B-42518, B-42519, OCTOBER 30, 1944, 24 COMP. GEN. 325

B-42518, B-42519, OCTOBER 30, 1944, 24 COMP. GEN. 325

CHECKS - FORGERIES - FICTITIOUS-PAYEE CHECKS WHERE AN UNMARRIED ENLISTED MAN, IN APPLYING FOR AN ALLOWANCE UNDER THE SERVICEMEN'S DEPENDENTS ALLOWANCE ACT OF 1942 FOR A WIFE, SPECIFIED A NAME PURPORTING TO BE THAT OF HIS ALLEGED WIFE WHEN, IN FACT, THERE EXISTED NO SUCH PERSON BEARING THAT NAME, IT MUST BE REGARDED THAT A CHECK IN PAYMENT OF THE FRAUDULENTLY CLAIMED ALLOWANCE ISSUED TO THE ORDER OF THE PAYEE SO SPECIFIED WAS PAYABLE TO A FICTITIOUS OR NONEXISTENT PERSON, WAS NOT SUSCEPTIBLE OF GENUINE INDORSEMENT, AND THAT THE INDORSEMENT THEREOF IN THE NAME OF THE FICTITIOUS WIFE BY THE ENLISTED MAN'S ACCOMPLICE WHO RECEIVED IT WAS A FORGERY, SO THAT THE CASHING BANK--- WHICH GUARANTEED FORGED INDORSEMENTS--- MUST BE HELD LIABLE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE TREASURY, OCTOBER 30. 1944:

THERE HAS BEEN CONSIDERED YOUR LETTER OF SEPTEMBER 28, 1944, AS FOLLOWS:

REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 9, 1944, TO THE TREASURER OF THE UNITED STATES WITH WHICH WERE FORWARDED RECLAMATION CASES OF MRS. MARGARET GRYLLS AND MRS. VIVIAN HART.

IN THE CASE OF MRS. MARGARET GRYLLS YOU REQUESTED THAT THE AMOUNT OF THE 4 CHECKS DESCRIBED BELOW BE RECOVERED FROM THE ENDORSERS:

CHECK NO. DATE AMOUNT DRAWER SYMBOL

569,616 12/2/42 $50.00 W. L. JOHNSON----- 211,240

1,560,470 1/5/43 50.00 W. L. JOHNSON----- 211,240

2,759,207 2/1/43 50.00W. L. JOHNSON----- 211,240

5,547,834 3/1/43 50.00 W. L. JOHNSON----- 211,240

AS TO THE CASE OF MRS. VIVIAN HART YOU REQUESTED THAT THE AMOUNT OF THE FOLLOWING 5 CHECKS BE RECOVERED FROM THE ENDORSERS:

CHECK NO. DATE AMOUNT DRAWER SYMBOL

639,063 11/2/42 $50.00 T. G. MCCULLOCH--- 210,219

585,257 12/1/42 50.00 W. L. JOHNSON----- 211,240

1,575,988 1/4/43 50.00 W. L. JOHNSON----- 211,240

2,774,394 2/1/43 50.00 W. L. JOHNSON----- 211,240

5,562,627 3/1/43 50.00 W. L. JOHNSON----- 211,240

YOUR DECISION IN THE CASE OF MRS. MARGARET GRYLLS STATED IN PART:

"IN THE PRESENT SITUATION, HOWEVER, NO CHANGE HAS BEEN MADE IN THE INSTRUMENT AND IT WAS THE DUTY OF THE BANK WHICH CASHED THESE CHECKS, TO DETERMINE THE GENUINENESS OF THE INDORSEMENT OF THE PERSON WHO PRESENTED THE CHECKS TO IT. WASHINGTON LOAN AND TRUST COMPANY V. UNITED STATES, SUPRA. THE DRAWER, WHETHER IT BE THE UNITED STATES OR ANOTHER, IS NOT CHARGEABLE WITH THE KNOWLEDGE OF THE SIGNATURE OF THE PAYEE, CLEAR FIELD TRUST COMPANY V. UNITED STATES, SUPRA (318 U.S. 363); UNITED STATES V. NATIONAL EXCHANGE BANK OF PROVIDENCE, 214 U.S. 302.'

