Court Opinion

ID: 3918584
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:46:00.059336+00
Date Added: 2024-06-11T14:16:15.716732
License: Public Domain

I feel constrained to enter my dissent from the action of the majority in reversing the judgment of the trial court.
In presenting my reasons for dissenting, I shall first discuss the question as to whether the instruments involved are negotiable, and, second, as to whether the bank obtained them in due course.
The instruments which came into the possession of the bank came into its possession as an innocent purchaser for value. I think it clearly apparent that the express company intended that the instruments should be sold and delivered to purchasers by its trustee, and become negotiable paper in the hands of all persons who might become bona fide purchasers thereof after the signature of the purported purchaser is placed in the upper and lower left-hand corners thereof. They were prepared by the express company, and signed by its authorized agent, J. F. Fargo, its treasurer. After such preparation, and after being properly signed by the treasurer, the papers involved in this suit and many others of like kind were placed with the Oklahoma bank for sale. While these papers were in the possession of said Oklahoma bank, said bank was robbed, and the papers involved were taken by the robbers, one of whom was the party who placed his name in the top and lower left-hand corners of the papers. By reason of the signature of the robber, the papers contained all the elements of negotiable paper. It is apparent, I think, that, since it is generally known that banks are often robbed, and money and valuable papers in their possession taken, it was negligence on the part of the express company to so execute the papers as it did, making it both possible and probable that just such a transaction as did occur would reasonably occur, and thereby cause loss and damage to any person who might purchase such paper.
"It is a general and just rule that, when a loss has happened which must fall on one of two innocent persons, it shall be borne by him who is the occasion of the loss, even without any positive fault committed by him, but more especially if there has been any carelessness on his part which caused or contributed to the misfortune." 3 R.C.L. p. 999, § 209.
Knowing that the travelers' checks prepared by it with the signature of its treasurer affixed thereto might in some unlawful manner fall into the hands of some third person, the express company was careless in having them so signed and in such shape as to enable such third person to defraud those who might become the purchasers of the checks in good faith and for value. Had the signature of the agent of the express company been affixed to the checks only after a sale thereof was made to a purchaser, no such misfortune as did happen could have occurred. Suppose some one should sign his name to all the checks in his bank book and then carry them in his pocket, and then suppose some one were to rob him of these signed checks, fill out the blanks, and cash them at the bank, could it be reasonably said that his carelessness was not the proximate cause of the loss to the bank?
In 3 R.C.L. pp. 1000 and 1001, § 210, it is said:
"It is familiar law that one in possession of chattels by theft can convey no title to an innocent purchaser. Coin and bank bills, however, are excepted from this rule. As to those, even if feloniously obtained, the holder can convey a good title to an innocent purchaser. And from the considerations of public policy, the law also excepts from the rule negotiable instruments acquired for value in good faith before maturity and without notice. Such paper takes the place and performs, to a large extent, the office of money. It is used for the transaction of much the largest part of the business of mankind. It would be most embarrassing, therefore, if every taker of such paper was bound, at his peril, to inquire into the title of the holder, and if he was obliged to take it with all the imperfections and subject to all the defenses which attach to it in the hands of the holder. It has, therefore, become the settled rule that a thief or any other person having possession of such paper fair upon its face can give a holder in due course a good title to it, against all the parties thereto, as well as the true owner. It may be taken, then, to be the well-settled rule of law that the transfer of stolen commercial paper, negotiable by delivery, to a bona fide purchaser, for value, without notice and before maturity, vests him with a good title against all the world. The rule seems to be the same in the case of instruments that have been lost by the owner. The due course holder of a lost or stolen negotiable instrument may recover against the maker and indorsers thereof, and the damage must be borne by the person from whose possession the instrument was lost or stolen."
The author cites in support of the text authorities from many states. See, also, 3 R.C.L. §§ 207 and 208, pp. 997 and 998.
In section 208 the author says:
"The law extends a peculiar protection to negotiable instruments because it would seriously embarrass mercantile transactions to expose the trader to the consequences of having the bill or note passed to him impeached for some covert defect. The convenience and necessities of commerce require that instruments so generally used as an apt and ready substitute for coin should be protected by the same rule which, in the absence of fraud, confers a title to coin by its mere possession. In addition to this fundamental principle there are, in many of the situations in which the parties may be placed, additional reasons for shielding the innocent holder from defenses based on infirmities in the instrument and defects in the title thereto. The defendant may have been guilty of such negligence as to have lost the right to protection *Page 891 
secured by other rules of law. Perhaps no rule overrides the doctrine that if one's negligence influences and induces an act whereby an innocent man is injured, the culpable party must sustain the loss. And so one who signs his name to a negotiable instrument may be held liable to a bona fide holder because of his negligence in permitting the instrument to get into circulation. Although a person ordinarily may not be deprived of his property without his consent, yet if he negligently leaves an instrument transferable by delivery in such a situation that a thief may possess himself of it — it is but just that he and not an innocent purchaser should suffer the consequences of the theft."
