A-65965, JANUARY 18, 1936, 15 COMP. GEN. 631

A-65965: Jan 18, 1936

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CHECKS - RECLAMATION - FORGED ENDORSEMENTS RECLAMATION IN CONNECTION WITH CHECKS INVOLVING FORGED ENDORSEMENTS ISSUED BY THE UNITED STATES SUBSEQUENT TO DATE OF DEATH OF THE PAYEE AND BEARING NOTICE ON THE BACK THAT THEY WERE VOID IN CASE OF THE PAYEE'S DEATH PRIOR TO DATE OF ISSUE. SHOULD BE PROCEEDED WITH NOTWITHSTANDING THE PROTEST OF THE ENDORSERS FROM WHOM REFUND IS CLAIMED THAT THEY HAVE BEEN PREJUDICED BECAUSE RECLAMATION WAS NOT COMMENCED UNTIL LONG AFTER THE ISSUANCE OF THE CHECKS. THE DATE OF THE CHECKS NOT BEING THE CONTROLLING FACTOR AND RECLAMATION HAVING BEEN INSTITUTED WITHIN A REASONABLE TIME AFTER NOTICE OF THE PAYEE'S DEATH WAS RECEIVED BY THE GOVERNMENT. AS FOLLOWS: REFERENCE IS MADE TO THE FOLLOWING CHECKS IN FAVOR OF ALEXANDRA POGORZELSKI: CHART DATE NUMBER DATE AMOUNT DRAWER SYMBOL PAID 8293792 .

A-65965, JANUARY 18, 1936, 15 COMP. GEN. 631

CHECKS - RECLAMATION - FORGED ENDORSEMENTS RECLAMATION IN CONNECTION WITH CHECKS INVOLVING FORGED ENDORSEMENTS ISSUED BY THE UNITED STATES SUBSEQUENT TO DATE OF DEATH OF THE PAYEE AND BEARING NOTICE ON THE BACK THAT THEY WERE VOID IN CASE OF THE PAYEE'S DEATH PRIOR TO DATE OF ISSUE, SHOULD BE PROCEEDED WITH NOTWITHSTANDING THE PROTEST OF THE ENDORSERS FROM WHOM REFUND IS CLAIMED THAT THEY HAVE BEEN PREJUDICED BECAUSE RECLAMATION WAS NOT COMMENCED UNTIL LONG AFTER THE ISSUANCE OF THE CHECKS, THE DATE OF THE CHECKS NOT BEING THE CONTROLLING FACTOR AND RECLAMATION HAVING BEEN INSTITUTED WITHIN A REASONABLE TIME AFTER NOTICE OF THE PAYEE'S DEATH WAS RECEIVED BY THE GOVERNMENT.

COMPTROLLER GENERAL MCCARL TO THE TREASURER OF THE UNITED STATES, JANUARY 18, 1936:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF AUGUST 17, 1935, AWS-C, AS FOLLOWS:

REFERENCE IS MADE TO THE FOLLOWING CHECKS IN FAVOR OF ALEXANDRA POGORZELSKI:

CHART

DATE

NUMBER DATE AMOUNT DRAWER SYMBOL PAID 8293792 -------- 8/4/15 $36.00 GUY O. TAYLOR -- 62-035 8 14-15 9060788 -------- 11/4/15 36.00

DO DO 11-12-15 9770778 -------- 2/4/16 36.00 DO DO 2-18-16(AND 97 OTHERS)

WITH REFERENCE TO YOUR LETTER OF AUGUST 10, COPY ATTACHED, PLEASE BE INFORMED THAT RECLAMATION HAS BEEN COMPLETED ON ALL CHECKS WITH THE EXCEPTION OF CHECKS NO. 8238792, NO. 9060788, AND NO. 9770778.

INASMUCH AS THE ENDORSERS ARE PROTESTING THE ACTION OF THE TREASURER IN REQUESTING REFUND ON CHECKS NO. 8293792, NO. 9060788, AND NO. 9770778, CLAIMING THEY HAVE BEEN PREJUDICED BY THE LAPSE OF TIME, THE THREE CHECKS AND FILE PERTAINING THERETO ARE FORWARDED TO YOU, AND ADVICE IS REQUESTED AS TO WHETHER, IN VIEW OF THE DECISION OF THE COURT IN THE CASE OF LADD AND TILTON BANK V. UNITED STATES, 30 FED./2ND) SERIES) 334, THE TREASURER SHOULD INSIST UPON RECLAMATION.

