
    The S. Weisberger Co. v. The Barberton Savings Bank Co.
    
      Liability of drawee bank — To drawer of check fraudulently endorsed ■ — -By party having same name as payee — Negligence of drawer in delivery of check — Releases liability of drawee bank, when.
    
    W. being indebted to R., whose place of business W. knew to be 48 Walker street, New York City, drew a check on his local bank of deposit in favor of R. for the amount of the debt, without designating therein his place of business, and enclosed the check with a letter in an envelope which he through mistake addressed to R., 48 Walker street, Cleveland, Ohio, and caused the envelope and contents so addressed to be mailed in the usual way, and it arrived in Cleveland in due course of mail, where the letter carrier found no one of that name on Walker street of that city, but found a man whose name was R. on Henry street and to whom the carrier delivered the letter. He opened it and took possession of the check, and by endorsing the name R. on the back thereof obtained the cash from an acquaintance, who endorsed and deposited said check in his bank of deposit in Cleveland. The latter bank endorsed it over to another bank in the same city, guaranteeing prior endorsements, and this bank endorsed it payable to any bank or bearer, guaranteeing all prior endorsements, and in this condition it was presented to the drawee bank, by it paid and charged to W.’s account, it having no knowledge of said mistake in addressing the letter. 'W. afterwards discharged his debt to the New York creditor by other means and brings suit against the drawee bank to recover the amount of the check so charged to his account.
    
      Held: The drawer of the check was first in fault, and as his negligence contributed directly to its wrongful and fraudulent appropriation, he is not entitled to recover.
    (No. 11679
    Decided March 28, 1911.)
    Error to the Circuit Court of Summit county.
    The parties to this case are corporations doing business in the village of Barberton, Summit county, Ohio, the plaintiff in error being engaged in mercantile business, and the defendant in error engaged in a general banking business. The former brought suit against the latter and for cause of action alleged in substance that on or about January 13, 1906, and prior thereto, it had deposited with the said bank an amount of money in excess of one hundred and twenty-two and 13/100 dollars ($122.13), which sum was on deposit on said day subject to check in excess of any liability or claim against the same; that on that day the plaintiff drew a check upon the bank for the sum of $122.13, payable to Max Roth of New York City; that said check so drawn was fraudulently endorsed in blank by a person purporting to be Max Roth of Cleveland, Ohio, and that said check so fraudulently endorsed was delivered to one B. Schoenfeld, and by him endorsed in blank and deposited with The Cleveland Trust Co., of Cleveland, Ohio, and by the latter said check was endorsed with the following endorsements: “Pay to the Union National Bank of Cleveland, or order, prior endorsements guaranteed.
    “Ti-ie Cleveland Trust Co.
    “Perry Office,
    “C. O. Patch, Secy-Treas.”
    
    The said check was further endorsed by the 'Union National Bank of Cleveland, as follows: “Pay to the order of any bank or bearer, all prior endorsements guaranteed. Jan. 10, 1906.
    “Union National Bank, Cleveland, Ohio.
    “E. R. Fancher, Cashier.”
    
    It is alleged that said check, with the forged endorsement thereon of Max Roth, and with the other endorsements thereon as stated, was wrongfully accepted and paid by the defendant bank, at Barberton, on or about .the 23d day of January, 1906,' and afterwards was wrongfully and without authority from the plaintiff, charged against its account with said defendant bank.
    It is alleged that when plaintiff discovered the ■forged endorsement and the wrongful payment aforesaid, and on or about February 7, 1906, plaintiff demanded that defendant correct said account, and not charge said check against its account, which defendant refused to do, and refused to pay the plaintiff the amount of the check so wrongfully paid, and it prays judgment for the amount.
    The answer admits most of the allegations made in the petition, but denies that said check was made payable to Max Roth of New York City.
    