THE FOLLOWING IS QUOTED FROM THE CASE OF MRS. VIVIAN HART:

"ANY INDORSEMENT OF THESE CHECKS BY ONE HOLDING HERSELF OUT TO BE THE PAYEE THEREOF WOULD BE A FORGERY. WASHINGTON LOAN AND TRUST CO. V. UNITED STATES 134 F.2D 59.'

THESE CHECKS ARE BASED ON APPLICATIONS FRAUDULENTLY MADE BY THE ALLOTTERS UNDER THE SERVICEMEN'S DEPENDENTS ALLOWANCE ACT (56 STAT. 381). IN THIS CONNECTION YOUR ATTENTION IS INVITED TO THE CASE OF UNITED STATES V. LIBERTY INSURANCE BANK ( W.D. KY. 1928), 26 F. (2D) 493, IN WHICH THE FACTS WERE SUBSTANTIALLY IDENTICAL TO THOSE IN THE TWO CASES WHICH ARE THE SUBJECT OF THIS COMMUNICATION. IN THIS CASE THE COURT STATED:

"IT WILL BE OBSERVED FROM THE ALLEGATIONS QUOTED THAT THE PLAINTIFF DOES NOT QUESTION THAT THE PERSON GOING UNDER THE NAME OF HATTIE PRICE DUNN WAS IN FACT THE PERSON THE SOLDIER INTENDED TO DESIGNATE AS HIS DEPENDENT. THE CONTRARY, IT IS QUITE CLEAR THAT THE PLAINTIFF INTENDS BY ITS PLEADING TO ADMIT THAT THE PERSON GOING UNDER THAT NAME IS THE PERSON DESIGNATED BY THE SOLDIER TO RECEIVE THE BENEFITS OF ALLOTMENT AND ALLOWANCE, AND I THINK IT QUITE CLEAR THAT IT WAS THE PURPOSE OF THE GOVERNMENT TO ISSUE THE CHECKS TO THE PERSON SO DESIGNATED BY THE SOLDIER. THEREFORE, THERE IS PROPERLY IN THIS CASE NO QUESTION OF IDENTITY OF THE PAYEE IN THE CHECKS. THE GOVERNMENT MADE NO MISTAKE AS TO IDENTITY OF THE PERSON IN ISSUING THE CHECKS TO HATTIE PRICE DUNN. THE MISTAKE OF FACT WAS AS TO THE LEGAL STATUS OF SUCH PERSON. THE CHECKS WERE ISSUED TO THE PERSON THE SOLDIER AND THE GOVERNMENT INTENDED TO HAVE THEM ISSUED TO, VIZ, A WOMAN GOING UNDER THE NAME OF HATTIE PRICE DUNN. THE MISTAKE OF FACT WAS AS TO THE LEGAL STATUS OF SUCH PERSON. THE CHECKS WERE ISSUED TO THE PERSON THE SOLDIER AND THE GOVERNMENT INTENDED TO HAVE THEM ISSUED TO, VIZ, A WOMAN GOING UNDER THE NAME OF HATTIE PRICE DUNN. IT IS TRUE THE GOVERNMENT WOULD NOT HAVE ISSUED THESE CHECKS TO HER HAD IT BEEN KNOWN THAT SHE WAS NOT THE WIFE OF THE SOLDIER, BUT THIS MISTAKE AS TO LEGAL STATUS IS QUITE A DIFFERENT THING FROM MISTAKE AS TO IDENTITY OF PERSON. THEREFORE, WHEN THESE CHECKS WERE PRESENTED TO THE DEFENDANT BANK, THEY WERE ENDORSED WITH THE NAME OF THE PERSON INTENDED TO BE NAMED AND ACTUALLY NAMED IN THE CHECKS AS THE PAYEE THEREOF, AND WHEN THE LIBERTY INSURANCE BANK ENDORSED THE CHECK GUARANTEEING ALL PRIOR ENDORSEMENTS, IT SIMPLY GUARANTEED THAT THE ENDORSEMENT OF THE NAME " HATTIE PRICE DUNN" ON THE BACK OF THE CHECK WAS THE ENDORSEMENT OF THE PERSON NAMED IN THE FACE OF THE CHECK. IT WAS IN NO SENSE ANY GUARANTEE AS TO HER LEGAL STATUS. THE PETITION DOES NOT QUESTION, AND IT THEREFORE MUST BE TREATED ON THIS DEMURRER AS ADMITTED, THAT THE PERSON NAMED AS PAYEE IN THE CHECK, AND GOING UNDER THE NAME OF " HATTIE PRICE DUNN," WAS THE PERSON WHO ENDORSED THE NAME " HATTIE PRICE DUNN" ON THE BACK THEREOF. THEREFORE, THE ENDORSEMENT OF THE NAME " HATTIE PRICE DUNN" ON THE BACK OF THE CHECK WAS NOT A FORGERY.

