Missouri Pacific Railroad v. M. M. Cohn Co.
261 S.W. 895
Ark.
1924
Check Treatment
Hart, J.,

(after stating the facts). The judgment of the circuit court was right. This case is ruled by the principles of law decided in Cureton v. Farmers’ State Bank, 147 Ark. 312. In that case Cureton drew checks payable to A. J. Carmon and delivered them to H. Y. Carmon, believing him to be A. J. Carmon. H. Y. Carmon forged the name of A. J. Carmon on the checks, and gave them to some merchants in payment of goods purchased from them. The checks were presented by the merchants to the bank upon which they were drawn, and were paid by it out of funds on deposit to the credit of Cureton. Cureton sued the bank to recover the aggregate amount of the checks, and the circuit court rendered judgment in favor of the bank. It was there insisted that the bank ought to be held liable as for a negligent payment on a forg’ed indorsement. The court held that this rule should not apply when a check is issued to one whom the drawer intends to designate as- the payee, and there was no negligence on the part of the party cashing the check. The court adopted the rule that, where a drawer of a check, draft, or bill of exchange has been induced through fraud to deliver it to an impostor, believing him to be the person named in the check, draft, or bill of exchange, and the impostor negotiates the instrument, and receives payment thereon from an innocent third party, as between bona fide holder and drawer, the latter must stand the loss. This is an application of the rule that, when both parties to a transaction are innocent, and the loss must fall upon one, it should be upon the one who in law most facilitated the fraud. In the application of this rule, the railroad company, having issued and placed in the hands of an impostor a negotiable instrument, which in good faith is cashed by a dry-goods company in payment of goods purchased from it by such impostor, ought not to be permitted to repudiate it and compel the dry-goods company to stand the loss which was made possible by the railroad company’s failing to recognize its own employee, and delivering his wages to another person representing himself to be such employee.

It is claimed, however, by counsel for the railroad company that it is not liable under the provisions of § 7789 of Crawford & Moses’ Digest, Avhich is as follows': “When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.”

We cannot agree with counsel in this contention. The statute is not absolute in its terms,, but recognizes the rule laid down above in the concluding part of the section. The right to be relieved where the signature is forged does not obtain under the statute, where the drawer is precluded from setting up the forgery or want of authority.

In the present ease the undisputed facts show that the railroad company is estopped by its own lack of caution from denying liability on the check which it issued and put in circulation by delivering it to a person intended by it as the payee of the check, although he turned out to be an impostor.

It cannot be claimed that the plaintiff was negligent in failing to make inquiries about the personality of the party presenting the check. He was the same man to whom the railroad company delivered the check, and, if an agent of the plaintiff had gone with the impostor to' the agent of the railroad company, who delivered the check to him, such agent would doubtless have identified, the impostor as the payee of the check. In other words, the plaintiff was only required to see that the person presenting the check was the one to whom, the railroad company had delivered it as the payee. Of course, if the plaintiff had been in possession of facts sufficient to put it on inquiry that the person presenting the check was an impostor, it would have been its duty to have made further inquiry about the matter.

There was nothing in the present case, however, tending in the remotest degree to warn the plaintiff that the person presenting the check was an impostor. On the contrary, the undisputed facts show that the plaintiff believed him to be the payee of the check. There is some division in the authorities of the courts of last resort of the different States on this question, and counsel for the plaintiff have cited many of them in support of the holding of the circuit court.

Inasmuch as this court lias already settled the question under the principles of law decided in the case above cited, we need not review or cite these cases.

It follows that the judgment of the circuit court must be affirmed.