Third National Bank v. Merchants' National Bank

O’BRIEN, J. Aside from the question raised by the affirmative defense as to plaintiff’s duty of exercising diligence in giving defendant information that the payment was irregular or unauthorized upon the undisputed facts and the settled principles of law, the plaintiff was entitled to a verdict. As correctly argued by respondent, the plaintiff was bound to pay any check drawn upon it by the [1072] Bank of ¡New Hanover. It is not disputed that it did pay the check, to the defendant, that the signature of the payee was a forgery, and that the defendant indorsed the check. The plaintiff was, therefore, entitled to recover the amount from the defendant, on the familiar principle that an indorser of commercial paper impliedly warrants the genuineness of the instrument and of every preceding indorsement. Canal Bank v. Bank of Albany, 1 Hill, 287; Turnbull v. Bowyer, 40 N. Y. 456; White v. Bank, 64 N. Y. 316, 320; Corn Exch. Bank v. Nassau Bank, 91 N. Y. 74. That the forgery was committed by a person having the same name as the genuine payee makes no difference. It is the signature of the genuine person that transfers the title. The mere fact that another person may have the same name gives him no power to make the transfer, and the signature of such person is just as much a forgery as if the names had been different. Graves v. American Exch. Bank, 17 N. Y. 205; Paris v. Peck, 10 Abb. Pr. (N. S.) 55; Pen. Code, § 522. Appellant insists, however, that this rule of law is varied by the fact (which it is claimed here appears) that the plaintiff was wanting in the duty which it owed to the defendant, of exercising diligence in giving notice after knowledge of the diversion of the check, and also in discovering it; and a quotation to support the proposition thus advanced is taken from an opinion of the presiding justice of this court, wherein he says: “The parties were bound to proceed diligently after discovering the fraud, but no loches can be imputed prior to its discovery.” Central Nat. Bank v. North River Bank, 44 Hun, 116. We have no fault to find with this statement of the law, nor with an equally well-settled principle invoked by the appellant, to be found in the opinion of Rapallo, J., in National Bank of Commerce v. National Mech. Banking Ass’n, 55 N. Y. 216, wherein he says: “If the defendant had shown that it has suffered loss in consequence of the mistake committed by the plaintiff,—as, for instance, in consequence of the recognition by the plaintiff of the check in question, etc.,—then clearly, to the extent of the loss thus sustained, the plaintiff should be responsible.” These cases are authority for the position that, though the plaintiff would otherwise be entitled to recover where it has paid a check to the defendant, which, by the latter, was presented to it through its correspondent, having thereon the signature of the payee forged, nevertheless, no recovery could be had if the conduct and acts of the plaintiff were such as to amount to an equitable estoppel. Such estoppel, it is claimed, exists in this case by reason of the plaintiff’s negligence. But we think that in this the appellant overlooks the essential element of an equitable estoppel, in failing toi produce the evidence from which (assuming that in some aspects negligence might be imputed to the plaintiff) the inference might be reasonably and fairly deduced that it has, by reason of such negligence, been .injured. It will be noticed, in examining the cases relied upon by appellant, that they all hold that money paid by mistake can be recovered, provided the one seeking to recover has not, by his careless or negli [1073] gent acts, injured or prejudiced the person from whom the recovery is sought. There is no claim that there was any negligence on the part of plaintiff in paying the check when presented, or that it was-wanting in any duty that it owed to the defendant up to the time when the latter paid the money to the wrong person. The insistence, however, is that, having received notice on ¡November 18th, which was four days after the check had been paid by plaintiff, and one day after the defendant had paid to the indorsee, this was negligence which should prevent a recovery by plaintiff. The difficulty with this position, however, is that, when the defendant paid the money over to the wrong person, the harm was done; and the only evidence of any injury caused by the alleged delay of plaintiff was-given by the defendant’s cashier, who said that, “if more seasonable notice had been given, the forger would have been arrested earlier,- and more favorable results might have arisen.” Estoppels, however, a.re never based upon conjectures, the law requiring that facts-must be presented showing substantial damages sustained by the delay. As said in White v. Bank, 64 N. Y. 316: “In the case at har it is the merest conjecture, with scarcely a possibility to support it, that the defendant, or those from whom it received the bill, could, at any time after the transmission of the foreign bill of exchange-to Baltimore, have taken any effectual measures either for arresting