THE THREE CHECKS REFERRED TO WERE DRAWN IN PAYMENT OF PENSION UNDER PENSION CERTIFICATE NO. 731247, ISSUED TO ONE ALEXANDRA POGORZELSKI. THE BASIS OF EVIDENCE SUBMITTED SHOWING THAT THE PAYEE HAD DIED ON OCTOBER 19, 1911--- THUS SUGGESTING THAT THE SAID THREE CHECKS (AMONG OTHERS) HAD BEEN NEGOTIATED WITHOUT THE GENUINE ENDORSEMENT OF THE PAYEE'S NAME--- YOU WERE AUTHORIZED IN LETTER OF THIS OFFICE, DATED MARCH 7, 1935, TO RECLAIM THE AMOUNT OF THESE CHECKS. IT NOW APPEARS THAT RECLAMATION PROCEEDINGS ARE RESISTED PRINCIPALLY FOR THE REASON THE DELAY IN THE MATTER HAS PREJUDICED THE RIGHTS OF THE ENDORSERS THEREON, AND YOU THEREFORE REQUEST TO BE ADVISED WHETHER RECLAMATION PROCEEDINGS SHOULD BE INSISTED UPON IN VIEW OF THE RULING IN LADD AND TILTON BANK V. UNITED STATES, 30 FED./2ND) 334.

THE CITED DECISION, SO FAR AS HERE MATERIAL, HELD AS FOLLOWS (QUOTING FROM PARS. 2 AND 4 OF THE SYLLABI):

WHERE GOVERNMENT, AFTER DISCOVERING FORGERY OF INDORSEMENTS ON VICTORY NOTES FOR WHICH IT HAD THERETOFORE EXCHANGED COUPON BONDS, FAILED TO NOTIFY BANK EFFECTING EXCHANGE OF SUCH FORGERIES FOR PERIOD OF APPROXIMATELY 19 MONTHS, RESULTING IN INJURY TO BANK BY REASON OF INSOLVENCY AND LIQUIDATION OF BANK FROM WHOM IT HAD RECEIVED NOTES, THE GOVERNMENT'S FAILURE TO GIVE TIMELY NOTICE OF FORGERY CONSTITUTED A DEFENSE, NOTWITHSTANDING THAT RIGHT OF ACTION RESTED ON IMPLIED WARRANTY.

THOUGH MERE RIGHT OF ACTION IS NOT AFFECTED BY DELAY IN DEMAND OR NOTICE, DEFENDANT, OTHERWISE LIABLE BECAUSE OF MONEY OR PROPERTY OBTAINED ON FORGED BILL, NOTE, OR OTHER INSTRUMENT, MAY DEFEND ON GROUND THAT DELAY IN NOTICE OR DEMAND AFTER DISCOVERY OF FORGERY HAS WORKED INJURY.

IT WILL BE NOTED THAT THE COURT DECISION, SUPRA, TURNS ON THE POINT OF THE FAILURE OF THE GOVERNMENT TO NOTIFY THE PROPER PARTIES "AFTER DISCOVERING FORGERY OF ENDORSEMENTS.' IN THE INSTANT CASE IT DOES NOT APPEAR THAT THE GOVERNMENT WAS APPRISED OF THE PAYEE'S DEATH UNTIL SOMETIME IN 1932. THE GOVERNMENT, THEREFORE, HAD NO KNOWLEDGE OF ANY IRREGULARITY IN THE NEGOTIATION OF THE SUBJECT CHECKS UNTIL THAT TIME. DECEMBER 1934 AFTER IT HAD BEEN DEFINITELY CONCLUDED FROM THE INVESTIGATION CONDUCTED INTO THE MATTER THAT THE CHECKS HAD BEEN CASHED ON FORGED ENDORSEMENTS, THE ENDORSING BANKS WERE PROMPTLY ADVISED IN THE MATTER OF THE FORGED ENDORSEMENTS. CONSIDERING THE THOROUGHNESS WITH WHICH THE GOVERNMENT MUST INVESTIGATE THIS CLASS OF CASES BEFORE DEFINITE ACTION MAY BE TAKEN THEREON IT IS READILY APPARENT THAT THE GOVERNMENT MAY NOT BE CHARGED WITH SUCH LACHES HERE AS TO BRING THE CASE WITHIN THE MEANING OF THE COURT DECISION, SUPRA.

