Andrews v. Northwestern National Bank

ELLIOTT, J. This action was brought by Andrews & Gage, the appellants, against the Northwestern National Bank to recover the sum of $926.72 — 201 — which the bank charged against their account because of the cashing of a check upon which the name of the payee was forged. The parties stipulated, and the court found, in substance: That Andrews & Gage were engaged in the grain and grain elevator business in the state of Minnesota, and during the time covered by the transaction in question operated an elevator for the purchase, handling, and storage of grain at Berlin, North Dakota. That during said time and until about October 27, 1905, one P. T. Bangdon was an employee and agent of Andrews- & Gage at Berlin in charge of their elevators there, and as such employee and agent engaged in purchasing, storing, and shipping wheat and other grain at Berlin. That Bangdon had power and authority from Andrews & Gage to purchase wheat and other grain from the farmers in the vicinity of Berlin, and to store it in the elevators and ship it to Andrews & Gage at Minneapolis and other markets, and pay for or make advances on the grain so purchased with money furnished by Andrews & Gage for that purpose, or by delivering to the vendor of such grain the checks of Andrews & Gage furnished to him by them for that purpose. But he had no authority to sign or indorse any check made by, or on behalf of, Andrews & Gage, nor to indorse any draft made by or upon them, nor to sign drafts on their behalf in the course of the business or otherwise. On or about September 23, 1905, Andrews & Gage made a certain check for $926.72 payable to Z. W. Thomas or order. This check was drawn upon the Northwestern National Bank at Minneapolis, and was mailed by Andrews & Gage to Bangdon at Berlin, North Dakota, with instructions to deliver it to Z. W. Thomas if it was then due and owing to him for grain theretofore received by Andrews & Gage from him. Bangdon received the check with the instructions, but, instead of delivering the check to Thomas, he, without the knowledge or consent of Andrews & Gage, on October 6, 1905, presented it to the State Bank at Berlin, North Dakota. Before such presentation’ Bangdon, without any authority, indorsed the name of Z. W. Thomas on the back of the check. At the request of Bangdon, the State Bank of Berlin then placed the amount of the check to the credit of an account then opened by Bangdon in that bank in the name of P. T. Bangdon & Co. The State Bank of Berlin took the check, and credited the — 202 — amount thereof to P. T. Bangdon under the name of P. T. Bangdon & Co. There was no firm or partnership or corporation of that name, and the name was assumed by Bangdon for the purpose of that account only. Thereafter, on October 17, 1905, Bangdon deposited the further sum of $380.25 in the account. No other deposits were made to the credit of that account. Thomas never received any of the proceeds of the check. The State Bank of Berlin after receiving the check indorsed the same, “Pay any bank or banker or order, prior indorsements guaranteed, State Bank of Berlin, Berlin, North Dakota, F. F. McGuire, Cashier,” and delivered it to the First National Bank of Crystal Bake, Minnesota, and received from the bank either in cash or credit the amount of the check. That bank delivered the check to the National Citizens’ Bank of Mankato with a similar indorsement, except the words, “Prior indorsements guaranteed,” and received from it the amount of the check either in cash or credit. The National Citizens’ Bank of Mankato delivered the check to the First National Bank of Minneapolis with a similar indorsement, and received from it the amount of the check in cash or credit. The First National Bank of Minneapolis presented the check for payment to the Minneapolis Clearing House on October 9, 1905, and the Northwestern National Bank received the check through the clearing house in the usual method, and paid to the First National Bank of Minneapolis the amount thereof either in cash or in credit, and charged the amount of the check upon its books to the account of Andrews & Gage. The State Bank of Berlin on October 6, 1905, received the check, supposing and believing that the indorsement thereon was a valid and proper one, and neither the First National Bank of Bake Crystal, the National Citizens’ Bank of Mankato, the First National Bank of Minneapolis, nor the respondent, the Northwestern National Bank, had any knowledge that the first indorsement on the check was not genuine, valid, and proper until on or about May 17, 1906. Each and all of these banks received, accepted, and paid the check in the ordinary and usual course of business, and without any knowledge that the indorsement of the name of Thomas was not genuine and properly authorized. The State Bank of Berlin learned that it was not the genuine indorsement of Thomas on or about October 27, 1905. The account opened — 203 — with the State Bank of Berlin by P. T. Bangdon in the name of P. T. Bangdon & Co. was not opened under the direction or with the knowledge of Andrews & Gage. On October 27, 1905, Andrews & Gage demanded of Bangdon certain moneys which they asserted he should account for. He thereupon informed them that it was in the bank to their credit, except about $79, which he then paid, and handed to them a bank pass book of the State Bank of Berlin in their name, showing that Andrews & Gage had to their credit in that bank the sum of $1,003.01. The fact was that, although not then known to Andrews & Gage, Bangdon had on the same day drawn a check for $1,003.01 on the P. T. Bangdon & Co. account, and had it credited to the account of Andrews & Gage in said bank and charged against the account of P. T. Bangdon & Co. When Andrews & Gage received this, bank book showing that they had a credit of $1,003.01 at the State Bank of Berlin, they were not aware that it was to any extent the proceeds of the Thomas check. On November 9 Bangdon withdrew the balance left to the account of P. T. Bangdon & Co. from the State Bank of