146 Ky. 538 | Ky. Ct. App. | 1912
OPINION of the Court by
Reversing.
On the 3d day of January, 1891, J. B. Jones presented to the appellee Bank of Pikeville a draft for $1,960, drawn by the Moline Bank of Illinois, to the order of the Deer Mansur Company, and endorsed to
“Pikeville, Ky., January 8, 1891.
“L. D. Kelly, Esq.:
“Dear Sir — Mr. Jones was here last Saturday. I paid off tbe teachers of this county, which amounted to over $5,000, and I told Mr. Jones- at tbe time tba't I could not pay bim tbe money on bis check as I was close for cash. I have got' plenty of money in my Cincinnati bank and other banks, but haven’t any more than tbe regular reserve here. Therefore, I' write you and ask you if you can not make it convenient to check this out at different times by giving to parties below and to merchants over there, so they can send them to their banks and their banks to me. In that way, I am out no currency. I send you a bank book and a check book, and if you can do this way conveniently, it will very greatly oblige,
Tours truly,
“J. B. Hatton, Cashier.”
After Kelly received tbe letter, witb tbe check book and pass book showing that there bad been placed to bis credit in tbe bank tbe amount mentioned, and on January 16, 1891, be drew checks for tbe amount due tbe appellant and tbe other execution creditors on tbe bank in favor of S. J. Kilgore; attorney for appellant,
In its answer to the suit brought against it, the bank averred in substance that the draft presented by Jones was a forgery, and that at the time it placed to the credit of Jones the $1,660, and to the credit of Kelly ' the $1,011.30 it had not discovered that the draft was forged. It also set up lack of diligence in presenting to it for payment the Kelly check; and further, that Kilgore who was at the time the agent and attorney for appellant was a party, together with Jones and Bailey, to the fraud and forgery perpetrated upon it in the presentation of the draft by Jones.
It is conclusively shown by the evidence that the draft presented to the bank by Jones was in fact made payable to the Hickman Lumber Company, but by some misadventure the letter enclosing the draft to the Hickman Lumber Company, which was addressed to Hickman, Ky., fell into the hands of Bailey, who was operating a lumber company at Hindman, in Knott County, Kentucky. When the draft in this manner came into the possession of Bailey, he and Jones conceived the idea of forging the name of the Hickman Lumber Com
The chief argument of counsel for the bank is rested upon the ground that Kilgore, the agent and attorney of appellant, was a party to the fraud and that it occupies no better position than its agent Kilgore would if he was seeking to collect the check for himself and on his own account. Of course, if this legal conclusion of counsel was sound, and the evidence supported the contention that Kilgore was a party to the fraud, it would be an end of the case. But we do not take the same view of this issue that counsel does. If Kilgore was a party to the fraud, his conduct would not prejudice the rights of appellant, who is- admittedly the owner of the debt for which the check was given, and free from any blame in the transaction. In short, the attitude of appellant is precisely the same as if Kelly had made the check payable to it in place of payable to
The commercial interests of the country demand that banks should be held to a high degree of care in the conduct of their business with customers to whom they give credit they would not otherwise be able to obtain. And when a bank receives, not for collection, but as so much money, a check and places the amount to the credit of a customer, it thereby assumes liability for this amount to ■all persons to whom the customer may give cheeks. And we think the principle of law is or should be well settled that when a bank by its course of dealing with a customer authorizes him to issue checks on it, it will be estopped to say after such checks have come in good faith into the hands of innocent holders, that the customer did not in fact have any money to his credit, and for this1 reason decline to pay the checks. Especially should this principle obtain when to permit the bank to .make this defense would cause a bona fide holder of the customer’s check to lose the. amount of it. Our attention has been called to a number of analogous cases treating on this subject, and from them we select the following as illustrating the doctrine that under circumstances such as are disclosed by this record a bank will not be allowed to escape liability, although it may suffer a loss in consequence of its course of dealing.
“In determining the legal effect of such transactions, we must apply the same rules applicable to all contracts and business affairs, and effectuate and carry out the intention of the parties, to be gathered from their acts and declarations, and the accustomed and understood course of the particular business. Applying these rules, there can be no doubt but there was an express demand on one side, and consent on the other, that this check should be placed to the credit of the plaintiff as a deposit. The legal effect of the transaction was precisely the same as though the money had been first paid to the plaintiff, and then deposited. When a check is presented to a bank for deposit, drawn directly upon itself, it is the same as though payment in any other form was demanded. It is the right of the bank to reject it, or to refuse to pay it, or to receive it conditionally, but if it accepts such a check and pays it, either by delivering the currency or giving the party credit for it, the transaction is closed between the bank and such party, provided the paper is genuine. In the case of a deposit, the bank becomes at once the debtor of the depositor, and the title of the deposit passes to the bank. * * * Under these circumstances it would be inequitable and unjust to permit the defendants to throw the responsibility of their own acts upon the plaintiff, and the law has established a rule which forbids it. Every element of an estoppel in pais exists in this case.”
