22 Cal. 2d 154 | Cal. | 1943
Lead Opinion
The plaintiff, Security-First National Bank, issues numerous checks drawn on itself. It was the sole duty of one of plaintiff’s officers, A. M. Hadley, to sign such checks. Each check was presented to him with a debit slip, and if the slip showed that the check was properly authorized and that funds were available in the proper account, he signed the check. Among the employees who prepared debit slips and wrote checks, but who were not authorized to sign checks, was Dee L. Ellis, Jr., head of the accounting division of the trust department. Ellis prepared a number of checks for Hadley’s signature, drawn to the order of L. W. Bobbitt, together with debit slips in the usual form on the basis of which Hadley signed the checks. There was such a person as Bobbitt, but he knew nothing of the transaction, and Ellis did not intend that he receive any of the checks. Ellis had become acquainted with one of defendant’s employees and had no difficulty in establishing an account with defendant as agent for Bobbitt. He indorsed the name of L. W. Bobbitt on the cheeks, deposited them in this account, and later withdrew the funds deposited. Defendant presented the checks through the Los Angeles clearing house and in accord with
Defendant invokes section 3090 of the Civil Code (§9(3) of the Uniform Negotiable Instruments Act) providing: “The instrument is payable to bearer . . . (3) When it is payable to the order of a fictitious or non-existent person, and such fact is known to the person making it so payable. ...” If these checks are payable to a fictitious payee, and are therefore bearer paper, defendant’s guarantee of the indorsements imposes no liability. (Union B. & T. Co. v. Security-First Nat. Bank, 8 Cal.2d 303 [65 P.2d 355].) The fact that Bobbitt was an actual person does not prevent his name from being that of a fictitious payee, for it is settled that an instrument is drawn to the order of a fictitious payee if it is not intended that the person named on its face have any interest in it. (Union B. & T. Co. v. Security-First Nat. Bank, supra.) Such a check, however, is not payable to bearer unless the fact that the payee is fictitious is known by “the person making it so payable.” (Civ. Code, § 3090.)
This condition limits the extent to which the fictitious payee rule qualifies the usual rules governing the effect of forged indorsements. A forged indorsement is ordinarily a nullity. It does not pass title to a check (Civ. Code, § 3104; Anglo-California Trust Co. v. French American Bank, 108 Cal.App. 354 [291 P. 621]) and a bank may not charge to the account of its depositor a check paid on the basis of such an indorsement. (Hatton v. Holmes, 97 Cal. 208 [31 P. 1131]; Atwell v. Mercantile Trust Co., 95 Cal.App. 338 [272 P. 799].) Where the drawer intentionally makes a cheek payable to a fictitious payee, he knows that it will be indorsed in the name of the payee by someone bearing another name and he thus cannot obtain the benefit of these rules. Similarly, when he entrusts an employee with the responsibility of signing his checks, the signer takes the place of the drawer. His signature creates the check and his knowledge binds the
Hadley, not Ellis, was the signer of plaintiff’s checks. Defendant, however, asserts that Hadley acted as a mere automaton, and that Ellis’s authorization was in effect an order to him to execute the checks. While Hadley ordinarily signed in reliance on vouchers executed by Ellis, the record shows that he refused on at least one occasion to sign a check authorized by Ellis. In many large businesses, it is necessary for the officer authorized to sign checks to do so in reliance on the vouchers of another employee, although that employee has no authority over him. In this situation, as in the execution of plaintiff’s cheeks, the fraud of the employee preparing the vouchers automatically leads to the. unwitting execution by the signer of cheeks to fictitious payees. Since this severance of the function of investigating disbursements from that of executing checks creates the only situation in which checks can be commonly executed to a fictitious payee without the knowledge of the person making them so payable (See Note, 74 A.L.R. 822), it is probable that the requirement of knowledge was included in the section to prevent such checks from becoming payable to bearer. Thus, in Los Angeles Investment Co. v. Home Savings Bank, 180 Cal. 601 [182 P, 293, 5 A.L.R. 1193], one Emory, the manager of the insurance department of a real estate firm, prepared requisitions representing false insurance claims. He was not authorized to sign checks. On the basis of his requisitions another officer signed checks drawn to the order of various persons, and in their names Emory signed and negotiated them. It was held that those checks were not payable to bearer, because the officer signing them was the person making them payable to a fictitious payee, and he had no knowledge that the payee was fictitious. Defendant attempts to distinguish the Home Savings Bank case on the theory that the representations of the defrauding employee were there subject to an independent audit, so that they were not the direct cause of the execution of the fictitious payee checks. The opinion, however, attaches