In section 115, 3 R.C.L., it is said that a maker of commercial papers is estopped from setting up any infirmity when in its execution, consideration, or negotiation he was guilty of negligence or imprudence.
The appellee City National Bank at no time prior to its purchase of the checks sued upon knew anything of the circumstances under which they were issued.
The express company intended that the checks should become negotiable as soon as the name of the purchaser, or apparent purchaser, was signed in the upper and lower left-hand corners thereof. Such was the condition of the checks when purchased by the bank. Most, if not all, travelers' checks are handled in the same manner. In these circumstances, the bank's ownership is analogous to those cases where a check is drawn by one person to be used in paying a debt due from the person procuring the check to the person to whom the debtor has had the check made payable. The courts of Massachusetts recognized and applied this doctrine in the leading case of Boston Steel  Iron Co. v. Steuer, 183 Mass. 140,66 N.E. 646, 97 Am. St. Rep. 426.
In S. S. Allen Grocery Co. v. Bank, 192 Mo. App. 476, 488, 182 S.W. 777, it is said at page 781:
"Considering the facts that a bank must honor the checks of its depositor, and cannot by the exercise of any degree of skillful inspection detect a forgery of a check signed and delivered in blank, we think every consideration of justice and common sense sustains the conclusion that a depositor should affix his signature to a blank check only for the purpose of directing the bank to pay out the money, and that the risk of signing and then keeping a blank check, whether the keeping be careful or negligent, should be considered a risk the maker voluntarily assumed. Trust Co. v. Conklin, 65 Misc.Rep. 1 [119 N.Y.S. 367]; Snodgrass v. Sweetser, 15 Ind. App. 682, 44 N.E. 648; Putnam v. Sullivan, 4 Mass. 45, 3 Am.Dec. 206. If the exigencies of the depositor's situation create a necessity for the signing of checks in blank, and then keeping them a time before putting them into circulation, why should he not bear the risk made by his own necessities, rather than the banker, who is a stranger to them, and is under the contractual duty to honor his written orders for the payment of money? He is the one who, in the service of his own interest, has given occasion for the commission of the wrong, and, under the familiar maxim, is the one who should bear the consequences."
See Lloyd's Bank v. Cook, 1 K. B. 794; 8 Ann.Cas. 182; notes in 32 A.L.R. pp. 291 to 299; Phillips v. Joy Co., 114 Me. 403, 96 A. 727, L.R.A. 1916E, 690.
The express company voluntarily delivered these checks to its trustee, the Oklahoma bank, to have it put them in circulation, and intended that, when in circulation, they should pass in effect as so much money. By such act, coupled with the form in which the checks were issued, the express company made it possible, and in recent times probable, for innocent persons to suffer as did the appellee bank, and should be, under the well-established rule above stated, required to sustain the loss. Jones v. Primm, 6 Tex. 170; Close v. Fields, 2 Tex. 232; Crouchley v. Clarence, 2 M.  S. 90.
1 Joyce on Defenses to Commercial Paper (2d Ed.) p. 905, quoted with approval the following from a New York case:
"The business of this country is done so largely by means of commercial paper that the interests of commerce require that a promissory note, fair on its face, should be as negotiable as a government bond. Every restriction upon the circulation of negotiable paper is an injury to the state, for it tends to derange trade and hinder the transaction of business. Commercial necessity requires that only slight evidence should be insisted upon to establish an estoppel in pais as to the validity of commercial paper. The only practicable rule is to make the face of the paper itself, when free from suspicion, sufficient evidence in the absence of notice, against all who aided to put it into circulation, unless the note is void by the positive command of a statute, such as the act against usury. No other rule would work well, for it would be intolerable if every bank had to learn the true history of each piece of paper presented for discount before it could act in safety. It is better that there should be an occasional instance of hardship than to have doubt and distrust hamper a common method of making commercial exchanges."
Having reached the conclusion that the facts and circumstances shown justified, if not compelled, a finding of estoppel as against the appellant express company to deny its liability upon the checks, I think the judgment of the trial court should be affirmed. *Page 892