Court Opinion

ID: 3516486
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:27:47.679557+00
Date Added: 2024-06-11T13:45:10.892529
License: Public Domain

DISSENTING OPINION.
I concur in the views expressed in the dissenting opinion of the Chief Justice, particularly in the disclosure that the funds paid out by the bank were its own funds, and not those of the Association. This is important since the initial inquiry should involve the nature of the obligation owed by the bank to its depositor, for this is what was transferred by the assignment to the surety company. To give full effect to Code 1930, Section 505, the assignee must be allowed to stand in the shoes of the assignor, and not hobbled in his progress toward his acquired rights by being compelled to proceed while clad in one only. *Page 78
The obligation of the bank did not arise from a breach of any duty to know the signature of the payee. It arises from its contract with its depositor to pay out the funds of the latter only when authorized by it. In this case, as always, the paying bank accepts the guarantee of prior endorsements at its peril, and not at that of its depositor. The debt assigned to the surety is therefore the debt of the bank to the Association. The bank's explanation that it withholds payment because of some fraud practiced upon its prior endorser by a third person is indeed not relevant. It owes its depositor at all events.
To hold that the surety acquired no rights by the assignment must mean that the debt of the bank is not assignable in the sense that such assignment would transfer all rights of the assignor. This must be true unless the surety by force of some fiction was disqualified from purchasing or otherwise acquiring the rights of the Association. This view in turn leads inescapably to the novel conclusion that the surety could not acquire by assignment the claim of the Association. In other words, the assignment transferred nothing.
Neither we nor the trial court should have been concerned with the principle of subrogation. The suit was brought by the Association, the real creditor of the bank. Even if the fact that the surety company was an assignee suing in the Association's name should be seen as relevant, which I discount, its rights as such ought to be respected and fully enforced. It seems to be overlooked that the surety did not guarantee the fidelity of the bank. It is not suing one whom it had indemnified, or whose integrity it had guaranteed. It purchased or acquired the right to stand in the shoes of the bank's creditor. Let it be supposed that the surety company had not paid the Association for the default of Henderson. It would then be a third party, and its rights as assignee would be honored, for the disturbing factor of subrogation would not have arisen. Does it then, or would it later, forfeit such rights by paying the Association, whether liable *Page 79 
or not, or for whatever reason, the amount which Henderson had unlawfully procured from the bank and its prior endorser? Such view invests the payment by the surety with an unwarranted quality. Here the surety paid what the Bank ought to have paid. We cannot decide whether the surety was, in fact, liable to the Association. Henderson did not defraud it, but the bank. It is quite possible that the surety could have withstood the claim of its obligee, yet because it is a surety its rights have been tainted with fictions borrowed from theories of subrogation. The invocation of the doctrine, however, would operate to invest the surety with a claim, not against the bank, but against Henderson.
When it is realized that the fraud of Henderson did not change the obligation of the bank to its depositor, the question arises as to when or how this obligation was acquitted. The answer of my brethren is that it persisted up to the moment that the depositor assigned this debt to the surety. I am unable to refer this conclusion to any acceptable legal or equitable principle. This view would lend stimulus to depositories to encourage the assignment of debts against them into the dead hands of sureties. The bank has no right to be concerned with any relationship between the association and its employees or its surety. I have been reasoning upon the assumption, but contrary to my views, that subrogation is the basis of appellant's claim. If this principle is involved it would better be derived from the fact that the surety paid a debt which the bank owed to the Association. In this view the principle would rather be effective to give the surety the right to sue the bank.
The debt of the bank to its depositor is not created by Henderson's default, but by the original deposit. The bank has the right to enforce the liability of Henderson. But it has no right to plead the fraud upon it as a defense to its breach of contract with its depositor.
The reasons for its failure to make the deposit good are not available as against an absolute liability. The court *Page 80 
has, in effect, held that the assignor transferred less than it had, or that the assignee received less than was assigned. This dilemma compels the conclusion that if the surety re-assigned the claim to the Association it would become reinvigorated. What the Association has lost is due not to Henderson's act of commission, but the bank's act of omission. It was the bank that was defrauded, and not the Association. It would present a different case had Henderson stolen from the cash drawer of the Association. If he had been a cashier of the bank and had manipulated the account of the Association, and thereby defrauded the bank, it would be the loss of the latter, and not of the depositor.
The case has become complicated by the circumstance that it was transferred to the equity side. In my judgment this should not have been done. It perpetuates the error of refusing to recognize the simple fact that the suit is by the original depositor, and is purely legal. Even if the assignment is imported into the case it remains a merely legal demand. In any event, equity should follow the law and recognize the legal principles, and enforce them as such. We have gone on record hereby that the holder of a chose in action can assign his full rights to anyone provided he be not a surety. I do not overlook National Surety Corp. v. Edwards House Co., 191 Miss. 884, 4 So.2d 340, 137 A.L.R. 697, whose facts are clearly distinguishable. The majority opinion unjustifiably repudiates the holding in Grubnau v. Centennial Nat. Bank, 279 Pa. 501, 124 A. 142, and similar cases which are directly in point, and whose reasoning appears sound and unassailable.
I find no place here for counterbalancing equities between the parties. Any willingness to consider this theory first ignores the fact that the parties here are the bank and its depositor. Once this barrier is broken, and one enters the field where the rights of the surety are to be considered, it is necessary next to ignore the fact and force of the assignment. Thus the suit is stripped of its *Page 81 
record status, and the complainant forced to stand alone upon the perilous footing of a subrogee. It is there alone that it is made vulnerable to the attack of comparative equities. Yet if we must follow this reasoning into this arena, we cannot find that the bank has any superior equity. As stated above, it is far from obvious that Henderson defrauded the Association and not the bank. The surety did not guarantee that Henderson would not defraud the bank. The obligation ran, not to the Bank, but, rather, from it to its depositor. The perfidy of Henderson was not the result of any negligence of the Association. It was the result of a criminal act which was not forseeable nor facilitated by the course followed by the Association. The checks were not placed in his hand but in the hands of its payees from whom Henderson fraudulently procured them by his own unaided ingenuity. The bank is not without fault, nor did Henderson directly defraud it. The fraud was practiced upon the party who first cashed the checks. The bank's explanation that it paid these checks upon the guarantee of prior endorsers is no defense. The party ultimately liable for this negligence is the initial payor. The reason the bank accepted the checks was on the faith of the guarantee of these endorsers. Its default is in refusing to pay its depositor the amount of its deposit.
Brushing aside all right in the appellant to sue, and the right of its assignee to sue, and assuming the applicability of the doctrine of subrogation, I cannot find that the bank has a superior equity. There are only two parties at fault here, Henderson and the bank. *Page 82