Berlin. After receiving the bank book, Andrews & Gage made other deposits in the account so opened in their name by Bangdon, and prior to January 1, 1906, checked out of said account all the moneys so deposited by them and by Bangdon. The check of $1,003.01 was given by Bangdon to Andrews & Gage in settlement of a shortage known on October 27, 1905, and for no other purpose and upon no other consideration. Shortly prior to October 27, 1905, Andrews & Gage were informed by Thomas that he had not received the check in question, nor indorsed the same. At that time they had the check with all the indorsements thereon in their possession. Prior to the delivery of the bank pass book to Andrews & Gage, Bangdon stated to them that he was the agent of Thomas, and had authority to indorse the check. The sum of $1,003.01 owed by Bangdon to Andrews & Gage was in addition to, and exclusive of, any liability on his part to the firm for said check or the money received from it. Upon these facts„ the trial court found that Andrews & Gage were not entitled to recover the amount of the check from the Northwestern — 204 — National Bank, and the correctness of this conclusion is the only question involved upon this appeal. The facts present a rather unusual condition of affairs, hut we are satisfied that the court reached the proper conclusion. The appellants contend that as depositors they were creditors of the Northwestern National Bank to the extent of their balance therein, and entitled to disregard any charge made against their account which was not authorized by them or made by reason of their negligence or other misconduct. The correctness of this general proposition cannot be questioned, but nevertheless Andrews & Gage are not in a position to require the Northwestern National Bank to credit their account with the amount of this check. The appellants make an ingenious argument, but the result which they desire to bring about would be so unjust and inequitable as to suggest that a fallacy lurks somewhere in the process of reasoning. The appellants have not been injured by the fact that the Northwestern National Bank paid this check upon a forged indorsement, and their theory, if accepted, would merely result in substituting the bank for the defaulting employee as the creditor [debtor] of Andrews & Gage. The check for $926.72 came into Tangdon’s hands on October 6, 1905, and with it he opened an account with the State Bank of Berlin in the name of P. T. Tangdon & Co. Ten days later he deposited an additional sum of $380.25 in the account, making a total of $1,306.97. On October 27, 1905, he drew a check on the account of P. T. Tangdon & Co. for the sum of $1,003.01, and deposited it in another account in the same bank in the name of Andrews & Gage. The result of all this juggling was that the $926,72, the proceeds of the check with the forged indorsement, and an additional $76.29 from some other source, went into the new Andrews & Gage account. Tangdon was then short in his accounts with his employers, Andrews & Gage, and when on October 27, 1905, they made a demand on him for a settlement, he responded by turning over to them the account in the State Bank of Berlin which he had evidently created fc • that purpose. That is, Tangdon was short in his accounts, and had no money with which to pay. The check for $926.72 which was delivered to him by Andrews & Gage to be used in paying Thomas was in effect cashed by him. With the proceeds which still belonged to Andrews & — 205 — Gage or to the Northwestern National Bank, Langdon assumed to pay his debt to Andrews & Gage. It does not appear that at that time Thomas was entitled to the check, and it was sent to Langdon for delivery to Thomas upon certain conditions. If Langdon had forged the indorsement and himself presented the check to the Northwestern National Bank and secured the cash, carried it to the office of Andrews & Gage, and handed it to them in settlement of his shortage, the situation in legal effect would have been identically the same as at present. Andrews & Gage could have put the money in the bank. They would have had Thomas’ wheat, and still owed him for the same. The forged check would have been where it now is, Langdon would still have been short in his accounts, and the net result of the entire transaction would have been the liability of Langdon for prosecution for forgery. We cannot see that the fact that this business was transacted by the use of credits, instead of the handling of actual cash, makes any difference so far as the liability of the Northwestern National Bank is concerned. It paid the check upon a forged indorsement, and thereby became liable to its depositor for any damages thereby sustained by him. If the depositor lost nothing, he should recover nothing. If a forged check for $100 on B.’s account is paid to A., and A. immediately on being caught hands the money back to B., it would not be claimed that B. could sue the bank and recover the $100 which had been wrongfully charged to his account. Again, suppose A. in the employ of B. owes B. $100 which B. cannot collect. A. is given a check on the bank payable to D., with instructions to deliver it to D. Instead of doing so, he forges the payee’s name, draws the money from the bank, and with it pays his debt to B., and receives a receipt in full. Can B.’ collect $100 from the bank? If so, it would be quite easy for A. and B. to arrange for the bank to pay A.’s debt to B., leaving B.’s account unimpaired. Of course, A. might take some chances of criminal prosecution, but Langdon was willing to assume the chances in this instance in order to square his account with his employers. The result of the entire transaction is that the money started with Andrews & Gage, and, after passing around the circle, came back to them. The fact that credits, instead of cash were used, does not change the legal effect. Langdon’s debt to them is to that effect un — 206 — paid. There is nothing in this record which shows that the appellants were damaged; and the order of the trial court is therefore affirmed.