is a corporation or, as in the Board of Education case, a municipality, and acts by agents. The argument that, if the fraudulent intent of one required cosignor is to determine the character of the instrument, the precaution of requiring the signatures of several officers so common in business loses some of its value, is, of course, perfectly sound, but the contrary view merely amounts to saying that the corporation has to take the risk of one or more of the cosignors being deceived or dominated by another of them in this respect -- a risk which it takes in most cases of fraudulent issuance of checks.
The conclusion is that the check in question was payable to bearer.
In what has been said, the plaintiff's position that this suit is upon the defendant's guarantee of all prior indorsements has not been overlooked. Whatever the effect of such guarantee in extending the liability assumed by an ordinary general indorsement, the plaintiff conceded, as he must, that his action fails if the Thomas indorsement was not a forgery.
It certainly was not a forgery within the meaning of Sec. 23 of the Negotiable Instruments Law. Of course, in popular language, it would not be incorrect to say that Reilly (or his agent) forged the name of J. L. Thomas to this check, but, as was pointed out in Snyder v. Corn Exchange National Bank, supra, whether indorsing the check as he did was or was not a forgery in the strict legal sense was not an important question.
It remains to notice the second defense presented, namely that, inasmuch as F.I.F. suffered no loss it could not recover the amount of the check from the drawee bank and hence the drawee bank can not recover from this defendant, the collecting bank. With the exception of Merchants' National Bank v. Federal State Bank, 206 Mich. 8, 172 N.W. 390, 391, all the cases cited by the defendant to sustain this proposition are cases in which the depositor, whose account had been charged by the drawee bank with the amount of the check and never reimbursed, brought suit against the drawee bank. Obviously, in such case the action was based upon the bank's implied contract not to pay out the deposit except to the person designated by the depositor or his genuine indorsee. If the proceeds of the check were simply used to liquidate a debt which the depositor owed, there was no loss, no damage, and consequently no cause of action.
I think that the Merchants' Bank case referred to (which is on all fours with the present case) was wrongly decided, and that the terse dissent of one of the judges in that case is correct. He said, "I am not able to see what [the depositor] has to do with the matter. True, it was [the depositor's] check, and has been charged by the plaintiff to its account, but how does the fact that [the depositor] got, indirectly, something of value change the situation?"
As has been noted, this is a suit by the drawee bank against the collecting bank. The drawee sues on the indorsement and not by way of subrogation to any right of its depositor. As a matter of fact, the weight of authority is to the effect that in such case the depositor, even though his account were charged with the amount of the check, would have no right of action against the recipient of the money. This is because of the nature of the action and is without regard to whether or not the check was a forgery or whether or not the depositor suffered loss. This is the law of Pennsylvania. In Land Title & Trust Co. v. Northwestern National Bank, 196 Pa. 230, 46 A. 420, 50 L.R.A. 75, 79 Am.St.Rep. 717, the Court said: "The case, as presented by the plaintiff's declaration, is that of the payment by the plaintiff of a check drawn on it by a depositor to the order of a third person, whose indorsement was forged; the payment having been made in reliance upon the subsequent indorsement of the defendant; the ground of liability being that the defendant, by its indorsement and presentation, warranted the genuineness of the indorsement of the payee. * * Between the bank and the trust company, as the drawer of the check, no relation, contractual or otherwise, existed. The drawer of a check cannot maintain an action against one who collects it on a forged indorsement from the bank on which it was drawn, although the bank paying the check may. The remedy of the drawer is against the bank which pays his check, and the bank's remedy is against the person to whom it paid. The liability of the party collecting the check arises from his implied warranty of the indorsement."
The Court's conclusions of law are:
1. The check which is the subject of this suit was payable to bearer.
2.Whether or not F.I.F. suffered any loss as a result of the entire transaction is immaterial.
3. The plaintiff's reimbursement of F.I.F. in the amount of the check previously charged against its account has no effect upon the rights or liabilities of any of the parties so far as this action is concerned.
4. The plaintiff is not entitled to recover in this action.
Judgment may be entered for the defendant.
Note. -- Throughout this opinion I have used the term plaintiff as a matter of convenience, and have made no distinction between the plaintiff and the use-plaintiff.
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