267 F. 367 | 4th Cir. | 1920
Lead Opinion
(after stating the facts as above). The plaintiff in error will be referred to as plaintiff, and the defendant in error as defendant; such being the relative positions the parties occupied in the court below.
The defendant, having filed a demurrer, thereby admitted all the allegations contained in the complaint, to wit, that Mordeeai had nq authority to indorse the check or collect the same; that the bank knew, or should have known, that it had no right to pay the check; that the bank came into possession of the check with that knowledge; that it charged Wagener’s account with the same, and thereupon came into possession of the proceeds thereof, which were the property of the plaintiff, and it has not paid them over to the plaintiff, or any one authorized to receive the same, and refuses to do so; and that the bank turned over the check to the drawer.
"There is no suggestion in the evidence that either the bank or Mr. Spinner knew that the indorsement of the payee was unauthorized. The hank, we assume, would not knowingly subject itself to the dangers and liabilities resulting from making payment to one not authorized to receive it.”
Thus it will be seen that that case is easily distinguishable from the case at bar. In this instance, as we have said, it is admitted by the demurrer that the bank knew the indorsement was unauthorized. Therefore, with full knowledge that Mordecai had no right to indorse the check, it subjected itself to all dangers and liabilities that might occur by making payment to one not authorized to receive it.
The case of Laclede Bank v. Schuler, 120 U. S. 511, 7 Sup. Ct. 644, 30 L. Ed. 704, affirms the doctrine announced in the Millard and Whitman Cases, supra. Mr. Chief Justice Fuller, in delivering the opinion of the court in the case of St. Louis & San Francisco Railway Co. v. Johnston, 133 U. S. 566, 10 Sup. Ct. 390, 33 L. Ed. 68, which bears on this point, said:
“It is settled law in this court that the holder of a bank check cannot sue the bank for refusing payment, in the absence of proof that it was accepted by tiie bank or charged against the drawer (Bank of The Republic v. Millard, 10 Wall. 152; First National Bank v. Whitman, 94 U. S. 343, 344; Laclede Bank v. Schuler, 120 U. S. 511, 514). * * *”
In the case of Thompson v. Sioux Falls National Bank, 150 U. S. 231, 14 Sup. Ct. 94, 37 L. Ed. 1063, it was alleged that the check had been issued by the bank (cashier’s check) for value received, and duly indorsed, and that plaintiff had lawfully come into possession of it in due course of business. The defense in that instance was tiiat the check had not come lawfully into possession of the plaintiff in the usual course of business, and that its acquisition was ultra vires. Mr. Justice Brown, who delivered the opinion of the court, said:
“We have not deemed it necessary to consider whether this check falls within the class upon which we have held that no action will lie in favor of the holder against the drawee before acceptance. Bank of Republic v. Millard, 10 Wall. 152; First Nat. Bank of Washington v. Whitman, 94 U. S. 343; Bull v. Bank v. Kasson, 123 N. Y. 105. In any view we have been able to take of this case, we think the question of plaintiff’s title to the check*370 and its right to recover upon the same should have been left to the jury-under proper instructions.”
In the case of Fourth Street National Bank v. Yardley, 165 U. S. 634, 17 Sup. Ct. 439, 41 L. Ed. 855, the court upheld an equitable assignment of die amount of the check in question in favor of the drawee. There the question as to the right of the holder of a check against the bank was urged, and the previous decisions of the court were presented and argued. Mr. Justice White, in delivering the opinion of the court, commences with the citation of the previous decisions, beginning with the Millard’' Case.
When we come to consider the above authorities, we find that the Supreme Court of the United States has decided only that an action ex contractu on the check by payee against the bank before acceptance will not lie, but it did not decide that an action for conversion could not be maintained. On the contrary, as in the Millard and Johnston Cases,, it is fair to infer that, if it had been shown the bank had charged' this check on its books against the drawer, using that as a basis, plaintiff would be entitled to recover on a count for money had and received, and it should be remembered that in the Whitman Case it is equally reasonable to infer that an action would lie against the bank, if it appeared that the bank knew the indorsement was unauthorized. Therefore the real question presented in this case has not been directly passed upon in any decision of the Supreme Court.
In the case of Siegel v. Kovinsky, 93 Misc. Rep. 541, 157 N. Y. Supp. 340, the court recognizes the principle contended for by plaintiff in this instance. Among other things, the court in that case said (Syl. 3 and 4):
“In .the absence of an indorsement of a cheek by one authorized thereto by him, the payee, on a wrongdoer’s appropriation of the check, may recover from the maker as his debtor. In such ease the payee may also recover from the bank upon which the check is drawn as for a conversion of the cheek, or of its proceeds, by the bank’s payment to one other than the payee.”
