{ "id": 3335473, "name": "William A. Paine et al., Trading as Paine, Webber & Company, Appellees, v. Continental & Commercial National Bank of Chicago, Appellant", "name_abbreviation": "Paine v. Continental & Commercial National Bank", "decision_date": "1931-01-26", "docket_number": "Gen. No. 34,591", "first_page": "526", "last_page": "536", "citations": [ { "type": "official", "cite": "259 Ill. App. 526" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "52 Ia. 207", "category": "reporters:state", "reporter": "Iowa", "case_ids": [ 2322168 ], "opinion_index": 0, "case_paths": [ "/iowa/52/0207-01" ] }, { "cite": "100 Tenn. 187", "category": "reporters:state", "reporter": "Tenn.", "case_ids": [ 8536889 ], "opinion_index": 0, "case_paths": [ "/tenn/100/0187-01" ] }, { "cite": "120 A. 698", "category": "reporters:state_regional", "reporter": "A.", "opinion_index": 0 }, { "cite": "277 Pa. St. 81", "category": "reporters:state", "reporter": "Pa.", "case_ids": [ 1079562 ], "opinion_index": 0, "case_paths": [ "/pa/277/0081-01" ] }, { "cite": "311 Ill. 278", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5116242 ], "opinion_index": 0, "case_paths": [ "/ill/311/0278-01" ] }, { "cite": "193 N. Y. 26", "category": "reporters:state", "reporter": "N.Y.", "case_ids": [ 55780 ], "opinion_index": 0, "case_paths": [ "/ny/193/0026-01" ] }, { "cite": "294 Ill. 223", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5076056 ], "opinion_index": 0, "case_paths": [ "/ill/294/0223-01" ] }, { "cite": "192 Ia. 366", "category": "reporters:state", "reporter": "Iowa", "case_ids": [ 8645476 ], "opinion_index": 0, "case_paths": [ "/iowa/192/0366-01" ] }, { "cite": "211 N. W. 542", "category": "reporters:state_regional", "reporter": "N.W.", "opinion_index": 0 }, { "cite": "203 Ia. 833", "category": "reporters:state", "reporter": "Iowa", "case_ids": [ 2296472 ], "opinion_index": 0, "case_paths": [ "/iowa/203/0833-01" ] }, { "cite": "276 Pa. 212", "category": "reporters:state", "reporter": "Pa.", "case_ids": [ 1077566 ], "opinion_index": 0, "case_paths": [ "/pa/276/0212-01" ] }, { "cite": "101 Kan. 369", "category": "reporters:state", "reporter": "Kan.", "case_ids": [ 87743 ], "opinion_index": 0, "case_paths": [ "/kan/101/0369-01" ] }, { "cite": "246 Ill. App. 92", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 3338059 ], "opinion_index": 0, "case_paths": [ "/ill-app/246/0092-01" ] } ], "analysis": { "cardinality": 752, "char_count": 18436, "ocr_confidence": 0.518, "pagerank": { "raw": 5.298132930532853e-08, "percentile": 0.33309046203079795 }, "sha256": "8206e02f11790737fba763891e19b0d5f6dbdaa59f500d1274b4457e93f66e34", "simhash": "1:a84e209651b7d65a", "word_count": 3123 }, "last_updated": "2023-07-14T14:37:37.096016+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "William A. Paine et al., Trading as Paine, Webber & Company, Appellees, v. Continental & Commercial National Bank of Chicago, Appellant." ], "opinions": [ { "text": "Mr. Justice McSurely\ndelivered the opinion of the court.\nIn an action of assumpsit tried by the court, plaintiffs had judgment for $11,562.50, from which defendant appeals.\nAlthough the respective briefs give considerable space to a recital of the pleadings, yet we are not asked to pass on any point arising on them. The declaration in appropriate language alleged that defendant was obligated for money had and received by reason of its payment of its cashier\u2019s check upon a forged indorsement. Defendant\u2019s liability, if any, must be determined upon this action.\nThe facts were stipulated as follows: Plaintiffs are partners engaged in the stock brokerage business in Chicago and elsewhere. Defendant is a banking corporation carrying on business in Chicago. December 15, 1926, and for a long time prior and subsequent thereto plaintiffs maintained a checking account with defendant, carrying on numerous banking' transactions. During this time plaintiffs had in their employ in the Chicago office Joseph J. Collum as assistant cashier, whose duty it was to draft and receive checks on behalf of plaintiffs, enter the same upon the books and perform the usual duties of a cashier. He had no authority to draw checks for plaintiffs except to pay their obligations. No check drawn and signed by Collum was valid until it had been signed either by the resident partner or the office manager or Walter Brunton, the head bookkeeper of plaintiffs at the Chicago office. Brunton usually signed more than a hundred checks a day. The checks were drawn on the defendant bank, which had instructions to honor such checks. Collum also had authority to give directions in the name of plaintiffs to defendant to issue its cashier\u2019s checks.