"THERE IS NO CLAIM THAT THE BANK KNEW THAT SHE WAS NOT THE WIFE OF THE SOLDIER, FRANK DUNN. IT IS NOT CLAIMED THAT THE DEFENDANT BANK KNEW THAT THE ASSUMED NAME UNDER WHICH SHE WAS TRANSACTING HER BUSINESS WITH IT WAS NOT HER REAL NAME OR WAS ADOPTED FOR THE PURPOSE OF COMMITTING ANY FRAUD UPON THE GOVERNMENT. IF THE COLLECTION OF THE ALLOWANCE MONEY IN THIS CASE RESULTED FROM THE NEGLIGENCE OF ANY ONE, IT WAS THE NEGLIGENCE OF THE GOVERNMENT AUTHORITIES IN ISSUING THE CHECKS, RATHER THAN THE NEGLIGENCE OF THE BANK IN CASHING THEM.

" I CAN DISCOVER NO LEGAL REASON, UNDER THE FACTS DISCLOSED BY THE PETITION, FOR HOLDING THE BANK LIABLE FOR THESE ERRONEOUS PAYMENTS BY THE GOVERNMENT. TO SO HOLD WOULD NOT ONLY BE A PERVERSION OF THE LAW RELATIVE TO THE LIABILITY OF ENDORSERS OF CHECKS, BUT IN THIS CASE SUCH A HOLDING WOULD WORK A GLARING INJUSTICE.

"THE DEMURRER TO THE PETITION WILL THEREFORE BE SUSTAINED, AND AS I UNDERSTAND THE GOVERNMENT DOES NOT CARE TO PLEAD FURTHER, JUDGMENT MAY BE ENTERED DISMISSING THE PETITION.'

YOUR ATTENTION IS ALSO INVITED TO COMPTROLLER GENERAL DECISIONS NOS. A- 23534, DATED JULY 12, 1928, AND A-13805, DATED OCTOBER 23, 1929, IN WHICH THE DECISION OF THE COURT IN UNITED STATES V. LIBERTY INSURANCE BANK, SUPRA, WAS FOLLOWED. BRIEFLY THIS CASE HELD THAT THE GOVERNMENT COULD NOT RECOVER FOR THE REASON THAT THE CHECKS HAD BEEN ENDORSED BY THE PAYEE INTENDED AND THE QUESTION INVOLVED WAS THE LEGAL STATUS OF THE PAYEE OF THE CHECKS, AND UNDER THE LAW, ENDORSERS ARE NOT REQUIRED TO DETERMINE SUCH STATUS. IN THIS CONNECTION SEE THE DECISION IN THE CASE OF UNITED STATES V. PEOPLES-1PITTSBURGH TRUST CO. ( W.D. PENN. 1940), 34 F.SUPP. 230, THE UNPUBLISHED DECISION OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TENNESSEE IN THE CASE OF UNITED STATES V. HAMILTON NATIONAL BANK, A PHOTOSTATIC COPY OF WHICH IS ENCLOSED HEREWITH, AND THE CHARGE TO THE JURY IN THE CASE OF UNITED STATES V. NORFOLK NATIONAL BANK OF COMMERCE AND TRUST IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA, A PHOTOSTATIC COPY OF WHICH IS ALSO ENCLOSED FOR YOUR CONVENIENT REFERENCE.

