
    Williamsburgh Trust Company, Appellant, v. Peter R. Tum Suden, Respondent.
    Second Department,
    June 28, 1907.
    Bills and notes— forged check payable to bearer—when indorser liable to drawee. ,
    A drawee who pays money on forged checks payable to bearer relying upon the unqualified indorsement of the holder presenting them for payment and who has been in the habit of cashing checks of the drawer whose name was forged, may recover the' money of the indorser, when -the mistake of the drawee has not been to the prejudice of the indorser.
    
      Appeal by the plaintiff, the Williamsburgh Trust Company, from a judgment of the Municipal Court, of the city of New York, borough of Brooklyn, in favor of the defendant, rendered on the lOtli day of January, 1907.
    
      Fernando Solinger, for the-appellant.
    
      Clinton T. Roe, for the respondent.
   Woodward, J.:

This is an- action to recover money paid by mistake — the amount of four certain checks payable to bearer which were forgeries, pur- ■ porting to. be signed by L. F. Rand and indorsed by Peter R. Turn Suden. The checks with Turn Suden’s single and unqualified indorsement were presented and paid to him by the plaintiff. It was shown at the trial -that Turn Suden had been- in the habit of cashing checks for Rand, and that the forged checks were cashed, in part, for a maid servant in the employ of Rand, the other part of their face value being retained by Turn Suden for groceries, previously furnished to Rand. As the checks were negotiable without indorsement, it is evident that Turn Suden’s indorsemént would divert the trust conipany from that careful scrutiny which otherwise it" would have been likely to give them. It was Turn Suden who negotiated the checks and put them into circulation, and as by his unqualified indorsement he facilitated the forgery his position is not that of an indorsee who holds a forged check sanctioned by a prior indorsement. '

If Turn Suden suffered loss, or damage by cashing the checks, it is evident that such loss- was sustained before the- checks were-honored by the trust company. I fail to see, therefore, how the trust company, when it paid the checks, can be held responsible for a loss previously sustained. As there is no proof that the mistake of the trust company has been to the prejudice of the respondent, it is but right that he should refund the money had and received.

The evidence .shows' that Turn Suden, for several months prior to the time of these forgeries, had been accustomed to cash checks for Rand. It follows, therefore, that 'Turn Suden, who had had- every opportunity to become acquainted with Rand’s signature;-lias no right to shift the loss' resulting from his own fault, oversight or negligence, upon another, On the other liand, it was but natural for the bank to assume that Turn Suden’s indorsement warranted the genuineness of the signature. • It was Turn Suden who had the first . contact with the forger, and who first failed to detect the forgery, and upon- him, therefore, must fall the burden of loss. From the foregoing it will appear that"the case at bar presents an interesting exception to the case of Price v. Neal (3 Burr. 1354), which ruled 1 that the bank must bear the loss when it pays a check to which the drawer’s name is forged. Such exceptions, however, have long ceased to be unusual.

In National Bank, etc., v. Bangs (106 Mass. 441)- the court said: “We are aware of no case in which the principle that the drawee is bound to know the signature of the drawer of a. bill or check, which he' undertakes to pay, has been held to be decisive in favor of a 'payee of a forged bill or check to which he has himself given credit by his indorsement.” The sainé principle should - be applied here. Upon the first indorser is the burden of the first precaution,- aiid his negligence or omission will exonerate, as. in the ' present instance, the' bank. Had a third party presented the check, already in circulation, for payment, the bank would have been put upon inquiry, and for any negligence in that case it would have been responsible. .

In First National Bank of Danvers v. First National Bank of Salem (151 Mass. 281) the court uttered a principle of construction which justifies my view : “The indorsement, which was not necessary to the transfer of the check, was a guaranty of the" signature of the drawer, ,and the plaintiff had a right to believe that the’indorser was known to the defendant by proper inquiry.”

The judgment should be reversed and a new trial ordered, costs to abide the event.

Jenks, Hooker and High, JJ., concurred.

. Judgment of the Municipal Court reversed and new trial ordered, ' costs to abide the event. ■ ' '  