 180 Cal. 601, 182 P. 293, 5 A. L. R. 1193; United States Cold Storage Company v. Central Manufacturers District Bank, 343 Ill. 503, 175 N. E. 825, 74 A. L. R. 811, and Cosmopolitan State Bank v. L. S. T. & S. B., 343 Ill. 347, 175 N. E. 583. In the first the court deals with a very similar situation, created by the dishonesty of an employee of the drawer of the check, and, for reasons applicable here, held the company not hound by tho fraudulent acts of its agent in forging indorsements on its checks; that tho intent and knowledge of tho principal was that tho money should go to the party named as payee, and the court would not concern itself with an act done by the guilty agent, especially when adverse to the principal, and against the agent’s interest to reveal.
*692A similar situation was presented in the United States Cold Storage Company Case, supra.- We quote from the opinion (page 829 of 175 N. E.): “The negligence of the drawer of a check is immaterial, unless it is such as directly and proximately affects the conduct of the hank in the performance of its duties. [Citing cases.] A bank can justify a payment on a depositor’s account only upon the actual direction of the depositor. The questions arising upon cheeks between the drawee and the drawer ‘always relate to what the one has authorized the’other to do. They are not questions of negligence or of liability of parties upon commercial paper, but are those of authority solely. * * * The question of negligence cannot arise unless the depositor has, in drawing his cheek, left blanks unfilled, or by some affirmative act of negligence has facilitated the commission of a fraud by those into whose hands the checks may come.’ ”
And in the Cosmopolitan Bank Case, supra, the court dealt with a defense identical with that urged here, in the following language (pages 584, 585 of 175 N. E.): “The relations of Anderson and Schuster, of Schuster and the automobile company, of the automobile company and Anderson, or of any of them, and the bank, under the circumstances shown by the evidence, had nothing to do with the duty of the bank to pay the cheek to the order of the automobile company. It was a complete granger to the transaction of the purchase of the ear and was under no obligation to any one in respect to that transaction. Its duty in regard to the check ■ was to Anderson only—the drawer. The general rule is well settled that the obligation of a bank is to pay, on demand, the funds of the depositor to the payee named in each check, or to his order or to bearer, as the check may direct, and it must ascertain at its peril the identity of the payee and the genuineness of the indorsements, though each indorsement is a guaranty of all prior indorsements. The bank cannot settle equities among the various indorsers, the payee and the drawer of a cheek and third parties, strangers to the instrument, but its only authority, where the cheek is payable to the order of the payee, is to pay it on such order according to its terms. Yet the defendant in error’s brief is based entirely on these supposed facts wholly outside the terms of the cheek: (1) Anderson, the drawer, intended that Schuster should use the cheek or its proceeds to accomplish the payment of a particular automobile, and that was done; (2) Schuster was authorized to use the cheek in the manner he did;” etc.
The decision in Federal Land Bank of Omaha v. Omaha Nat. Bank, 118 Neb. 489, 225 N. W. 471, is based on the exception to the general rule, as the court makes clear. It turned upon the peculiar provisions of the statutes applicable to federal land banks.
In Merchants’ Nat. Bank v. Home Bldg. & Sav. Ass’n, 180 Ark. 464, 22 S.W.(2d) 15—stressed by appellee—different instructions were given Dewberry in the way the check was to be handled. Many other cases cited by appellee are not in point on the facts, and in many the question of forgery is not involved.
The so-called Arkansas rule has never been approved by the federal courts. The only federal case cited by appellee is United States v. National Exchange Bank (C. C.) 45 F. 163, an opinion by a District Judge. There, the bank which paid the cheek on a forged indorsement was held not liable to the drawer because the person who committed the forgery was, in fact, the person to whom the drawer delivered the cheek, and whom he believed to be the payee.
The suits in the state court do not bar this actioii.