ON THE BASIS OF THE HOLDING IN UNITED STATES V. LIBERTY INSURANCE BANK, SUPRA, IT WOULD SEEM THAT THE CASE OF WASHINGTON LOAN AND TRUST CO. V. UNITED STATES ( U.S.C.A.D.C. 1943), 134 F./2D) 59, IS NOT APPLICABLE TO THE CASES OF MRS. MARGARET GRYLLS AND MRS. VIVIAN HART, SINCE THE CHECKS IN THESE CASES WERE ENDORSED BY THE PAYEES INTENDED AND THEREFORE DID NOT INVOLVE FORGERIES.

THE MATTER IS REFERRED TO YOU FOR FURTHER CONSIDERATION IN VIEW OF THE FACT THAT MANY CASES HAVE ARISEN DURING THE PRESENT WAR AND THE TREASURER'S RIGHT TO RECOVER FROM THE ENDORSERS UNDER EXISTING DECISIONS OF THE COURTS IS DOUBTFUL.

WHILE IT IS TRUE THAT THE FACTS IN THE CASE OF UNITED STATES V. LIBERTY INSURANCE BANK ( W.D. KY. 1928), 26 F.2D 493, CITED IN YOUR LETTER, DO NOT DIFFER IN ANY MATERIAL RESPECTS FROM THOSE IN THE CASES HERE INVOLVED, YET, HAVING REGARD FOR THE COURT'S FAILURE TO CONSIDER THE PRINCIPLES OF LAW RELATIVE TO CHECKS DRAWN TO THE ORDER OF FICTITIOUS OR NONEXISTING PAYEES, AND SINCE IT IS BELIEVED THAT THE CONCLUSION REACHED BY THE COURT WAS PREDICATED UPON ERRONEOUS PREMISE, I AM CONSTRAINED TO THE VIEW THAT SAID DECISION MAY NOT BE REGARDED AS A CONTROLLING PRECEDENT.

AS POINTED OUT IN YOUR LETTER, THE COURT HELD THAT RECOVERY BY THE GOVERNMENT WAS PRECLUDED UPON THE GROUND THAT (1) THE CHECKS HAD BEEN INDORSED BY THE PAYEE INTENDED BY THE GOVERNMENT, AND THAT (2) INDORSERS ARE NOT REQUIRED TO DETERMINE THE LEGAL STATUS OF THE PAYEE OF SUCH CHECKS.