the swindler or reclaiming the bill bought and paid for upon the credit of the bill. Estoppels cannot be based upon mere conjectures, even if a proper foundation is laid for them in other respects.” Although, as early as December 3d, the Bank of ¡New Hanover had notified the plaintiff that the check had not been received by the payee, and although plaintiff had then paid the check, that the-plaintiff did not know of the forgery is evidenced by the fact appearing that as late as December 18, 1891, it paid the duplicate check. It is certain, therefore, that it had no actual knowledge until the latter day, and the most that could be claimed from the notice that it received is that it was negligent in not having discovered the-forgery sooner. But this claim of negligence is-offset by the facts-appearing,—that the plaintiff was paying three or four thousand checks a day, which, between ¡November 13th and December 3d or December 18th, would make many thousand checks which it had' paid, and in the business connected with this mass of checks the-plaintiff could not well be held to have been guilty of negligence in-not having discovered the payment of the forged check at the time-the second check was presented. As the defendant, however, chose-to make the payment to a person who was not the payee, it alone is-responsible for the loss; and it cannot get rid of such liability by-showing that, after the loss had occurred, there was negligence pro the part of .the plaintiff in discovering the forgery, or, after it had discovered it, in giving notice to the defendant, unless in the latter contingency it was coupled with proof that the defendant was damaged by the failure to give notice within a reasonable time after discovery. For this proposition we refer to the two cases of National Bank of Commerce v. National Mech. Bank. Ass’n, 55 N. Y. 211, and Corn Exch. Bank v. Nassau Bank, 91 N. Y. 74. But, apart [1074] from this, the fact that we have already adverted to—that it does not appear that by such delay the defendant was damaged—is a complete answer to the defense thus sought to be interposed. As correctly said in Bank of Commerce v. Union Bank, 3 N. Y. 236: “The greater negligence in a case of this kind is chargeable on the party who received the bill from the perpetrator of the forgery. So far as respects the genuineness of the bill, each indorsee receives it on the credit of the previous indorsers; and it was the interest and the duty, in the present case, of the Bank of Charleston, [for which, in the case at bar, substitute the defendant,] to satisfy itself that the bill was genuine, or that its immediate indorser was able to respond in case the bill should prove to be spurious.” This is followed by what we regard as a very clear expression of the law: “The party who fraudulently passed the bill cannot avoid his liability to refund on the pretext of delay in detecting the forgery or in giving notice of it; and, if reasonable diligence is exercised in giving notice after the forgery comes to light, it is all that any of the parties can require.” But a claim of negligence based upon a failure to discover is very different from one based upon a failure, after discovery, to give notice. A failure to discover, though resulting in loss to another, who might, if sooner apprised, have apprehended the forger and recovered the money, gives no right of action; and for obvious reasons, one of which alone need be mentioned. There is no duty imposed on one who receives a forged check from another to unearth the crime. He receives it presuming, as he has a right to do, that all the signatures and indorsements are genuine,, which is impliedly warranted by the person from whom it is received. This presumption, and the right to rely on this implied warranty, are only destroyed when, by inspection, the forgery could be detected because apparent on the face of the check or bill, or where, from the surrounding circumstances, the suspicions of the person receiving the note, check, or bill should be aroused, and his scrutiny challenged. Hot so after discovery, for then the duty is incumbent on the one detecting the imposition to act promptly in giving notice; and, if he fails therein, to the injury and damage of the one entitled to notice, he will be prevented from recovering the damage or injury shown to have been actually incurred. Upon the facts here, negligence is not imputable to plaintiff for failure to sooner discover the forgery, and, as it was not shown that any injury or damage resulted from the delay in giving notice after discovery, plaintiff was not precluded from recovering the whole amount paid to defendant by mistake. Upon an examination, therefore, of the entire record, we think there was no disputed question of fact, nor any fact from which different inferences could reasonably be deduced, which would in any way affect the liability incurred by the defendant in paying to the wrong person, upon a forged indorsement, moneys which, by mistake, it had received from the plaintiff, and which the latter was entitled to recover from it. The judgment, therefore, should be affirmed, with costs. All concur.