Louisiana National Bank of New Orleans v. Citizens' Bank

Ludemnu, C. .T. This suit, is brought by the Louisiana National Hank against the Citizens’ Ha.uk to recover the amount oí a eheek drawn by the Hank of Mobile, purporting to he for twenty-seven hundred dollars, but which luid been fraudulently raised from a smaller amount, and paid, in ignorance of the forgery, by the, Louisiana. National Hank, on which the cheek was drawn. The answer of the Citizens’ Hank is tlm general issue; it avers the eheek was deposited in the Citizens’ Hank by anil for account of the New Orleans .Saving's Institution, which instil Litton is ealied in warranty. The answer of the Savings Insiitutton is the general issue', and the special defense-that the Savings fiist-it-ntton took tiie eheek oil deposit, and paid out on account of it, upon the faith of tile certification that it “was good” put, upon the chock by 1 lie Louisiana National Hank. There is no dispute about the facts. The bill of exchange or check was drawn by tile Hank of Mobile, but the amount thereof had been raised from twenty-seven dollars to twenty-seven hundred dollars before it was presented to the Louisiana National Hank of New Orleans for eor-tilieation, and the New Orleans Savings Institution and the Citizens’ Hank received and paid their money for it. after the Louisiana National Hank hud eertiiied that it was “good.” Who must bear the Loss? We do not consider it important to determine whether this be a eheek or a bill of exchange. In the. ease of City Bank vs. Girard Hank this court said: “Wo are unable, to discover any difference between the obligation, to pay a check or a bill of exchange. Both contain a request from the drawer to the drawee to pay a sum of [190] money -to the person in whose favor the cheek or bill is drawn. A check drawn in New Orleans on London would, in our opinion, be. a foreign bill.” 10 La. 567. Mr. Parsons says: “ The check is always considered in England as a kind’ of inland bill ot‘ exchange, and this language is frequently adopted by American writers. They are much used here in drawing from one State' upon houses of deposit hi another, and small sunis of money are frequently and very conveniently sent in this way ; and it has even been suggested that these checks are foreign bills, and as such subject to protest and damages.” 2 vol. Notes and Bills. The obligation of the Louisiana National Bank to pay was the same whether the instrument be called a check or a bill. What was the effect of the acceptance or certification of the Louisiana National Bank? Clearly, it created an engagement of the bank to pay the cheek, and the bank became primarily liable to any innocent holder thereof for the debt which it had certified was “ good.” Mr. Parsons says : “ It is quite common in this country to present a check, not for payment, but to bo marked or certified as good * * * and then it circulates or is transmitted as cash. Checks arc often certified as good in England as well as here, and are there used and deposited as bills of the certifying bank. This marking or certifying is called in some cases ‘acceptance,’ and is said to have the same ('fleet as acceptance.” Parsons’ Notes and Bills, vol. 11, p. 74. The counsel for plaintiff says the general rule is, that, he, who pays in error is entitled to recover back the money so paid, and ho admits the exception to this rule in favor of commercial paper, when the drawee has paid — but he says that the exception applies only when the siyna-ture of the. drawer is forged, as the drawee was bound to know the signature of his correspondent, and whether he had funds, and that he guaranteed nothing else. It seems to us that tested by this rule the plaintiff can not recover. We have already said that, by certifying the check “ good,” the bank bound itself primarily to bona fide subsequent holders — according to the agreement of the plaintiff, its act in certifying only estopped the bank from denying the signature of the drawer and the a,mount certified. That is all the plaintiff seeks to make the defendant responsible for. It is the signature, and the amount of the check which give it value. It is of no consequence by whom the, body of the instrument was' written. It often happens that a check is written by a clerk or third person and signed by the drawer. One of two innocent persons musí, suffer in this case; it would seem but just that he whose act has caused the loss should bear it. Price vs. Neal, 6 Burrows, p. 