IN THE CASE OF MRS. MARGARET GRYLLS, FOR EXAMPLE, AS A RESULT OF THE DECEPTION PRACTICED BY THE SOLDIER THE CHECKS INVOLVED WERE DRAWN TO THE ORDER OF " MARGARET GRYLLS" BUT NOT TO MARGARET ROUSE, THE PARTY WHO INDORSED THEM. THERE WAS NO COURSE OF DEALING BETWEEN THE GOVERNMENT AND MARGARET ROUSE WITH REFERENCE TO THE CHECKS AS A RESULT OF WHICH MARGARET ROUSE WAS ACCEPTED BY AUTHORIZED OFFICERS OF THE GOVERNMENT AS THE PHYSICAL PERSON ENTITLED TO THE CHECKS. THE CHECKS WERE NOT ISSUED OR DRAWN WITH THE INTENTION THAT SHE SHOULD RECEIVE THE PROCEEDS THEREOF BUT, ON THE CONTRARY, THE GOVERNMENT INTENDED ONLY THAT THE CHECKS SHOULD BE PAYABLE TO THE PERSON NAMED THEREIN AS PAYEE, TO WIT, MARGARET GRYLLS. ACTUALLY, THERE WAS NO PERSON BEARING THAT NAME. UNDER THESE CIRCUMSTANCES, THERE IS SUBSTANTIAL GROUND FOR THE VIEW THAT THE CHECKS WERE MADE PAYABLE TO A FICTITIOUS PERSON, THAT THEY WERE NOT SUSCEPTIBLE OF GENUINE INDORSEMENT, AND THAT THE INDORSEMENT THEREOF BY MARGARET ROUSE WAS A FORGERY. MOREOVER, THERE HAS NOT COME TO ATTENTION ANY PRINCIPLE OF LAW OR JUDICIAL PRECEDENT WHICH WOULD SUPPORT THE VIEW THAT THE GOVERNMENT'S ACTION IN MAILING THE CHECKS TO AN ADDRESS WHERE THEY WOULD COME INTO THE POSSESSION OF MARGARET ROUSE SPELLS OUT AN INTENTION THAT SHE SHOULD RECEIVE THE PROCEEDS THEREOF.

IT IS A WELL ESTABLISHED PRINCIPLE OF LAW THAT WHEN A CHECK IS PAYABLE TO THE ORDER OF A FICTITIOUS OR NONEXISTENT PERSON, AND THE PERSON MAKING IT SO PAYABLE HAS BEEN INDUCED TO BELIEVE THAT HE IS DESCRIBING AN EXISTING PAYEE, NO OTHER PERSON CAN ACQUIRE ANY RIGHT OR TITLE TO THE CHECK. UNLESS THE DRAWER MAKES A REPRESENTATION TO THE CASHING VOLUNTEER AS TO THE GENUINENESS OF THE PAYEE'S INDORSEMENT, TITLE TO THE CHECK DOES NOT PASS AND THE UNAUTHORIZED INDORSEMENT GIVES NO RIGHT TO THE CASHING VOLUNTEER TO ENFORCE PAYMENT. THE RISK OF PURCHASING OR PAYING UPON A GENUINE INDORSEMENT IS UPON THE VOLUNTEER TO WHOM THE DRAWER'S ONLY DUTY IS TO REFRAIN FROM AN AFFIRMATIVE REPRESENTATION CONCERNING OWNERSHIP OF THE CHECK. UNITED CIGAR STORES CO. V. AMERICAN RAW SILK O., 184 APP.DIV. 217, 171 N.Y.S. 480, AFFIRMED 229 N.Y. 532, 129 N.E. 904; SHIPMAN V. BANK OF STATE OF NEW YORK, 126 N.Y. 318, 27 N.E. 371; JORDAN MARSH CO. V. NATIONAL SHAWMUT BANK, 201 MASS. 397, 87 N.E. 740; COM. V. GLOBE INDEMNITY CO., 323 PA. 261, 185 ATL. 796; FARMERS' STATE BANK V. UNITED STATES, 62 F.2D 178; CONTINENTAL NAT. BANK AND TRUST CO. V OLNEY NAT. BANK, 33 F.2D 347.

