McCall v. Corning

| La. | Apr 15, 1848

The judgment of the court was pronounced by

Seidell, .1.

This is an action to recover from the defendants the amount of a bill of exchange for §¡>2847 50, drawn in the name of F. D. Conrad, upon the plaintiffs, to the order of Messrs. Pike and Hart, endorsed in the name of the payees in blank; also, by L. B. Belgrove, W. A. Britton and Co., and by J. Corning and Co. The bill was at sight, and dated at Baton Rouge, 4 Feb., 1847. It was paid by the plaintiffs to Corning and Co., on the 12th day of Feb., 1847. The signatures of Conrad, and of Pike and Hart, were both forgeries.

It appears that, in 1847, a person calling himself Belgrove, was introduced to Conrad, a planter living in Louisiana, by a letter from Henry Clay; who stated that Belgrove had been introduced to him by Abbott Lawrence, and was desirous to obtain information in relation to the culture of sugar. Relying upon this introduction, Conrad entertained him at his plantation; and, while there, from a conversation between Conrad and a member of the firm of Pike and Hart, Belgrove ascertained that there were some business relations between Conrad and Pike and Hart, and that McCall and Adams were Conrad’s factors. A few days afterwards Belgrove went to Natchez, and there, through a letter of introduction from Mr. Clay, obtained the acquaintance of a gentleman who introduced him to Duncan, a planter living in that vicinity. He stated to this person that, he wished to negotiate a draft on New Orleans, and was accompanied by him to the office of Britton and Co., bankers, at Natchez. Duncan stated to Britton and Co. that Belgrove had brought letters from Henry Clay, and upon iheir enquiring whether the bill was all correct, replied: “I have no doubt it is.” Britton and Co. then cashed the bill, and Belgrove left Natchez a day or two afterwards, and has notsince beenheardof. Britton and Co. endorsed, and have remitted the bill to the defendants, who received it on the 12th February, 1847, and having endorsed it in blank, presented it for payment by their clerk, to Adams, one of the plaintiffs. Ad,ams said he had no advice of it, and asked the clerk to leave it; that he would see his partner, and if it was right, would send a check. At 3 o’clock on the same day, Adams bought a cheek of McCall and Adams for the amount, and stated that Conrad had no authority to draw the draft, his erop not being in hand, and that he would write him a letter censuring him. It does not appear that, in presenting, or receiving payment of the bill, Corning and Co. held themselves out as other than principals. On the 14th February, McCall&nd Adams wrote a letter to Conrad informing him that they had paid the draft. Conrad immediately sent a special messenger to Me Call and Adams, to inform them that he had not drawn such a draft. This messenger reached New Orleans with all possible despatch, and sooner than a letter could have reached the city by mail; and, immediately upon reception of this information, to wit, on the 18th February, the plaintiff communicated it to the defendants, and asked the return of the money, which the defendants declined. The defendants gaye Britton and Co. credit on account for the amount of the draft; and subsequently, after notice of the forgery, paid it over to Britton and Co. The forgery of both names is conclusively established. That of the drawer bore some resemblance, it is proved, to the genuine signature of Conrad, but was a bad imitation. That of the first endorser bore no remblance to to the genuine signature. The good faith of the plaintiffs, of the defendants, and of Britton and Co. is entirely unimpeached. But it is asserted by the defendants in argument, that there was, under the circumstances, gross negligence on the part of the plaintiffs in paying the bill, and that there was also gross and unnecessary delay and negligence in discovering and communicating the fact of the forgery. Upon these charges, we premise that the latter appears entirely untenable; as to the former, there seems to us to have been an over confidence on the part of the plaintiffs, amounting perhaps to imprudence, but not amounting to gross negligence. The indiscretion is much palliated by the consideration that Conrad was not a merchant, but a planter; one of a class not punctual in their advices. As regards the signature of the drawer, it is obvious that their suspicions were not in the least excited on that score; and it is not shown that the relations between him and the plaintiffs had been so intimate and so frequent, as to have given that familiarity with his signature which should have led them to pronounce the draft a forgery.

