318 Mass. 142 | Mass. | 1945
In this case we must decide which of the innocent parties must bear a loss caused by the forgery and fraud' of one Meissel, an insurance broker in the city of New York. The facts appear in a case stated. The judge made no decision, but reported the case under G. L. (Ter. Ed.) c. 231, § 111.
One Schneierson held life insurance policies on his own life in the defendant company and in five other life insurance companies. Evidently Meissel had the custody of the policies or at least access to them. On July 15, 1942, Meissel sent to the defendant the policy issued by it, together with an application for a loan of $2,520 upon the security of the policy, and a policy loan agreement, both purporting to be signed by Schneierson. In fact the signatures had been forged by Meissel. On July 17, 1942, the loan was completed, and the defendant in Philadelphia sent through its New York office to Meissel in New York its check on a Philadelphia bank for $2,520 payable to Schneierson. Instead of delivering the check to Schneierson, Meissel forged Schneierson’s name by way of indorsement on the check, collected it, and kept the proceeds.
By a similar forgery Meissel obtained a check for a similar policy loan in the name of Schneierson from each of the five other companies already mentioned, upon the security of a policy owned by Schneierson which had been issued by the lending company, forged Schneierson’s name by way of indorsement upon the check, and collected and kept the proceeds. The aggregate of the loans so negotiated and of the checks so obtained from the defendant and the other five companies was about $25,000. In March, 1943, Meissel formed a desire to replace the several loans from the six insurance companies by a single loan át a lower rate of interest.
Acting ostensibly on behalf of Schneierson, Meissel en
The plaintiff received from Faber & Company a promissory note for $25,500, and also an assignment as collateral security therefor of the policy issued by the defendant to Schneierson. Both purported to be signed by Schneierson, but the signatures were forged by Meissel. By similar transactions the plaintiff received similar assignments, likewise forged, as collateral security for the same note, of the policies issued by the five other insurance companies already mentioned.
The plaintiff, having on hand the $2,000 plus $25,114.66, the net proceeds of the note after discounting it, paid to the defendant on April 2, 1943, the sum of $2,627.69 (the amount claimed by the defendant to be due), in discharge of the defendant’s prior supposed lien upon the policy. The defendant cancelled its claim upon the policy, and sent the policy and its original loan agreement to the plaintiff. The plaintiff paid to the other five insurance companies in the aggregate the. sum of $24,289.70 which was the amount of their loans, taken together. The plaintiff had a balance remaining of $197.27, which it paid by its check payable to Schneierson. Meissel obtained that check, forged an in
It was not until about November 24, 1943, that either the plaintiff or the defendant discovered Meissel’s forgeries and frauds. Until that time both parties had faith in the signatures that purported to be those of Schneierson. Both acted in good faith and without negligence.
On March 2, 1944, the plaintiff demanded from the defendant repayment of the sum of $2,627.69 which the plaintiff had paid in discharge of the prior supposed lien of the defendant upon Schneierson’s policy in the defendant company.
It is fairly to be inferred from the case stated that Schneierson, who in truth borrowed nothing and received none of the proceeds of the loans, has received back his policies or is entitled to receive them. The liability to the defendant of the bank that in July, 1942, paid to Meissel the check of the defendant for $2,520 payable to Schneierson upon an indorsement forged by Meissel is not before us. Jordan Marsh Co. v. National Shawmut Bank, 201 Mass. 397, 405. United Security Life Ins. & Trust Co. v. Central National Bank, 185 Penn. St. 586.