The second cause of action was not litigated there. In the other 17 the plaintiff here was made a defendant in all but the seventh and tenth. In those^two the Midland Company was plaintiff. In some the ■owners of the respective properties, upon which the .mortgages had been placed of record in favor of the Midland Company, sued to cancel the notes and mortgages. In others the holders of prior mortgages made the Midland ■ Company party defendant in order to establish their mortgages as prior and superior, and the two actions that the Midland Company brought—the seventh and tenth—were to establish the validity of its notes and mortgages. The issue was the same in all, however, to wit, the validity of the respective mortgages, notes, and cheeks, and the genuineness of the indorsements oh the latter.
The state court determined as a fact that the indorsements were all forgeries; that the Midland Company had no remedy, against-the payees, or mortgagees, except in a few instances where, on equitable principles, it held for the Midland Company to the extent only of the amount that the borrower had actually received from Dewberry, for which it gave an equitable lien, at the same time *693canceling its notes and mortgages. That litigation determined that the appellant in the case at bar had no right of action against the payees of the respective cheeks,
A party makes an election only between existing, not supposed or mistaken, rights, Bierce v. Hutchins, 205 U. S. 340, 27 S. Ct. 524, 51 L. Ed. 828; Thomas v. Sugarman, 218 U. S. 129, 30 S. Ct. 650, 54 L. Ed. 967, 29 L. R. A. (N. S.) 250; Doyle v. Hamilton Fish Corp. (C. C. A.) 234 F. 47, and cannot destroy its rights by following remedies which turn out not to exist. It therefore appears that at no lime did the Midland Company have two remedies; that all it had was one against its hanker for paying its cheeks on false indorsements.
The fact that it misconceived its remedy, or attempted to exercise a right to which it is not entitled, and was defeated, does not constitute an election, or preclude it from prosecuting an inconsistent, remedial right. A party- is not held to have two remedies between which he must elect, where there is a valid defense to one of them. See, generally, 20 C. J. §§ 1 to 18, inclusive, pp. 2 to 18, inclusive.
The forgeries are admitted by both parties here, and it cannot he said that the Midland Company should at its peril have permitted the actions in the state court to go against it by default.
The question of whether the indorsements on the checks were forged or not had to be determined by some court before the rights of the parlies could be finally determined. Neither was prejudiced by having that determined in .advance, and the state court was competent to try that issue.
A very late case on this question is Henderson Tiro & Rubber Co. v. Gregory et al. (C. C. A.) 16 F.(2d) 589, 593, 49 A. L. R. 1503, in which Judge Booth assembles the authorities, and holds that to constitute an election two actual inconsistent remedies must exist for one wrong, and that the pursuit of a supposed, but nonexistent, remedy, does not constitute an election, quoting Barnsdall v. Waltemeyer (C. C. A.) 142 F. 415, at page 420; as follows: “But the fatuous choice of a fancied remedy that never existed, and its futile pursuit until the court adjudges that it never had existence, is no defense to an action to enforce an actual remedy inconsistent with that first invoked through ndstake.”
It appears, however, that as to certain of the checks the Midland Company pursued Dewberry either by making a claim against his estate or accepting relief as against Dewberry and his estate. If this was done subsequent to the time the plaintiff acquired actual knowledge, as distinguished from suspicion, that Dewberry had forged the in-dorsements, or if the relief asked for or accepted was grounded upon the fact of his forgery, then under the rule laid down, supra, it eleeted to treat the entire proceeds of such cheeks as lawfully coming into his possession, and thereby ratified the act of the hank in paying out its money. Since the ease must be reversed, it is unnecessary to make a finding of fact on this question, for the evidence may develop differently at another trial. Furthermore, there is some evidence that as to two checks Dewberry was the aetual borrower, and that the ostensible borrower was a “straw man,” and known to he such by the plaintiff. If such is the fact, it may be sufficient to justify a jury in finding as to that particular transaction that Dewberry was actually authorized to indorse the “straw” borrower’s signature to the check.
Furthermore, defendant is entitled to credits for the amount of the liens granted by the state court, together with all sums recovered from the surety company on account of loans included in counts 2 to 19, inclusive.
The judgment of the lower court is reversed, and the case remanded for a new trial.