    The answer avers that said check was endorsed by Max Roth, and by the said Max Roth delivered to one B. Schoenfeld, and by him was endorsed in blank and deposited with The Cleveland Trust Co., -of Cleveland, Ohio, and that this trust company endorsed the check to Union National- Bank of Cleveland, or order, and it endorsed the same payable to the order of any bank or bearer, on the day and in the form alleged in the petition.
    The Union National Bank presented the check so endorsed to the defendant bank, at Barberton, for payment, and it paid the same and charged it to plaintiff’s account.
    The defendant further alleges that said check was paid to Max Roth, of Cleveland, Ohio, without any information or knowledge to show that it was paid to any one else, and that if said plaintiff has been damaged, that it occurred by reason of its own negligence in misdirecting said check and mailing the same to Max Roth, at Cleveland, Ohio, instead of Max Roth, of New York City.
    It is then averred that plaintiff did not act promptly when it discovered its mistake and inform defendant in time to protect itself against any fraud committed.
    The new matter of the answer is • denied by reply.
    The parties waived a jury and submitted the case on the facts to the court, who found for the defendant. A judgment on the finding was affirmed by the circuit court.
    Error is prosecuted here to reverse both judgments.
    
      Messrs. Musser, Kimber & Huffman, for plaintiff in error.
    Plaintiff in error contends that by the statutes of Ohio and by the decisions in the courts of this state, together with the decisions in the courts of other states, a bank undertaking to pay money in pursuance of a check drawn upon it is bound to ascertain that the true and rightful payee of said check, or a proper and rightful endorsee thereof, receives such payment.
    Plaintiff in error further contends that by the false and fraudulent endorsement of the check by Max Roth of Cleveland no title whatever could pass to the second endorsee, B. Schoenfeld, and of course B. Schoenfeld could confer no other or better title to The Cleveland Trust Company bank by his endorsement of said check, and so on.
    
      Every endorser who endorses without qualification warrants to all subsequent holders in due course, first, that he has a good title to it, etc., second, that the instrument is at the time of his endorsement valid and subsisting. Bank v. Bank, 58 Ohio St., 207; Bank v. Bank, 68 Ohio St., 43; Dumont v. Williamson, 18 Ohio St., 516; Tiedeman on Commercial Paper, Sec. 259; 2 Daniel on Negotiable Instruments, Sec. 1364; 2 Randolph on Commercial Paper, Sec. 752; Story on Promissory Notes, Sec. 135.
    The above are well known principles of law governing commercial paper and are cited here merely for the purpose of showing the chain of liability between the different endorsers of the check in question, and also as showing that the plaintiff in error could look to the defendant in error for redress by reason of the unlawful payment of the check in question.
    Will the placing of the address of Cleveland, Ohio, instead of New York on the envelope containing the check, by the plaintiff in error, relieve and excuse the liability of the defendant in error in the case at bar?
    The payment of the check in question was not made by reason of any address placed on the envelope. No inquiry whatever was made by the bank making the first payment on the check when first presented for payment and of course no statement or act in any way influencing the payment of the check was made by this plaintiff in error. 24 Banking Law Journal, No. 10, “The Law of Bank Checks.”
    
      If a bank pays money to or on the endorsement of a person of the same name as the payee, but not the real payee intended by the check drawer, the payment is not valid or chargeable against- the depositor. Mead v. Young, 4 T. R., 28; Foster v. Shattuck, 2 N. H., 446; Graves v. Bank, 17 N. Y., 205; Bank v. Holtsclaw, 98 Ind., 85; 2 Morse on Banks and Banking, Sec. 474; Zane on Banks and Banking, 267; Dodge v. Bank, 20 Ohio St., 234; 30 Ohio St., 1; Armstrong v. Bank, 46 Ohio St., 512; Merrick v. Bank, 11 Dec., 293, 8 N. P., 411, 67 Ohio St., 530; Hoffmaster v. Black, 78 Ohio St., 1; Mackintosh v. Bank, 123 Mass., 393; Robb v. Pennsylvania Co., 186 Pa. St., 456; Bank v. Nolting, 94 Va., 263; Welsh v. Bank, 73 N. Y., 424; Crawford v. Bank, 100 N. Y., 50, 2 N. E. Rep., 881.
    
