C.O. Fish was engaged in the farm loan business at Guthrie, and was a regular depositor of the National Bank of Commerce. It seems that Fish had an arrangement with one J.V. Graham, of Pauls Valley, Okla., whereby Graham would procure applications for farm loans and forward to Fish, and after approving the applications and receiving the notes, mortgages, and abstracts, with a draft of the borrower drawn in favor of Fish, Fish would negotiate the loans and deposit the draft for collection with the National Bank of Commerce, and thereafter forward to the borrower his individual check drawn on said Bank of Commerce.
Fish received from Graham applications, promissory notes, and mortgages purported to have been executed by three different husbands and wives respectively, which mortgages purported to bear the file marks of the register of deeds showing due recordation and purported to have been acknowledged by each respective husband and wife before said J.V. Graham as notary public, and at the same time received drafts drawn in favor of Fish on his Chicago correspondent by each borrower for the amount of his respective loan.
Upon receipt of these loans Fish sold them to his Chicago correspondent, indorsed the drafts, and deposited the proceeds to his credit in the National Bank of Commerce, and thereafter drew his individual checks on said bank in favor of each borrower for the amount of his loan, and forwarded the same by mail to the said Graham at Pauls Valley to be delivered to the respective borrowers who resided in that vicinity. When Graham received the checks, instead of delivering them to the borrowers, he forged the indorsement of the respective payees thereon, and then wrote his indorsement thereunder, and then presented two of these checks to the Pauls Valley National Bank of Pauls Valley, and the other to the First National Bank of Wynnewood, and received the money thereon. Upon cashing these checks these banks indorsed them and guaranteed all prior indorsements, and in due course they were returned to the National Bank of Commerce at Guthrie through Kansas City, each bank in turn placing its indorsement upon them. The National Bank of Commerce paid the checks and charged the same to the account of Fish, and in due time returned same to him as paid checks. Something like two years after the loans were made and the checks cashed it was discovered that the entire transaction was a forgery; that Graham had forged the names of the purported borrowers to the notes, mortgages, drafts, and checks. Some months before the discovery of the forgeries Graham had absconded leaving no property.
Shortly after these forgeries were discovered Fish instituted suit against the three banks seeking to hold the National Bank of Commerce and the Pauls Valley National Bank for two of the checks, and the National Bank of Commerce and the First National Bank of Wynnewood for the other.
The cases by agreement were consolidated, and upon the trial of the cause, when plaintiff had rested his case, the court sustained a demurrer to the evidence as to the Pauls Valley National Bank and the First National Bank of Wynnewood, and at the close of all the testimony instructed the jury to return its verdict in favor of Fish against the National Bank of Commerce for the amount of the three checks aggregating something over $3,700, and from such verdict and judgment, the National Bank of Commerce appeals, making C.O. Fish and the other two banks parties defendant in error.
Plaintiff in error directs his complaint chiefly to questions he contended are material *Page 104 error as follows: The exclusion of testimony, the sustaining of the demurrer to the evidence as to the Pauls Valley National Bank and the First National Bank of Wynnewood, and the directing of the verdict for plaintiff. We shall discuss these questions in the order stated.
Plaintiff in error offered to prove that at a time subsequent to these forgeries that officers of the Pauls Valley National Bank wrote to Mr. Fish to the effect that they desired, in the light of recent developments as to the business methods of Graham, to revoke letters of recommendation formerly furnished him by them, and that Mr. Fish replied to this letter saying that Mr. Graham had been his agent down there for nearly two or three years, that Graham's business had been very profitable to him, and that he was honest and straight, and that the banks did not have any reason to write such a letter, etc. We think this testimony immaterial for the reason that it was a transaction occurring subsequent to the forgeries, and for the further reason that it does not tend to contradict Fish's testimony that he had confidence in Graham, but tends to corroborate rather than impeach it.
The record discloses that one of the attorneys for plaintiff in error interposed the demurrer to plaintiff's evidence on behalf of plaintiff in error and Paul's Valley National Bank and the First National Bank of Wynnewood, its codefendants, and this demurrer was sustained by the court as to said codefendants. Since the trial court did the very thing requested by plaintiff in error, it is in no position to complain.