Defendant relies particularly on Union Bank & Trust Co. v. Security-First Nat. Bank, supra, Goodyear Tire & Rubber Co. v. Wells Fargo Bank, 1 Cal.App.2d 694 [37 P.2d 483], and Rancho San Carlos v. Bank of Italy, 123 Cal.App. 291 [11 P.2d 424], The Union Bank & Trust Co. case involved the fraud of one Williams, the director and assistant secretary of two corporations that maintained accounts at the Union Bank. He was authorized by his employers to sign checks, on which counter-signatures were also required. He drew and signed checks on his employers’ accounts and procured the necessary co-signatures. He presented these checks to the Union Bank, and upon a written requisition on behalf of his employers, drawn and signed by himself, purchased cashier’s checks to the order of the payees designated in the requisitions. He later indorsed the checks in the name of the payees and deposited them. It was held that the checks were payable to bearer. The court emphasized the special situation of a bank in issuing cashier’s checks, a form of currency for which the bank is paid in advance. It is not concerned with who the payee should be. For this reason the knowledge of the purchaser may determine whether a cashier’s cheek to a fictitious payee is payable to bearer. Williams, as authorized by his employers, purchased and designated the payee of the cashier’s checks. The court also emphasized the fact that Williams was authorized to sign his employers’ checks. He could therefore have drawn fictitious payee cheeks against his employers’ account that would have been payable to bear
In the Goodyear Tire and Rubber Co. case one Downs was authorized to sign checks, which, however, were not valid until signed by certain co-signers. Downs drew and signed a number of checks and his co-signers signed on the strength of his signature. He then forged the indorsements of the payees and collected the cheeks. The court pointed out that Downs knew that the payee was fictitious when he drew and signed these checks, and made it clear that the requirement of cosigners did not restrict the effect of his knowledge. Since the joinder of the co-signers was automatic, the court treated the case as if Downs were the sole signer, and concluded that the checks were payable to bearer. The opinion, however, expressly asserts that if Downs had not been the signer of the cheeks, his knowledge would not have been controlling.
In Rancho San Carlos v. Bank of Italy, supra, an employee was entrusted with signed blank checks and was authorized to fill in the blanks. He completed them in the names of fictitious payees, indorsed the checks in those names and then negotiated them. It was held that they were payable to bearer. The court viewed the authority to complete a signed blank check by filling in the name of the payee and the amount payable as the equivalent of the authority to sign an otherwise complete check.
Defendant in the present case contends that Ellis delivered the trust department checks because they were sent to the payees by the accounting division. Delivery of a negotiable instrument, however, is not essential to its execution. A check is complete when received by the person who is to deliver it, and lack of delivery is no defense against a holder in due course. (Civ. Code. § 3097.) Ordinarily, therefore, the signer remains the person making the completed check payable to a fictitious payee regardless of whether another employee is responsible for seeing that it reaches the payee. (Los Angeles Investment Co. v. Home Savings Bank, supra; United States Cold Storage Co. v. Central Mfg. Dist. Bank, 343 Ill. 503 [175 N.E. 825, 74 A.L.R. 811] ; Sealoard Nat. Bank v. Bank of America, 193 N.Y. 26 [85 N.E. 829]; Jordan Marsh Co. v. National Shawmut Bank, 201 Mass. 397
After the checks were cleared they were returned to the trust department accounting division, which was under the supervision of Ellis, and there examined and balanced against the file of outstanding checks. Defendant concludes from these facts that Ellis was the officer who paid them, and argues that in so paying them Ellis represented that he knew of nothing wrong with the checks or their indorsements, and accepted defendant’s guarantee of the indorsements without disclosing that they were forged. Defendant contends that because Ellis performed these acts in the course of his employment, plaintiff is estopped from denying the validity of the indorsements. The checks were not paid merely by the settlement at the clearing house. This settlement is usually tentative only, and the cleared checks are not regarded as paid until the time has passed under the clearing house rules during which the drawee bank can return them to the forwarding bank. (Sneider v. Bank of Italy, 184 Cal. 595 [194 P. 1021, 12 A.L.R. 993].) It is difficult to regard any one employee as paying the checks. If one were to be singled out it would most likely be the employee who has authority to decide whether or not the cheeks should be returned to the forwarding bank. There is no showing that Ellis had such authority.