      Mr. J. A. Kohler; Mr. Arthur S. Mottinger and Mr. Charles E. Smoyer, for defendant in error.
    The question upon whom the loss should fall where a check is paid to a person of the same name as the payee seems to have occurred very infrequently in the reported decisions, there having been seemingly but four decisions upon the question. Mead v. Young, 4 T. R., 28; Graves v. Bank, 17 N. Y., 205; Bank v. Holtsclaw, 98 Ind., 85; Bank v. Ginocchio, 27 Mo. App., 661.
    First: There was no negligence on the part of the Barberton Savings Bank, and
    Second: The negligence of plaintiff in error in placing its check in the hands of the wrong Max Roth, did not throw the Barberton Savings Bank off its guard.
    When the check of plaintiff in error was returned to the Barberton Savings Bank with the name of the payee, Max Roth, endorsed on the back thereof, the defendant in error had fulfilled, to its depositor, that degree of care which it owed it. Forbes v. Espy, 21 Ohio St., 474; Bank v. Shotwell, 35 Kans., 360; Title & Trust Co. v. Bank, 196 Pa. St., 230, 43 Atl. Rep., 420; United States v. Bank, 45 Fed. Rep., 163; Construction Co. v. Bank, 64 Ill. App., 225; Robertson v. Coleman, 141 Mass., 231; Bank v. Bank, 5 N. Y. Leg. Obs., 18; Bank v. Bank, 7 Ind. App., 322.
    The negligence of plaintiff in error occasioned the loss. It should be made to bear that loss. Hern v. Nichols, 1 Salk., 289; Bank v. Bank, 58 Ohio St., 207; Insurance Co. v. Eshelman, 30 Ohio St., 659; Fullerton v. Sturges, 4 Ohio St., 530; Selser v. Brock, 3 Ohio St., 302; Bank v. Bank, 151 Mass., 280, 21 Am. St. Rep., 450; Bank v. Bangs, 106 Mass., 441; Crawford v. Bank, 100 N. Y., 55.
   Price, J.

At the trial in the court of common pleas, some of the facts were agreed upon, and they show that at the date of the check mentioned in the petition, the plaintiff in error was indebted to one Max Roth, of New York City, in the sum of $122.13, and that his place of business at that time was No. 48 Walker street of that city. To pay the above indebtedness, the plaintiff in error, on the 13th day of January, 1906, drew its check for said amount, on the defendant in error, in favor of and payable to Max Roth, in the following words: “Barberton, O., 1-13, 1906. Pay to the order of Max Roth ($122.13/100) one hundred twenty-two 13/100 dollars.

“The S. Weisberger Co.

“To the Barberton Savings Bank, Barberton, Ohio.”

This check, with a letter signed by the firm, was placed in an envelope, which was addressed to Max Roth, 48 Walker street, Cleveland, Ohio, instead of Max Roth, 48 Walker street, New York City. The letter so addressed and containing the check, shortly after it had been mailed to Cleveland, was delivered by the postoffice authorities to one claiming to be Max Roth, who lived or roomed on Henry street in the city of Cleveland. It appears that his name was Max Roth, but not the Max Roth to whom plaintiff was indebted and whose place of business was 48 Walker street, New York City. The Cleveland Max Roth, to whom the letter containing the check was delivered, took the check to a saloon-keeper in Cleveland, with whom he was acquainted, and after endorsing his name Max Roth on the back Of the check, received the cash for the same from the saloon-keeper, whose name is B. Schoenfeld. The latter endorsed and delivered it to The Cleveland Trust Co., which later endorsed and deposited it with the Union National Bank of that city, by which the check was presented to defendant bank for. payment, and it was paid and charged to the account of plaintiff. It never reached the Max Roth of New York, for whom it was intended, and plaintiff, afterwards and by means of another check, discharged its indebtedness to the New York creditor. As between the parties hereto, who should bear the loss sustained?

