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ORIENTAL BANK v. GALLO
Factual and Procedural Background
This action was brought by the Oriental Bank to recover from the defendant, its depositor, the amount of a check deposited by the defendant, on the ground that the indorsement immediately prior to that of the defendant was a forgery. The check, drawn on the Nassau National Bank and certified by it, was indorsed to the order of Antonio Cona, purportedly by him, and then indorsed by the defendant. Upon deposit, the Oriental Bank credited the defendant's account and received payment through the clearing house with the indorsement guaranteed according to custom.
Subsequently, the Brooklyn Savings Bank discovered the indorsement of Antonio Cona was forged. The Nassau National Bank repaid the Brooklyn Savings Bank and sued the Oriental Bank to recover on its guaranty of the indorsements. The Oriental Bank settled by paying the Nassau Bank and then demanded repayment from the defendant, offering to return the check. The central dispute, properly submitted to the jury, was whether the indorsement of Antonio Cona was forged. Evidence showed the passbook and check had been fraudulently presented by a person other than the true depositor Antonio Cona, leading to the conclusion that the indorsement was forged and the defendant was liable for repayment.
Legal Issues Presented
- Whether the indorsement of Antonio Cona on the check was a forgery.
- Whether the defendant, by indorsing the check and depositing it, warranted the genuineness of the prior indorsement and became liable upon discovery of forgery.
- Whether the plaintiff was obliged to await judgment in the suit brought against it before making payment to the Nassau National Bank.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Story Promissory Notes (7th ed.), § 135 | Defendant's indorsement is a warranty of the genuineness of prior indorsements. | Supported the court's conclusion that the defendant was liable upon discovery of forgery. |
| Turnbull v. Bowyer, 40 N.Y. 456 | Liability arising from forged indorsements and warranty by subsequent indorsers. | Reinforced the principle that the defendant must make good the amount after forgery was found. |
| Bank of British North America v. Merchants' Nat. Bank of N.Y., 91 N.Y. 106 | Liability of parties guaranteeing indorsements in the banking context. | Applied to confirm plaintiff's right to recover from defendant. |
| Lennon v. Grauer, 159 N.Y. 433 | Principles regarding forged indorsements and warranties by endorsers. | Used to support the court's ruling on defendant's liability. |
| Packard v. Windholz, 88 App. Div. 365; affd., 180 N.Y. 549 | Enforcement of liability for forged indorsements and warranty obligations. | Confirmed the legal basis for holding the defendant liable to repay the plaintiff. |
Court's Reasoning and Analysis
The court analyzed the facts surrounding the check's indorsement and the circumstances under which the defendant received and deposited it. The evidence demonstrated that the individual who presented the passbook and received the check was not the true depositor Antonio Cona, and that the indorsement purporting to be his was forged. The defendant's indorsement constituted a warranty that the prior indorsement was genuine. Upon discovery of the forgery, the defendant became liable to repay the amount received. The court rejected any argument that the plaintiff's payment to the Nassau National Bank was voluntary or premature, reasoning that the payment was compelled by the circumstances and did not relieve the defendant of liability.
Holding and Implications
The court's judgment and order were affirmed.
The direct effect of this decision is that the defendant is held liable to repay the Oriental Bank the amount of the check, as his indorsement implied a warranty of the genuineness of the prior indorsement which was forged. The plaintiff was justified in settling the related suit without awaiting final judgment. The opinion does not establish any new legal precedent beyond affirming existing principles regarding forged indorsements and warranty liability.
HIRSCHBERG, P.J.:
This action is brought by the Oriental Bank to recover from the defendant, its depositor, the amount of a check deposited by the latter in the bank, upon the ground that the indorsement immediately prior to that of the defendant is a forgery.
The check is the check of the Brooklyn Savings Bank, drawn upon the Nassau National Bank, certified by the latter and indorsed to the order of Antonio Cona, purporting to be indorsed by Antonio Cona, and then indorsed by the defendant. On the deposit of the check by the defendant with the Oriental Bank, the plaintiff, the amount of the check was credited to the defendant's account, and in due course the check was paid to the plaintiff through the clearing house by the Nassau National Bank, the indorsement being guaranteed in accordance with custom.
The Brooklyn Savings Bank afterwards discovered that the indorsement of Antonio Cona on the check was forged. The Nassau National Bank thereupon on demand repaid the amount of the check to the Brooklyn Savings Bank and thereafter sued the plaintiff to recover such amount on its guaranty of the indorsements made at the time of the payment through the clearing house. The plaintiff paid the Nassau Bank the amount of the check, with the costs and attorney's fees in settlement of the action, and thereupon demanded from the defendant repayment of the money and duly offered to return the check to him. The only disputed question in the case, and which was properly submitted to the jury, and I think correctly decided by them, was whether or not the signature of Antonio Cona in the indorsement on the check was a forgery. While this question was submitted as a disputed one, the evidence all points to the conclusion that the indorsement was forged. It appears that in the month of January, 1903, Antonio Cona, a resident of No. 273 Tillary street in Brooklyn, in company with another who owned the money, made a deposit of $600 in the Brooklyn Savings Bank. The money was deposited in the name of Antonio Cona, but the passbook was taken by the owner of the money. In some manner not explained, the passbook subsequently came into the possession of another person named Alphonse Cono, but sometimes called Antonio Cona or Tony Cona, by whom the book was presented to the savings bank in November, 1903, and a demand made for the money. The officers of the savings bank could not recognize this individual as the depositor, and, having some doubt as to his identity, concluded on consultation to deliver to him a check payable to the order of Antonio Cona for the amount of the deposit, with interest, in return for the delivery of the passbook. This was accordingly done, and the person to whom the check was so given applied shortly afterward to the defendant, a private banker, and asked him to cash it. The defendant required an identification of the individual, as he was personally unknown to him, and on being assured by a neighbor that he was Antonio Cona, did cash it on the indorsement by this individual of the name of Antonio Cona, and then deposited it with the plaintiff as already stated.
The depositor, Antonio Cona, was a witness on the trial. It was proved beyond dispute that he was not the person to whom the check was given by the savings bank, and that he was not the person who indorsed the check to the defendant and received the money on it from him. The defendant, who testified in his own behalf, made no claim as a witness that the depositor whom he saw as a witness for the plaintiff was the one from whom he received the check. I do not see how the jury, under the circumstances, could have reached any other conclusion than that the check was procured by a fraud perpetrated by the individual who presented the passbook to the savings bank, and that the indorsement by which the defendant was induced to cash the check was a forgery. The right of the plaintiff to recover under the circumstances is undoubted. The defendant's indorsement was a warranty that the prior indorsement was genuine, and upon discovery of the forgery he became immediately liable to make good the amount he had received. (Story Prom. Notes [7th ed.], § 135; Turnbull v. Bowyer, 40 N.Y. 456; Bank of British North America v. Merchants' Nat. Bank of N.Y., 91 id. 106; Lennon v. Grauer, 159 id. 433; Packard v. Windholz, 88 App. Div. 365; affd., 180 N.Y. 549.)
The plaintiff was not obliged to allow the suit brought against it by the Nassau National Bank to proceed to judgment before making the payment which it did. In making such payment it did only what it could have been compelled to do, assuming that the disputed signature was a forgery. The signature proving to be a forgery, such payment is not to be regarded as voluntary in any sense which would operate to relieve the defendant from his liability to restore the money which he received from the plaintiff upon his implied guaranty of the genuineness of the forged indorsement.
The judgment and order must be affirmed.
WOODWARD, JENKS and HOOKER, JJ., concurred; GAYNOR, J., concurred in result.
Judgment and order affirmed, with costs.
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