Court Opinion

ID: 7069367
Source: CourtListenerOpinion
Date Created: 2022-07-24 07:30:22.763051+00
Date Added: 2024-06-11T16:12:32.273109
License: Public Domain

On Petition for Rehearing.
Dausman, J.
The opinion in Citizens Nat. Bank v. Reynolds (1920), 72 Ind. App. 611, 126 N. E. 234, contains the following statement: “The rule is well established that a bank on which a check is drawn must ascertain at' its peril the identity of the person named therein as payee.” Counsel for appellant insist that the rule there stated is applicable to the case at bar. The contention cannot be sustained. From the nature of the Reynolds case, from the statement of the facts of that case, from the opinion itself, when considered as an entirety, the clear implication is that the rule is limited to the class of cases wherein a check is presented for payment by a person who claims to be the payee. However, in order that no one may be misled, the rule above quoted is hereby expressly so limited.
*697The general rule is that a bank.may not have credit for money paid on its depositor’s check unless the payment has been made strictly in accordance with the depositor’s directions as stated in the check itself. But, to that rule,- there are some exceptions. A bank is bound to know the signature of its depositor; but it would be a strange and arbitrary rule that would require a bank to know the signature of every person to whom its depositor issues a check. In this age of industrial activity, bank checks pass freely' from hand to hand. Where a check passes from hand to hand by successive indorsements, each indorser assumes a well-defined liability (Article 5, Negotiable Instruments Law [§9089h2 et seq. Burns 1914, Acts 1913 p. 120]); and where a check is presented for payment by an indorsee, the drawee is not bound to institute an investigation to determine the genuineness of the signature which purports to be the payee’s indorsement, but may rely upon the subsequent indorsements. If the drawee pays a check to a holder by indorsement and it develops that the purported indorsement of the payee is, in truth, a forgery, the bank ordinarily may not have credit therefor against the account of its depositor; but, in that case, the depositor must have exercised due diligence in the matter of examining his cancelled checks and in giving the bank timely notice of the forgery, or he cannot recover from the bank. Fletcher, etc., Bank v. Crescent Paper Co. (1923), 193 Ind. 329, 139 N. E. 664.
As stated in the original opinion, the orders involved in the case at bar are not checks. But if the rules of law applicable to checks were applied to these orders, the appellant would not be benefited thereby; for the record before us utterly fails to show any diligence whatever on the part of the city.
The petition for a rehearing is denied.