\nDecember 15, 1926, Collnm drew a check on plaintiffs\u2019 account with defendant, payable to the order of defendant, for $10,000, and signed the same and presented it along with other checks to Brunton for signature. Brunton signed the check. Collum thereupon sent the check by messenger to defendant bank with a written requisition in the name of plaintiffs for a cashier\u2019s check in the sum of $10,000, payable to the order of George Halas, a man in business in Chicago and a customer of plaintiffs. Brunton at this time did not know that Collum was acting dishonestly and did not know that the check was to be used for any other purpose than the payment of an obligation of plaintiffs. Brunton made no examination of his books to ascertaip the facts as to the Halas account but relied on Collum\u2019s representations concerning the same. The facts were that on that date plaintiffs were not indebted to Halas and did not know of Collum\u2019s intention to purchase the cashier\u2019s check. Defendant accepted the check in the regular course of business and charged it to plaintiffs\u2019 account and in consideration of the sum therein mentioned, $10,000, executed and delivered to plaintiffs\u2019 messenger its cashier\u2019s check for $10,000, payable to the order of George Halas. None of defendant\u2019s officers had any knowledge of Collum\u2019s secret intention to use said check for his own private purposes. This cashier\u2019s check was never delivered to Halas.\nWhen the messenger returned to plaintiffs\u2019 office with the cashier\u2019s check, it was given by Collum without the knowledge, consent or approval of any of plaintiffs and indorsed by Collum as follows: \u201cPay to order of George Gottschalk \u2014 George Halas\u201d and was sent by Collum to Gottschalk at Los Angeles, California. Upon receiving same Gottschalk indorsed it to John C. Feys & Associates, Inc., who were stock brokers of Los Angeles, California. The check was sent by Collum through G-ottschalk, without the knowledge of plaintiffs, to be applied and the same was applied by Feys & Associates as required margin on an account that was then being carried on by Collum in the name of Gottschalk with Feys & Associates.\nDecember 27, 1926, defendant paid the amount of said cashier\u2019s check to the holder thereof. It bore the indorsement above stated and the subsequent indorsements of John C. Feys & Associates, Inc., and others. Defendant now has possession of the cashier\u2019s check. George Halas never had possession of it nor any interest in it and has received no part of the proceeds of same. Plaintiffs have never delivered said cashier\u2019s check to anyone for any purpose and have received no part of the proceeds thereof.\nAbout June 1, 1927, plaintiff discovered the theft of the cashier\u2019s check and thereupon notified defendant that said check had been stolen from them and had not been delivered to nor indorsed by Halas and called upon defendant to repay said sum of $10,000 paid by plaintiffs to defendant for the cashier\u2019s check, which defendant refused to do.\nFrom December 1, 1926, to July 1, 1927, defendant rendered monthly statements to plaintiffs showing all deposits made by plaintiffs and all checks drawn against their account and with such statements returned to plaintiffs the cancelled checks. This included the check of plaintiffs for $10,000, dated December 15, 1926, with which' the cashier\u2019s check was purchased.\nDuring all the time between November 1, 1926, and May 14,1927, Collum was a trusted employee of plaintiffs and none of them had any knowledge of his unfaithfulness. About May 14, 1927, while plaintiffs\u2019 books were being audited, Collum voluntarily confessed to one of the resident partners of plaintiffs that he had embezzled large'sums of plaintiffs\u2019 funds during the past year and that he had for a time successfully concealed his defalcations by manipulating the records and accounts of plaintiffs. Prior to June 1, 1927, none of plaintiffs had any knowledge of the purchase of the cashier\u2019s check on December 15, 1926, payable to G-eorge Halas, and did not know that Collum had indorsed this with the name of Halas nor the use he had made of it nor that defendant had paid said check. Immediately upon discovering the facts plaintiffs notified defendant by letter and demanded payment. It being refused, this suit was commenced July 30, 1927.