THUS, IN BRANNAN'S NEGOTIABLE INSTRUMENTS LAW, 6TH USED., PAGE 223, IT IS SAID:

BUT WHEN A MAKER BELIEVES THAT THE PAYEE IS A REAL PERSON, EVEN IF HIS SIGNING AND PUTTING INTO CIRCULATION THE INSTRUMENT PAYABLE TO A FICTITIOUS OR NONEXISTING PAYEE IS HELD TO BE AN ADMISSION THAT THE PAYEE IS A REAL PERSON, THIS DOES NOT SHOW THAT THE MAKER EXPECTS AND INTENDS THE INSTRUMENT TO PASS AS IF MADE TO BEARER. QUITE THE CONTRARY, HE INTENDS IT TO PASS ONLY BY INDORSEMENT, AND IF THERE IS NO SUCH PERSON AS THE PAYEE, IT SIMPLY CAN NOT PASS AT ALL. ANY OTHER RULE IS ILLOGICAL AND UNJUST, FOR THE PERSON TAKING AN INSTRUMENT PURPORTING TO BE PAYABLE TO A PERSON WITHOUT INDORSEMENT, IS NOT ENTITLED TO CONSIDERATION, AND IF IT IS INDORSED BY SOMEONE IN THE NAME OF THE FICTITIOUS OR NONEXISTING PERSON THE LOSS TO THE BUYER OF SUCH AN INSTRUMENT IS NOT DUE TO THE FACT THAT THE PAYEE IS FICTITIOUS OR NONEXISTING, BUT TO THE FACT THAT THE INSTRUMENT IS INDORSED BY SOMEONE WHO IS NOT AUTHORIZED TO INDORSE IT, EITHER BY THE MAKER OR BY THE TERMS OF THE INSTRUMENT, AND THE INDORSEE IS IN SUCH A CASE NO WORSE OFF THAN IN THE CASE OF THE FORGERY OF THE INDORSEMENT OF THE NAME OF A REAL PERSON.

IN THE CASE OF JORDAN MARSH CO. V. NATIONAL SHAWMUT BANK, SUPRA, THE COURT STATED:

* * * IF ONE IS FRAUDULENTLY INDUCED TO DELIVER TO A PERSON WHO IS NOT ENTITLED TO IT A CHECK MADE PAYABLE TO ANOTHER PERSON WHO IS NOT ENTITLED TO PAYMENT OF IT, CAN HIS NEGLIGENCE IN SUFFERING THE FRAUD TO BE PRACTICED UPON HIM BE FOUND TO BE DIRECT AND PROXIMATE CAUSE OF A PAYMENT MADE BY THE BANKER UPON WHOM THE CHECK IS DRAWN, UPON A FORGED INDORSEMENT OF THE NAME OF THE PAYEE, WITHOUT ANY INVESTIGATION BY THE BANKER AS TO THE GENUINENESS OF THE INDORSEMENT? WE THINK NOT. THE CHECK IS LIKE ANY OTHER CHECK PAYABLE TO A REAL PERSON WHICH HAPPENS TO BE IN THE POSSESSION OF ANOTHER PERSON. IT IS POSSIBLE TO FORGE AN INDORSEMENT UPON IT, AS IT IS TO FORGE AN INDORSEMENT UPON ANY OTHER CHECK. PERHAPS THE CIRCUMSTANCES MAKE A SPEEDY DETECTION OF SUCH A FORGERY LESS PROBABLE THAN IN ORDINARY CASES. BUT THE WHOLE DUTY OF SEEING WHETHER THERE IS A FORGERY OF SUCH AN INDORSEMENT UPON ANY CHECK RESTS PRIMARILY UPON THE BANKER. THE DRAWER OF THE CHECK HAS NOTHING TO DO WITH THAT. ORDINARILY HE MAKES NO REPRESENTATION THAT HAS ANY RELATION TO IT. IN THE CASE JUST SUPPOSED HE MADE NO REPRESENTATION IN REGARD TO IT. THE CHECKS PAYABLE TO THE ORDER OF A. L. SEFTON, WHICH SHE DID NOT INDORSE, WERE WRONGLY PAID, AND THE DEFENDANT'S LIABILITY FOR PAYMENT IS LIKE THAT FOR THE PAYMENT OF ANY OTHER CHECK BEARING SUCH A FORGED INDORSEMENT. THE PLAINTIFF HAD NOTHING TO DO WITH THE PAYMENT, OR WITH THE DEFENDANT'S PERFORMANCE OR NONPERFORMANCE OF ITS DUTY TO SEE THAT PAYMENT WAS MADE TO THE RIGHT PERSON.

