McKinnon v. Boardman

COXE, Circuit Judge (after stating the facts as above). The allegations of the complaint were found to be facts in the exact language as pleaded. But three witnesses were called — Morgan J. O’Brien,. Miles M. O’Brien and the plaintiff. Morgan J. O’Brien testified as follows: “I never gave O. W. Morse a written power of attorney. I did not authorize him to indorse the check in my name. I do not know that indorsement nor do I know the time it was made. It was done without my knowledge and consent.” Morse was not called as a witness, and the above testimony stands-wholly uncontradicted. It is plain, therefore, that the indorsements by Morse were unauthorized and that the check would not have been paid but for the guaranty of the indorsements by the National Bank of North America. The note presented for discount was signed by Morgan J. O’Brien' payable to his own order and was indorsed by him, the check of the Mercantile National Bank was made out to his order and the money would, presumably, have been paid to him but for the fact that Morse indorsed O’Brien’s name “per C. W. Morse” and also indorsed his own name and procured both to be guaranteed by the National Bank of North America. Miles M. O’Brien, vice president of the Mercantile Bank, testified: “X made out the check to Morgan J. O’Brien. I did that because the note-was his. I wanted him to get the money.” Whether a check payable to Morse would, upon request, have been made in exchange for the check as made is, of course, problematical. The facts do not warrant the conclusion that compliance with such a request could have been compelled. It is enough, however, that no such request was made. The note was discounted at the request of Morse, but there is no finding that the proceeds of the discount were solely for his benefit. The inference from the facts as they occurred at the bank would seem to point to a different conclusion. But, however this may be, there can'be no doubt that Morse'sold the note without authority, received' a check which he could not legally cash and was enabled to procure the money by an indorsement which he was not authorized to make and by procuring a guaranty of the indorsements by the Bank of North. America. In other words, the bank’s guaranty procured the money. Those who have relied upon the bank’s assurance that these indorse-ments were authorized and have lost thereby, are entitled to redress. The Circuit Court found: “That said note discounted by tbe Mercantile National Bank of tbe City of New York at tbe request of said Morse, was delivered by said O’Brien to said Morse under an agreement between them that said Morse should retain tbe same in his possession, and renew the same, at the maturity thereof, which said agreement was in full force and effect between said O’Brien and said Morse on the Gth day of May, 1907, when said note was discounted by the Mercantile National Bank of the City of New York at the request of said Morse.” It is true that on June 17, 1907, six weeks after the check was paid, an agreement was made between Morse and O’Brien and his [923] partners changing materially the original understanding between Morse and O’Brien. As Morse had already discounted the note in question he quite naturally refused to have inserted a clause providing that he was to retain the notes in his possession. But even if the elimination of this clause might be considered as permitting future discounts it could have no retroactive effect and change the status of the transaction of May 6th, which was already established. In no sense can it be considered a ratification of Morse’s act for the reason, among others, that O’Brien did not know of the occurrences of May 6th until after October 22d when the note matured. It must be remembered that this is an action at law based upon the guaranty by the Bank of North America of unauthorized indorsements on the cashier’s check. The controversy must be determined upon the facts as they existed at the time these indorsements were made, uninfluenced by subsequent occurrences arising under changed conditions. As pointed out by the trial judge these matters may be available in an equity action for an accounting but cannot be considered here. The acts of Morse in selling the note and in indorsing O’Brien’s name upon the check were wholly unauthorized. The Mercantile Bank was induced to accept them as genuine because of,the guaranty of the Bank of North America and we agree with the trial judge in thinking that these facts give to the plaintiff, who succeeds to the rights of the Mercantile Bank, a good cause of action against the Bank of North America which was paid the money because of its guaranty. The judgment is affirmed.