The judgment is affirmed.
Gibson, C. J., Curtis, J., and Edmonds, J., concurred.
Dissenting Opinion
I dissent. In my opinion the judgment should be reversed for the reasons stated by the District Court of Appeal of the Second Appellate District, Division Three, in an opinion prepared by Justice Hartley Shaw, acting pro tempore, and concurred in by the then Presiding
“There are two defendants in this action, but, since the defendant bank only is before us on this appeal, the word ‘defendant’ where hereinafter used, refers to it only, unless otherwise indicated. The plaintiff issued certain checks drawn upon itself, which came to the defendant upon forged indorsements. The defendant impressed its clearing house stamp upon these cheeks, presented them to plaintiff through the clearing house and obtained payment. This stamp included the words, ‘all prior endorsements guaranteed,’ and plaintiff brings this action to recover on that guaranty. Judgment went for plaintiff and defendant appeals.
“The checks in question were drawn and signed in plaintiff’s trust department, and purported to be made for payments due from trusts held by it, to the order of a person named L. W. Bobbitt. Plaintiff had in its trust department several divisions, including an accounting division, the head of which was the other defendant, Ellis, who had no official title. All of these checks were false and fictitious cheeks, written by Ellis, but not signed by him, he having no authority to sign cheeks for plaintiff, and none of them represented any actual payment due from plaintiff. After they were signed Ellis obtained possession of them, indorsed the name of L. W. Bobbitt upon them and deposited them in an account he had opened with defendant bank, at one of its Los Angeles branches, in the name of Bobbitt. Ellis then drew the money out of defendant bank, on checks to which he signed Bobbitt’s name, and used it himself. In dealing with defendant bank Ellis did not pose as Bobbitt, but as the latter’s agent, making all of the signatures except the first indorsement before presenting them to the bank. There was such a person as L. W. Bobbitt known to Ellis, but he did not live in California, had nothing to do with these acts of Ellis, knew nothing of them, had no interest in the checks, was not intended by Ellis to have either the cheeks or the money procured on them, and did not in fact receive either.
“The mode in which Ellis accomplished this defalcation is
“It is defendant’s contention that under the circumstances above stated, the checks in question were payable to bearer, within the intent .of section 3090 of the Civil Code. If this
“Section 3090 of the Civil Code, so far as material here, reads as follows: ‘The instrument is payable to bearer— ... (3) When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable . . . ’ There is no doubt that, if Ellis’ knowledge and intent are regarded as determinative, all the checks in question were payable to the order of a fictitious person, and this also, plaintiff concedes. While there was such a person as Bobbitt, Ellis did not intend that he should have any interest in the cheeks and he had in fact no rights in them. This is sufficient to make him a fictitious payee, if Ellis was the person making the cheeks so payable, within the meaning of section 3090. (Union B. & T. Co. v. Security-First Nat. Bk., supra.) Of course, the character of the payee in this respect was known to Ellis, but it was not known to Hadley, who believed all checks signed by him to be regular and genuine in all respects and had no information to the contrary, nor was it known to any person connected with plaintiff, other than Ellis. The question for decision on section 3090 therefore resolves itself into these two questions: Was Ellis the person making these checks ‘so payable,’ or if not, was his knowledge on the subject chargeable to plaintiff?
