Levy v. Bank of America

Howéll, J. Tbe plaintiffs, wbo are brokers and dealers in State warrants, etc., purchased of a man unknown to them a State warrant for nine hundred dollars, drawn to the order of and indorsed by Charles II. Merritt, the secretary of the State Senate, for which they gave their check for seven hundred and twenty dollars on the bank of America,, (where they kept a deposit account) drawn first to bearer, but changed by them before delivery to the order of said Merritt. This change was made after the stranger was asked if he was Charles II. Merritt and replied affirmatively, the object being, as stated, to make Mm identify himself to the bank. This check, bearing the name of Charles II. Merritt on its back, was taken by Isidore Newman, a broker, keeping an account also with the defendant, in exchange for coin and currency and by him deposited with his indorsement on it with the bank of America, its amount being credited to him and charged to the plaintiffs. The State warrant passed through several hands and was finally, some four or five months after the above transaction, presented by one of the tax collectors to the Auditor, when it was found to have been changed from the sum of one hundred dollars to nine hundred dollars. Erom each successive holder it reverted to the plaintiffs, who found then that [221] ■the indorsement of Charles EL Merritt was forged upon their cheek. They now sue the bank for having paid the check on this forged indorsement. The bank called Newman in warranty. The district court gave judgment in favor of the bank on the authority of the case of Smith v. Mechanics’ and Traders’ Bank, 6 An. 610; and the plaintiffs appeal. They call in question the correctness of the doctrine of that ease, but contend that it differs entirely from the one at bar, upon the point considered by the Supreme Court as of the first importance, to wit: That Smith in drawing his check to the order of the supposed acceptors of the bill purchased by him and not to the order of the holder from whom he purchased, was deviating not only from the usual course of business, but from his own long established and regular custom; while in this case the plaintiffs draw their check according to the ordinary usual course of huiness, to the order of the payee of tho warrant purchased, whose genuine indorsement was on it at the time. This difference does not seem to us to' be such as to greatly benefit the plaintiffs. In each case the instrument purchased was a forgery at the time of the purchase, and the purchasers issued their checks in payment thereof to unknown persons, hut in the name of tho payees alike of the forged instruments, with the acknowledged purpose of throwing upon the bank the responsibility of paying to the right party. In each case the signature to the check was genuine and the checks were given to tho guilty parties or their accomplices, who havo easily ■and successfully deceived tho drawers of the chocks, who it seems had some suspicions as to tho identity of the parties with whom they were dealing; as said in the Smith case, the first fault was committed hy the plaintiffs in taking the forged or false instrument, and placing their check in the hands of a party who had every interest to use it as an implement of fraud. The plaintiffs can not successfully complain that the bank failed to i>rotect them from the devices of a person who had, with so little effort, deceived and defrauded them. If the warrant purchased by tbem bad been genuino, we presume tliey would not have complained of tlie payment of their check hy the bank to any other party than Merritt, in whose favor it was drawn hy them. It seems to us they are endeavoring to make the hank repair a loss which they brought on themselves by their own carelessness. There is a feature in this case which makes it a stronger one in favor ■ of tho hank than the Smith case : It is that the bank in this instance paid on the genuine indorsement of tho party presenting it for payment, tho indorsement of Newman. We are aware of no law nor custom, which makes banks responsible primarily for the genuineness of every indorsement which may appear on checks drawn on them. Wo apprehend that they are not required to suspend payment until they are ■furnished with direct proof, that each indorsement preceding that of [222] the party presenting- or depositing- it, is genuine. They must know the party to whom they pay and the signature of the drawer. The authorities cited by plaintiffs come under the general rule, that banks pay checks to order at their own risk, when their customers, in drawing the chocks, have done nothing on their part to create or increase that i-isk, as in this case. Judgment affirmed.