The question presented by this case is certainly perplexing. In deciding it we are not aided by any conclusive and direct authority, and must seek its solution by the application of general principles and by a consideration of those rules pertinent to the subject, which are peculiar to bills of exchange.

It is perhaps a safe starting point in our investigation to consider what would have been the rights of the plaintiffs, had the forged instrument upon which they made the payment not been a bill of exchange, but one falling within the domain of ordinary rules. Thus let us suppose that Belgrove had forged an order of Conrad upon McCall and Adams, his factors, to deliver to Pike and Hart, or their order, fifty hogsheads of sugar; and had also forged the signature of Pike and Hart to a transfer of the instrument; that he had transferred it to Britton and Co., who, in their turn, had transferred it to Corning and Co., and that Corning and Co., on presentation of the order, had received the sugar-, and that, upon discovery of the forgery, a prompt call had been madeupon Corning and Co. to restore the sugar, and they had refused — could McCall and Adams have recovered its value from them ? The prompt answer to this enquiry would not admit of a doubt. The payment would have been made in error. They would be considered as having made it solely upon the belief, created by the forged order, that they were complying with the request of their principal.

“ He who receives what is not due to him, whether he receives it through error or knowingly, obliges himself to restore it to him from whom he has unduly received it.” “ He who has paid through mistake,” says the Code, “ believing himself a debtor, may reclaim what he has paid.” “ To acquire this right, it is necessary that the .thing paid be not due in any manner, either civilly or naturally. A natural obligation to pay will be sufficient to prevent the recovery.” “That which has been paid in virtue of a void title is also considered as not due.” Civil Code, arts. 2279, 2280, 2281, 2283. Here all the circumstances^ concur which the Lw requires to authorize the relief. Mistake, for McCall and Adams believed the order genuine; an absence of all civil or natural obligation, for their duty was only to Conrad; and a void title, the instrument being forged. The articles we have cited confer a right to recoyer back upon him who has paid,'what was not due, and impose ihe correilative duty on him who has unduly received to restore; and the knowledge or the ignorance, the fraud or the good faith, of the party so unduly receiving, is immaterial. The obligation rests upon that great rule of natural equity, “ Neminem cum alterius detrimento et injuria fieri locupletiorem. It is true that the question is, which of .two innocent parties is to bear the loss; but the Joss had already fallen upon the holders before they presented the forged order; and they could not equitaably ask to shift that loss to another, through that person's mistake. In legal contemplation McCall and Adams would be regarded as never having consented to the delivery of the property; for he does not consent who consents in error.

In the supposed case we hold it to be clear that, upon principles of natural equity,.and under the express rules of law, McCall Sp Adams would be entitled to relief. And if so, it is obvious that they must be relieved in the present case, unless the peculiar nature of the transaction, as growing out of a bill of' •exchange, subjects them to some technical rules which forbids the .application ■of the ordinary standards of justice and legal obligation. We think it was fairly put by the ¡plaintiffs’ counsel that, if the cause is to be withdrawn from tho •operation of general principles and they are subjected to the burden of technical rules, .they are also .entitled to the advantage of such rules.

The rule which is invoked against the plaintiffs is, that payment by the drawee admits the genuineness of the drawer’s signature, and the .drawee is .legally estopped from disputing it. The rule, in a qualified sense, is true. The holder, it seems, is permitted to profit by the accidental payment, though the drawer’s name be forged, when there has been an interval between payment and notice to him of the forgery, and his situation has been altered to his prejudice, either in fact or in legal presumption.

But, on the other hand, acceptance is notan admission of the payee’s signature. Here a technical rule comes in aid of the acceptor. If sued upon his .acceptance, even if .estopped from disputing the signature of the drawer, he has a right to insist upon proof of the payee’s signature. The very rule which .concludes him as to the genuineness of the drawer’s signature and supposes that signature to be genuine, places him in the attitude of one who is really •ordered to pay to the payee named in the bill, or his order. How then can the holder of a bill, upon which the payee’s endorsement is forged, recover from the acceptor, who can be considered only as having admitted the genuineness Tof the drawer’s signature 1 Tested, therefore, by technical rules^it seems to I us it would be im possible to condemn Me Call Sp Adams, were this a suit against ' them upon the bill as acceptors. An acceptance is, an engagement to pay according to the tenor of the hill. But the tenor of the bill was “ pay to Pike <$* Hart, or their order;” and Pike .Sp Hart have never ordered its payment to Corning Sp Co.

