96 Tenn. 641 | Tenn. | 1896
The complainants are cotton factors in the city of Memphis. On July 13, 1894, they purchased from the First National Bank of Memphis a draft for $3,000, payable to their order, and drawn on the defendant, the First National Bank of New York. After getting this draft, they indorsed it ‘ ‘ pay to H. C. Hamilton or order, ’ ’ and then
They were induced by • him (at that time a man of fine reputation in the community) to think Hamilton was a real person,' who had consigned to him as warehouseman, for storage and sale, a large lot of cotton, and ’ this draft represented the advance which complainants agreed to make to the supposed consignor upon this cotton, upon an understanding that they were to sell same and earn the commissions accruing therefrom. It turned out, however, that Hamilton was nonexistent, and that Weems had no such cotton' under his charge. But the record discloses that complainants neither knew, nor had occasion to suspect, such to be the facts, but, believing that Hamilton was a real personage, and with the view of carrying out this agreement with Weems, they purchased- this draft and turned it over to him, indorsed, as is stated above, for delivery to their indorsee.
Immediately after its receipt, Weems indorsed it to himself or order, using for this purpose ■ the name of Hamilton, and then carried it to the Mercantile Bank of Memphis, and that bank, without any suspicion of the bad faith of the transaction, or of the right of Weems to transfer title upon his indorsement, paid him full value for it, and then forwarded
1. That complainants were guilty of such carelessness in their dealings with Weems as to estop them from setting up the present claim.
2. That the indorsement by Chism, Churchill & Co. of this draft to a fictitious indorsee was in law an indorsement to bearer, and the result was that its payment through the usual channels of trade, without notice of the alleged defect, discharged the drawee.
As to the first of these grounds, it is sufficient to say that the record fails to show any recklessness or carelessness upon the part of complainants in' this transaction to prevent a recovery, if for any sound reason this suit is maintainable. It is the second ground, however, upon which the defendants rest largely their defense to this claim. What is the
And it is equally true that where a banker pays a draft or check drawn upon him, he, at his peril, pays it to anyone but the payee, or to one who is able to trace his title back to the payee through genuine indorsements. The mere possession of the check or bill, under apparent title, does not necessarily imply the right to demand or receive payment, and when it is paid to such holder the drawer has put upon him the risk of seeing that the apparent is the real title to the paper. For the banker holds the funds of his depositor, under an obligation to pay them to him or to his order, and if he pays them otherwise he cannot treat such a payment as a discharge of' his liability. Shipman v. Bank, 126 N. Y., 318; Robards v. Tucker, 16 Q. B., 575; Dodge v. Bank, 30 Ohio St., 1.
It is otherwise as -to his payment of a .check or bill payable to bearer. In such a case, in the absence of knowledge that the party presenting the paper is wrongfully in possession of it, he can safely
And it is insisted for the defense that this was the legal effect of the indorsement by Chism, Churhill & Co. to Hamilton, the fictitious indorsee.
It seems from a note to By les on Bills, p. T9, that the controversy over the effect of the indorsement of bills to fictitious persons . grew out of the bankruptcy of Linsay & Co. and Gibson & Co., who negotiated bills with fictitious names upon them to the amount of nearly a million sterling a year. A great many cases grew out of these indorse-ments in the various Courts of England, one of which, Minut v. Gibson, was carried to the House of Lords. 1 H. BL, 569. Mr. Chitty, in his work on Bills, p. 1T8, says: “The result of the discussion seems to be that a bill payable to a fictitious person, or his order, is in effect a bill payable to bearer, and may bé declared on as such, in favor of a bona fide holder ignorant of the fact, against all the parties knowing that the payee was a fictitious person.” In other words, whether such a bill was collectible by the holder as if payable to bearer, depended upon the fact that the party against whom it' was sought to be enforced, at the time he assumed liability upon it, knew that the payee was fictitious. Where he possessed such knowledge, he was estopped from saying to a bond fide holder that he was not bound; otherwise, he
Subsequently the Bill of Exchange Act of 1882 was passed, the effect óf which was, in part, that a bill might be treated as payable to bearer when the party named as payee was a real person, but has not, and was not intended by the drawer, to have any right arising out of it. Governor & Company Bank v. Vagliano Bros., Law Rep., Vol. I., Appeal Cases, p. 107.