The plaintiff cannot recover on the theory of an implied warranty by the defendant of the genuineness of its lien upon the policy. By analogy to a sale of chattels, an assignor of a chose in action has been held to warrant by implication the genuineness of his claim. Williston; Contracts (Rev. ed. 1936) §§ 445, 1162, 1162A. Am. Law Inst. Restatement: Restitution, §§ 15-24. Compare Sears v. Leland, 145 Mass. 277. But in the present case the defendant was not a vendor or an assignor. Its title, whether good or bad, never passed to the plaintiff. It never even made a demand upon the plaintiff for payment. It merely suffered the plaintiff to pay off what both believed to be a valid prior lien, which the plaintiff desired to discharge for its own purposes. Ketchum v. Bank of Commerce, 19 N. Y. 499. Appenzellar v. McCall, 150 Misc. (N. Y.) 897.
The case must be approached from the standpoint of unjust enrichment. The basic principle is stated in Am. Law Inst. Restatement: Restitution, § 1, in these words;
In Williston, Contracts (Rev. ed. 1936) § 1574, which lays down a somewhat similar rule, it is said: “But if, in spite of even a mutual mistake, and a failure of the exact consideration expected, it nevertheless seems to the court that the defendant has such moral right to what he received as to make recovery inequitable, it will be denied. Where A, under a mistaken belief in his liability to B, on direction of the latter pays C a claim which C has against B, A cannot recover the payment from C. If the payment was voluntarily and intentionally paid by A to C to satisfy the latter’s claim against B, and C had a genuine claim against B, it seems clear that no recovery should be allowed. C is a purchaser of the money for value and in good faith,” it being assumed that taking money in payment of an antecedent debt is a taking for value. See also Am. Law Inst.
The case at bar differs from the case's just discussed primarily in the fact that in this case the defendant had no valid claim against its supposed debtor, Schneierson, or
In some of those cases importance was attributed to the question whether the money used to pay off the prior supposed lien was the money of the swindler or that of the taker of the later supposed lien. In Russell v. Richard & Thalheimer, 6 Ala. App. 73, affirmed in Ex parte Richard & Thalheimer, 180 Ala. 580, the taker of the later supposed, lien handed to the innocent attorney for the swindler the money with which to pay off the earlier supposed lien, and sent the attorney with the swindler to see that it was paid off. The court seized upon that fact as showing that title to the money used had passed to the swindler, and held for that reason that the ‘defendant could not be compelled to restore the money that he had received." In Walker v. Conant, 69 Mich. 321, the taker of the later supposed lien paid the money to the holder of the earlier supposed lien upon the order of the swindler, but of course for the purpose of clearing off the prior lien. The majority of the court held that title to the money thereby passed to the swindler, just as was held in the Alabama-case, and denied restitution.
On the other hand, in another similar case, Strauss v. Hensey, 9 App. D. C. 541, the taker of the later supposed lien paid off the earlier supposed lien, with the assent of the swindler, in order to make the later lien a first lien. It was held that the money used to pay off the earlier supposed
In Am. Law Inst. Restatement: Restitution, § 14, the case put in illustration 7, hereinbefore quoted, is answered by the statement that “C is not entitled to restitution from B.” To this answer not all the advisers agreed. The illustration seems to assume that the money used to discharge the prior supposed hen is that of the taker of the later supposed hen, but nevertheless the answer is given that the latter is not entitled to restitution. On the other hand, Professor Williston, in his work on Contracts (Rev. ed. [1936], § 1574, note 10), takes the view that the prior supposed henor must make restitution, “as there was no mortgage or mortgage debt, due from anyone to the defendant, but only the counterfeit áppearance thereof.” He disposes of the question whose money was paid by saying: “It does not seem material whether the plaintiff paid the defendant with his own hand or by the hand of the borrower [the swindler], so long as the money which was paid was dedicated by the plaintiff to that purpose and the borrower [the swindler] was merely executing a trust when he° paid it. That the plaintiff would undoubtedly have lent the whole sum to the fraudulent person, if the latter previ
The fundamental question in the present case is whether the defendant has received money which in equity and good conscience belongs to the plaintiff. If so, the defendant must restore it. Although Meissel in the name of Schneierson requested the payment to the defendant, the plaintiff made the payment primarily to remove a prior supposed lien for the plaintiff's own benefit. The money paid belonged to the plaintiff, and not to Meissel or Schneierson. The fact that the legal title to the money passed to the defendant is not significant. That is true in most instances in which restitution is ordered.
