National Bank of Commonwealth v. Grocers' National Bank

Majority

p. 289

The National Bank of the Commonwealth v. The Grocers’ National Bank.

Headnote

The drawee of a check is presumed to know the handwriting of the drawer, and the genuineness of the signature to the paper, and, having paid the same, cannot recover back the money from the payee, although it afterward appears that the name of the drawer was forged.

The plaintiffs bank, in the regular course of its business, received from one of its depositors a check drawn upon the defendant’s bank, and passed the same through the bank clearing-house, where it was debited to the defendant, and credited to the plaintiff. The defendant afterward finding that the drawer’s signature was a forgery, returned the check to the clearing-house, contrary to its rules, where it was credited to the defendant and debited to the plaintiff, who paid it. Held, That the payment of the check by the plaintiff was not voluntary, and did not prevent a recovery of the amount from the defendant.

Appeal by the defendant from a judgment of the First District Court. The action was commenced before the justice by summons, with a complaint annexed. On the return day the parties appeared before the justice, and the defendant interposed no answer to the complaint, but admitted the facts therein stated to be true. The complaint averred that in December last, the plaintiff received on deposit from one of its dealers a bank check drawn upon the defendant; that the check was passed by the plaintiff to the credit of its dealer; that the plaintiff and defendant were both members of the New York Clearing-House Association, which was formed for the purpose of adjusting the balances of accounts, and settling the dealings of and between the several banks in the city of New York; that by the constitution and rules of the Clearing-House Association, the checks on other banks, received by banks belonging to the association from any of its dealers, are, on the morning of the day next after their receipt, presented at the clearinghouse, and there all the checks so received by said banks respectively are assorted for exchange between said banks, and the amount of every check then appearing to be drawn against

p. 290

any bank is credited in account to the bank to which it is presented, and is charged and debited in account against the bank on which it appears to have been drawn, in the accounts of said clearing-house, whether the same be or be not good or valid.

In accordance with the above-mentioned custom, the plaintiff, on or about the 13th day of December, 1866, sent the check to the clearing-house, and the plaintiff was then and there credited, and the defendant debited, with the same. The defendant, on the 6th of March, 1867, returned the check through the clearing-house to the plaintiff, on the ground that the same was a forgery, in violation of the rules prescribed by the association, and of the rights of the plaintiff, and thereupon the defendant was credited, and the plaintiff debited, with the amount of the check on the books of the ClearingHouse Association; whereupon plaintiff immediately brought this suit to recover the amount from the defendant. The case was submitted to the justice on the complaint, whereupon the justice rendered judgment in favor of the plaintiff for the amount for which the check purported to be drawn, from which judgment the defendant appealed to the general term of this court.

Raymond & Coursen, for appellant.

Convers & Lyman, for respondent.

The drawee of a check or bill of exchange is presumed to know the handwriting of the drawer, and the genuineness of the signatures to the paper, and having paid the same, although it should afterward be discovered that the name of the drawer was forged, he cannot recover back the money from the party to whom it was paid.

This was determined quite early, in Price v. Neal (3 Burr. 1354). In that case, two forged bills were drawn upon the plaintiff. Notice of the first bill was left at the plaintiff’s house on the day it became due; plaintiff sent his servant to call on the defendant to pay it, which was done. The other bill the plaintiff accepted and paid at maturity.. On discover

p. 291

ing the forgery, plaintiff brought an action for money had and received, to recover back the amount paid. The court held that the action would not lie. Lord Mansfield said it was incumbent upon the plaintiff to be satisfied that the bill drawn upon him was in the drawer’s hand before he accepted or paid it, but that it was not incumbent on the defendant to inquire into it.

If the holder was at all implicated in the forgery, the action would lie against him (Bank of Commerce v. Union Bank, 3 N. Y. 230 ).

In this last case, the Bank of Commerce was allowed to recover back the amount of a forged bill which it had paid to the Union Bank, but the recovery was justified on the ground that the forgery was not in counterfeiting the name of the drawer, “ but in altering the tody of the bill,” there being no presumption that the body of the bill is in, the handwriting of the drawer, or in any handwriting known to the drawee; and it is unreasonable to require of him knowledge of the handwriting of any part of the bill except the signature of the drawer.

The case first above cited charges the loss of the drawee to his own negligence, in accepting or paying a bill which he should have known to have been a forgery. The last case does not question, but in terms affirms, the principle announced in Price v. Neale.

The check in this case appears to have come regularly to the plaintiff in the course of business from its dealers, and under no circumstances to excite suspicion, or make inquiries necessary. The check went to the clearing-house, and was then, in an adjustment of the checks and accounts between plaintiff and defendant, in pursuance of the rules of this body, credited to plaintiff and charged to defendant. As the usage of the clearing-house is not to pass upon the genuineness of the paper which passes through it, the act of debiting the defendant with the amount of the check should not charge the defendant with having adopted or accepted the check. But the check went from the clearing-house to the defendant’s bank, and was there received, and its being charged to it at the clear

p. 292

ing-house was acquiesced in by the defendant. It does not appear how soon the defendant ascertained the forgery, but it appears that it held on to the check for several months, and then, “ in violation of the rules prescribed by the association, and of the rights of the plaintiff,” returned same to the clearinghouse, and caused it there to be debited to the plaintiff and credited to itself.

The plaintiff at once repudiated this debiting of the check to its account, and of the return of the check, by bringing this action. If the defendant can in this way, and by the instrumentality of the clearing-house, and against its rules, succeed in getting back money which it had previously paid on a forged check, it may do indirectly what it cannot do directly. It is quite clear that if the defendant had sued the plaintiff for the money as soon as the forgery was discovered, it would have failed in the action. The fact that the Bank of the Commonwealth is plaintiff rather than defendant cannot change the absolute rights of the parties.

The payment by the plaintiff, on the return of the check to it, was not voluntary. It was forced by the action of the clearing-house.

This action is equitable in its nature. The question really is upon whom the loss should fall. Under the circumstances of this case, I think the defendant should bear the loss.

Judgment affirmed.

Cases cited

Bank of Commence v. Union Bank 3 N. Y. 230 N.Y. p. 291