B-155599 December 11, 1964
B-155599: Dec 11, 1964
Which were forwarded to our Office at your request by letter of October 21. Are returned herewith. Alleging that he did not endorse the check and that the endorsement in his name was not made with his consent or by agreement or understanding with anyone. Who at the time was married to and living at the same address as the claimant. The check is endorsed "M.W. & D.G. Were divorced May 24. Stating as follows: "After hearing oral argument herein and taking the same under advisement I have now decided that the defendant's demurrer is well taken. I believe there is no duty owing from the defendant to the plaintiff in this instance. That any recourse that he has is by collecting from the United States Government and having them fall back on the Peoples Trust & Savings Bank.
B-155599 December 11, 1964
Mrs. Kathryn O'Hay Granham Treasure of the United States
Dear Mrs. Granaham:
Subject: Check No. 41,174,066 dated March 21, 1961, for $432.48, symbol 3100, drawn to the order of M.W. & D.G. Taylor
Subject check and your file pertaining thereto, which were forwarded to our Office at your request by letter of October 21, 1964, reference CC-424 JK, signed by Special Assistant Treasurer I.L. Band, are returned herewith.
The file furnished to our Office discloses that on April 26, 1962, co-payee Malcolm W. Taylor filed a claim form TUS 6133C with your office claiming one-half of the amount of the check, alleging that he did not endorse the check and that the endorsement in his name was not made with his consent or by agreement or understanding with anyone. Investigation established that the check had been negotiated by co-payee Dorothy G. Taylor, who at the time was married to and living at the same address as the claimant. The check is endorsed "M.W. & D.G. Taylor by Dorothy G. Taylor." Dorothy G. Taylor, now using the name Dorothy M. Minton, executed affidavits that she endorsed the check as shown and negotiated it at the request of her former husband, Malcolm W. Taylor, and that she gave the entire proceeds to him. Malcolm W Taylor executed an affidavit that he did not authorize Dorothy G. Taylor or anyone else to receive and endorse his name to the check and cash it, and that he did not receive any of the proceeds therefrom. Mr. And Mrs. Taylor separated May 13, 1961, and were divorced May 24, 1962.
On December 3, 1962, your office advised Mr. Taylor that the dispute over the check and the disposition of its proceeds appeared to be a matter of adjustment between him and his former wife. Mr. Taylor thereupon filed suit against the cashing bank, Peoples Trust and Savings Bank, Boonville, Indiana, alleging that his former wife had cashed the check without his endorsement or permission. The court sustained the defendant bank's demurrer, stating as follows:
"After hearing oral argument herein and taking the same under advisement I have now decided that the defendant's demurrer is well taken. I believe there is no duty owing from the defendant to the plaintiff in this instance, and that any recourse that he has is by collecting from the United States Government and having them fall back on the Peoples Trust & Savings Bank. I believe there is a misjoiner of parties."
Mr. Taylor then renewed his demand upon your office.
Your office attempted reclamation from the presenting bank, Old National Bank in Evansville, Indiana. After considerable correspondence you were advised by the bank's attorney that the prior endorser, Peoples Trust & Savings Bank, intended to resist collection of the amount requested and since ultimate liability, if any rests with that bank, his client was unable to make refund without first obtaining the amount involved from that bank. The file indicates that the Peoples Trust & Savings Bank bases its resistance on the allegation that Dorothy G. Taylor had been authorized by Malcolm W. Taylor to endorse his name on the check. However, there is nothing in the file to indicate that the bank has any evidence to support that allegation other than the affidavit executed by Dorothy G. Taylor on June 13, 1962, long after the check was cashed. There is no indication as to what, if any, proof of identify and authority was required by the bank at the time the check was cashed.
The file shows that the matter was referred to the Department of Justice on September 3, 1964, "for such action as may be deemed indicated for the protection of the interests of the United States." The Department of Justice returned the matter to the Treasury Department by letter of September 11, 1964, which stated in pertinent part that:
"* * * your letter was not intended as a request for the institution of a suit and that no suit against the Government based upon this transaction is presently pending."
"In the circumstances, the problems presented appear to be administrative rather than involving litigation and accordingly no action on our part appears required at this time."
It is apparent therefrom that the Department of Justice expressed no opinion as to the merits of the case.
By letter of September 18, 1964, your office advised Mr. Taylor that you could take no further action in the matter, but that he could appeal your decision to the Comptroller General of the United States if he so desired. Mr. Taylor followed your suggestion and the matter is now before our Office for consideration.
It has generally been held that the endorsement of the names of both payees of a check by one of them is invalid and passes no title to the endorsee in the absence of authority from the other payee. Virginia-Carolina Joint Stock Land Bank v. First & Citizens' National Bank of Elisabeth City, 150 SE 34: First National Bank of Garden City v. Daniel, 20 F. 2d. 488; Crahe v. Mercantile Trust & Savings Bank, 129 NE 120. Also, section 312 of Title 19 of the Indiana statutes in force at the time the check was negotiated (19-312, Burns Indiana Statutes, Annotated, 1950 Replacement) provides as follows:
"Where an instrument is payable to the order of two 2 or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others."
In view thereof, it is apparent that Mrs. Taylor's action in endorsing her husband's name to the check constituted a forgery and passed no title to the Peoples Trust & Savings Bank, unless she had authority from her husband to so endorse. Thus, the endorsing banks appear liable for the amount of the check paid out under their guarantee of prior endorsements unless, of course, they can establish Mrs. Taylor's specific authority to endorse for her husband. In the circumstances the burden of proof is upon the parties alleging and relying on the purported authority to endorse. The sole evidence presented to support the allegation of such authority consists of the two affidavits signed by Mrs. Taylor (or Minton) stating that she was so authorized. These affidavits are counterserved by the affidavit signed by Malcolm W. Taylor, which is entitled to equal consideration, and which categorically denies Mrs. Taylor's allegations. It seems apparent that the record presented to our Office does not adequately support the allegation of authority. Names, reclamation should be continued for the full amount of the check.
If in the course of reclamation claimant's former wife makes refund of the amount of the check to the bank, she and the claimant should be given appropriate advice to the effect that the check represents the amount refundable as an overpayment on a joint income tax return filed by a husband and wife and neither has any separate interest in the amount thereof except such as they may elect to take by agreement between themselves. Upon receipt of such agreement, the amount may be disbursed in accordance therewith. In the event that the former wife does not make refund and Mr. Taylor and the bank agree as to a division, disbursement may be in accordance therewith.
Joseph Campbell Comptroller General of the United States