ON MOTION FOR REHEARING. This is an action by one bank against another for money had and received. It is in three counts, each seeking to recover the sum of $1,000 obtained from plaintiff, The First National Bank of Kansas City, in this manner:
The List Construction Company, the List Clark Construction Company and the List Bagwell Construction Company were engaged in the railroad contracting business and during the years 1929-30-31, carried bank accounts in the two banks parties to this suit and in other Kansas City Banking Institutions. They were more or less affiliated under one management, C.J. Brown being the secretary-treasurer of these companies and Ben T. Wilson the "office manager" of all of them and preparing the vouchers and the checks on the bank accounts, which were then signed by Brown, the secretary-treasurer. The money in controversy was obtained in this wise: Wilson, *Page 917 on September 25, 1929, secured from one of said companies a check for $1,000, took it to the plaintiff bank where that company's banking business was done and had the bank to issue in exchange therefor its cashier's check for $1,000, payable to James Edgar, who was not a real but a fictitious person. The plaintiff bank however did not know this. The bank thereupon delivered the cashier's check to Wilson and he thereafter wrote the following endorsement on the back thereof: "Pay to the order of Ben Wilson, James Edgar." And underneath it he wrote the endorsement of his own name, "Ben Wilson." He then took the check, thus endorsed, to the defendant, Produce Exchange Bank, and deposited the check to his own credit. The defendant then, by endorsement and through the usual rules and procedure of the Kansas City Clearing House, of which both banks were members, received the $1,000 from the plaintiff, The First National Bank.
In the same method Wilson, on October 26, 1929, obtained another cashier's check for $1,000 from plaintiff, payable to the mythical James Edgar, but not known to be such by plaintiff bank, then after forging the fictitious name, an endorsement of James Edgar to himself and placing his own endorsement thereunder, Wilson deposited it to his own credit in the defendant Produce Exchange Bank. Said bank, thereupon, in the same way as before, endorsed the check and, through the Kansas City Clearing House, obtained $1,000 from the plaintiff. On November 13, 1929, exactly the same procedure was gone through with whereby Wilson got from the First National Bank another cashier's check for $1,000 payable to James Edgar, a fictitious person, forged that endorsement to himself, placed his own endorsement thereon and deposited it to his own credit in the defendant bank and thereafter, through the Clearing House as before, obtained $1,000 from the plaintiff bank.
Thereafter, upon its being discovered that the James Edgar endorsements were forged, the plaintiff gave written notice to defendant and demanded that it repay plaintiff the $3,000 it had received on said checks. Defendant refused and this suit was brought.
Defendant requested the trial court, at the close of plaintiff's case, to peremptorily instruct the jury to return a verdict for it, and this the court was proceeding to do over plaintiff's objections and exceptions, whereupon the latter took an involuntary nonsuit with leave to move to set the same aside. This being filed and overruled, plaintiff duly appealed.
It would seem to be manifest that under well-established general principles of law, as well as by virtue of the Clearing House Rules No. 18 and 19, which are merely declaratory of the law governing the banking transactions between the members of said Clearing House Association, that the defendant, Produce Exchange Bank, obtained from the plaintiff, The First National Bank, the $3,000 on the three checks bearing the false endorsements of James Edgar placed thereon *Page 918 by Wilson for the fraudulent purpose of getting the money into his private bank account, or in other words into his own pocket, and said defendant bank thereby guaranteed to the plaintiff bank the genuineness of said endorsements on said checks. If they were false and fraudulent then the Produce Exchange Bank got no title to the checks or to the money obtained by them. Not having any right to it, the plaintiff bank can demand and enforce its return. [Real Estate, etc., Trust Co. v. United Security Trust Co., 303 Pa. 273, 154 A. 593; First National Bank v. Federal Reserve Bank, 88 Mont. 589, 294 P. 1105; Leather Manufacturers National Bank v. Merchants National Bank, 128 U.S. 26; United States v. National Exchange Bank, 214 U.S. 302; First National Bank v. United States National Bank, 197 P. 547; American Exchange National Bank v. Yorkville Bank, 204 N.Y.S. 621, 206 N.Y.S. 879; Seaboard National Bank v. Bank of America, 193 N.Y. 26 .]
In 3 Ruling Case Law, section 244, page 616, the rule of law is stated in these words:
"Where the collecting bank endorses generally a check received by it for collection, it thereby guarantees the authenticity of the prior endorsements, and in case such a prior endorsement is a forgery, it is liable to the drawee bank for the money paid to it by the latter."
There is no question but that the foregoing is the general rule. Of course, under certain circumstances, a situation may arise where the general rule cannot operate. However, I am unable to see where, in the case at bar, there is anything to take the general rule out of its usual operation. The rule is proper and necessary in the dispatch of the commercial business of the country and of the transactions in which the party banks are engaged. It is not a matter in which equitable rights are to be considered unless there is something unusual or out of the ordinary, so as to make it inequitable and wrongful to enforce it. There is nothing of the kind in the transaction here involved. The danger of being called upon to guarantee the previous endorsements is a liability that inheres in the very nature of the business the parties hereto are engaged in, and, when encountered, it must be met in its entirety and full force, else business of the kind cannot be transacted satisfactorily. In the end, the proper enforcement of the rule will result in the so-called equities, if any, and the losses, being allowed to finally settle down to the places where they properly belong.
