Argued June 7, 1880
Decided September 21, 1880
John E. Parsons for appellant. Samuel Hand for respondents.
Had it appeared in this case that the certification of the check given by the defendant to the plaintiffs was obtained by the plaintiffs or their authorized agent, or that the claim of the defendant upon the Merchants' Bank had been barred by the statute of limitations before the plaintiffs notified the defendant of the forgery, and demanded payment from it, there would be great difficulty in affirming this judgment. Ordinarily, where the payee or holder of a check which is payable immediately, instead of demanding payment procures the check to be certified, the check is as between the drawer and holder regarded as paid, and the holder must look to the bank whose obligation it has accepted in lieu of the money, because by procuring the certification he has caused an amount of the drawer's funds, or credit, equal to that for which the check was drawn, to be set apart for the payment of that check, and withdrawn from the control of the drawer, and his funds are as effectually diminished as if the money had been paid; while the bank has given a negotiable obligation to the holder of the check, which is equivalent to a certificate of deposit. If the holder of the certified check should lose it, he would still have his remedy upon it against the bank, but could not have recourse against the drawer whose funds had been thus locked up, or transferred to the credit of another party. And even the subsequent payment of the check by the bank upon a forged indorsement would not relieve it of its liability upon the contract it had made with the true owner, nor restore to the drawer the right to draw upon the bank for the funds which had been appropriated to the payment of the check, and were consequently no longer his. ( Freund v. Importers Traders' Nat. Bk., 12 Hun, 537; affirmed, 76 N.Y. 352; First Nat. Bk. v. Leach, 52 id. 350; First Nat. Bk. v. Whitman, 4 Otto, 343.) On the other branch of the case, if it were shown that the delay of the plaintiffs in discovering and giving notice of the forgery had caused the defendant's remedy over against its own bank to be barred by the statute of limitations, there would be no equity in opening the settlement of accounts between plaintiffs and defendant for the purpose of shifting upon defendant a loss which, without any wrong or default on its part, the plaintiffs had sustained through the fraud of their own agent.
But neither of these defenses is established. The findings are, "that the Merchants' Bank certified the check, but that by whom the same was presented for certification, or when it was so certified, does not appear." Although the evidence might justify the inference that the certification was obtained by Barrett, there is no finding of that fact, and no request to find it, or to find that the check was certified at the instance of any authorized party, or that any contract was made by the bank with any one lawfully holding the check, and it is the settled law that on appeal to this court no fact can be considered for the purpose of reversing a judgment, unless it is either stated in the findings, or requested to be found, on uncontroverted evidence.
On the subject of the statute of limitations there are no findings or requests to find facts showing that the defendant's claim against its own bank was barred when reclamation was made upon it by the plaintiffs. There is no finding or request to find at what date this reclamation was made, and even if it were found not to have been made until after the expiration of six years from the payment of the check, it does not appear that the account of the defendant with its own bank was ever balanced, or that six years had elapsed from the time that the defendant had knowledge that the check had been paid, or charged to it in its account with its bank. The finding is that the Merchants' Bank is, and always has been, a good solvent institution, and the defendant has kept a running account with said bank and has had a balance to its credit as a depositor therein, continuously from the day upon which the said defendant's check was drawn down to the present time.
The Merchants' Bank being under no outstanding liability on its certification, which has been surrendered, and it not appearing that any lawful holder ever was entitled to the benefit of the certification, nothing appears which should impede the recovery by the defendant against it for the balance which would remain to the credit of the defendant, if the charge of the bank for the payment of the check on the forged indorsement were disallowed, as it doubtless would be. The finding is that the charge was made on the payment of the check, and it is well settled that a bank paying upon a forged indorsement must bear the loss, and cannot charge the payment to its depositor. ( First Nat. Bank v. Whitman, 4 Otto, 343.) The lapse of six years is not a bar to an action for a deposit. The statute begins to run only from the time payment is refused. Thus, from all that appears in the case, the defendant has its remedy against its own bank for the amount thus wrongfully paid out.
The case then presents the simple question whether a party paying his own debt by a check to the order of his creditor, or of a party nominated by his creditor, can be called upon to pay it again, in case the creditor loses or is defrauded of the check, and it is paid to the finder or fraudulent holder, on a forged indorsement. We think this question should be answered in the affirmative, unless in some very special case, if such a case can be supposed, where the check was taken in absolute payment and extinguishment of the debt. What the rights of the parties might be in such a case it is not necessary to determine.
For the reasons before stated, the case is not varied by the circumstance that the check was certified after delivery and before payment, it not being shown that such certification was procured by the creditor to whom the check was given, or by the payee of the check. If the check had been lost and the finder had procured it to be certified, and forged the indorsement, the certification would not be binding upon the bank, nor affect the rights of the parties after it had been surrendered. It is only in case the true owner of the check had received the certification, that recourse could have been had upon it against the certifying bank, notwithstanding the subsequent loss of the check and the payment upon the forged indorsement. ( First Nat. Bank v. Whitman, 4 Otto, 343.) In this case, for all that appears, the certification may have been obtained by the bank to which Barrett transferred the check by the forged indorsement, and had it placed to his own credit. Neither the plaintiffs nor Mr. Halpine would have acquired any right of action against the Merchants' Bank by virtue of such a certification, unless they regained possession of the check, or adopted the act of the wrongful holder in obtaining the certification, before payment of the check to such wrongful holder.
In this case there is the additional circumstance that the account between the plaintiffs and the defendant, in which the check is charged to the plaintiffs, has been settled and closed, and it is necessary to open this account in order to afford relief to the plaintiffs. If the delay in applying to open this account had been such as to deprive the defendant of its remedy over against the Merchants' Bank, we should hesitate to say that the relief should be granted at the expense of the defendant, who has been guilty of no default. But as it has not been shown that the defendant has lost its right of action against the Merchants' Bank, and the account between the plaintiffs and defendant was settled and balanced under a mistake of fact, we do not think that it was erroneous to allow that settlement to be opened, and to permit the plaintiffs to show that they never received payment of the check, and that it was returned to the defendant without a valid payment. The Merchants' Bank, having paid the check on a forged indorsement, is the party in default, who should sustain the ultimate loss, but we think that inasmuch as, from all that appears in this case, the defendant is the only party to whom the Merchants' Bank is liable, equity requires that the defendant should make good the payment for which it has received credit in its account with the plaintiffs, and seek its reimbursement from the Merchants' Bank. Otherwise the plaintiffs would be remediless.
The point made by the appellant's counsel that Barrett was authorized to indorse the check with the name of Mr. Halpine, and that the indorsement was therefore valid, is not tenable for various reasons.
First, although the circumstances tend strongly to show that Barrett made the indorsement, that fact is not found. Secondly, it is not found that Barrett was authorized to receive the money for Mrs. Halpine. On the contrary, she denies such authority; and finally, we are not prepared to hold that when a payment is made to an agent, by a check payable to the order of his principal, the authority to receive the payment is of itself sufficient to authorize the agent to indorse his principal's name on the check. It is sufficient, however, for the purposes of the present case to say that the necessary facts are not found, upon which to raise that question.
The judgment should be affirmed.