While not resuming to fortify Justice Hart's dissent, which is quite sufficient of itself, the fact that we seem free to choose between two conflicting lines of authority from other states may permit these few observations of my own of a semi-practical or business order.
I think the majority decision, while actually in favor of the particular bank here involved, may do harm to the banking business generally, in that it deprives banks of a responsibility which is rightfully theirs and thereby lowers the value of the good service which careful banks have as their stock in trade. By the same token the decision also strikes a blow at the present convenient system of conducting the great bulk of business by check.
In effect it is now held that where the corporate or other payee of a check allows an employee to have physical access to it, — however incidental the access may be, — the bank on which that check is drawn may with absolute impunity pay the check to that employee, though the latter has no vestige of even apparent authority to receive the money. The payee itself, of course, has no rights against the bank direct, because the bank's duty to pay the true payee is a duty owed only to the drawer-depositor. And we now hold that even the drawer-depositor has no rights against the bank — once the latter has made its wrongful *Page 217 payment to the payee's unauthorized agent. If, as the majority here decides, the drawer-depositor has no cause of action against the bank which he can assign to the payee, obviously he has no cause of action which he could enforce himself. Even if he thought — as well he might and in this case evidently did think — that as between himself, the payee and the bank, the latter should bear the loss for having failed in its elemental duty as a banker on performance of which businessmen are accustomed to rely, still he can now no more call his bank to account than the payee could; and so the bank, which is most to blame, goes scot free. I don't believe the banks of this state want to be placed in any such status of moral coverture or guardianship. It is still more likely that such immunity on the part of drawee banks will result in a loss of public confidence in the present highly useful system of "pay by check" which banks have done so much to promote. If the drawee bank may with immunity pay checks to any servant of the payee who may have incidental physical access to the check, payee must either bond all such employees or we must return to the antiquated system of having the drawer who owes a debt to the payee, bring the cash to the payee's office and get a receipt stamped on his invoice.
In exchange for the above disadvantages, I can see no substantial advantage to be derived from the decision. Certainly, as Justice Hart says, we bestow no useful item of protection on the drawer. Had we treated his debt to the payee as unpaid, as we should have done, and thereby have preserved his right of action against the bank, the drawer would lose nothing, except in the highly unusual case where the bank, after making its unauthorized payment to the payee's agent, fails in the brief period before the drawer has had a chance to make the bank rectify its error by reversing the corresponding charge against the drawer's account. And even if the decision should have — which it does not — the virtue of greater abstract justice through punishing the payee for having an unfaithful employee, future cases may well prove again that such virtues are often worse than illusory. What, for one example, will we do in a case in which the payee has his employee pick up the drawer's check at the special insistence ofand solely for the convenience of the drawer? Will we then hold that the payee's bill has been discharged by the bank's unauthorized payment to the employee, because the payee is less innocent than the drawer, and again let the admittedly non-innocent bank escape all liability? We probably will not, since the drawer would certainly be no more *Page 218 innocent than the payee. So, thereafter, instead of the old simple rules for which the minority contends, we will struggle interminably with fine distinctions over relative innocence as between drawer and payee.
Opinion delivered November 10, 1948.