The complaint alleges that on November 23rd, 1903, one Antonio Cona was a depositor in defendant bank; that on said day a person representing himself as Antonio Cone presented to the defendant the deposit book of said Cona and in payment of said deposit the defendant delivered *Page 224 to the said person so presenting the deposit book a check for $610.50, drawn by its comptroller on the Nassau National Bank to the order of John Ray, its teller, and indorsed by the teller to the order of Antonio Cona; that thereafter, upon identification of the said person as Cona, the plaintiff cashed said check and deposited it with the Oriental Bank; that the check was presented by the Oriental Bank to the Nassau Bank, by which it was paid; that subsequently an action was brought by the Nassau Bank against the Oriental Bank to recover the amount of the check on the ground that the indorsement of said Cona was a forgery, and the Oriental Bank was compelled to repay the Nassau Bank the amount of the check; that thereafter, in May, 1904, the Oriental Bank brought an action against the plaintiff to recover the amount of the check on the same ground — that the indorsement of Cona was a forgery; that the plaintiff notified the defendant of the pendency of the action, and that in case it was determined adversely to him he would look to the defendant to make good the loss sustained by him; that the defendant refused and neglected to intervene and contest the claim of the Oriental Bank; that the trial of the action resulted in a judgment in favor of the Oriental Bank, which was subsequently affirmed by the Appellate Division and by this court, as the result of which the plaintiff was compelled to pay the amount of the check as well as the costs of the litigation. It is then alleged that by reason of the foregoing facts and the negligence and want of care of the defendant, the plaintiff was damaged in the sum of $1,500; that Cona was irresponsible; that the plaintiff offered to return said check to the defendant and demanded the payment of the amount thereof and the costs of the unsuccessful litigation, which the defendant refused to pay. The answer averred that the indorsement of Cona was in fact forged; that the plaintiff had the check certified by the Nassau Bank, and that he negligently failed to properly identify the payee.
From the evidence taken at the trial it appeared that one Antonio Cona was a depositor in the defendant bank; that *Page 225 at the time of drawing the check in suit, a young man presented himself to the defendant bank with the deposit book of Antonio Cona. He was unknown to the officers of the bank, and they referred to the book in which savings banks enter statements and information given by the depositor which may tend to identify him when he calls to draw upon the deposit. He answered the questions satisfactorily, but his age seemed to be much less than that given by the depositor. The explanation was given that the depositor was his uncle, but the deposit was his; that his uncle had given the right name, but had mistakenly given his own description; that the uncle had gone to Italy and could not be found. The defendant not being satisfied with the identification, finally refused to give him the money, but to settle the matter agreed to give him a check to the order of Antonio Cona, the name of the depositor. The person so representing himself was Alphonse Cona, though commonly called Tony Cona. Being identified as such, he succeeded in getting plaintiff to cash the check. The true depositor subsequently appeared at the defendant bank and from him it was learned that his bank book had been stolen. Alphonse Cona was subsequently criminally prosecuted for forgery, but the record does not show what was the result of that prosecution. Upon these facts the trial court dismissed the complaint. The judgment entered thereon was reversed by the Appellate Division, which granted a new trial. From that order an appeal was taken to this court.
I do not see upon what theory the present action can be sustained. The learned justice who wrote for the Appellate Division has said: "It is certain that the defendant drew its check and delivered it to the person, claiming to be the payee, or technically in this case the indorsee, and that it knew that he would try to get the money on the check and would succeed, if identified to the drawee or to third parties as Antonio Cona. Either the person presenting the pass book was the depositor or he was trying to perpetrate a fraud. In the latter case the defendant surely did not expect him to *Page 226 seek out the real depositor and deliver the check to him. It seems to me that the defendant must take one of two positions; either it intended to make the check payable to the person to whom it delivered it, or it knowingly put in his hand an instrument to defraud innocent third parties, and it will not be heard in a court of justice to assert the latter." I am not prepared to admit the proposition that when a bank or individual, not being satisfied of the rights or identity of the party claiming payment from it or him, declines to pay the party in money, but gives a check to the order of the known creditor, it or he is thereby necessarily guilty of negligence or fraud. It is the general rule of law in this country, and such is the common law, that the drawee of a bill or check or persons purchasing it "take the paper relying solely on the reputed responsibility of their transferers, and the other parties to it, and its apparent genuineness, and they, therefore, deal in it at their peril." (Crawford v. West Side Bank, 100 N.Y. 50.) In Graves v.Am. Exchange Bank (17 N.Y. 205) it was held that the drawee of a bill of exchange is bound to ascertain that the person to whom he makes payment is the genuine payee or is authorized by him to receive it, and that it is no defense against such payee that the drawee, in the