345 Mass. 1, 5, 184 N.E.2d 358, 360–61, 1 UCC 195, 199 (196
Stone & Webster Engineering Corp. had its usual place of business in Boston.1 Between January 1, 1960, and May 15, 1960, it drew three checks on its checking account at The First National Bank of Boston payable to Westinghouse Electric Corporation.2 The checks were dated January 5, March 8, and May 9, 1960, in the respective amounts of $36,982.86, $10,416.58, and $17,355.3 Each check was made payable to the order of "Westinghouse Electric Corporation, 10 High Street, Boston."4
An employee of the plaintiff who had possession of the checks forged the indorsement of Westinghouse before any delivery to the payee.5 The employee presented the checks to the defendant, First National Bank & Trust Co.6 The defendant cashed the checks and delivered the proceeds to the plaintiff's employee, who used the money for his own purposes.7 The defendant then forwarded the checks to the drawee bank and received from it the full amounts of the checks.8 The drawee charged the plaintiff's account with those amounts and refused to recredit the account.9
The plaintiff brought an action of contract or tort against the defendant in four counts for the same cause of action.10 Count 1 alleged the facts of the checks and the forged indorsements in contract form seeking recovery of $64,755.44 with interest.11 Count 2 was on an account annexed for the same sum as proceeds of the checks cashed by the defendant.12 Counts 3 and 4 were in tort for conversion of the checks and for negligence in cashing checks with forged indorsements.13
By order of court, copies of the three checks were filed and treated as part of each count.14 The first two checks bore a typewritten indorsement "For Deposit Only: Westinghouse Electric Corporation By: Mr. O. D. Cos-tine, Treasury Representative" followed by an ink signature of O. D. Costine.15 The third bore a typewritten indorsement "Westinghouse Electric Corporation By: [Sgd.] O. D. Costine Treasury Representative."16 All three also carried a rubber-stamp indorsement guaranteeing prior indorsements and directing payment to any bank.17 The defendant demurred to each count for failure to state a cause of action.18 The demurrer was sustained, and the plaintiff appealed under G. L. (Ter. Ed.) c. 231, § 96.19
Whether the drawer of checks has a cause of action for money had and received against a collecting bank that cashed the checks on forged indorsements of the payee?20
A drawer has no cause of action for money had and received against a collecting bank.21 The drawer maintains only a debtor-creditor relationship with the drawee.22 The drawer holds no property interest in undelivered checks or their proceeds under the Uniform Commercial Code or prior Massachusetts law.23
No. Stone & Webster Engineering Corp. drew three checks on its account at The First National Bank of Boston payable to Westinghouse Electric Corporation.24 An employee in possession of the checks forged the payee's indorsement before delivery and presented them to First National Bank & Trust Co., which cashed them with its own funds and obtained reimbursement from the drawee.25 The drawee then charged the plaintiff's account.26 The plaintiff possessed no rights in the proceeds, which remained the collecting bank's funds, and any claim lies solely against the drawee.27
The demurrer to count 1 was rightly sustained.28
Whether the drawer may maintain an action for conversion against the collecting bank that handled checks bearing forged indorsements?29
A drawer possesses no cause of action for conversion against a collecting bank.30 Undelivered checks confer no valuable property rights on the drawer.31 The forged indorsements prevent negotiation.32 The Uniform Commercial Code leaves the drawer's remedies against the drawee intact without creating direct liability for the collecting bank.33
No. The checks drawn by Stone & Webster Engineering Corp. were never delivered to Westinghouse Electric Corporation.34 The forged indorsements were wholly inoperative, so the collecting bank never became a holder.35 The plaintiff held only the physical paper, not rights measured by the payable amounts.36 Any conversion claim would circumvent the Code's allocation of defenses between drawer and drawee.37
The demurrer to count 3 was rightly sustained.38
Whether the drawer states a claim for negligence against the collecting bank for cashing checks with forged indorsements?39
A drawer states no negligence claim against a collecting bank.40 Cashing the checks with the bank's own funds causes no legal harm to the drawer.41 The drawer's only injury arises from the drawee's subsequent charge to the account.42 The Code preserves the drawer's direct remedies against the drawee.43
No. Stone & Webster Engineering Corp. suffered the charging of its account by The First National Bank of Boston after the defendant forwarded the checks.44 The defendant used its own funds to cash the instruments presented by the forger.45 No duty running from the collecting bank to the drawer appears on the facts.46 The harm remains remediable through the drawee.47
The demurrer to count 4 was rightly sustained.48
Whether the allegations in each of the four counts of the declaration state a cause of action against the defendant?49
None of the four counts states a cause of action.50 Count 1 and count 2 fail to establish money had and received.51 Count 3 fails to establish conversion.52 Count 4 fails to establish negligence or legal damage.53 All rest under the principles governing drawer-collecting bank relations on forged indorsements.54
No. Count 1 and count 2 rest on the same facts of undelivered checks and forged indorsements presented to First National Bank & Trust Co.55 Count 3 alleges conversion of checks in which the drawer held no ownership rights.56 Count 4 alleges negligence without identifying harm distinct from the drawee's charge.57 The demurrer was therefore properly sustained as to every count.58
The order sustaining the demurrer was affirmed.59