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Complainant while in the employ of a brick company received personal injuries, and the company executed to him a note of $1,750 in satisfaction of his claim to damages. The note was made payable June 1, 1915, which was the date on which complainant would arrive of age. On October 16, 1914, W. A. Murray, the father of complainant, with the knowledge and authority of the latter, sold the note to Thompson, indorsing the name of the son without apprising Thompson of the fact that he himself was not the payee. The proceeds of the note were deposited to complainant's account in bank, and later were invested in a saloon business in the name of the father and son, and in a short time lost. There was no actual fraud on the part of complainant in the transaction with Thompson.

The chancellor decreed that complainant was entitled to disaffirm and recover; but the Court of Civil Appeals reversed the ruling. The last-named court was of opinion that complainant would have been entitled to the relief awarded by the chancellor under the rules of law in force before the passage of the Negotiable Instruments Law; but that said act, by its section 22, so changed the law as to deny complainant the remedy sought. The section thus relied on is as follows: "The indorsement or assignment of the instrument by a corporation, or by an infant, passes the property therein, notwithstanding that from want of capacity the corporation or infant may incur no liability thereon."

It was to make certain and uniform the law on this point that section 22 was embodied in the Negotiable Instruments Act. In stipulating that the indorsement of the instrument by an infant "passes property therein," it was meant to provide that the contract of indorsement is not void, and that his indorsee has the right to enforce payment from all parties prior to the infant indorser. The incapacity of the minor cannot be availed of by prior parties.

It was not intended to provide that the indorsee should become the owner of the instrument by title indefeasible as against the infant, or to make the act of indorsement an irrevocable one.

The act does not concern the right of such an indorser to disaffirm under the rules of the law of infancy. The words "passes the property therein," if given a meaning that would deny that right in respect of a contract of indorsement, would deprive the infant of the right to reinvest in himself the title to the instrument against a holder who had knowledge of the indorser's infancy. The quoted words are not qualified so as to save his rights in such assumed case. It must be admitted that the Legislature did not intend any such radical and grossly inequitable departure from a settled and salutary rule of law. The common-law rule is that the purchaser and indorsee of such a note is not a bona fide holder as against an infant indorser, and that the latter may disaffirm and recover the note from the possession of the former, who takes with constructive notice of the incapacity.

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The chancellor made a proper disposition of the case in his decree. The decree of the Court of Civil Appeals is therefore reversed, and that of the chancellor affirmed.

(f) NO TITLE TO THE INSTRUMENT

If the party suing has no title to the instrument upon which action is brought, the party sued may successfully defend. In such case the party in possession of the instrument is not even a holder. Clearly the party in possession who in all other respects is a holder in due course cannot recover if he has no title to the instrument.3

SECTION 4.-RIGHT OF THE DRAWEE TO RECOVER MONEY PAID TO THE HOLDER UNDER MISTAKE

The preceding sections dealt with the special rights of the holder in due course against parties primarily liable on the instrument, free from personal defenses and equities of ownership. The rights of the holder in due course against parties conditionally liable on the instrument-the drawer of a bill of exchange and indorsersis the subject of the next chapter. The following sections, just as the preceding sections, are devoted to the consideration of a series of special problems growing out of the relation of the holder in due course, and the acceptor, and the drawee after payment of the bill. Stated broadly, the question is: Upon whom must the loss fall-the holder, or the acceptor, or drawee, who has paid-of an instrument bearing the forged name of the drawer or the forged name of a special indorsee?

The execution and delivery of a bill of exchange creates no legal rights in the holder against the drawee. The effect of the transaction is to confer a legal power upon the holder, either to create a legal duty in the drawee to the drawer to honor the instrument or to create a legal right of reimbursement in the drawee against the drawer, if the bill is honored. The holder possesses no rights of his own against the drawee. Before the adoption of the Negotiable Instruments Law some courts held that the delivery of a bill of exchange operated as an assignment of the amount specified therein, but the majority of courts held that such transaction was not to be interpreted as an assignment. The majority rule was adopted in the Negotiable Instruments Law.

