Bergstrom v. Ritz-Carlton Restaurant & Hotel Co.

171 A.D. 776, 157 N.Y.S. 959, 1916 N.Y. App. Div. LEXIS 5368

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: March 10, 1916
• Status: Published

Opinion

Dowling, J.:

Plaintiff sues as assignee of Elianor Bergstrom and of Bergstrom & Co., a firm composed of Oscar B. Bergstrom and Harry Taylor, private hankers. Elianor Bergstrom is the wife of Oscar B. Bergstrom, and on November 1, 1912, they were residing in apartments in Carlton House, an apartment hotel at Forty-seventh street and Madison avenue, New York city Defendant operates the Bitz-Carlton Hotel at Forty-sixth street and Madison avenue, adjoining Carlton House, and occupants of the latter may order meals from the former. Elianor Bergstrom was known to defendant, and her husband had an account with it. On the evening of the 1st day of November, 1912, a check in the sum of $300 on a printed form of check of said Bergstrom & Co., indorsed by one Gr. W. Freund, then an employee of the Carlton House Company, bearing the name of Elianor Bergstrom as drawer, and payable to the order of the Bitz-Carlton Bestaurant and Hotel Company, was presented to the cashier of the Bitz-Carlton Hotel by an employee of the Carlton House, with the statement that Mrs. Bergstrom wished the cash on the check, and that she was waiting for it in the Carlton House. The defendant’s cashier then cashed the check and paid the sum of $300 to the party presenting it. Defendant deposited the check in its bank, and on the 6th day of November, 1912, it was presented to Bergstrom & Co. for payment and was paid. On presentation of said check the attention of Oscar B. Bergstrom was called privately by his cashier to the fact that the signature of the drawer did not appear to be authentic, but he, after examining the check, ordered it paid, saying: “It is payable to the Bitz-Carlton and no doubt is given for the November rent of our apartment.” Bergstrom’s lease was with the Carlton House Company, and the monthly rental of their apartment was $300. The $300 paid by Bergstrom & Co. on presentation of the check in due course was. placed to the bank credit of defendant. In fact, the signature of Mrs. Bergstrom to the check and her indorsement thereon were forgeries, and it was drawn without her knowledge or consent. She received no part of the money paid thereon nor did any one on her account, and she had no knowledge of any of the circumstances attending the drawing, presentation or cashing of the check. On December 10, 1912, her bank book with Bergtsrom & Co. was balanced and her vouchers returned, including the paid check in question, when she discovered the forgery and thereupon notified her bankers thereof. Freund, whose name appears on the back of the check, drew his pay and left the employ of the Carlton House Company before defendant was notified of the forgery and he has not since been found despite diligent search. Demand has been made on defendant for the return of the $300, which has been refused.

Defendant relies upon the principle enunciated in Price v. Neal (3 Burr. 1354) and reiterated in National Park Bank v. Ninth, National Bank (46 N. Y. 77), where it was stated as follows: “For more than a century it has been held and decided, without question, that it is incumbent upon the drawee of a bill to be satisfied that the signature of the drawer is genuine, that he is presumed to know the handwriting of his correspondent; and if he accepts or pays a bill to which the drawer’s name has been forged, he is bound by the act, and can neither repudiate the acceptance nor recover the money paid. The doctrine was broached by Lord Raymond in Jenys v. Fawler (2 Strange, 946), the chief justice strongly inclining to the opinion that even actual proof of forgery of the name of the drawer would not excuse the defendants against their acceptance. In 1762 the principle was flatly and distinctly decided by the Court of King’s Bench in the leading case of Price v. Neal (3 Burrows, 1354), which was an action to recover money paid by the drawee to the holder of a forged bill. Lord Mansfield stopped the counsel for the defendant, saying that it was one of those cases that never could be made plainer by argument; that it was incumbent on the plaintiff to be satisfied that the bill drawn upon him was the drawer’s hand before he accepted and paid it, but it was not incumbent for the defendant to inquire into it. This case has been followed and the doctrine applied, almost without question or criticism, in an unbroken series of cases from that time to this, and it has been distinctly approved in very many cases which have not been within the precise range of the principle decided. (See Ancher v. Bank of England, 2 Doug. 639; Smith v. Mercer, 6 Taunt. 76; Wilkinson v. Johnson, 3 B. & C. 428; Cocks v. Masterman, 9 B. & C. 902; Cooper v. Meyer, 10 B. & C. 468; Sanderson v. Collman, 4 M. & G. 209; Smith v. Chester, 1 D. & E. R. 654; Bass v. Clive, 4 M. & S. 15; Bank of Commerce v. Union Bank, 3 Comstock, 230;