But it is urged that the payee named in these checks, James Edgar, was a fictitious person, and hence the checks were payable to bearer. I cannot agree to this. Section 2638, Revised Statutes of Missouri 1929, 1 West's Missouri Statutes Annotated, page 648, says:
"Sec. 2638. The instrument is payable to bearer . . . (3) when it is payable to the order of a fictitious or nonexisting personand *Page 919 such fact was known to the person making it so payable." (Italics mine.)
An instrument is drawn to a fictitious payee whenever the payee named has no right thereto and maker does not intend payee shall take anything thereby. [American Sash Door Company v. Commerce Trust Co., 25 S.W.2d 545.] Same case decided by Supreme Court,en banc, No. 30,410, 56 S.W.2d 1034. This definition fits this case precisely. The only person who knew that the payee, James Edgar, was fictitious was Wilson who directed and caused it to be done, and he did this in order that through his false endorsement of that name he could get the money into his possession. The plaintiff was wholly unaware of this, and did only as required to do by the purchaser of the checks. Plaintiff bank was not required to know the signature of that endorsement and when they were presented for payment had a right to rely on defendant bank's guaranty of its genuineness. The checks were not payable to bearer. [First National Bank v. Northwestern National Bank, 152 Ill. 296, 310-11.] (This case at pages 306-308 is an excellent authority in support of the general rule herein considered.) On the question whether the checks were payable to bearer, it is held that they are not, in Shipman v. Bank of State of New York, 27 N.E. 371, 374; Paine v. Continental, etc., National Bank, 259 Ill. App. 526.
It is clear to my mind at least that the signing of the name James Edgar by Wilson with intent to deceive, and to put into circulation the three checks so that he could obtain the funds thereof, undoubtedly constituted forgery. [Shipman v. Northwestern National Bank, 27 N.E. 371, l.c. 374.] Whether the endorsing of the fictitious names on the back of the checks were actually necessary to effect a transfer or not, it was deemed by Wilson to be necessary and it was indeed necessary to get the money under the checks into his account without comment or unwelcome inquiry. Our Supreme Court in State v. Andrews, 273 S.W. 726, following the statute, section 4202, Revised Statutes of Missouri 1929, 4 West's Missouri Statutes Annotated, page 2951, has announced a ruling that makes the endorsement of this fictitious name on these checks a forgery.
It is urged that plaintiff cannot recover because it has "suffered no loss." It paid out its depositors' money, or money it held for its depositors, which endorsements the defendant bank, in law and by contract, guaranteed, and by reason of either one or both, it is liable. The suit is not one for damages but to recover money the defendant bank had and received, but to which it never had title and for which it gave plaintiff no consideration. The plaintiff, the moment it paid out the money on the forged endorsements had a cause of action against defendant, which arose immediately. The suit is to recover the money, and is not dependent upon whether a loss will eventually accrue to plaintiff, nor is the suit based upon the checks. [Clearfield *Page 920 Bank v. Madera National Bank, 87 Pa. Super. 564.] [See also Leather Manufacturers National Bank v. Merchants National Bank,128 U.S. 126.]
The violation by Wilson of his duty to the Construction Companies has nothing to do with plaintiff's right to recover. Plaintiff did not pay out the money on the strength of any conduct on the part of them or their employee, Wilson. It paid the checks on the faith that they were honestly and genuinely endorsed by their payee. The defendant took the checks and, after endorsing them, got the money from plaintiff under its guarantee of prior endorsements. It cannot escape liability by pointing an accusing finger at the Construction Companies for allowing Wilson to get hold of the checks. [Paine v. Continental, etc., Bank,259 Ill. App. 526; Seaboard National Bank v. Bank of America,193 N.Y. 26; United States Mortgage, etc., Co. v. Liberty National Bank, 184 N.Y.S. 32.]
The contention that plaintiff has, by delay in notice to the defendant bank of its rights, lost its right of action, cannot be maintained, for the evidence is that notice was duly given, and plaintiff bank has not done anything to defeat or destroy its cause of action or right to recover.
Nor is it a defense to say that plaintiff has been reimbursed for its loss by an insurance company insuring it in the course of its business, and that the plaintiff is no longer the real party in interest, having no pecuniary right in the matter. Plaintiff has in no way or manner assigned its cause of action, and whether its insurance company has reimbursed it or not, it still remains the real party in interest under our laws. [Foster v. Missouri P.R. Co., 143 Mo. App. 547; Sexton v. Anderson Electric Car Co., 234 S.W. 358; Keeley v. Indemnity Co. of America,222 Mo. App. 439.]
I think the trial court erred in directing a verdict for the defendant, and that a rehearing should be granted.
I, FRANCIS H. TRIMBLE, one of the Judges of the Kansas City Court of Appeals, deem the decision in the above entitled cause (the motion for rehearing of which, filed by appellant, was overruled by the majority of the court at the March Term, April 3, 1933), to be contrary to the following previous decisions of the Supreme Court, to-wit: American Sash Door Co. v. Commerce Trust Co., 56 S.W.2d 1034; State v. Andrews, 273 S.W. 726; City of St. Louis v. St. Louis San Francisco Railway Co.,228 Mo. 712.
Therefore, in accordance with section 6, article 4 of the Amendment of 1884 to the Constitution of Missouri, I request that the above entitled cause be certified and transferred to the Supreme Court of Missouri.
This 5th day of April (March Term), 1933.
FRANCIS H. TRIMBLE, Judge. *Page 921