\nCollum confessed that he had embezzled a total amount of over $100,000, and offered to make restitution so far as he was able to do so, and thereupon delivered to plaintiffs certificates of stock in the Julian Petroleum Corporation. Plaintiffs had no knowledge of the existence of Collum\u2019s account with John C. Peys & Associates. When the certificates of the Julian Petroleum Corporation were delivered to plaintiffs by Collum, the shares were of unknown value and there was no market for them. Shortly thereafter the Julian Petroleum Corporation was placed in the hands of a receiver and new shares of stock were issued, plaintiffs exchanging the shares they had received from Collum for new shares. At this time plaintiffs knew that the cashier\u2019s check had been used by Collum to pay his obligations to John C. Feys & Associates. The actual value of the new shares of stock is unknown and its market value is continually fluctuating, although it was agreed that at the time of the stipulation its market value was approximately 15c a share. Plaintiffs\u2019 unrecouped losses as a result of Collum\u2019s embezzlement still exceed $100,000.\nObjections to certain paragraphs of the stipulation as irrelevant and immaterial were made by respective counsel, but we have set forth virtually all the facts contained in the stipulation.\nDefendant first asserts that the cashier\u2019s check was payable to bearer and hence it properly paid the same, regardless of the validity of the indorsement. Section 9 of the Negotiable Instruments Act (Cahill\u2019s Illinois Statutes, paragraph 29, chapter 98) provides:\n\u2018 \u2018 The instrument is payable to bearer: . . . When it is payable to the order of a person known by the drawer or maker to be fictitious or non-existent or of a living person not intended to have any interest in it.\u201d\nIt is conceded that George Halas, the payee in the cashier\u2019s check was a \u201cliving person not intended to have any interest in it.\u201d\nThe statute provides that an instrument is payable to bearer when \u201cthe drawer or maker\u201d knows that the payee is fictitious or non-existent or a living person not intended to have any interest in it. It is the intention of the maker of the instrument which controls its character with respect to whether or not it is payable to bearer.\nThis is the uniform construction of this statute. In National Surety Co. v. Hoisted Street State Bank, 246 Ill. App. 92 (writ of certiorari denied by the Supreme Court), the agent of an Insurance company caused drafts to be issued by the company to policyholders in payment of fictitious claims and instead of delivering them to the payees forged indorsements of the payees and procured the payment of the drafts by the bank. It was held that the fact that the agent did not intend to deliver the drafts to the payees but intended to use them in his own behalf did not make the payees \u2022 fictitious within the meaning of the Negotiable Instruments Law, for the drawer of the drafts, the Insurance company, assumed that the fictitious claims were genuine and that it was intended that the payees and no one else should receive the proceeds of same. In Grand Lodge v. Emporia National Bank, 101 Kan. 369, under somewhat similar circumstances, where a certificate was drawn payable to a fictitious beneficiary, it was held that the plaintiff did not know that the payee was a fictitious person but supposed she was an existing person and issued the order to that person, the opinion saying:\n\u201cWhen a negotiable instrument is knowingly issued to a fictitious person it is payable to bearer, because there is no one to endorse it; but when such an instrument is issued to a person supposed to be in existence, it is not knowingly issued to a fictitious person. When the instrument is not knowingly issued to a fictitious person it must be endorsed by the person to whom it is issued.\u201d\nTo the same effect is National Union Fire Ins. Co. v. Mellon Nat. Bank, 276 Pa. 212, where there is an extensive review of the authorities, the court holding that the fictitious persons \u201cmust be known to the drawer of the drafts to be such, before the result contended for could operate on the instruments.