It is not necessary that we consider the many authorities presented by the plaintiff in error, concerning the liability of a bank to one of its depositors, for paying a forged check, nor to discuss the general rule that such bank is bound to know the signature of its depositor. Those authorities may be regarded as sound on the facts of each case there found, and still the judgment of the lower court be free from error. There is one view of this case sufficiently clear to sustain the judgment, without conflict with any authority cited in the brief or oral argument.

It stands out boldly in the plaintiff’s case — in its petition and in its evidence, that it was first at fault, if not first and solely negligent. It was a business concern, keeping an account with the defendant bank. It knew that its creditor, Max Roth, resided in New York City, doing business at 48 Walker street, and desiring to pay its debt to him, drew the check payable to him, not designating therein either the place of residence or business, and thoughtlessly or negligently enclosed it with a letter, in an envelope which it addressed to Max Roth, 48 Walker street, Cleveland, Ohio, and so addressed, the plaintiff caused it to be mailed. Bearing that address, the letter could not properly go to New York City, but could and properly did go to the city of Cleveland. Perhaps there is no Walker street in Cleveland, but the postal service, after diligent effort, found a Max Roth, or a man who claimed to be of that name, and the letter containing the check was delivered to him.

Up to this point of time, no one connected with • the check was negligent, except the plaintiff, unless it be the letter carrier .who delivered the letter. The act of the Max Roth of Cleveland, who received the letter, was criminal, and he forged the name of the real party for whom the check was intended by endorsing his name thereon.

The carelessness of the plaintiff put it within the power of the Cleveland man to perpetrate a fraud and obtain the proceeds of the check, which he did at the hands of Schoenfeld, his acquaintance. Then it took the customary course on its way to the bank of defendant upon which it was drawn. Schoenfeld, believing the endorsement of the Cleveland acquaintance legitimate, deposited the check in his bank of deposit, having endorsed his name on the back thereof. This bank endorsed and transferred it to the Union National Bank, guaranteeing prior endorsements, and it in turn endorsed it payable to any bank or bearer, guaranteeing all prior endorsements. These were Cleveland banks, which made the endorsements and transfers, but it is not alleged in the petition that the defendant bank had any information or knowl- • edge as to the residence or place of business of Max Roth, the plaintiff’s creditor, and therefore the location of these endorsing banks was not calculated to put the' defendant on inquiry or excite its suspicion. They had severally guaranteed prior endorsements. It was not practicable for the defendant to interview Max Roth, to ascertain whether he was the lawful holder of the check. While it is true that a forged endorsement transfers no title to the check, we cannot avoid a comparison of the negligent conduct of the plaintiff, with the apparent good faith of the defendant, acting as it did under the circumstances narrated.

The misdirected letter was the source of possibilities that became realities in this case. In other words, the plaintiff was first at fault and its mistake made possible what in fact has transpired. If we admit, as we do, the ordinary rule that a bank is bound to know the signature of its depositor, it is a rule to protect the rights of the depositor. But where his carelessness has contributed directly to the deception of the bank, he may not be in position to enforce such general rule.

In the case at bar, it appears that neither the depositor nor the bank intended to commit any wrong, and we may apply a rule, the substance of which is, that where one of two innocent parties must suffer because of a fraud or forgery, justice imposes the burden upon him who is first at fault and put in operation the power which resulted in the fraud or forgery.

We decide this case on its own peculiar facts and make no search for or examination of reported cases, and affirm the judgment of the lower court.

Judgment affirmed.

Spear, C. J., Davis, Shauck, Johnson and Donahue, JJ., concur.  