N. I. L., Section 127. A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same.

N. I. L., Section 189. A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank and the bank is not liable to the holder unless and until it accepts or certifies the check.

3 See chapter II, section 3, as to the circumstances under which a party in possession will be deemed not to possess the title.

These sections merely provide that the drawing and delivery of a bill or check does not "of itself" operate as an assignment. It is still possible for the drawer to execute an assignment of his right against the drawee, but appropriate words, in addition to those which usually appear on the bill, must be employed to produce this effect.

If the name of the drawer has been forged, and the instrument. negotiated to a holder in due course, we have already seen that in: a suit against the drawer the defense of forgery is available against the innocent holder. Moreover, we have seen that if the instrument is accepted or paid, the drawee, in the absence of an estoppel does not have the right to charge the drawer's account. While the drawer of a check, in certain situations, does owe a greater duty to the drawee than to holders of the instrument, this duty is not so extensive as to include the obligation to prevent forgery. The drawee having accepted or paid an instrument bearing the forged signature of the apparent drawer must bear the loss unless there is a right in the drawee to recover the money paid to the innocent holder, or to successfully defend a suit brought by such holder against the drawee upon its acceptance. May the drawee recover the money so paid, and may an acceptor successfully resist payment? These are the questions raised in the cases presented in this section.

Certain analogous situations are also to be considered: First, where the check or other bill of exchange bears the genuine signature of the drawer, but is accompanied by a negotiable document of title bearing the forged signature of the carrier or other bailee; second, where the bill of exchange bears the genuine signature of the drawer, but the face of the bill has been materially altered, as, for example, by raising the amount; third, where the signature of the drawer is genuine, but the drawer accepted or paid under mistake as to the existence of funds or credit of the drawer with the drawee. As far as the right of the drawee to charge the drawer's account is concerned, that depends upon whether the bill bears the genuine signature of the drawer. If the signature is genuine, the drawee may charge the drawer's account; and this would be true, even though the drawer had no credit with the drawee at the time of the payment. If a genuine bill has been altered, the drawee may charge the drawer, as a rule, only for the amount of the bill as originally issued. The question involved in the following cases narrows down, therefore, to the inquiry: May the drawee recover money paid to an innocent holder of a bill of exchange: (1) When the drawer's name was forged; (2) where the drawer's name was genuine but a negotiable document of title to goods accompanying the same was forged; (3) where the drawer's signature was genuine but the face of the bill had been altered prior to acceptance or payment; and (4).where the drawer's name was genuine, but at the time of the acceptance or payment the drawer had no credit with the drawee?

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The section of the Negotiable Instruments Law, which is involved is as follows:

Section 62. The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits (1) the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument, and (2) the existence of the payee and his then capacity to indorse.

NATIONAL BANK OF ROLLA v. FIRST NAT, BANK OF SALEM. (Springfield Court of Appeals, Missouri, 1910, 141 Mo. App. 719, 125 S. W. 513.)

Action by the National Bank of Rolla against the First National Bank of Salem. Defendant had judgment, and plaintiff appeals. GRAY, J. * * The plaintiff's petition alleges that both parties, at the dates mentioned in the petition, were banking corporations, and on the 26th day of September, 1907, defendant, through its correspondent, presented to plaintiff for payment a check for the sum of $42, purporting to be drawn on the plaintiff by one H. W. Lenox, in favor of one J. B. Ragan, and purporting to be indorsed by the said Ragan, and which said check had been duly indorsed by the defendant, and previous indorsements thereon in writing, guaranteed by the defendant, and relying upon the indorsement of said check by the defendant and defendant's said guaranty, and believing that by reason thereof it was genuine cashed said check and paid the amount thereof to the defendant; that after it had cashed said check and paid the proceeds to defendant it discovered that the said check was forged, and thereupon it caused due notice to be given to defendant in writing, and demanded of it the payment of the amount of said check, and that defendant refused to pay the same, and asked for judgment for the amount of $42. It will be noticed that no allegation of negligence on the part of the defendant in cashing the check for Ragan is made in the petition, and the instruction asked by the plaintiff and refused by the court presented the issue as alleged in the petition. In other words, the question of the negligence of the defendant in cashing the check for Ragan was not submitted either in the petition or the instruction. There are but two reasons alleged for a reversal of the judgment, and they are: Because the court erred in refusing an instruction asked by the plaintiff; and, because under all the evidence in the case, the judgment should have been for the plaintiff.