THE ENDORSING BANKS' CONTENTION, THEREFORE, THAT THEIR RIGHTS HAD BEEN DEFINITELY PREJUDICED BECAUSE OF THE TREASURY DEPARTMENT'S FAILURE TO DETECT THE ALLEGED DISCREPANCY IN THE ENDORSEMENTS OVER A LAPSE OF 19 YEARS IS WITHOUT LEGAL JUSTIFICATION SINCE THE GOVERNMENT MAY NOT PROCEED IN SUCH MATTERS UNTIL NOTICE IS FIRST RECEIVED IN RESPECT OF THE MATTER--- THE DATE OF THE CHECK NOT BEING THE CONTROLLING FACTOR.

IT APPEARS TO BE THE FURTHER VIEW OF THE LAST ENDORSING BANKS THAT THEY SHOULD BE RELIEVED OF LIABILITY IN THE MATTER BECAUSE OF THEIR INABILITY TO COLLECT FROM PRIOR ENDORSERS. IN THIS CONNECTION SEE 14 COMP. GEN. 221, WHEREIN IT WAS HELD, IN PART, AS FOLLOWS, QUOTING FROM THE FIRST PARAGRAPH OF THE SYLLABUS:

AN ENDORSING BANK WHICH GUARANTEES ALL PRIOR ENDORSEMENTS ON A CHECK WHERE THE PAYEE'S ENDORSEMENT THEREON HAS BEEN FORGED IS LIABLE AS A GUARANTOR ON AN ORIGINAL UNDERTAKING, IN ADDITION TO THE LIABILITY ARISING UNDER THE IMPLIED WARRANTIES ATTENDANT UPON A GENERAL ENDORSEMENT, AND THE ENFORCEMENT OF THE LIABILITY ARISING UNDER SUCH ORIGINAL UNDERTAKING IS NOT CONTINGENT OR DEPENDENT UPON THE ABILITY OF THE GUARANTOR TO COLLECT FROM ANY PRIOR PARTY ON THE CHECK.

IT IS FURTHER SUBMITTED THAT THERE IS LIABILITY ON THE ENDORSERS OF THE CHECKS HERE ON THE BASIS OF THE NOTICE APPEARING ON THE BACK OF EACH CHECK --- SUCH NOTICE READING AS FOLLOWS:

THIS CHECK IS VOID IN CASE OF THE PAYEE'S DEATH, * * *, PRIOR TO THE DATE OF ITS ISSUE.

IT IS PAYABLE ONLY WHEN PERSONALLY INDORSED IN INK, BY THE PAYEE IN THE PRESENCE OF TWO RESPONSIBLE PERSONS WHO CAN WRITE AND WHO SHALL ACT AS ATTESTING AND IDENTIFYING WITNESSES. SIGNATURES BY MARK SHOULD READ THUS: "HIS X MARK" OR "HER X MARK" WITH THE NAME OF THE PAYEE WRITTEN EXACTLY AS IT IS ON THE FACE OF THE CHECK.

SINCE THE GOVERNMENT IS NOT ALWAYS PROMPTLY NOTIFIED OF THE DEATH OF A BENEFICIARY, SUCH AS WAS THE CASE HERE, IT IS NOT DIFFICULT TO UNDERSTAND WHY A CHECK MAY BE ISSUED BY THE GOVERNMENT IN FAVOR OF A DEAD PERSON. SOME RESPONSIBILITY, THEREFORE, RESTS WITH CASHING ENDORSERS IN THIS RESPECT, AS THE FACTS DISENTITLING ONE TO PAYMENT ARE MORE PARTICULARLY WITHIN THEIR KNOWLEDGE THAN THE GOVERNMENT. OBVIOUSLY, THEREFORE, THE PAYEE HAVING DIED PRIOR TO THE ISSUANCE OF THE CHECKS HERE, THERE COULD HAVE BEEN NO ENDORSEMENT SUCH AS THE NOTICE ON THE BACK OF THE CHECKS, SUPRA, REQUIRES, HENCE THE ENDORSING BANKS ARE SEVERALLY LIABLE FOR THE BREACH OF THEIR ENDORSEMENT CONTRACT ON THE INVOLVED CHECKS GUARANTEEING THE GENUINENESS OF ALL PRIOR ENDORSEMENTS.

FOR THE REASONS HEREIN STATED YOU ARE ADVISED THAT RECLAMATION PROCEEDINGS ON THE INVOLVED CHECKS SHOULD BE INSISTED UPON. THE RECLAMATION FILE IS RETURNED FOR YOUR FURTHER ACTION IN THIS RESPECT.