In Hardy v. Chesapeake Bank, 51 Md., 562, 34 Am. Rep., 325, it is said:
“It is now perfectly well settled, that the relation between banker and customer, who pays money into the bank, or to whose credit money is received there on deposit, is the ordinary relation of debtor and cred*545 itor; and that when the bank receives the money as an ordinary deposit and gives credit to the depositor, the money becomes the funds of the bank, and may be used by it as any other funds to which it may be entitled. It is accountable for the deposits that it may. receive as debtor, and in respect to ordinary deposits there is an implied agreement between the bank and the depositor that the checks of the latter will be honored to the extent of the funds standing to his credit. # * * There is no question of trust, therefore, between the parties, but their relation is purely a legal one; and if the bank pays money on a forged check, no matter under what circumstances of caution, or however honest the belief in its genuineness, if the depositor himself be free of blame, and has done nothing to mislead the bank, all the loss must be borne by the bank, for it acts at its peril, and pays out its own funds, and not those of the depositor. It is in view of this relation of the parties, and of their rights and obligations, that the principle is universally maintained, that banks and bankers are bound to know the signature of their customers, and that they pay checks purporting to be drawn by them at their peril.”
In Wasson v. Lamb, 120 Ind., 514, 6 L. R. A., 191, it is said:
“The settled rule is, where checks, drafts or other evidences of debt are received in good faith as deposits, if the bank credits them as so much money, the title to the checks or drafts is immediately transferred to the bank, and it becomes legally liable to the depositor as for so much money deposited.”
In First National Bank of Cincinnati v. Burkhardt, 100 U. S., 686, 25 L. Ed., 766, it is said:
“When a check on itself is offered to a bank as a deposit, the bank has the option to accept or reject it, or to receive it upon such conditions as may be agreed upon. If it be rejected, there is no room for any doubt or question between the parties. If, on the other hand, the check is offered as a deposit and received as a deposit, there being no fraud and the check genuine, the parties are no less bound and concluded than in the former case. Neither can disavow or repudiate what has been done. The case is simply one of an executed contract. There are the requisite parties, the requisite*546 consideration and the requisite concurrence and assent of the minds of those concerned.”
In Morse on Banking, Section 289, the author after stating that the relation of debtor and creditor exists between the depositor and the bank, proceeds to say:
“It follows that the act of deposit having been once consummated, nothing short of payment on the part of the bank, or some act of the depositor himself, will suffice to exonerate it from the indebtedness it has assumed. ’ ’
In German National Bank v. Grinstead, 21 Ky. L. R., 674, the facts were that Taylor, a dealer in eggs, made an arrangement with the bank by which he was to draw drafts on his New York consignees with a bill of lading covering the consignment of eggs attached thereto, and turn it over to the. bank, and thereupon the bank would place the amount of the draft thus secured by the bill of lading to the credit of Taylor on the books of the bank and on Taylor’s pass book, as so much cash. Taylor would then draw checks on the bank against this cash credit for the amount of the purchase price of the eggs in favor of the persons from whom he had purchased them. One of the drafts drawn by Taylor on his New York customers was dishonored, and thereupon the bank refused to pay the checks drawn on it by Taylor and made payable to the persons from whom he purchased the eggs. In holding the bank liable for the payment of the checks, Ta3dor had given, although the bank failed to collect the New York draft given to it by Taylor and on the faith of which Taylor drew checks on it in favor of the purchasers, the court said:
“The purpose of the arrangement was to secare Taylor as a customer and to enable him to buy and ship the eggs. His account having been credited by the draft, the outstanding checks were an appropriation of this credit.”
It is further insisted that the delay in presenting the check relieved the bank from the duty of paying it, but there is no merit in this contention. If the check given to appellant had been presented the same day that the credit was given to Kelly on the books of the bank, or the following day, and before the bank discovered the forgery, it would have been paid; and, of course, the bank would be no better off than it will be
Wherefore, the judgment of the lower court is reversed with directions to enter a judgment in favor of appellant for the amount of the debt with interest from March 10, 1891.