World Exchange Bank v. Commercial Casualty Insurance Co., 255 N.Y. 1 (1930)
Forgery, in the context of insurance coverage for losses due to forged checks, occurs when a person falsely makes a writing that purports to be the act of another, even if the person uses an assumed name, with the intent to deceive.
Summary
World Exchange Bank (plaintiff) sought indemnity from Commercial Casualty Insurance Co. (defendant) under a policy covering losses from forged checks. A depositor, using different names at different banks, deposited checks signed under assumed names into his account at World Exchange Bank, then withdrew the funds before the checks were returned unpaid. The court held that the checks were indeed forgeries because the depositor signed them under assumed names to deceive the bank into believing they were drawn by different individuals, thus triggering coverage under the insurance policy.
Facts
A man opened accounts at three different banks under the names George D. Wagner (at World Exchange Bank), Charles G. Weber (at Chatham & Phenix Bank), and Charles F. Viets (at Yorkville Bank).
Wagner deposited two checks into his World Exchange Bank account, one purportedly from Weber and the other from Viets, both drawn to his order.
In reality, Wagner signed both checks using the assumed names.
The bank, believing the checks to be genuine, credited Wagner’s account, and he withdrew $800.
The checks were returned unpaid due to insufficient funds or no account at the drawee banks.
Procedural History
The trial court ruled in favor of the World Exchange Bank.
The Appellate Division reversed, finding that the checks were not forgeries under the policy.
The Court of Appeals reversed the Appellate Division’s decision, reinstating the trial court’s ruling.
Issue(s)
Whether the checks signed by the depositor under assumed names constituted “forged” checks within the meaning of the insurance policy issued by Commercial Casualty Insurance Co.
Holding
Yes, because the depositor signed the checks under assumed names intending to deceive the bank into believing they were drawn by different individuals, constituting a “false making” of the instruments and thus a forgery.
Court’s Reasoning
The court reasoned that while a person may generally use any name, doing so to defraud others constitutes forgery. The checks in question were not what they purported to be – instruments drawn by one person to the order of another and endorsed by the payee. The act of signing and endorsing the checks under different names created a false impression that two separate individuals were involved.
The court emphasized that the test of forgery is whether a person falsely and with the purpose to defraud made a writing which purports to be the act of another. The court quoted Commonwealth v. Baldwin, 77 Mass. 197, stating, “Forgery, speaking in general terms, is the false making or material alteration of or addition to a written instrument for the purpose of deceit and fraud. It may be the making of a false writing purporting to be that of another.”
Even though the signatures matched the names on file at the respective banks, the intent to deceive World Exchange Bank transformed the act into forgery. The court distinguished this case from situations where a person signs a check under an assumed name simply to withdraw funds from their own account; here, the intent was to create the false impression of a transaction between two distinct parties.
The court stated, “In all forgeries the instrument supposed to be forged must be a false instrument in itself; and that if a person give a note entirely as his own, his subscribing it by a fictitious name will not make it a forgery, the credit there toeing wholly given to himself, without any regard to the name, or any relation to a third person.” The Court found that the check was made by the plaintiff’s depositor not as his own but as the act of a third party. Credit was not given wholly to himself but upon the faith of an instrument purporting to be that of a third party.
Therefore, the court held that the bank’s loss was covered by the insurance policy because the checks were indeed forgeries as defined by law and the policy’s intent, warranting indemnification by the insurance company.