Also the case of Louisville & N. R. Co. v. Citizens’ & People’s Nat. Bank of Pensacola, 74 Fla. 385, 77 South. 104, L. R. A. 1918C, 610, sustains the contention of the plaintiff in this instance. In discussing this phase of the question the court said:
“The first count of the declaration may be considered as one in trover for the conversion of a check. The check was the property of the plaintiff; it was in the plaintiff’s possession, for Weekly’s possession was the plaintiff’s possession; it was taken by the defendant, upon whom it was drawn, and the. proceeds paid to a person who had no authority from the plaintiff to receive it; the account of the drawer was charged with the amount paid, and the check was returned to the drawer. * * * The transaction as set forth in the declaration would support a count for money had and received. The check was the hank’s authority for paying to the plaintiff from the account of Virgin & Carter the amount of money named in the check. The drawer of the check had the necessary funds on deposit, and the bank was solvent. Therefore, when the bank took from the funds on hand, or from the funds of Virgin & Carter on deposit, the amount stated in the check, it had in its possession for that instant of time money which it should have paid to the plaintiff; but the bank took the responsibility of saying that a payment to Weekly was a payment to the plaintiff. * * * The defendant took up the check and*371 returned it to the drawer without authority from the owner to do so. This was an interference with plaintiff’s property and constitutes a conversion, because, when the bank undertook to return tlie chock to the maker, it exercised ownership over it. * * * This unauthorized act of ownership deprived the plaintiff of the use and possession of tlie chock. Lord Ellenborough, O. J., said: ‘It might be a hardship upon the defendant, but that by law a person is guilty of a conversion who intermeddles with my property and disposes of it; and it is no answer 1hat he acted under authority of another who himself had no authority to dispose of it.’ Stephens v. Elwall, 4 M. & S. 259. * * * The section in the Negotiable Instruments Law, providing that a cheek of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and that the bank is not, liable to tlio holder unless and until it accepts or certifies the check (section 3098, General Statutes), does not apply. The plaintiff is not suing the bank for breach of a contract in not paying the check. It is suing the bank, because the latter has undertaken to exercise ownership over a cheek which belonged to tlie plaintiff without its authority — because the bank had in its possession funds, the proceeds of the check, which it should have paid to the plaintiff, but negligently failed to do so.”
In tlie case of Thomson v. Gortner, 73 Md. 474, 21 Atl. 371, the Supreme Court of that state, in discussing the question when trover will lie for the conversion of a promissory note or other negotiable instrument, said:
“It is well-settled law that trover will lie for the conversion of a promissory note or other negotiable instrument, as well as for any other article of personal property. Winner v. Penniman, 35 Md. 163; Brown et al. v. Bokee, Adm’r, 53 Md. 170.”
In Kansas City Casualty Co. v. Westport Ave. Bank, 191 Mo. App. 287, 177 S. W. 1092, the court said:
“Wo concede that there was no privity of contract between the Inter-City Grocery Company and defendant, and hence no right to sue defendant upon a contract existed or was assigned to this plaintiff; and thus we fully recognize the soundness of that class of authority in which Grocer Co. v. Bank, supra, has placed the courts of this state. But tlie present action is not ex contractu; it is ex delicto. Defendant bank lias not contracted to pay the InterCity Grocery Company tlie amount of the cheeks in controversy, but it has wrongfully intermeddled with them to the exclusion and in disregard of the rights of the true owners, and that is a conversion. A conversion is ‘any distinct act of dominion wrongfully exerted over one’s property, in denial of his right, or inconsistent with it.’ 2 Cooley on Torts, 859. * * * And the measure of damages is prima facie tlie face value of the paper converted. * * * The grocery company had a choice of remedies; one of them being for the wrong done by defendant. The suggestion is well disposed of in Salomon v. Bank, 59 N. Y. Supp. 407, in these words: ‘A person or corporation who converis a promissory note or chee kto liis or its own use is liable in damages for tlie conversion in an amount equal to the amount due on the promissory note or check [citing authorities]. This action is in no sonso an action on contract. Undoubtedly, the plaintiffs had a right to sue the makers of the checks, respectively; but they have elected to avoid the burden of bringing 24 suits against the drawers of tlie checks, respectively, all but one of which suits would be against nonresidents of this state, and they have sued the defendant, and seek to recover as damages the amount of all the checks in one action. A person whose property has been wrongfully converted is not bound to take the same back. He may abandon it from the moment of its conversion, and sue for its value.’ ”
The cases of Graton, etc., v. Redelsheimer, 28 Wash. 370, 68 Pac. 879, Robinson v. Bank, 86 N. Y. 404, and Blum v. Whipple, 194 Mass.
“It is enough if it appears that ex aaquo et bono, the plaintiffs are entitled, as between the patties to the suit, and to the instrument, to the money. If so, an action lies for money had and received to their use".”
This argument cannot avail the defendant. The fact that Mr. Mordecai at one time enjoyed the confidence of the plaintiff, as well as the defendant, under the pleadings of this case, is not material, and could not be considered on a demurrer. It may or may not avail the ■defendant as a defense to the action, but in no view of the case could we consider the same as having any material bearing upon the question now before us.
In none of the cases relied upon by defendant does it appear that the bank at the time of the payment of the check, was aware of the fact that the indorsement was unauthorized. The facts as alleged in the complaint, we think, are sufficient to. raise an issue involving the ■question as to whether the defendant is liable for conversion, which ■should be submitted to the jury.
For the reasons stated, we are of opinion that the court below erred in overruling the demurrer. The judgment of the lower court is therefore reversed.
Dissenting Opinion
(dissenting). I think the difference between the courts as to the liability of a drawee of a check to the payee for an unauthorized payment upon it does not turn upon the form of action. The Supreme Court, as I understand it, holds that the drawee is not liable to the payee for a mispayment due to simple negligence, unmixed with any element of bad faith. If the allegation in the declaration that the bank knew it had no right to pay the check was unqualified, it would doubtless be good; but the plaintiff was not willing to undertake the burden of proving so much, and so, after the statement that the bank knew, it added “or should have known,” and that :may amount to nothing more than a charge of carelessness.
