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Board of Education of Township of Jefferson v. National Union Bank of Dover

Decided: September 16, 1938.

THE BOARD OF EDUCATION OF THE TOWNSHIP OF JEFFERSON, PLAINTIFF-RESPONDENT,
v.
NATIONAL UNION BANK OF DOVER, DEFENDANT-APPELLANT



On appeal from the Supreme Court.

For the defendant-appellant, Samuel C. Meyerson.

For the plaintiff-respondent, King & Vogt (Elmer King and Robert H. Schenck).

Bodine

The opinion of the court was delivered by

BODINE, J. The appellant, a banking corporation, appeals from a judgment in favor of the plaintiff, a board of education of one of the townships of this state. The bank had charged against the account of the board of education from August 13th, 1933, to February 16th, 1937, eighty-three school board checks, the signatures of the payees being forgeries. The judgment was for the aggregate of these checks, with interest, from the date each was improperly charged against the account. It was stipulated that:

"The payees named in all of disputed checks or warrants were individuals residing in the township of Jefferson or elsewhere in the county of Morris, who at various times had had dealings with the Board. As to the checks or warrants in suit, the Board of Education was not indebted to any of them, and none of them was entitled to receive the money

for which each check had been drawn, and none of them knew of them or had any interest in them. They were all regular as to form, and the signatures of the president and clerk of the board and of the custodian of the school fund were genuine. The Board never authorized or knew of the issuance of the checks or warrants in suit. The clerk and custodian were employes of the Board of Education. The president was a member of the Board of Education. The clerk of the board forged the names of the payees in the checks in question, and subsequently deposited most of these checks to his personal account in the defendant bank. The said clerk and the president of the board were subsequently indicted on a series of indictments arising out of the said forgeries, and on one of the cases which was tried, the clerk was convicted of forgery, and the president was convicted of conspiracy to defraud the Board of Education from which conviction an appeal has been taken. Other indictments against both the clerk and the president covering other transactions are still undisposed of. Each month from January 1st, 1935, defendant bank rendered a monthly statement to the plaintiff, which was delivered and received by the custodian, and with the said statements there was returned monthly the checks with forged endorsement of payee which had been paid during the current months. No objection to the correctness of the account was made at any time until March 10th, 1937, when the suspicions of the custodian having been aroused, she called the attention of the board's attorney to the checks in question, with the result that he communicated verbally with the officers of the bank, and on April 8th, 1937, wrote on behalf of the Board of Education demanding that it restore the Board's account and reimburse the board for the loss. The bank refusing to do this, the suit was brought."

"Generally a bank is liable to the drawer of a check for paying it on a forged endorsement, in the absence of estoppel, contributory negligence, or ratification, or unless the money has reached the intended person. Since, under the contract between a bank and its depositor, the bank is bound to pay checks only to persons designated by the depositor, supra,

section 340, it becomes the duty of the bank to its depositor, at its peril, to determine the genuineness of the endorsements on his checks and pay only where they are genuine." 9 C.J.S. p. 734.

This doctrine of law prevails in this state. Harter v. Mechanics Bank, 63 N.J.L. 578; Pratt v. Union National Bank, 79 Id. 117; Pannonia Building and Loan v. West Side Trust Co., 93 Id. 377.

It was argued that the checks or warrants in question were bearer instruments and passed title on delivery, because they ...


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