But it is said that Pike Sp Hart never had any interest in the bill, and must be regarded as fictitious payees. If they be so regarded, that still would.not authorize a recovery against McCall Sp Adams, had they accepted. For the rule with regard to fictitious payees has only been carried to this extent, that the hona fide holder of such a bill, ignorant of the facts, may recover against an acceptor who knew that the payee was a fictitious person.f The use of such 'names" has been, indeed7highly censureHTFnd an" acceptance, without knowledge by the acceptor of the fictitious character of tlie bill, would, it seems, give no remedy and be completely void. (1 This seems to accord with principle; for the acceptor promises to pay the payee, or his order; and if the payee 1ms no existence, there is no one in whose favor the promise takes effect. Hence it seems to us clear that if this forged bill had been at so many days sight, or after date, and had bean accepted by McCall Sf Adams, Coming <$• Co. could not have recovered on the bill. ,

This view of the case, their having paid a bill which they could not have been compelled by suit to pay, goes very far to show that they ought not to be estopped from recovering it back. But as, perhaps, there may be a question how far the right to resist payment in the one case, and to recover back in the other, are to be treated as identical in principle, we proceed to another view of the rights of the parties, technically considered.

When this bill was presented for payment to McCall Sf Adams by Corning Sf Co., the names of the latter were upon it, and they were endorsers of the bill. Let it be conceded that, according to the technical rule, McCall Sf Adams are to be considered as having admitted the signature of Conrad, and estopped themselves from denying it; was there no legal consequence flowing, on the other hand, from the endorsement of Corning Sf Co., and the presentation of the bill for payment by them 1 We think there was. They are to be considered I as representing at least, if not warranting, to' Ik?c Call Sf Adams, that Pike Hart, the persons named as payees, had negotiated the drafts — that their en- ' dorsement was genuine and true.

The case of The East India Company v. Tritton, 3 Barnwall & Creswell, 82, has been cited as authority that an endorsee does not warrant the genuineness of the prior endorsements. But what is there said cannot be regarded as authority, in the proper sense of the term. The bill had been endorsed by one 'Card, professing to actas attorney of Hope, the payee, but under an insufficient power of attorney. The East India Company accepted the bill, and paid it to the defendants, the' holders, who had taken it from Card's endorsees, and subsequently sued the defendants to recover back the amount which the company had been compelled to-pay a second time to Hope's administrator. It was found by the special verdict that, before the bill was paid, the plaintiffs took all such steps as they judged fit to satisfy themselves that the first endorsement by Card was made by virtue of a sufficient authority. The power was not produced by the defendants, and it did not appear that- they ever saw it, or had any means whatever of forming a judgment as to its'suffieiency. Abbott, C. J. notices the facts as favorable to the defendants, but puts the ease, as with the defendants, upon the ground that they received the money as agents, and paid-over to their principals before any discovery was made of the insufficiency of Card’s authority; that it was unjust to call upon them to restore money no longer in their hands, and which they had not a right to withhold from their principals. Bayley, J. said, he was not prepared to admit that every endorsee warrants the genuineness of the prior endorsements; but added that it was not necessary to decide or discuss that question; that the power was shown to the-plaintiffs, and it was for them to judge of the extent of the authority conferred by it. He then adopts the same ground as the chief justice, that the defendants, having received the money as agents and paid it over, it would be unjust to make them refund. Holroyd, J. thought the plaintiffs, having the means of knowledge in their power, had made a mistake of law, and not of fact, with regard -to the power, and that, under the facts, a promise to repay, if the endorsement proved insufficient, could not be implied. Littledale, J. said, he was not aware that a warranty of the genuineness of endorsements was to be implied, but if there were such an implied warranty in ordinary cases, it was negatived there by the finding of the jury.

