Virginia-Carolina Joint Stock Land Bank v. First & Citizens National Bank of Elizabeth City

Connor, J. We find no error in the trial of this action for which either of the appellants is entitled' to a new trial. The objection of the defendant, the First and Citizens National Bank of Elizabeth City, N. C., to the introduction in evidence of the check, with endorsements thereon, and with the perforation showing that the check had been paid by said defendant, was properly overruled. The exception to the ruling of the court on this objection is not sustained. The check was competent as evidence by reason of admissions made by the defendant in its answer. These admissions were offered as evidence against this defendant by the plaintiff. Neither of the other defendants objected to the introduction of the check. The check and the admis *531 sions tended to sustain tbe allegations of tbe complaint, relied upon by plaintiff as constituting its cause of action against tbe defendant, tbe First and Citizens National Bank of Elizabeth City, N. C. There was no error in the refusal of the court to submit to the jury the issues tendered by the defendants. Plaintiff did not allege in its complaint, or contend at the trial that it was the owner of the check, nor is its cause of action as set out in the complaint founded upon such allegation or contention. Plaintiff’s cause of action against the defendant, the First and Citizens National Bank of Elizabeth City, N. C., is founded upon its relationship to said defendant as a depositor; it alleges that said defendant has on deposit to its credit and subject to its check, a sum of money which said defendant refuses to pay to it or to its order; that said defendant denies liability to plaintiff for said sum of money, upon its contention that it has paid out said sum on a check drawn by plaintiff on said defendant. Plaintiff controverts this contention, and demands judgment that it recover of said defendant the amount of its deposit. Plaintiff’s cause of action against the other defendants is founded upon the guarantee by each of said defendants of an endorsement appearing on the check, purporting to be the valid endorsement of the payees, but which plaintiff contends is invalid. Plaintiff contends that each of these defendants by reason of its endorsement and guarantee of the void endorsement in the names of the payees is liable to it, as drawer of the check, for the amount which the drawee bank has, without its authority, charged to its account. It is true that there are allegations in the complaint which are appropriate to a cause of action for the conversion of money belonging to plaintiff. Plaintiff did not rely upon these allegations for its recovery in this action; it offered no evidence at .the trial to sustain them. Its recovery, at least of the defendant, the First and Citizens National Bank of Elizabeth City, N. C., is not dependent upon the truth of these allegations. It has recovered of said defendant upon a cause of action founded upon its contractual rights as a depositor of said defendant. It is immaterial whether the cause of action set out in the complaint be classified as a cause of action on a contract, or as a cause of action on a tort. Estates v. Bank, 171 N. C., 579, 88 S. E., 783. There are allegations in the complaint which construed liberally and with a view to substantial justice (C. S., 535), are sufficient to constitute a cause of action on contract. Other allegations may be regarded as surplusage. Exceptions to the refusal of the court to submit issues tendered by defendants are not sustained. Tbe issues submitted by the court to the jury arise upon the pleadings. They.are sufficient in form and substance for the submission to *532 the jury, for its determination, of the contentions of the parties with respect to the essential question in controversy, to wit: Whether the amount charged to the account of plaintiff, as a depositor of the drawee bank, was paid by said bank to the payees, or to a holder claiming title to the check under a valid endorsement by the payees ? It has been held by this Court that where issues submitted by the court to the jury are sufficient in form and substance to present all phases of the controversy between the parties, there is no ground for exception to the same. Bailey v. Hassell, 184 N. C., 450, 115 S. E., 166; Potato Co. v. Jeanette, 174 N. C., 236, 93 S. E., 795; Power Co. v. Power Co., 171 N. C., 248, 88 S. E., 349. A new trial will not ordinarily be granted by this Court where it appears that the issues submitted to the jury presented for their determination the essential questions in controversy, although other questions not determinative of liability are also included in the issues. The liability of the defendants in this case to the plaintiff and to each other is dependent solely upon the answer to the question involved in the first issue, to wit: Was the endorsement on the check, purporting to have been made by the payees, authorized or ratified by James Squire, one of the payees named in the check, to whose order alone the cheek was payable ? It is conceded in the answer of each of the defendants that if plaintiff is entitled to recover in this action of the defendant, the First and Citizens National Bank of Elizabeth City, N. C., the drawee bank, then each of the other defendants, by reason of its endorsement of the check, and of its guarantee of all prior endorsements thereon, is liable to the drawee bank, to its immediate endorsee, and to subsequent holders, under said endorsements, for such amount as plaintiff shall recover of the drawee bank, who paid out such amount upon the faith of said endorsements and guarantees. It does not appear that either of the defendants have any valid ground for its exception to the issues submitted to and answered by