THE QUESTION ARISES WHETHER THE MAKING OF A CHECK PAYABLE TO A FICTITIOUS OR NONEXISTING PERSON, THROUGH NEGLIGENT FAILURE TO DISCOVER THE FRAUD BY WHICH THE CHECK IS OBTAINED, STANDS DIFFERENTLY FROM MAKING A CHECK TO AN ACTUAL PERSON, IN REFERENCE TO ITS EFFECT UPON PAYMENT BY THE DEFENDANT. WE ARE OF THE OPINION THAT THERE IS NO DIFFERENCE IN LAW. IN EITHER CASE IT IS THE DUTY OF THE BANK TO SEE THAT THERE IS A GENUINE INDORSEMENT.

THE FOREGOING PRINCIPLES WOULD SEEM TO APPLY WITH GREATER FORCE IN A CASE WHERE, AS HERE, A CHECK IS CASHED BY A VOLUNTEER--- A STRANGER TO THE DRAWER--- THAN WHERE THE CHECK IS PAID BY THE DEPOSITARY ON WHICH IT IS DRAWN, ALTHOUGH UNDER THE AUTHORITIES THE PRINCIPLES ARE APPLICABLE TO BOTH CASES. A DEPOSITARY ON WHICH A CHECK IS DRAWN OWES THE DRAWER A DUTY TO HONOR HIS CHECKS UNDER CERTAIN CIRCUMSTANCES; AND THE DRAWER, AS AN INCIDENT OF THE DEPOSITOR-DEPOSITARY RELATIONSHIP, OWES HIS BANK THE DUTY OF EXAMINING RETURNED VOUCHERS AND REPORTING INACCURACIES PROMPTLY. BUT THESE DUTIES DO NOT EXIST WHERE THERE IS NO RELATIONSHIP, CONTRACTUAL OR OTHERWISE, BETWEEN THE DRAWER AND THE PERSON CASHING A CHECK. THE LATTER IS UNDER NO OBLIGATION OR COMPULSION TO CASH THE CHECK AND, IN THE ABSENCE OF A REPRESENTATION BY THE DRAWER AS TO THE OWNERSHIP OF THE NEGOTIATOR, THE PURCHASER SHOULD AND DOES ASSUME THE RISK THAT THE NEGOTIATOR HAS A TITLE TO CONVEY. THE MANNER IN WHICH THE CHECK COMES INTO EXISTENCE IS IMMATERIAL, SO LONG AS, AFTER THE CHECK IS IN CIRCULATION, THE DRAWER MAKES NO REPRESENTATION AS TO THE TITLE OF THE PURPORTED OWNER.

APPLYING THE ABOVE PRINCIPLES TO THE INSTANT CASES, IT WOULD SEEM CLEAR THAT WHETHER OR NOT THERE WAS NEGLIGENCE IN THE ISSUANCE OF THE CHECKS IS IMMATERIAL. NEITHER THE BANKS NOR ITS INDORSERS WERE THE DEPOSITARIES ON WHICH THE CHECKS WERE DRAWN. THEY WERE UNDER NO COMPULSION OR DUTY TO THE GOVERNMENT TO CASH THE CHECKS. THE GOVERNMENT AT NO TIME MADE ANY REPRESENTATION TO THE BANKS OR THE INDORSERS AS TO THE OWNERSHIP OF THE CHECKS AND, THEREFORE, THEY ASSUMED THE RISK OF THEIR NEGOTIATOR'S TITLE. MOREOVER, THE GOVERNMENT MUST BE PERMITTED TO RELY UPON THE VIGILANCE OF BANKS IN DETECTING FORGED INDORSEMENTS, NOTWITHSTANDING POSSIBILITY OF ERROR OR COMMISSION IN THE EVENTS LEADING TO THE ISSUANCE OF THE CHECKS. NO OFFICER OR AGENT OF THE GOVERNMENT HAD THE AUTHORITY TO IDENTIFY, ON BEHALF OF THE GOVERNMENT, THE PAYEES OF THE CHECKS, AND, SO FAR AS APPEARS, NO ONE PURPORTED TO MAKE ANY SUCH REPRESENTATION.