\u201d In McCornack v. Central State Bank, 203 Ia. 833, 211 N. W. 542, it was contended that, as the payees had no interest in the checks involved, they were payable to bearer. The court held otherwise, saying that a check payable to the order of a fictitious person with the knowledge of the drawer is p\u00e1yable to bearer, but: \u201cWhere the fact that it is payable to a fictitious person is unknown to the drawer, the bank upon which it is drawn, on paying it, is in no different position than where it pays a check payable to a real party upon a forged indorsement.\u201d\nIn American Express Co. v. Peoples Savings Bank, 192 Ia. 366, it was held that, where drafts were drawn to the order of a fictitious person, but the drawer did not know this, the drafts would not be payable to bearer. The intention of the drawer is the test. These and many other cases which might be cited concur in holding that, where the drawer of the draft does not know that the payee is fictitious or one who has no interest in the check, such check is not payable to bearer.\nIn the instant case it is manifest that defendant had no intention to issue its cashier\u2019s check payable to a person who had no interest therein. It must be presumed to have believed that George Halas, the payee, was interested in the proceeds of the check and was entitled to the same. It had no knowledge to the contrary, and therefore its check cannot be construed as payable to bearer.\nDefendant\u2019s cited cases do not conflict with this rule, but are different in the facts. A typical case is American Hominy Co. v. National Bank, of Decatur, 294 Ill. 223, where the unfaithful agent drew the drafts, not intending that the payees should have any interest therein, and himself forged the indorsements, and it was held that the plaintiff was estopped to deny the authority of its agent who was clothed with general powers. The language of the opinion recognizes the distinction between knowledge of the drawer of the instrument and lack of knowledge.\nDefendant\u2019s position seems to be that, because Collum had a secret intention to use plaintiff\u2019s check improperly in purchasing a cashier\u2019s check payable to a person who had no interest in the cashier\u2019s check, this secret intention in some way is the knowledge of defendant in issuing its cashier\u2019s check. We can see no legal connection between the acts. The situation would be just the same if Collum had improperly taken cash from the plaintiff\u2019s funds and bought the cashier\u2019s check with the same. It is immaterial how the cashier\u2019s check was purchased. Nothing that was done in issuance of plaintiff\u2019s check payable to the defendant had any legal connection with the payment by defendant of its cashier\u2019s check on a forged indorsement. A similar situation arose in Seaboard National Bank v. Bank of America, 193 N. Y. 26, where the agent used a check of the firm employing him to purchase a New York draft payable to the order of an existing firm but one which the agent intended should have no interest in the draft. It was there specifically held that the fraudulent act of issuing the check with which to purchase the draft was wholly unrelated to the improper act of the bank in paying its draft upon a forged indorsement ; that there was no legal connection between the two transactions.\nConsiderable argument is presented with reference to the authority of Collum. It may be admitted that, when he ordered the cashier\u2019s check he did not pretend to order it for himself but for the plaintiffs, and that defendant knew that he had authority to use plaintiffs\u2019 funds for the use of plaintiffs. The purchase of the cashier\u2019s check was wholly within the scope of Collum\u2019s authority. Defendant could not be expected to know as to the account between plaintiffs and their customer, Halas, and whether or not such account showed a balance due Halas was immaterial so far as defendant was concerned.\nThere is no merit in defendant\u2019s claim that the loss was occasioned by plaintiffs \u25a0 negligence in not earlier discovering Collum\u2019s defalcations. For aught that appears to the contrary, the first wrongful act done by Collum was his fraudulent representation which induced Brunton to sign plaintiffs\u2019 check for the purpose of securing the cashier\u2019s check from defendant. There is no evidence that the prior payments made by Collum to Feys & Associates were improperly made. The most that the stipulation shows is that certain payments were made, although the year is not given, but where the money was procured with which Collum made such payments does not appear.