National Bank of Commerce v. Mechanics' American National Bank

148 Mo. App. 1 | Mo. Ct. App. | 1910

REYNOLDS, P. J.

(after stating the facts). — By act of the General Assembly of this State, approved April 10, 1905, what is called “The Negotiable Instrument Law,” was adopted in this State. See Sess. Acts, 1905, p. 243. The Forty-third General Assembly which adopted this Negotiable Instrument Law adjourned on the 18th day of March, 1905. There is no emergency clause in this act, nor, by any section or provision in it, is its operation postponed beyond the constitutional period of ninety days. Consequently it was in effect June 16, 1905. The checks in suit bear date August 12th and were cashed by the plaintiff bank August 15, 1905. That act, by section 196, provides that “in any case not provided for in this act, the rules of the law merchant shall govern.” All acts in connection with these checks are, therefore, to be construed, and the character and rights of the parties to them are determinable under the provisions of this Negotiable Instrument Act of this State, provided they are such as are covered by it. We call attention .to this for the reason that all of the counsel in the case seem to have lost sight of it, one of them even stating that at the time of the transaction the common law, meaning “Law Merchant,” then obtained in this State and that that law is to be applied in the determination of the questions arising in this case. We do not think so; on the contrary, we think that this whole transaction falls within our Negotiable Instrument Law of 1905. Section 62 of that law treating of bills of exchange and promissory notes, reads: “The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits: (1) 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 capacity to indorse.” Section 185 of the same act provides that a check is a bill of exchange drawn on a bank payable on demand, and except as in the act otherwise provided, the provisions of the act applicable to a bill of exchange payable on demand apply to a check. Section 188 reads: “Where the holder of a check procures it to be accepted or certified, the drawer and all indorsers are discharged from liability thereon.” The payment of a check or bill of exchange by the bank upon which it is drawn is equivalent to its acceptance. In view of this law of our State, there is no necessity for an elaborate discussion of the questions which have grown out of transactions occurring prior to its adoption .by our State. Two lines of decision, each line emanating from courts of the highest authority and most reputable standing for judicial learning, have followed through this class of cases. One line, tracing its origin to the decision of Lord Mansfield in the case of Price v. Neal, 3 Burr. 1354, holds without qualification to the rule 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. This on the rule that the drawee of a bill of exchange, check or draft is bound to know the handwriting of his customer, the drawer, and if he accepts or pays a bill check or draft in the hands of a bona fide holder for value, he is concluded by the act, although, it turns out that the signature of the drawer is a forgery, and having paid or accepted it, he can neither repudiate the acceptance nor recover the money paid. The other line, and because of comparatively late origin, or more accurately, announcement, sharply challenges this, and as said by an accepted authority on banks and banking in treating of it, 2 Morse (4 Ed.), sec. 464, “This doctrine is fast fading into the misty past where it belongs.” The co-called modern rule is that one who purchases a check or draft isjhound to satisfy himself that the paper is genuine and that by endorsing it or presenting it for payment or putting, it into_circulation before .presentation, hn._.impliedly-.asserts — that- he has performed this-duty. Consequently it is held in this line of cases, that if it appears that he has neglected this duty the drawee, who is without actual negligence on his part and who has paid the forged paper, may recover the money paid from such negligent purchaser. The recovery is permitted in such cases sometimes on the ground that although the drawee was constructively negligent in failing to detect the forgery, yet if the purchaser had performed his duty the forgery would in all probability have been detected and the fraud defeated, and again on the ground that he has received money to Avhich he is not entitled. As stated by the able counsel for appellant this modern rule does not always apply the rule of Price v. Neal to a case where the holder has himself been negligent in taking the check and has thereby led the drawee to relax his vigilance. One of the earliest cases so holding is that of the Gloucester Bank v. Salem Bank, 17 Mass. 32. Another is Ellis & Morton v. Ohio L. Ins. & T. Co., 4 Ohio St. 628. The cases illustrative of these two lines of decision are so fully compiled in I'O LaAvyers’ Reports, Annotated, New Series, p. 49 et seq., in annotation of the case of First National Bank of Lisbon v. Bank of Wyndmere, 15 N. Dak. 299, which case follows the latter line of decisions, that we can do no better than refer to that work for reference to the conflicting cases. It is to be noted that the so-called modern cases or what is a more proper denomination, the new rule cases, do not appear to notice the effect on the Price v. Neal rule of the Negotiable Instrument Law, although many of our states — thirty-five or more — have adopted it since it was drafted in 1895, practically in the form adopted by us. The courts following the new rule have frequently proceeded upon the idea that recovery could be had in case of payment of forged paper on the ground, to put it briefly, that it had been paid by mistake of fact, a rule denied in the cases which follow Price v. Neal. It is also to be remarked that the author of the notes to First National Bank of Lisbon v. Wyndmere, 10 L. R. A. (N. S.) 49, before referred to, does not notice the Negotiable Instrument Law, nor