entrusted the checks to an expressman for a delivery.
In the case of Shepard & Morse Lumber Company v. Eldridge, 171 Mass. 516, 51 N.E. 9, 41 L.R.A. 617, 68 Am.St.Rep. 446, the court said that the holder of a check is not deprived of his rights against a drawer by merely negligently delivering that check to a clerk who due care would have told him was dishonest, and thus giving the clerk an opportunity to commit the crime.
In these two cases it was held that the negligence in issuing the checks was not a defense: Los Angeles Investment Company v. Home Savings Bank, 180 Cal. 601, 182 P. 293, 5 A.L.R. 1193; American Sash and Door Company v. Commerce Trust Company, 332 Mo. 98, 56 S.W.2d 1034. Also it is held that it is not negligence to fail to discover the fraud at an earlier date; United States v. National Bank of Commerce, 9 Cir., 205 F. 433; Insurance Company of North America v. Fourth National Bank, D.C., 12 F.2d 100.
Now there are a number of cases cited by counsel for the defendants which support their views. I think some of these can be distinguished but some of them cannot. I will discuss them thereafter.
Also it is perfectly true that there are a number of cases decided on the proposition that it is negligence to fail to discover the fraud.
However, I think this court is bound by the other views, as announced by the Court of Appeals and the cases I mentioned.
Now, as to the question of equitable estoppel, I think I have read all the cases which were cited on this subject in the brief of defendants and after careful consideration of them, I am of the opinion that this is not a case in which the rule applies.
The checks here involved were not payable to Stitely, they were delivered to him for the purpose of delivery to the payees; they could not be used by him in their condition, but forgery of the names of the payees was necessary. Now, many of the cited cases, the cases cited by the defendants, I think can be distinguished on satisfactory grounds, though it is true that in many cases, the decision was in part based on equitable estoppel, and thus supports the contention of defendants.
It seems to me that the language used in National Safe Deposit, Savings and Trust Company v. Hibbs, 229 U.S. 391, 396, 33 S. Ct. 818, 820, 57 L. Ed. 1241, shows the extent of the rule. All of you gentlemen are familiar with the facts in that case. There the court said: "Here one of two innocent persons must suffer and the question at last is, Where shall the loss fall?It is undeniable that the broker obtained the stock certificates, containing all the indicia of ownership and possible of ready transfer, from one who had possession with the bank's consent, and who brought the certificates to him, apparently clothed with the full ownership thereof by all the tests usually applied by businessmen to gain knowledge upon the subject before making a purchase of such property. On the other hand, the bank, for a legitimate purpose, with confidence in one of its own employees, intrusted the certificates to him, with every evidence of title and transfer ability upon them. The bank's trusted agent, in gross breach of his duty, whether with technical criminality or not is unimportant, took such certificates, thus authenticated with evidence of title, to one who, in the ordinary course of business, sold them to parties who paid full value for them. In such case we think the principles which underlie equitable estoppel place the loss upon him whose misplaced confidence has made the wrong possible. Applying this principle, we think the Court of Appeals was right in affirming the judgment of the Supreme Court."
Now, it seems to me the distinction is that there, when the dishonest employee got the stock certificates, it was unnecessary for him to do anything else -- he apparently had the title and he did not forge anything.
In this case there was this other act and it seems to me that the line has been drawn there.
In the present case, Stitely got possession of the checks not payable to bearer. However, forgery was necessary to permit him to avail himself of the proceeds; first, the actual forgery was necessary and then an implied false representation to each bank which cashed the check was necessary.
I think the facts of the present case do not bring it within this rule as announced by the Supreme Court.
Now, in many of these cases relied on, and which are applicable, to some extent to the defense of negligence, there were other grounds on which the decision could be predicated, but it is true that in many of these cases, the court relied upon this defense alone, or a combination of the two grounds. I think in some it is put squarely on this one ground of equitable estoppel.
In many of those cases the checks were payable to bearer; in some cases the imposter rule was applicable; in some cases the wrongdoers were agents with authority to draw instruments which would bind their principals and they exceeded that authority. In others, the relation of bank and depositor existed, and the depositor failed to discover the forgeries within a reasonable time. In other cases, while the relation of depositor and bank may not have existed formally, nevertheless, the bank had some very definite business relation with plaintiff, and was being used by plaintiff in the performance of its business.
The case cited by defendants which is more like this than any of the others is United States v. Commercial National Bank, Law No. 77050 in the Supreme Court of the District of Columbia, decided by Justice Bailey. It is contended by plaintiff and I think with some force, that as to all but one check, that decision might have been grounded upon the impostor theory. However, Justice Bailey put his decision squarely on the ground of equitable estoppel and did not mention the other ground.
Counsel for defendants have called attention to the respect to which a decision by Justice Bailey is entitled.I realize that just as strongly as they do, perhaps better than they. I am acquainted with his great learning, his ability, sound judgment, and his infinite care in making a decision, and it is with great hesitation that I have found myself unable to agree with his view in that case.
In this matter, involving the question of the recovery of money received under an honest mistake of fact, there are a number of cases which hold that until there has been a request for repayment, interest is not payable, and I have reached the conclusion that interest should not be allowed before that date.
Now, as I recall the decisions of the Court of Appeals on the question of a motion of this kind, you have the right, if you so desire, to say anything or add anything to your statement heretofore made.
Mr. Hoover: "I do not have anything factual to add."
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