1357; Bass et al. vs. Clive, 4 Maulé & Selwyn 15; Smith vs. Mercer, 6 Taunton 81. By certifying the check the bank bound itself to pay the amount [191] which it. tía-id was good, and upon this obligation alone the defendant parted with its money. The Louisiana National Bank, by its cashier, wrote across the face of the check “good, Eug. F. (larda.” And with this certification, the cheek, as it was when certified, was acquired by the defendant in duo course of its business; and the plaintiff paid it. IVe can not perceive how the plaintiff can contend with any semblance of right that the defendant was negligent in not inquiring from the Bank of Mobile il’ the chock was genuiue. If this inquiry had to be made by any one, it seems that it should have boon made by the certifying- bank before it gave currency to it and lulled suspicion and stopped inquiry by the responsibility of its certification that it was good. In the cast'- of the Merchants’ Bank vs. State Bank, the Supreme Court said: “ By the law merchant of this country the certificate of the bank that a check is good is equivalent to acceptance. It implies that thé chock is drawn upon sufficient funds- in the hands of the drawee, that they have' been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an undertaking that the check is good then and shall continue good, and this agreement is as binding on the bank as its notes of circulation, a certificate of deposit payable to ¿lie order of the depositor, or any other obligation it cían assume. The object of certifying a check, as regards both parties, is to enable the holder to use it as money. The transferee takes it with the same readiness and sense of security that ho would take the notes of the bank. It is available also to him for the purposes of money. Thus, it continues to perform its important functions, until in the course' of business it goes back to the bank for redemption and is extinguished by payment. It can not be doubted that the certifying bank intended these' consequences, and it is liable accordingly. To hold otherwise, would render these important securities only a snare and delusion.” 10 Wallace, 647. Sec, also, United States Bank vs. Bank of Georgia, 10 Wheat. 333. The plaintiff relies upon the cases of McCall vs. Corning, 3 An. 409, and Espy vs. Bank of Cincinnati, 18 Wall. 604, as conclusively settling the rigid to recover. Neither of these cases was like the one under consideration. In the cíase of McCall vs. Corning et al. a forged draft had been sold to Britton & Go., who transferred it to Corning et al. before, acceptance. They had parted with their money, not on the credit of the drawee’s acceptance, but on the faith they had in the drawer and the payee and indorsor. In the case of Espy there was no written certification on the check. The cashier of the bank had verbally told the dlerk of Espy, Heidelbacli & Co., the payee, that “it is all right; send it through the Clearing [192] House.” In this eoimectioji tito court used the following language: “It is also to be considered that the hank was not asked to certify it in the usual way by indorsing it good, and that the party who asked information was tlie one wiio.se name was in tin; check as payee. We do not propose to decide hero what would have boon the legal effect in the present casi' if the bank officer had, under precisely those circumstances, boon requested to indorse the chock as good, and had done so, affixing his name or his initials in tlie ordinary way.” IS Wallace, pp. (ill), (120. This extract is sufficient to show that the question involved in this ease was" not decided in Espy vs. Bank of Cincinnati. The plaintiff also relies upon the case of the Marine National Bank vs. the National City Bank, recently decided hy the Court of Appeals JVn New York. That ease differs from the present ea.se in this, the party who had the chock certified, and to whom, subsequently, payment was made, was tin1 same whose name was in the check a,s payee; in the present ease' the Citizens’ Bank was not a party to the check. See, also, tlie eases of Farmers’ Bank vs. Butchers’ Bank, 16 N. Y. 125; First National Bank vs. Leach, 52 N. Y. 350; Cooke vs. State National Bank, 52 N. Y. 115. It is therefore ordered and adjudged that the judgment of the lower court bo reversed, and that there, he judgment in favor of the defendant, rejecting the plaintiff's demand with costs. -+ Rehearing refused. Mr. .Tnstieo Wyly dissents, and reserves the rigid: to Jile his reasons.