IT APPEARS FROM PAGE 494 OF THE REPORTED OPINION IN THE LIBERTY INSURANCE BANK CASE, SUPRA, THAT THE GOVERNMENT'S CLAIM WAS BASED PRINCIPALLY UPON THE GROUND THAT "THE INDORSEMENT OF THESE CHECKS BY THE LIBERTY INSURANCE BANK HAD THE EFFECT OF GUARANTEEING THAT HATTIE PRICE DUNN WAS IN FACT THE WIFE OF THE SOLDIER, FRANK DUNN, AND ENTITLED TO THE PROCEEDS OF THE CHECKS.' THE COURT HELD THAT THE BANK'S INDORSEMENT OF THE CHECK WAS IN NO SENSE A GUARANTEE OF THE PAYEE'S LEGAL STATUS. THIS HOLDING WOULD APPEAR TO BE CONSISTENT WITH THE DECISIONS CITED IN YOUR LETTER RELATING TO CHECKS MADE PAYABLE TO UNREMARRIED WIDOWS OF SOLDIERS. BUT, IT WOULD SEEM UNNECESSARY THAT THE CASES HERE INVOLVED SHOULD TURN ON THAT QUESTION. AGAIN REFERRING TO THE GRYLLS CASE WHEN THE GOVERNMENT ISSUED THE CHECKS PAYABLE TO MARGARET GRYLLS IT COULD NOT REASONABLY IMPOSE UPON ONE WHO CASHED THE CHECKS THE DUTY OF INVESTIGATING AND DETERMINING THAT THE INDORSER IS IN FACT A LAWFUL WIFE OF A SOLDIER; BUT IT IS OBVIOUS THAT THE GOVERNMENT WOULD HAVE THE RIGHT TO REQUIRE THAT THE CHECKS BE NEGOTIATED ONLY UPON INDORSEMENT OF THE PAYEE INTENDED BY IT AND NAMED THEREIN--- MARGARET GRYLLS--- AND, SINCE THE BANK GUARANTEED INDORSEMENTS WHICH WERE FORGED, IT SHOULD BE HELD LIABLE THEREFOR.

INASMUCH AS THE FACTS OF THE TWO CASES ARE SUBSTANTIALLY IDENTICAL, WHAT HAS BEEN STATED HEREIN WITH REGARD TO THE CASE OF MRS. MARGARET GRYLLS EQUALLY IS APPLICABLE TO THE CASE OF MRS. VIVIAN HART.

THE FACT, POINTED OUT IN YOUR LETTER, THAT MANY CASES SIMILAR TO THOSE HERE INVOLVED HAVE ARISEN DURING THE PRESENT WAR, WOULD SEEM TO EMPHASIZE THE NECESSITY FOR INSISTING UPON RECLAMATION IN THE PRESENT MATTER. THEREFORE, IN THE ABSENCE OF AN AUTHORITATIVE JUDICIAL DECISION TO THE CONTRARY WHEREIN IT IS SHOWN THAT THE FOREGOING PRINCIPLES HAVE BEEN CONSIDERED AND PASSED UPON, I AM CONSTRAINED TO THE VIEW THAT THERE IS A PROPER BASIS FOR RECLAMATION AND, IF NECESSARY, THE INSTITUTION OF JUDICIAL PROCEEDINGS FOR RECOVERY UPON THE CHECKS INVOLVED.