“It is now settled that ‘the person making it so payable,’ within the meaning of section 3090 above quoted, is not always or necessarily the nominal maker of a cheek or other negotiable instrument. (Union B. & T. Co. v. Security-First Nat. Bk., supra; Goodyear Tire etc. Co. v. Wells Fargo Bank (1934), 1 Cal.App.2d 694, 702 [37 P.2d 483]; Bancho San Carlos v. Bank of Italy (1932), 123 Cal.App. 291, 295 [11 P.2d 424].) In Union B. & T. Co. v. Security-First Nat. Bk., supra, the checks in question were cashier’s cheeks of the plaintiff, issued at the request of an agent of one of plaintiff’s depositors, made payable to persons named by him and delivered to him. He forged the payees’ indorsements and obtained the money on the checks. It was held that regarding the payees named in the checks the plaintiff had no intent
“In Union B. & T. Co. v. Security-First Nat. Bk., supra, the court cited with approval Rancho San Carlos v. Bank of Italy, supra, and Goodyear Tire etc. Co. v. Wells Fargo Bank, supra. In the Rancho San Carlos case the plaintiff delivered to an employee named Harris, who had no authority to sign its checks, several duly signed checks on defendant bank which were blank as to payees’ names and amounts. This was done, according to custom, to enable Harris to pay plaintiff’s bills. Harris filled out one of these checks for $10,000, naming as payee a real person who had no interest in it and was not intended by Harris to receive it, forged this payee’s name and contrived to get the money. It was held that plaintiff, by delivering the blank checks to Harris, gave him authority to fill the blanks, and further (at 123 Cal.App. 295): ‘It has been held that the words “the person making it so payable’’ refer to the person who actually drew the cheek whether he be the nominal maker or not [citing cases]; and in principle the same rule should apply where the person who actually makes the cheek payable is expressly or impliedly authorized to complete it in that manner.’ For this reason it was held that the check was payable to bearer, under section 3090 of the Civil Code, and defendant bank was not liable to plaintiff as for payment on a forged indorsement.
“In the Goodyear ease, supra, the plaintiff sued to recover money which it had deposited in defendant bank and which' the latter had paid out on duly signed checks of plaintiff. The plaintiff required two signatures on its checks, one of the authorized persons, Downs, being also its controller and in charge
“Under the facts of the ease at bar Hadley was in substantially the same situation as that given to the cosigners of Downs in the case just quoted. Hadley did not even look at the names of the payees on a check and either he had no actual intent at all regarding them, or if he had any such intent it was, at most, to make the checks payable to the persons intended by Ellis, and was thus like that of the bank which issued the cashier’s checks involved in Union B. & T. Co. v. Security-First Nat. Bk., supra. There must be an intent somewhere as to the payee to be named in a check and if the
“In opposition to this conclusion plaintiff cites and relies on Los Angeles Inv. Co. v. Some Sav. Bank (1919), 180 Cal. 601 [182 P. 293, 5 A.L.R. 1193], The plaintiff there was a corporation doing an extensive business, with several departments. One of these, in charge of one Emory, as manager, made many disbursements by check. Emory had no authority to sign cheeks, and to obtain a check he prepared a demand showing the purpose of the payment and the person to whom it was to be made. This demand was sent to the accounting department where it was examined and if found correct a check was prepared and presented with the demand to the officers authorized to sign checks and the signed check was returned to Emory’s department for delivery to the payee. Emory, like Ellis in this ease, prepared fictitious demands, and one real demand, in favor of named persons, some of whom were fictitious and some real, got possession of the checks signed for these demands, indorsed the payees’ names on them and thereby obtained the money payable on them. The checks were drawn on defendant bank and plaintiff sued to recover the amount paid on these forged indorsements. One of the defenses was that the checks were in law payable to bearer, because of Emory’s intent regarding them, but the court said, at p. 606, ‘Emory did not execute the checks on behalf of the company. It is the intention of the officers who did that must be taken to be the intention of the company. The execution of the checks was one within the scope of their authority, not within that of Emory. As to these officers, it is plain that they did not intend to execute checks to fictitious
The judgment should be reversed.
Carter, J., concurred.
Appellant’s petition for a rehearing was denied May 27, 1943. Shenk, J., and Carter, J., voted for a rehearing. Schauer, J., did not participate therein.