regular course of business and with nothing to excite suspicion, paid the bill to a holder in good faith and for value under the indorsement of a person bearing the same name as the payee, but not that person. It is on the faith of this rule that business in this country is conducted. Corporations, some of them numbering their stockholders by thousands, and usually ignorant of their identity and signatures, pay their dividends by checks to the orders of the various stockholders, transmitted by mail, relying on their right to reclamation from the banks in case the checks have been indorsed or collected by persons not entitled thereto. So, also, a person will send by post to the most distant part of the country his check to the order of another person to whom he wishes to pay or transfer money, confident in the knowledge that the abstraction of the check can entail no loss on *Page 227 him. On the continent of Europe a different rule prevails, and payment by the drawee to a party presenting the same, of a bill drawn to order, is valid, even though the indorsement is forged, provided the drawee acts in good faith and without negligence. In England the common-law rule prevailed as to bills (but not as to checks) until the Bills of Exchange Act of 1882, which adopted the continental rule as to sight bills, but not as to time bills, though a limited protection against forgery of the name of the payee may be had by "crossing." Such a rule would render the present business methods of this country impossible. Although at times banks have complained of the harshness of our rule, and in some instances while acting in good faith have been subjected to severe loss (Shipman v. Bank of the State of N.Y., 126 N.Y. 318), as a result of this rule banks are used by all classes of our people for the deposit of funds and payment is made by check to an extent unknown elsewhere. Of course a party entitled to the receipt of money may insist upon its payment in cash and not by check.
Still, there are cases in which the conduct of the drawer of a check or bill, or the maker or indorser of a negotiable instrument, has been such as to impose a liability upon him beyond his intent, as where, having signed an instrument in blank, it is filled in for an unauthorized amount. So also he may be estopped from denying the right of the particular payee to the ownership of the instrument. Also cases have arisen presenting nice questions as to what person was to be considered the payee of a bill or check. (First Nat. Bank v. Am. Exchange Nat.Bank, 170 N.Y. 88; Land Title Trust Co. v. NorthwesternNat. Bank, 196 Pa. St. 230; Sherman v. Corn Exchange Bank,91 App. Div. 84.) In all such cases, however, the action is on the bill itself, and the defendant is estopped as against a bonafide holder from asserting that the instrument was for a different amount than that which it purports to be, or that its holder was not entitled to it. Such cases are on contract, though the contract may rest on mere estoppel. I can find no case in which it was *Page 228 sought to maintain an action in tort on the ground of negligence.
On the original transaction, had the check not been paid and the plaintiff sued the defendant as drawer, two questions might have arisen: 1st, the identity of the payee — whether the person to whom the check was delivered was not to be considered the payee thereof; 2nd, whether the defendant was not estopped from denying that he was such payee. Assuming that the circumstances were such as to authorize the court as a matter of law, or a jury as a matter of fact, to determine either of those questions in favor of the plaintiff, the result of such determination would be that the plaintiff was the owner of the check and the indorsement by which he obtained title valid. The certification of the check and its payment by the drawee discharged the defendant as drawer. (Negotiable Instruments Law, § 324; First Nat. Bank of Jersey City v. Leach, 52 N.Y. 350.) I do not see how thereafter it could become liable. When the plaintiff was sued by the Oriental Bank, the claim on which he now seeks to impose liability on the defendant would, if established, have been a complete defense to that suit. If the man for whom he cashed the check was the real payee, or if this defendant was estopped from denying that he was such, there was no forgery of the check so far as the present plaintiff was concerned. On the contrary his title was complete and he was under no liability to refund. (Hortsman v. Henshaw, 11 How. [U.S.] 177.) But the difficulty is that, as alleged in the complaint, that issue has been decided against him. It is alleged that he called upon this defendant to defend the suit, but the defendant was under no obligation of that character. It discharged its obligation when it provided funds for the payment of the check and the check was paid. It may have been interested in establishing that the check was improperly charged to its account and thus relieving itself from the obligation to make a second payment to the true Antonio Cona, and it may be surmised that the litigation which terminated adversely to the plaintiff was instituted in its behalf. If this fact were proved *Page 229 the defendant, though not a party to the action by the Oriental Bank, would be concluded by the judgment rendered therein. (2 Black on Judgments, § 539.) But that judgment was against the plaintiff, not in his favor. It is very difficult to see how this defendant could be under any obligation to defend a suit the prosecution of which was in its interest. If, as stated by the learned court below, the defendant was estopped from denying that the man to whom it had delivered the check was the payee thereof, that should have been so decided in the suit of the Oriental Bank against the plaintiff.
The order of the Appellate Division should be reversed and the judgment of the Trial Term affirmed, with costs in all courts.