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Ocean Accident and Guarantee Corp. v. Lincoln National Bank

Decided: April 12, 1934.

OCEAN ACCIDENT AND GUARANTEE CORPORATION, LIMITED, PLAINTIFF-APPELLANT,
v.
LINCOLN NATIONAL BANK, DEFENDANT-RESPONDENT



On appeal from the Supreme Court.

For the appellant, Isidor Kalisch.

For the respondent, Louis Auerbacher, Jr.

Perskie

The opinion of the court was delivered by

PERSKIE, J. This appeal brings up for review a judgment of nonsuit in favor of the defendant-respondent and against plaintiff-appellant.

In this case the appellant seeks to recover from the respondent bank the money paid out by the latter on a draft of the former because of an endorsement of the payee's name by some one other than the payee, after the bank in the ordinary course of its business forwarded the draft to the appellant (drawer) and received the money paid out by it.

The facts are as follows: On November 29th, 1930, a draft in the sum of $600 was drawn by one Julius M. Shoemaker, on the Ocean Accident and Guarantee Corporation, Limited, a corporation (hereinafter called the plaintiff) to be presented for acceptance by it. The payee's name was Joseph Johnson. Julius M. Shoemaker, the drawer of the draft, was employed by the plaintiff and had authority to draw drafts on plaintiff. He frequently did so (making workmen's compensation payments) in furtherance of the plaintiff's business. Joseph Johnson was one who was receiving such payment from the plaintiff. He was known to both plaintiff and Shoemaker. The latter presented the draft to the Lincoln National Bank, a corporation (hereinafter called the defendant) with the name of Joseph Johnson endorsed thereon, together with the additional words "O. K. Julius M. Shoemaker" written at right angles to the place for regular endorsements. Joseph Johnson did not endorse the instrument. Defendant paid the $600 to Shoemaker, as it had done on other occasions in lesser amounts, at the "O. K." of Shoemaker, and several days later presented it through usual banking channels to plaintiff. The instrument appears to have a stamp of the defendant on it guaranteeing all prior endorsements. Proof, however, as to its authenticity is challenged. The draft was paid and the $600 received by the defendant. Later, about February 27th, 1931, plaintiff notified defendant that the purported endorsement of Joseph Johnson was a forgery and made demand for reimbursement of the $600. This was refused. Suit followed. At the conclusion of the plaintiff's

proofs defendant made a motion for a nonsuit and the trial judge granted it.

The sole ground of appeal is that in this ruling the trial judge erred.

This court has heretofore considered this case on the review of an order striking out the complaint. 111 N.J.L. 58; 166 A. 157. On the motion to strike, affidavits were presented by each party. This court, in an opinion by Mr. Justice Lloyd, reversing the action of the court below, held that "* * * the signature of the payee having been forged it was necessary for the bank to show facts which precluded the plaintiff from setting up forgery as a defense." The basis for this ruling is contained in section 23 of our Negotiable Instruments act (3 Comp. Stat., p. 3738; Pamph. L. 1902, ch. 84, p. 588), which provides as follows:

"Where a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party, against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority."

In the case supra, the court, on page 60, further held:

"The authority of Rudd to speak for the plaintiff is not averred in the defendant's affidavit, and his endorsement of Shoemaker's right to sign claim drafts established nothing, and particularly is this true in view of the denial of such right by the affidavit presented on behalf of the plaintiff. Nor could ratification of the action of Shoemaker be inferred in the face of the denial of all knowledge by plaintiff of his fraudulent acts.

"For both of these propositions our cases are abundant and uniform, the most recent being that of Passaic-Bergen Lumber Co. v. United ...


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