Mr. Story, in his Treatise on Bills, very clearly intimates his dissatisfaction with the dicta in the East India Company’s case. In the text he says: ■“ There is yet another engagement which is implied in every endorsement, on the part of the endorser. It is that the instrument which he endorses is a genuine instrument, and not forged; that the signature of the drawer, and also of the antecedent endorsers, are genuine; and that he, the endorser, has a good right to transfer the same to the immediate endorsee.” Story on Bills, § 111. These expressions, it is true, point to the relation of the endorser to his endorsee ; but the reason of the rule, so far at least as the warranty of the payee’s endorsement is concerned, applies with equal force to the acceptor; for if the payee’s endorsement be forged, the holder would be receiving a payment to which he had no right; and there is the same justice in his warranting his title to the acceptor from whom he receives payment, as to the endorsee who gives him the money upon the negotiation of the bill. In a note, Mr. Story comments upon the case of the East India Company, as not supporting the doctrine that the endorser does not warrant the genuiness of antecedent names; and cites the contrary opinion of Pardessus. See also Febrero, vol. 3, p. 350, where it is said: El portador de una letra de cambio es enteramente garante de la validación de ella, y de todos sus endosos. See also Dalloz, 1844, part 2, p. 200. Jousse, Nouveau Commentaire sur les Ordonnances de 1669 and 1673, p. 62. Kent’s Commentaries, edit, of 1844, p. 88.

Whether the endorser may be considered as warranting or not to the acceptor the genuineness of the payee’s name, it is hard to conceive, at all events, how he can be considered otherwise than as representing the payee’s endorsement as genuine. It is certain that, if the title to the bill has not been passed to the holder, he has no right to receive payment; and the presentation for acceptance or payment, is an implied declaration that the title is in him.

The presentment of the bill for payment by Corning 8f Co., being an implied representation by them to McCall Sf Adams, that Pike 8p Hart, the payees named in the bill, had endorsed it, if McCall 8^ Adams are to be held to the technical rule of an implied admission of the drawer’s signature, they must have the benefit of the implied representation; and, having paid upon a false representation, however innocent, the money should be restored to them.

It is not admissible to say that Corning 8f Co.'s endorsement, and the implied obligation which it involved, had no effect upon McCall 8f Adams, in inducing them to pay the bill. The very fact that a house of such respectable standing presented the bill, was a circumstance which probably lessened their vigilance. If the forger, a stranger, had presented the bill, it is not at all improbable that they would have waited for advice.

It is an important feature in this case that the holders were not induced to take the bill by any act of the plaintiffs, and the case is thus relieved from any equity which might be urged, in the case of a forged bill accepted by the drawee, and going after acceptance into the hands of a bond fide holder for value.

It cannot be said that the holder loses his remedy over against his prior endorsers, by the payment of the bill to him by the drawee; if we are right in the doctrine that an endorser is to be considered as representing the genuineness of prior endorsements, then the holder has the same equity against his • prior endorser as the drawee has against him.

The maxim invoked by the defendants, “ In equal: jure melior est conditio possidentis,” is one which cannot be applied in this case, without assuming that the parlies do stand in equal right. But this cannot properly be said; for here the loss had first fallen on Britton 8f Co. without any act or fault whatever of the plaintififs, and if there was some overconfidence or indiscretion on the part of the plaintiffs, it does not appear that the defendants were put in a worse position by the brief delay between the payment and the discovery of tho forgery; and it would be going very far to say that, a simple indiscretion, not shown to have actually made the situation of the defendants, or of Britton ¿j-Co., their principals, worse, should shift the loss from the party upon whom it had first fallen, to a party who paid under an evident mistake of facts, and in good faith.

The defendants had notice of the forgery, and of the plaintiiFs claim upon them, before they paid over the money to Britton Sf Co., and cannot complain that they are treated as principals. We have also seen that on the presentment and receipt of payment they did not disclose their agency.

We have considered the question presented in this cause With care on account of its commercial importance, and have not come to a conclusion without diffidence. The case is embarrassing in consequence of the double forgery of the names of the drawer and payee; and we have not the benefit of authority in point. We are clear that the cause is with the plaintififs upon principles of natural justice, and under the ordinary rules of law; and when technical rules are invoked to break down the equity of a case, they ought to be so clearly applicable and conclusive as to leave no room for doubt.

Judgment affirmed.