161 N.W. 616 | S.D. | 1917
The facts material to a determination of the rules of law applicable in this case are undisputed, and are substantially as fellows: One George Kost, a Greek laborer, was employed as one of a track gang on the Chicago, Milwaukee & St. Paul Railway near Pukwana in Brule county. On July 21, 1913, Kost made a deposit of $200 in the First National Bank of Pukwana. He was klentied by the foreman of the track gang-; said 'he could not write. The bank entered the deposit in the ordinary bank passbook and delivered the. book to Kost. On
“Pukwana, S. Dak. 9-9-1913.
“First National Bank of Pukwana.
“Pay to the order of Brule National Bank, $370.00, three hundred seventy and no 100 dollars.
His
X George Kost.
mark
“Witness to mark George F. Pilger.”
This check was indorsed “Brule National Bank, Chamberlain, S. D.,” and delivered to the Whitbeck National Bank of Chamberlain which was used as a clearance bank for other banks. The check was marked
“Paid, Sep. 1913,” and the Brule National Bank given credit therefor in clearance.
The check was indorsed by the clearing- bank:
“Pay any bank or banker, or order. The Whitbeck National Bank, Chamberlain, S. D. A. C. Whitbeck, Cashier.”
'The check was credited to the Brule county bank, and changed in clearance against the Pukwana bank. It was stamped by • the latter bank as follows:
“The First National Bank, Pukwana. Paid Sept. 10, 1913.”
The amount of' this check was paid by the Brule National Bank of Chamberlain, on September 12, 19x3, to the person who signed the check by mark, and represented himself to be George
Appellant assigns as error the allowance as damages of the amount expended by plaintiff for costs and attorney’s fees in the case of Kost against the Pukwana bank, in the reception and exclusion of certain evidence, and insufficiency of the evidence to sustain the decision and judgment. It is appellant’s contention that under the facts disclosed the plaintiff is not entitled to recover amffhing whatever. Appellant founds this contention upon what it concedes to be an exception to a general rule. The exception -as stated , in appellant’s brief is that:
‘'Where a bank pay-s money on an instrument, purporting to be signed by one of its own customers, it is not entitled to recover t'he money so paid, because it is held that it is in a better position than any one else to' know -the genuineness of its customer’s signature.”
“Every -person negotiating an -instrument by delivery or by qualified indorsement, warrants:
*404 “i. That the instrument is genuine arid in all respects what it purports to ibe.”
Section 38 defines' the term “qualified indorsement” as thus used, to be an indorsement which “constitutes the indorser a mere assignor of the title to the instrument.”
Section 30 declares that an instrument .is “negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof,” and, if payable to order, is “negotiated by indorsement of the holder, completed by delivery.”
It will suffice to say that we are clearly of opinion that sections 65 and 66 of the Negotiable Instruments Act, supra, establish the law in this state, and that the Brule National Bank, by its general indorsement as payee, warranted to- the First National Bank of. Pu-kwana that the signature of George K-o-st upon the chock was genuine, and that, in the absence of any act or change of conditions on the -part of the latter bank, sufficient to- create an estoppel, the former bank is entitled to recover the amount of the forged check, upon such warranty. Gabay v. Doane, 66 App. Div. 507, 73 N. Y. Supp. 381.
The New York Courts have held, interpreting the Uniform Negotiable Instrument Law as declaratory of the rule in force in that state prior to its adoption, that the warranty of the genuineness of the signature of the drawer does not extend to the drawee, but exists only in favor of subsequent holders in due course for value, upon an unqualified indorsement. Farmers’ Bank v. Rutherford Bank, 115 Tenn. 64, 88 S. W. 939, 112 Am. St. Rep. 817. But we are of the view that under section 65 an action upon the warranty may be maintained against the -party “negotiating” the instrument, either by indorsement or delivery. The two causes of action, one upon the -contract of indorsement, the other upon- the warrant}'', are distinct. The right of' action against him as indorser is limited- by the provisions of section 66, and extends only to subsequent holders in due course. In such an- action, no -recovery can be had against the -drawee, for the simple reason that he is not and cannot become a bolder in due course. It has been so held in many -cases.