\nIt is said that plaintiffs ratified the' acts of their employee, Collum, by claiming title to the cashier\u2019s check. We do not agree with this. We repeat, plaintiffs cannot complain of the purchase of the cashier\u2019s check. They must be held to have purchased it and thereby became the owners of it; but, because the principal may be held by one act of his agent, he is not obliged to adopt a wrongful act for which he is in no way responsible. Independent Oil Men\u2019s Ass\u2019n v. Fort Dearborn Nat. Bank., 311 Ill. 278. In Morris & Bailey Steel Co. v. Bank of Pittsburgh, 277 Pa. St. 81, 120 A. 698, the court said: \u201cWe must assume Leder (the agent) had authority to draw and deliver the original checks in favor of plaintiff and, as the cashier\u2019s checks issued in lieu of them were intended for plaintiff, it had a right to ratify the action of Leder up to the time he received them. This did not operate as a ratification of his subsequent wrong in indorsing the checks, his conduct in this respect being repudiated both before and by this suit. \u2019 \u2019 To the same effect are Farmer v. People\u2019s Bank, 100 Tenn. 187; Robinson Machine Works v. Vorse, 52 Ia. 207.\nWhen plaintiffs accepted the Julian Petroleum Corporation stock from Collum in partial satisfaction of his defalcations, they had no knowledge that he had stolen the cashier\u2019s check and had forged the indorsement of the payee, thereby using it to discharge his obligation to John C. Feys & Associates in connection with the purchase of stock. It was not until two weeks after the certificates of stock were delivered to them that they learned of the purchase and use of the cashier\u2019s check. The record shows that the value of the stock turned over to them does not appreciably make good the losses suffered by Collum\u2019s defalcations.\nFeys & Associates were not holders in due course. They could not have collected against the bank, if the bank had discovered that the payee\u2019s name was forged and had refused payment for this reason. Feys & Associates\u2019 remedy would be against Grottschalk, the prior indorser, and it is reasonable to presume that defendant has its recourse against the prior indorsers.\nDefendant did not render a statement to plaintiffs between the time the cashier\u2019s check was purchased and the time it was cashed, so that plaintiff had no opportunity to know the facts of the transaction until long afterwards. Furthermore, such statements would not have disclosed the payment upon the forged indorsement.\nDeduced to its simplest elements, this is a case where the defendant issued its cashier\u2019s check payable to a certain payee who, as far as the bank knew, was interested in its proceeds. In due time the check was returned to the bank for payment with a forged indorsement of the name of the payee. Without making any inquiry as to the genuineness of this indorsement the bank paid the check. While counsel have extensively argued and presented numerous decided cases, the view we take of the essential elements of the case leads inevitably to only one conclusion, namely, that the plaintiffs\u2019 loss was occasioned by the mistake of the bank in paying the check. Under such circumstances the bank must make good the loss. The judgment is therefore affirmed.\nAffirmed.\nHatchett, P. J., and O\u2019Connor, J., concur.", "type": "majority", "author": "Mr. Justice McSurely" } ], "attorneys": [ "Loucks, Eckert & Peterson, for appellant.", "Poppenhusen, Johnston, Thompson & Cole, for appellees ; Floyd E. Thompson, of counsel." ], "corrections": "", "head_matter": "William A. Paine et al., Trading as Paine, Webber & Company, Appellees, v. Continental & Commercial National Bank of Chicago, Appellant.\nGen. No. 34,591.\nHeard in the first division of this court for the first district at the October term, 1930.\nOpinion filed January 26, 1931.\nLoucks, Eckert & Peterson, for appellant.\nPoppenhusen, Johnston, Thompson & Cole, for appellees ; Floyd E. Thompson, of counsel." }, "file_name": "0526-01", "first_page_order": 560, "last_page_order": 570 }