Goldmann, Lewis and Carton. The opinion of the court was delivered by Carton, J.A.D.
[99 NJSuper Page 539] Plaintiffs Gast appeal from a judgment in favor of defendant insurance company based upon
a jury verdict of no cause for action. They attribute the result to erroneous instructions the trial judge gave the jury.
Plaintiffs brought the action to recover a fire loss of $3,435.92 under an insurance policy issued by defendant, covering premises which plaintiffs had contracted to sell to Mark and Gertrude Hanna. The policy, which had been procured by the Hannas pursuant to their obligation under the contract, insured them "as purchasers under the contract as their interest may appear," and, under its standard mortgagee clause, provided that "loss, if any, on building items shall be payable to Stuart and Elizabeth Gast."
On January 7, 1965 a fire damaged the property and the amount of the loss was agreed upon at $3,435.92 through Sidney Rosenbaum and Co., a public fire adjuster. On March 31 defendant issued a draft in that amount, drawn upon itself, and stating on its face "payable thru Berks County Trust Co., Reading, Pa. upon acceptance by American Casualty Companies."
The draft was payable to the Hannas, the Gasts and Sidney Rosenbaum and Co. According to the date stamped on the back of the instrument, it was presented to the bank on April 29, 1965. The proceeds of the draft were paid to persons other than plaintiffs, who never received any of the proceeds or any payment on the loss from defendant. The Hannas, defaulting on the contract, absconded, leaving the property in its damaged condition. Presumably they were responsible for the forging of plaintiffs' signatures as indorsers.
Defendant denied that it had any liability by reason of the forgery of the indorsements on the draft and, in addition, alleged that plaintiffs had contributed to the forgery by their negligence and were thus precluded from recovery. At the conclusion of the testimony in the course of which the facts recited above were established without substantial dispute, the trial judge instructed the jury that plaintiffs had an insurable interest under the policy and charged the applicable law as follows:
"* * * A drawee is liable for payment to a person whose name had been forged unless the person was subsequently negligent in contributing to the forgery. Therefore, the factual problem, members of the jury, in this problem reduces itself to one of alleged negligence on the part of the defendant, in their manner of payment and too, the alleged contributory negligence on the part of the plaintiffs under the facts of this case, and these factual issues, of course, will be for your determination. * * *" (Emphasis supplied)
We conclude that the charge as given was erroneous, both on the issue of defendant's liability as drawer-drawee to plaintiffs on the forged indorsements and on the issue of plaintiffs' contributory negligence.
The underscored language is a misconception of the law regarding the elements of defendant's liability. The draft was drawn upon defendant and was executed by defendant. As both drawer and drawee defendant had the responsibility to make payment to the named payees on the instrument. That the draft was "payable thru Berks County Trust Co., Reading, Pa." upon acceptance does not alter that responsibility. See N.J.S. 12A:3-120.
The nature of defendant's obligation is set forth in the statute. It is not ...