The relation between bank and depositor is that of debtor and creditor. When a depositor issues his check upon his bank payable to payee or order, it is the duty of the bank to pay same to the person named in said check or upon his genuine indorsement, and a failure so to do is at the peril of the bank. Jordan, Marsh Co. v. National Shawmut Bank,201 Mass. 397, 87 N.E. 740, 22 L. R. A. (N. S.) 250; Union Biscuit Co. v. Springfield Grocery Co., 143 Mo. App. 300, 126 S.W. 996; Jackson et al. v. National Bank of McMinnville, 92 Tenn. 154, 20 S.W. 802, 18 L. R. A. 663, 36 Am. St. Rep. 81.
The reason for this rule is readily apparent. The depositor cannot know the signatures of the persons to whom he issues checks, and is not called upon nor expected to identify the payee or his signature; while, on the other hand, the bank may decline to pay until sufficient proof of the identification is furnished. It is, of course, impractical for banks at all times to require proof of the genuineness of the payee's indorsement, so a custom has arisen among banks that requires the bank cashing the check in the first instance to indorse same guaranteeing all prior indorsements, and, relying upon this guaranty, the bank of deposit pays without further question, and in the event same has been paid upon a forged indorsement the bank of deposit has no right to charge same against the account of the depositor, but must look to its remedy upon the guaranty of the paying bank or other intermediate indorsers .Unless, of course, the depositor has been guilty of negligence which induced the bank to pay, or having learned of the forgery in time that notice to the bank would have saved it the loss and failed to so notify it, or was guilty of other conduct constituting an estoppel. 5 Cyc. 548; Zane on Banks and Banking, pp. 266-270; Hatton v. Holmes, 97 Cal. 208, 31 P. 1131; Atlanta Nat. Bank v. Burke, 81 Ga. 597, 7 S.E. 728, 2 L. R. A. 96; Murphy v. Metropolitan Nat. Bank, 191 Mass. 159,77 N.E. 693, 114 Am. St. Rep. 595; Chipman et al. v. Bank of New York, 126 N.Y. 318, 27 N.E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 845; Armstrong v. Pomeroy Nat. Bank, 46 Ohio St. 512, 22 N.E. 866, 5 L. R. A. 625, 15 Am. St. Rep. 655; National City Bank v. Third Nat. Bank, 177 Fed. 136, 100 Cow. C. A. 556.
The only allegation and proof of negligence against Fish was the sending of the checks to Graham instead of to the payees, and the failure of Fish to examine the checks when returned to him by the bank. The checks were sent to Graham for delivery to the payees, and Fish had a right to presume that such would be done, and we can see no negligence in this. Fish was not presumed to know the signatures of the payees, nor did it appear that he, in fact, knew, so that an examination of the checks after their return to him would not have disclosed the forgeries, so we can see no want of care in that regard. German Savings Bank v. Citizens' Nat. Bank, 101 Iowa, 530, 70 N.W. 769, 63 Am. St. Rep. 399; First National Bank v. Tappan,6 Kan. 456, 7 Am. Rep. 568; Brixen v. Deseret Nat. Bank, 5 Utah, 504, 18 P. 43; Grand Lodge, A. O. U. W., v. State Bank,92 Kan. 876, 142 P. 974, L. R. A. 1915D, 815.
The record further discloses that Fish learned of the forgeries some two or three *Page 105 months prior to his informing plaintiff in error thereof, but prior to his learning of the forgeries Graham had absconded, leaving no property. That being true, notice would have been without avail, and we are unable to see wherein Fish failed in any duty in this.
Plaintiff in error alleges in its answer that it paid these checks relying upon the guaranty of its codefendants, and if the indorsements of the payees had not been guaranteed by some responsible person, it would not have paid them, and, that being true, its recourse was on said guaranties. Harmon v. Old Detroit Nat. Bank, 153 Mich. 73, 116 N.W. 617, 17 L. R. A. (N. S.) 514, 126 Am. St. Rep. 467.
From a careful examination of the evidence, we are convinced that it was insufficient to have supported a verdict for plaintiff in error, and the trial court did not err in directing a verdict for defendant in error.
Finding no error, the judgment of the trial court should be affirmed.
By the Court: It is so ordered.
On Rehearing.