the jury. There was no error in the refusal of the court to dismiss the action, as upon nonsuit, at the close of the evidence, or in the instructions of the court to the jury. Neither of defendants offered evidence in support of the allegations of its answer. Each relied upon its contention that the burden was on the plaintiff to prove that the endorsement on the check of the name of James Squire, one of the payees, by E. A. Matthews, atty., was neither authorized nor ratified by the said James Squire. This contention cannot be sustained; upon the admissions in the pleadings and the facts shown by the evidence offered by plaintiff, the burden was on the defendants to offer evidence to show that the endorsement was either authorized by James Squire, or ratified by him, as alleged in their answers. Bell v. Bank, 196 N. C., 233, 145 S. E., 241. *533 It is a well settled principle that the relationship between a depositor and bis bank, with respect to bis general deposit, is that of a creditor and debtor. It has been so held by this Court. Graham v. Warehouse, 189 N. C., 533, 127 S. E., 540; Reid v. Bank, 159 N. C., 99, 74 S. E., 746; Boyden v. Bank, 65 N. C., 13. Where money bas been deposited in a bank, on general deposit, the bank impliedly undertakes to pay out said money only to the depositor himself, or to such person as be may direct payment to be made. Goodloe v. Bank, 183 N. C., 315, 111 S. E., 516; McKaughan v. Bank, 182 N. C., 543, 109 S. E., 355. Tbe deposit, in the absence of a special agreement to the contrary, creates a debt; this debt can be discharged only by a payment or by payments made to the creditor, or to bis order. Tbe burden is on the bank as debtor, to show payment to the depositor as creditor or to a person or persons to whom the depositor bas authorized payment to be made. Harmon v. Taylor, 98 N. C., 341, 4 S. E., 510. Where it is admitted or established by evidence that at a certain date, a depositor bad on deposit with bis bank, to bis credit and subject to bis check, a sum of money and the bank contends that it has been discharged of liability by reason of such deposit, either in whole or in part, by the subsequent payment of a check drawn by said depositor on said bank, the burden is on the bank to show that the amount of the check was paid to the payee named in the check, or if the check is payable to bearer, that said amount was paid to a bolder in possession of the check, or if the check is payable to the order of the payee, that said amount was paid to a bolder claiming title to the check under a valid endorsement of the check by the payee. In the absence of evidence showing such payment, the bank remains liable to the depositor, notwithstanding payment of the amount of the check to a stranger and notwithstanding the check bas been marked “paid” by the bank, and charged on its books to the account of the drawer. Tbis principle is recognized in Bell v. Bank, 196 N. C., 233, 145 S. E., 241. In that case, however, it was beld that the drawer was not entitled to recover of the drawee bank, for the reason that although the amount of the check payable to the order of the payee was paid to a bolder without the endorsement of the payee, said amount bad been paid subsequently to the payee by such bolder, as the drawer of the check intended. Tbe plaintiff bad therefore suffered no loss, for the amount of the check bad been applied as a payment on her indebtedness to the payee. In Dawson v. Bank, 196 N. C., 134, 144 S. E., 833, the payees and not the drawers were plaintiffs. It was beld that upon the facts which the evidence tended to show in that case the plaintiffs were entitled to recover of the drawee bank, the amount of the check payable to their *534 order and paid by tbe drawee bank to a bolder without their endorsement. There the drawers by special agreement had authorized the drawee bank to pay their checks, although drawn payable to order, as if they had been drawn payable to bearer. In the instant case the payees make no claim on the drawee bank for the amount of the check, which the drawee bank has paid to a holder without their valid endorsement. By virtue of the provisions of C. S., 3022, the endorsement of the check by one of the payees, in his own name, and in the name of the other payee, without the authority of the latter," was invalid and passed no title to the check to the endorsee or to subsequent holders. Payment of the check to a holder, without the valid endorsement of the payees, did not discharge the drawee bank from liability to the drawer for its deposit. Upon the verdict in this case, it was properly adjudged that plaintiff recover of the defendant, the First and Citizens National Bank of Elizabeth City, N: C., the amount of its check, charged to its account by said defendant. Said amount was not paid to the payees, or to their order, as plaintiff directed when it issued its check. Plaintiff is not entitled, however, to judgment against the other defendants. These defendants sustained no contractual relation to the plaintiff, by reason of which they are liable to plaintiff upon the verdict in this action. Endorsers of a check are liable only to their- immediate endorsees, to subsequent holders, and to the drawee bank. The judgment should be modified to the end that the drawee bank shall recover of each of the other defendants the amount which it shall be required to pay to plaintiff in satisfaction of its judgment; and to the end that each of the defendants may recover such amount as it shall be required to pay by reason of its endorsement of the check, and its guarantee of prior endorsements thereon, of its eodefendants, prior endorsers of said check. In order that the judgment may be modified in accordance with this opinion, the action is remanded to the Superior Court of Pasquotank County. No error.