But section 66, which is an adoption of rules quite universally recognized in commercial law, limits the warranty of genuineness as well as the contract of' indorsement, as distinct obligations, to subsequent holders in due course. The drawee is not, and cannot become, a holder in due course, and for that reason the warranty created1 by that section does not extend to him. National Bank v. Bangs, 106 Mass. 441, 8 Am. Rep. 349. See note 10 L. R. A. (N. S.) 51(b). This rule is based upon the assumption that the holder of a negotiable instrument who simply presents it for payment makes no representation as to the genuineness of the signature. Dedham Nat. Bank v. Everett Nat. Bank, 177 Mass. 392, 59 N. E. 62, 83 Am. St. Rep. 286.
"Sec. 185. Where a check is certified by the bank on which it is drawn, the certification is equivalent to1 an acceptance.
"Sec. 186. Where the holder of a check procures it to be accepted or certified, the drawer and all indorsers are discharged from liability thereon.”
The Missouri court, following the interpretation given them in Title Guaranty & Trust Co. v. Haven, supra, holds that these sections of the act amount to an adoption of the line of decisions founded upon the decision of the English court in Price v. Neal,_ 3 Burr. 1354, which holds that when the drawee of a check to which the name of the drawer has been forged pays it to a bona fide holder, he is bound 'by the act, and cannot recover the payment. It will be observed that in all three of these cases* the drawee who paid the forged instrument was suing the holder in due course upon the warranty, or the contract of indorsement, and it was held that both the warranty, and the contract of in-dorsement were discharged by payment or acceptance by the drawee. We have no doubt whatever that section 66, supra, is an adoption of the rule announced in these cases, but as we have endeavored to point out supra they have no application, whatever to the liability created by the warranty under section 65. See Haven case, 196 N. Y. 487, 89 N. E. 1082, 1085, 25 L. R. A. (N. S.) 1308. The warranty under that section is an-obligation on the part of the negotiator of the instrument, distinct from the contract obligation created by his indorsement, where the instrument is put in circulation by indorsement instead of deliver}1-. And even though the contract of indorsement be held discharged .by the operation of section 66, that fact does not affect his liability upon the warranty as negotiator of the instrument.
The New York court, Appellate Division, in the Haven case, supra, interprets the section of their act corresponding to section 62 of our act as a guaranty by the drawee of the genuineness of the signature of the drawer, and holds that payment is equivalent to acceptance. Section 62 reads as follows:
*408 “The acceptor (by accepting the instrument engages that he will' pay it according to the tenor oí his acceptance and admits: i. The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument, and, 2. The existence of the payee and his then capacity to- indorse.”
“Title Three” of the Negotiable Instruments Act, comprising sections 182 to 187, inclusive, prescribes the rule applicable to checks as negotiable instruments, and' defines the rights of parties thereto, and we are of the view that section 186 excludes the application of section 62 to checks, and for that reason the admissions specified in that section have no application in this case.
Section 186 declares the effect of acceptance or certification of a check, and specifies that the drawer and all indorsers are thereby discharged from liability. We are of the opinion drat “payment” is not “acceptance.” Acceptance, as defined by section 131, cannot be confounded with- payment. Section 112 of the New York act is identical with our section 62. The Haven Case, 196 N. Y. 487, 89 N. E. 1082, 1085, 25 L. R. A. (N. S.) 1308, involved payment of a forged check. That court said:
“Section 112 of the Negotiable Instruments Law upon which- the referee based his decision has nothing to do with the question.”
Acceptance, certification, or payment of a check, by the express language of the statute, discharges the liablity only of the persons named in -the statute, to-wit, -the -drawer and all in-dorsers-, and the contract of Indorsement by the negotiator of the check is discharged by acceptance, certification, or payment. But clearly the statute -does not say that the contract of warranty of the negotiator, -created by section 65 is -discharged by these -acts.
An interesting historical side light is thrown upon banking customs in the matter of restricting indorsements along the line of the New Negotiable Instruments Act, by the case of Belmont First National Bank v. Barnesville First Nat. Bank, 58 Ohio St. 207, 50 N. E. 723, 41 L. R. A. 584, 65 Am. St. Rep. 748, which states that the banking business of the country is now done almost universally upon unrestricted indorsements.