National City Bank of Chicago v. Third Nat. Bank of Louisville

BAKER, Circuit Judge (after stating the facts as above). • It was defendant’s duty under the law to pay plaintiff’s draft only to the payee, or to some one who by indorsement or otherwise had good title [140] or as to whom plaintiff was estopped to deny title. Plaintiff’s undisputed evidence made out its case. The question is whether defendant’s evidence tended t.o establish a defense. We have been unable to imagine any theory in addition to those advanced by defendant. 1. La Bree’s indorsement of the payee’s name was authorized, so defendant says, because La Bree was either sole owner of the fund with which the draft was bought, or joint owner with Powers as partner or tenant in common. La Bree’s arrangement with Powers gave Powers no interest in common with La Bree as partner or otherwise in the property or funds at hazard in the subscription book business. Powers was not to be a' sharer in the profits or losses of the business. The relation of Powers to La Bree was limited to that of lender to borrower. The $5,000 was a bonus for the loan of $15,000. It represented in no way an interest in the profits of the enterprise in which La Bree was supposed to be risking the borrowed money. Añd La Bree’s obligation to pay the $20,000 according to the tenor of his notes was not at all dependent upon the success or failure of the project. Though La Bree was sole owner of the fund with which the draft was bought, it does not follow that he had an unrestricted dominion. For instance, he was sole owner of the Dana, Estes & Co.’contract (supposing for the moment that it was valid), but he did not have unrestricted dominion, because he had given the right of collection to Powers. And likewise, with respect to the deposit with plaintiff, he had given the right of application to Powers. By force of the contract (as a matter of law) Powers had just as much right to limit the payment of that $7,000 (both in the check and in the draft) to BobbsMerrill Company as he had to make the collection from Dana, Estes & Co. So La Bree’s indorsement of the paj^ee’s name was a forgery, passing no title to the Southern National Bank, and conferring no right on defendant to charge the draft to plaintiff’s account.' 2. Too obviously to warrant discussion neither plaintiff nor Powers was guilty of any act or omission that misled or contributed to misleading the Southern National or defendant into taking the draft on a forged indorsement. The charge of subsequent negligence respecting the discovery of the forgery is unavailing. Plaintiff had the right to rely, in the absence of notice that its reliance was misplaced, upon the assumption that defendant would perform its legal duty. It was not for plaintiff to assume the contrary and to search through its canceled drafts for forged indorsements. Kearny v. Met. Trust Co., 110 App. Div. 236, 97 N. Y. Supp. 274; Id., 186 N. Y. 611, 79 N. E. 1108; German Savings Bank v. Citizens’ Nat. Bank, 101 Iowa, 530, 70 N. W. 769, 63 Am. St. Rep. 399; Harter v. Mechanics’ Nat. Bank, 63 N. J. Law, 578, 44 Atl. 715, 76 Am. St. Rep. 224; Critten v. Chemical Nat. Bank, 171 N. Y. 219, 63 N. E. 969, 57 L. R. A. 529. Owing no duty, plaintiff could not be guilty of negligence in that regard. And Powers was one step farther removed from the draft. Even if plaintiff and Powers owed defendant the duty to use diligence in discovering that defendant had paid the draft on a forged in [141] dorsement, the result in this case would be unaffected. There is no evidence tending to prove that, if the utmost diligence had been used, defendant (or the Southern National) could have done more than make a partial recoupment of the loss. Not by plea, nor by proffered instruction, nor in any way, did defendant tender the question of a partial defense and concede to plaintiff a partial recovery.' 3. Proof of the Louisville custom was irrelevant. Aside from the question of the power of a custom in one city to affect the law merchant, the offer did not go to the extent of exhibiting a custom that a failure to examine a title conferred a good title, and that a banker’s reliance upon his customer’s indorsement of a bad title exempted the banker from liability on his own indorsement. The judgment is affirmed.