is it noticed in the annotated case although North Dakota appears to have adopted the law between 1897 and 1902. See Crawford Ann. Neg. Ins. Law (3 Ed.). The doctrine applicable in cases of negligence is also invoked in these new rule cases, that as between two innocent parties he through whose negligence the act first occurred is the one to suffer. Nearly the identical questions here involved have very lately been before the Springfield Court of Appeals, where under the title of National Bank of Rolla v. First National Bank of Salem, 141 Mo. App. 719, 125 S. W. 513, a very elaborate and learned discussion will be found. Judge Gray, writing the opinion in that case, held, after an examination of the cases and in the light of our Negotiable Instrument Act, that where the payee bank pays a check to another bank, which is a bona fide holder, such drawee cannot recover the money back on discovering such check to be a forgery. The only material difference between that case and the cases now before us is that in the case before the Springfield Court of Appeals negligence was neither pleaded nor in issue. Here it is. Judge Gray first disposing of the question on principle and on the author! ties, and independent of the statute, follows the rule in Price v. Neal. He further holds that in the adoption of our Negotiable Instrument Law, we have adopted the rule announced in Price v. Neal. The State of New York has adopted this same Negotiable Instrument Act and in the case of Title Guarantee and Trust Co. v. Haven, No. 2, 126 App. Div. (1908) 802, the Supreme Court of that state, in an opinion by Judge Ingraham, passing upon sections similar to the ones which we have quoted from our law, construes them as making it conclusive upon the drawee after acceptance that the note was genuine and the endorsements and all prior endorsements assured. That is to say, the Supreme Court of New York in this case recognizes that in the adoption of this Negotiable Instrument Act the State of NeAV York had adopted to its fullest extent the rule announced in Price v. Neal, the court quoting from National Park Bank v. Ninth National Bank, 46 N. Y. 77, that “for more than a century it has been held and decided, without question, that it is incumbent upon the drawee of the bill, to be satisfied that the signature of the drawer is genuine; that he is presumed to knoAV the handwriting of his correspondent; and if he accepts or pays a bill to which the drawer’s name has been forged, he is bound by the act and can neither repudiate the acceptance nor recover the money paid.” Quoted approvingly in Bank v. Bank, 107 Mo. 402, 17 S. W. 982. See also Bank v. Bank, 109 Mo. App. 665, 83 S. W. 537. Taking the same view of our Negotiable Instrument Law as that taken by the Springfield Court of Appeals in the National Bank of Rolla v. First National Bank of Salem case, and by the Supreme Court of NeAV York in the case of Title Guarantee and Trust Co. v. Haven, No. 2, we hold that when our State adopted the Negotiable Instrument Law it adopted the rule announced in Price v. Neal. We are therefore not called upon to inquire into the soundness of that rule or whether modem decisions have overturned it. We are bound to it by force of our own statutory law. This disposes of the main contention. Bnt it is urged that negligence on the part of defendants has been proven, and that even the cases which follow Price v. Neal, recognize negligence on part of the holder as taking the case out of the rule. It is not necessary to discuss the proposition of law involved. The negligence here reliad on is in the failure to identify thejnavees as the real parties named as such. But there is no probative evidence that they were not the very parties named in the checks as payees. The defendants’ agents were not bound to determine at their peril that the signature of the drawer was forged. That, under our Negotiable Instrument Law and under Price v. Neal, is not negligence. The genuineness of that signature was vouched for by the plaintiff when it cashed the checks. Why should the fact that defendants passed it as genuine be imputed as negligence to them? It was so near the genuine that the officers of the plaintiff bank, the drawee, accepted and cashed the checks upon which it appeared as genuine. Nor do we think that endorsements and presentation of these checks to the plaintiff bank was in any sense a negotiation of them. They were presented to the drawee by the defendants for payment, not in the line of negotiation, and they were paid, not bought. Finally, Ave hold that the appellant bank, under rule 12 of the Clearing House, of which it and the defendant banks Avere members, and by which they are all bound, was chargeable with the consequences of a disregard of that rule. It is no answer to this to say or prove that no harm resulted to defendants by the delay. The rule makes no such exception. Nor is it an answer here to the charge of disregard of that rule to say that these checks came in in such great number and by one delivery that there was not time to examine and reject these forty-eight. This rule was made by men of long experience in banking, men of great banking acumen. There is no' suggestion that it violated any law. It is not possible to believe that in the city of St.. Louis, with its Avonderful banking business, it was an uncommon occurrence to have hundreds of checks turned in through the Clearing House at one and the same time. If out of their exe.prience these bankers making their own law, did not think it wise to make an exception to the rule to meet such an event, it is fair to assume that they have concluded that it is not the part of wise and safe banking to make such an exception. As they have made none, we do not think the courts should undertake to do so.

On a careful consideration of the case we hold that under the facts in evidence before the learned trial court, the demurrers were properly sustained and judgment properly entered in favor of the defendants. That judgment is affirmed.

All concur.