I respectfully contend that the defendant is in no position to assert that it received no notice of the forgeries until this suit was filed. It did not set up in its affidavit of merits that lack of notice would be a defense, and the abstract of record, on page 73, reveals why this defense was not asserted in the trial court. Frank Mayer, house attorney and assistant trust officer for the Kaspar American State Bank, had a conversation about the checks involved in this case in the latter part of 1928, and this is reasonably close to May 1, 1928, the date of the last check on which an endorsement was forged. The proof indicates that defendant was promptly notified and never thought of asserting this defense until it reached the Appellate Court. The majority opinion reaches the conclusion that proof of notice was a part of plaintiff's case, since the giving of notice was alleged in some of the counts of its declaration, and so it did not matter whether lack of notice was set up in defendant's affidavit of merits. In United States v. National Bank of Republic, 141 Fed. 208, it is held that a declaration which fails to allege the giving of such notice is not demurrable. In this case the common counts, numbered 1 and 2 in the amended declaration, and counts 7, 8 and 9, did not allege *Page 41 notice. Counts 3, 4, 5 and 6 alleged the giving of notice. The first named counts would support the verdict and judgment, since the surplus allegations of the other counts need not be proved.Clay Fire and Marine Ins. Co. v. Wusterhausen, 75 Ill. 285.
But even if the question of notice were properly presented, I believe the majority opinion is wrong. The case of First Nat.Bank v. Northwestern Nat. Bank, 152 Ill. 296, stated by the majority to be the only Illinois decision which has considered the question of the effect of failure of the drawee to give prompt notice to a cashing bank is not in point. The language quoted is obiter, because there was no question of negligence in the case. Independent Oil Men's Ass'n v. Ft. Dearborn Nat. Bank,311 Ill. 278, is not distinguishable on principle. We there held that the payee of a check is under no duty to notify the cashing bank of an endorsement forged by the payee's secretary. If the object of requiring notice to the cashing bank is to enable it to apprehend the forger and to hold prior endorsers, it does not matter who gives the notice, the payee or the drawee. If the payee is under no duty to give notice, but the drawee is, all that the drawee need do is to persuade the payee to bring the suit, and the rule announced by the majority opinion would be circumvented. The opinion in Independent Oil Men's Ass'n v. Ft.Dearborn Nat. Bank, supra, conforms with commercial practices, and places the loss on the one most responsible for it. The cashing bank is nearer to the forgery than the drawee, and can protect itself by taking only responsible endorsers. The opinion in that case recognizes that the drawee has been deprived of its money by tortious conduct, and trover would lie to recover the money so obtained, but the tort may be waived and a contract action may be brought. In Wizard Oil Co. v. United States ExpressCo. 265 Ill. 156, 164, we held that the negligence of the payee in discovering the forgery of its endorsements was no bar to recovery against the express company for *Page 42 money paid by it on the endorsements. On page 164, we said: "There is a rule which obtains between banks and depositors quite similar to that which is applied wherever accounts are rendered, and that rule is that depositors must exercise reasonable care in examining returned statements and canceled checks and give prompt notice of irregularities discovered by such care. That rule is adopted so that the bank may not only be able to proceed promptly against guilty parties, but may be put on its guard and protect itself from similar fraud in the future. It cannot be applied in this case where accounts were never returned to the plaintiff by the defendant, and neither a statement of account nor vouchers were ever returned. That the plaintiff was grossly negligent in the management of its affairs can scarcely be doubted, but under the law as declared by all the authorities that fact was not a defense."
The majority opinion distinguishes the Wizard Oil Co. case by saying that there is no duty to discover the forgery, but that once it is discovered prompt notice must be given. If the reason for requiring prompt notice is to enable the cashing bank to apprehend the forger, it would seem that diligence should be required at all times. While Crahe v. Mercantile Trust andSavings Bank, 295 Ill. 375, is not strictly in point, as stated by the majority opinion, it is nevertheless harmonious withIndependent Oil Men's Ass'n v. Ft. Dearborn Nat. Bank, supra. It does not permit a drawee to interpose the payee's negligence in allowing a check to be put into circulation with a forged endorsement on it as a defense in a suit by the payee to recover money paid on the forged endorsements. Both of these latter cases adhere to the principle that one acting on an endorsement must ascertain its genuineness at his peril. The payee, whose endorsement has been forged, may sue the cashing bank, the drawee, or any intervening party through whose hands the check has passed. Negligence is no defense to such a suit. It should follow, logically, that if the payee *Page 43 has been paid and the drawer has been reimbursed, the drawee may recover its losses from those through whose hands the check passed until it was presented to it for payment while bearing a forged endorsement. Thus, in theory, no one would lose money, except in the case of an insolvent forger, and then the loss would be placed on the one nearest to him, who could have avoided paying on the forged endorsement by the exercise of prudence. Negligence should be a defense only when the drawer sues the drawee. I find further support for my views in Brannon's Neg. Inst. Law, (Beutel's ed. 1932,) pp. 288, 289.