The question presented here may be submitted in the following language: If B. representing himself to be A. presents to C.'s bank a check purporting to be signed by D., payable to A., and drawn on E.'s bank, of which D. is a customer, and C.'s bank cashes the check and sends it for collection to E., who, when it is presented, pays the same and charges it to D.'s account, and at the time of said payment E. has reason to believe that the signature to the check is not D.'s, can E. sue C. for the amount of the check, upon learning that D.'s name was forged to the check, and showing that C. had sent the check for collection, and that the money paid by E. at the time it cashed the check

had been received by C.? The question has been answered in the negative many times in the courts of this country. Since the case of Price v. Neal, 3 Burrows, 1355, decided by Lord Mansfield in 1762, the general rule has been that when the drawee of a check or bill pays the same to a bona fide holder, such drawee cannot recover the money back upon discovering such check or bill to be a forgery. Many of the text-writers on negotiable instruments declare that when a bank, upon which a check is drawn, pays it upon the forged signature of the drawer, the money can be recovered as paid under mistake of fact. Story on Promissory Notes, §§ 379-529; 2 Parsons on Notes and Bills, 80. Others, while recognizing a different rule, incline to the opinion that the one just cited is the most equitable. 2 Daniel on Negotiable Instruments, c. 48, § 13. Whatever the text-writers may think and declare the law to be, a long line of cases sustain the proposition that as between the drawee and the holder of a check the drawee bank is to be deemed the place of final settlement where all prior mistakes and forgeries can be corrected and settled at once, henceforth and forever more; and, if overlooked and payment is made, the chapter is closed and there can be no recovery over. Price v. Neal, 3 Burrows, 1355. * *

Judge Allen, in Bank v. Bank, 46 N. Y. loc. cit. 80, 7 Am. Rep. 310, states the rule in the following clear language: "For more than a century it has been held and decided, without question, that it is incumbent upon the drawee of the bill to be satisfied that the signature of the drawer is genuine; that he is presumed to know the handwriting of his correspondent; and, if he accepts or pays a bill to which the drawer's name has been forged, he is bound by the act, and can neither repudiate the acceptance nor recover, the money paid." In Price v. Neal, which was a similar action, Lord Mansfield stopped the counsel for the defendant, saying that it was one of those cases that never could be made plainer by argument; that it was incumbent upon the plaintiff to be satisfied that the bill drawn upon him was the drawer's hand, before he accepted and paid it. In the case of Ellis v. Trust Co., supra, 4 Ohio St. 628, 64 Am. Dec. 610, the doctrine as announced in Price v. Neal, is reviewed, approved, and a long list of authorities cited in support thereof, and among these authorities will be found the case of the Northwestern National Bank v. Bank of Commerce, 107 Mo. 402, 17 S. W. 982, 15 L. R. A. 102. This doctrine is founded by many courts, upon the thought that the drawee bank is conclusively presumed to know the signatures of its depositors. Upon examination of the authorities, this, however, is too narrow a basis. courts that declare the rule as above stated put it upon the theory that the rule is demanded by the necessities of business in these times when the currency of the commercial world is composed so largely of checks and drafts. There is another line of decisions that state the rule as follows: The drawee of a forged check, who has paid the same, may, upon discovery of the forgery, recover the money paid from the party who received the money, even though the latter was a good faith holder, provided the latter has not been misled or prejudiced by the drawee's failure to detect the forgery, and the burden of showing that he has been misled or prejudiced by the drawee's mistake rests upon him who claims the right to retain the money. First National Bank of Lisbon v. Bank of Wyndmere, 15 N. D. 299, 108 N. W. 546, 10 L. R. A. (N. S.) 49, 125 Am. St. Rep. 588. ***

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