* Goddard v. Merchants Bank, 4 Comstock, 149;† Canal Bank v. Bank of Albany, 1 Hill, 287.) Cases have been distinguished from Price v. Neal, and its applicability to a transfer of a forged instrument, between persons -not parties to it, has not been extended to forgeries of indorsemen fcs or handwriting of parties to negotiable instruments, other than the drawer. But, as applied to the case of a bill to which the signature of the drawer is forged, accepted or paid by the drawee, its authority has been uniformly and fully sustained, and the rule extends as well to the case of a bill paid upon presentment, as to one accepted and afterward paid. (Bank of St. Albans v. Farmers & Mechanics’ Bank, 10 Vermont, 141; Levy v. Bank of the U. S., 4 Dallas, 234; Bank of U. S. v. Bank of Georgia, 10 Wheat. 333; Young v. Adams, 6 Mass. 182; Gloucester Bank v. Bank of Salem, 17 Mass. 41.) A rule so well established and so firmly rooted and grounded in the jurisprudence of the country ought not to be overruled or disregarded.” (See Daniel Neg. Inst. [6th ed.] §§ 1359, 1360.)

Plaintiff admits that this rule of law applies to the case of a holder in due course and for value, but claims that defendant being a party to the check itself, and it becoming commercial paper only after defendant had indorsed it and put it in circulation, defendant cannot stand in the position of a purchaser of commercial paper in due course. To support this contention plaintiff relies on National Bank of North America v. Bangs (106 Mass. 441) which held that the responsibility of the drawee,

who pays a forged check, for the genuineness of the drawer’s signature, is absolute only in favor of one who has not, by his own fault or negligence, contributed to the success of the fraud or to mislead the drawee; and if the payee took the check, drawn payable to his order, from a stranger or other third person, without inquiry, although in good faith and for value, and gave it currency and credit before receiving payment of it, the drawee might recover back the money paid. Of course the reasoning of that case does not apply to the case at bar, where the member of the drawee firm who honored the check was the husband of the drawee. His attention was called to the apparent forgery but he exercised his own judgment as to the genuineness of his wife’s signature and indorsement, not relying upon or being deceived by defendant’s indorsement as payee. Nor is the other case relied on by plaintiff (Title Guarantee & Trust Co. v. Haven, 196 N. Y. 487) authority in her favor, it holding that “ the rule, therefore, that he who accepts a negotiable, instrument to which the drawer’s name is forged is bound by the act and can neither repudiate the acceptance nor recover the money paid, has no application in behalf of one who has acquired the paper in the absence of any consideration whatever therefor either present or past. ” In the case at bar defendant paid full consideration for the check.

In any event the defendant was a holder of this check in due course under the Negotiable Instruments Law (Consol. Laws, chap. 38; Laws of 1909, chap. 43). Section 91 thereof provides:

“A holder in due course is a holder who has taken the instrument under the following conditions:

“ 1. That it is complete and regular upon its face;

“ 2. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

“3. That he took it in good faith and for value;

“4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.”

Defendant’s course answers each of these requirements, and it is, therefore, a holder in due’" course and comes within the general rule followed with practical unanimity ever since Price v. Neal (supra). That the payee of a check may be a holder in due course if he complies with the requirements of the Negotiable Instruments Law has been held, among other cases, in Boston Steel & Iron Co. v. Steuer (183 Mass. 140); Thorpe v. White (188 id. 333), and Brown v. Brown (91 Misc. Rep. 220).

It follows that plaintiff has no cause of action as assignee of the claim of Bergstrom & Co., the drawees of the check, nor has he any better standing as assignee of the claim of Mrs. Bergstrom, for she has sustained no loss, having her right of recovery of the $300 in question against Bergstrom & Co., and neither Freund, who presumably profited by the forgery, nor any other person concerned in the transaction by which the money was obtained from the defendant or from the drawees, was her agent nor "has she ever ratified their acts.

Judgment is, therefore, directed in favor of the defendant, with costs.

Clarke, P. J., Smith, Page and Davis, JJ., concurred.

Judgment ordered for defendant, with costs. Order to be settled on notice.

3 N. Y. 230.—[Rep.

4 N. Y. 149.—[Rep.