Before the plaintiff even considered making the payment to the defendant, the defendant had already lost its money, although it did not realize the fact. When by the further forgery and fraud of Meissel money was obtained from the plaintiff and the defendant's past loss was thereby repaired at the plaintiff's expense, we think that the plaintiff acquired a right to restitution, unless the defendant suffered such an injurious change of position in the process as to make it substantially a purchaser for value. Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 272-274. Metropolitan Trust Co. v. Federal Trust Co. 232 Mass. 363. Compare London & County Banking Co. Ltd. v. London & River Plate Bank, Ltd. 21 Q. B. D. 535.
The defendant contends that restitution should be denied because in receiving payment from the plaintiff it lost rights against Meissel. But whether any right against Meissel had practical value or not (and nothing in the record suggests that it had) the defendant is not shown to have lost any such right. The policy loan agreement contained no promise to pay anything, but ‘merely created a lien for the advance made by the defendant. If Schneierson himself had signed the policy loan agreement, he would have come
As to any possible liability of Meissel to the defendant upon his forged indorsement of the check drawn by the defendant payable to the order of Schneierson, the whole transaction between the defendant and Meissel, purporting to act for Schneierson, took place in the States of New York and Pennsylvania, and was governed by the law of one of those States. In each State the uniform negotiable instruments law has been substantially adopted, including § 18 which provides that “no person is liable on the [[negotiable] instrument whose signature does not appear thereon,” with an immaterial exception, and § 23 which provides that a .forged signature to such an instrument is “wholly inoperative.” Consol. Laws of N. Y. Anno. Book 37, §§ 37, 42. Purdon's Penn. Stat. Anno. Title 56, §§ 23, 28. Consequently Meissel was not liable in either State in an action upon the check because of his forgery of the name of Schneierson as indorser.
The defendant, upon being paid by the plaintiff, gave no release to anyone, but merely cancelled its supposed lien upon the policy. No evidence, even, was surrendered to Meissel. Nothing was done to impair any cause of action that the defendant had against Meissel, except that the defendant received money that, if it could be retained, would make the defendant whole notwithstanding the forgery and fraud. But if the defendant must restore that money to the plaintiff, the defendant would be a loser and would have, unimpaired, its right of action against Meissel for the deceit or breach of warranty. Pritchard v. Hitchcock, 6 Man. & G. 151. Aiken v. Short, 1 H. & N. 210, 215. Petty v. Cooke, L. R. 6 Q. B. 790. Williston, Contracts (Rev. ed. 1936) § 1219. The defendant therefore has lost no right against Meissel, and is not a- purchaser for value.
We think that the plaintiff has a superior right to the money, and that the defendant shows no escape from the general rule that one receiving money of another without just right to it must restore it. We follow the decisions in Strauss v. Hensey, 9 App. D. C. 541, and Grand Lodge, Ancient Order of United Workmen v. Towne, 136 Minn. 72.
Judgment is to be entered in favor of the plaintiff for $2,627.69, with interest from April 2, 1943, the date of the payment to the defendant, and costs.
So ordered.
This case does not fall within § 20 of the uniform negotiable instruments law (Consol. Laws of N. Y. Anno. Book 37, § 39; Purdon’s Penn. Stat. Anno. Title 56, § 25;. G. L. [Ter. Ed.] c.107, § 42), under which an agent signing a negotiable instrument as such is liable thereon if he was not “duly authorized.” New Georgia National Bank v. Lippmann, 249 N. Y. 307. Jump v. Sparling, 218 Mass. 324, 326. Tuttle v. First National Bank, 187 Mass. 533, 535. Dunham v. Blood, 207 Mass. 512. In this case Meissel did not purport to sign as agent for Schneierson or at all.