In this country, among the text - writers, Mr. Daniel states the rule as general, and says that “in the case of a note payable to a fictitious person, it appears to be well settled that any Iona fide, holder may recover on it against the maker as upon a note payable to bearer. It will be no defense against such bona fide holder for the maker to set up that he did no.t know the payee to be fictitious.” Mr. Daniel rests the rule upon the ground of estoppel, but Mr. Randolph, in his work on Commercial Paper, Yol. I., §164, note 4, suggests that the cases cited by him to support his text “apply this rule only when the maker has, by his words or conduct, raised any estoppel against himself,” and this latter author 'fails in his text, as we understand it, to give the sanction of his approval to the rule as announced by Mr. Daniel.
Kahn v. Watkins, 26 Kan., 691, does raise the precise question here presented, and is a direct authority for the contention of defendants. In that case it was held that the drawer of a bill who makes it payable to a fictitious person, and transmits to a third person for delivery to the payee, is bound to a Iona fide purchaser from that third party, who indorses it with the name of the payee,
The Court rested its opinion on the text of Mr. Daniel, which has already been adverted to, and certain cases which were regarded as authorities, to sustain the rale adopted. Lane v. Kreker, 22 Iowa, 399, one of these cases, while it contains a dictum which is in harmony with the conclusions reached by the Court citing it, was confessedly not an authority on the real point in controversy, as in that case the note sued on was payable to bearer. Another of these cases is Phillips v. Inthum, 114 Eng. C. L., 694. There the signature of the drawer, as well as the indorsement, was a forgery, but the acceptor was held liable upon the ground that he had misled the holder. The ground of the decision, as stated by Keating, J., in the final disposition of this case, reported in 1 Law Kep. C. P., 463-472, was that “upon the facts stated in this special case, it was not competent for the defendant to deny the genuineness of this bill. He knew that the plaintiffs were willing to advance money upon the bill only upon his vouching, by his acceptance of it, the authenticity of the drawing.” Forbes v. Fspy, 21 Ohio St., 474, was also relied upon in Kahn v. Watkins, supra. In that case E., W. & Co. issued a bill on New York to the order of C., H. & Co., its purchasers, who indorsed it to one Charles Clark,
Upon the other hand, we have at least two well-considered cases, which, in effect, adopt the English rule, to wit: that only such paper as is issued to a fictitious payee or indorsee by the party sought to be bound, with full knowledge of the fact, shall be treated as payable to bearer.
In one of these cases — that of Armstrong v. National Bank, 46 Ohio St. Rep., 512—after a careful review of the authorities, it is said: “If the drawer of a check, acting in good faith, makes it payable to a certain person or order, supposing there is such person, when, in fact, there is none, no good reason can be perceived why the banker should be excused if he pay the check to a fraudulent. holder upon any less precautions than if it had been made payable to a real person; in other words, why he should not be required to use the
The case of Shipman v. The Bank of New York, 126 N. Y. R., 318, involved over two hundred thousand dollars, was argued by counsel of research and ability, and was determined by a Court of deserved reputation. In that case it appeared that the plaintiffs were depositors in the defendant bank. They drew checks for large sums to fictitious payees, supposing them to be real persons. These checks were given to a trusted employee to be turned over to the respective payees. Instead, however, this employee indorsed the names of the payees upon them and had them presented to the drawee, when they were paid without inquiry or suspicion of the genuineness of the indorsements. Suit having been instituted by the drawer to recover the sum so paid out, it was resisted upon the ground that these checks were, in law, payable to bearer. The Court, however, speaking through O’Brien, J., say: “The maker’s intention is the controlling consideration which determines the character of such paper. It cannot be treated as payable to bearer unless the maker knows the payee to be fictitious and actually intends to make the paper payable to a fictitious person. ’ ’
We think the rule, thus limited, is reasonable,
In the present case, without fault on the part of the complainants, the drawee has paid upon a forged indorsement, to a party not entitled to collect it, a bill of which Chism, Churchill & Co. were owners,