A-17138, FEBRUARY 8, 1927, 6 COMP. GEN. 513

A-17138: Feb 8, 1927

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WHICH WAS FRAUDULENTLY INDORSED AND NEGOTIATED BY SALLIE DEVORE. THE FACTS SHOW THAT THE AMOUNT RECOVERED FROM THE FRAUDULENT INDORSER WAS DEDUCTED FROM AWARD OF INSURANCE IN HER FAVOR AND IS BEING HELD IN THE APPROPRIATION "MILITARY AND NAVAL INSURANCE. THE REFUND OF ONE OF THE AMOUNTS IS AUTHORIZED. IT IS SIMPLY A QUESTION WHETHER REFUND SHOULD PROPERLY BE MADE TO THE PERSON WHO FRAUDULENTLY INDORSED AND NEGOTIATED THE CHECK OR TO THE INDORSING BANK. THE INDORSING BANK GUARANTEED THE GENUINENESS OF ALL PRIOR INDORSEMENTS AND WAS LIABLE FOR THE PROCEEDS OF THE CHECK IN CASE OF FORGERY. THIS CASE IS TO BE DISTINGUISHED FROM CASES WHERE RECOVERY OF THE AMOUNTS OF FORGED CHECKS HAS BEEN MADE ONLY FROM THE INDORSING BANK AND NO RECOVERY HAS BEEN MADE FROM THE FRAUDULENT INDORSER OR OTHER PERSON.

A-17138, FEBRUARY 8, 1927, 6 COMP. GEN. 513

CHECKS - FORGED INDORSEMENT - DISPOSITION OF TWO RECOVERIES WHERE RECLAMATION OF THE AMOUNT OF A FORGED GOVERNMENT CHECK HAS BEEN MADE BOTH FROM THE FRAUDULENT INDORSER AND FROM THE INDORSING BANK, REFUND SHOULD BE MADE TO THE INDORSING BANK RATHER THAN TO THE FRAUDULENT INDORSER.

DECISION BY COMPTROLLER GENERAL MCCARL, FEBRUARY 8, 1927:

THE FARMERS' NATIONAL BANK OF NORWAY, S.C., HAS REQUESTED REVIEW OF SETTLEMENT NO. 0166583, DISALLOWING ITS CLAIM FOR $60, THE AMOUNT OF CHECK NO. 3090168, DRAWN APRIL 28, 1919, BY C. E. GRAY, SYMBOL 26156, TO THE ORDER OF JOHN INABINET, WHICH WAS FRAUDULENTLY INDORSED AND NEGOTIATED BY SALLIE DEVORE, THE AMOUNT OF THE CHECK HAVING BEEN RECLAIMED BY THE UNITED STATES FROM BOTH THE FRAUDULENT INDORSER AND CLAIMANT BANK.

THE FACTS SHOW THAT THE AMOUNT RECOVERED FROM THE FRAUDULENT INDORSER WAS DEDUCTED FROM AWARD OF INSURANCE IN HER FAVOR AND IS BEING HELD IN THE APPROPRIATION "MILITARY AND NAVAL INSURANCE, VETERANS' BUREAU," FOR PROPER DISPOSTION, AND THAT THE AMOUNT RECOVERED FROM THE BANK HAS BEEN DEPOSITED AND A CHECK FOR THE AMOUNT THEREOF HAS BEEN ISSUED TO THE RIGHTFUL PAYEE, JOHN INABINET.

THE UNITED STATES CLEARLY HAD THE RIGHT TO RECOVER THE AMOUNT FROM EITHER THE FORGER OR THE INDORSING BANK AND TO PROCEED AGAINST EACH CONCURRENTLY. BUT AS RECOVERY HAS BEEN EFFECTED IN EACH INSTANCE, THE REFUND OF ONE OF THE AMOUNTS IS AUTHORIZED, AND IT IS SIMPLY A QUESTION WHETHER REFUND SHOULD PROPERLY BE MADE TO THE PERSON WHO FRAUDULENTLY INDORSED AND NEGOTIATED THE CHECK OR TO THE INDORSING BANK.

CERTAINLY REFUND SHOULD NOT BE MADE TO THE FRAUDULENT INDORSER WHO WOULD THEN RECEIVE $60 TO WHICH NOT ENTITLED. THE INDORSING BANK GUARANTEED THE GENUINENESS OF ALL PRIOR INDORSEMENTS AND WAS LIABLE FOR THE PROCEEDS OF THE CHECK IN CASE OF FORGERY. BUT SINCE RECOVERY BY THE GOVERNMENT HAS BEEN OTHERWISE EFFECTED FROM THE PRIOR INDORSER, THERE WOULD APPEAR TO BE NO REASON WHY REFUND OF THE AMOUNT THUS OTHERWISE RECOVERED MAY NOT BE MADE TO THE BANK. THE BANK MAY BE CONSIDERED AS STANDING IN A POSITION SOMEWHAT SIMILAR TO THAT OF A SURETY UNDER A CONTRACT AND AS SUBROGATED TO THE RIGHTS OF THE UNITED STATES AGAINST THE PRIOR INDORSER.

THIS CASE IS TO BE DISTINGUISHED FROM CASES WHERE RECOVERY OF THE AMOUNTS OF FORGED CHECKS HAS BEEN MADE ONLY FROM THE INDORSING BANK AND NO RECOVERY HAS BEEN MADE FROM THE FRAUDULENT INDORSER OR OTHER PERSON. SUCH A CASE IT WOULD BE A QUESTION BETWEEN THE BANK AND THE FORGER, WHICH ADJUSTMENT MAY NOT BE UNDERTAKEN BY THE GOVERNMENT. IN OTHER WORDS, THERE IS NO LEGAL LIABILITY ON THE GOVERNMENT TO COLLECT FROM THE FORGER FOR THE BENEFIT OF THE INDORSING BANK.

UPON REVIEW THERE IS CERTIFIED DUE CLAIMANT THE AMOUNT OF $60 PAYABLE FROM THE APPROPRIATION ,MILITARY AND NAVAL INSURANCE, VETERANS' BUREAU.' CHECK FOR THE AMOUNT ALLOWED WILL ISSUE IN DUE COURSE.