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Allen v. Fourth National Bank

37 N.Y. Super. Ct. 137 5 Jones & S. 137 Court N.Y. Super. Ct. Decision date 1874-02-28 English

Contents

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BENJAMIN F. ALLEN, et al., Plaintiffs, v. THE FOURTH NATIONAL BANK OF THE CITY OF NEW YORK, Defendant.

Headnote

Brief of the facts in the case at ha/r.
In March, 1873, plaintiffs received for collection, a certificate of deposit, proporting to have been made by George Opdyke & Co., for six thousand two hundred dollars. They deposited it with defendant and the amount was credited to them on their bank book. The deposit was made pursuant or accordant with the following custom
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and usage, admitted by both parties: “That it is a custom and usage among banks and bankers to credit their depositors with all checks, drafts and certificates of deposit deposited with them ; but that such credit is subject to a counter charge, if the paper so deposited proves to be not good, and is returned to the party depositing it, in compliance with the usage of banks in respect to time and manner of return in such cases.”
There existed at this time an agreement between the defendant and the firm of George Opdyke & Co., to the effect that the defendant should talce up each day at the Clearing House in New York, all commercial, paper drawn upon said firm, that should be presented there by the other banks belonging to the clearing house asssoelation, and said firm should forthwith send a check for the amount so taken up; and if, on inspection of the paper so taken up, any portion should prove not to be good, the said firm should be entitled to a credit for the amount of the same upon sending it back to the bank through which it came, before the close of bank hours on the same day.
That on March 27, 1872, the defendant sent to George Opdyke & Co., a statement of commercial paper which defendant had received upon that day through the Clearing House for account of George Opdyke & Co., and which had been charged on the books of the Clearing House to the defendant, and that the amount of the alleged certificate of deposit described in the answer herein was included in such statement, although such alleged certificate had not been presented by the defendant at the Clearing House on that day ; that thereupon George Opdyke & Co. sent to the defendant a check for the total amount of such statement, including the amount of such alleged certificate ; that the defendant then delivered the paper so cleared with the said alleged certificate to the said George Opdyke & Co., before twelve o’clock, noon, the said March 27, 1872.
Later in the day, and about 5.30 p. M., Opdyke & Co., upon examination of the pretended certificate of deposit, discovered that it was a forgery. Recognizing the indorsement of the plaintiffs, and it being late, they at once sent notice to the plaintiffs of the fact of the forgery. The plaintiffs received this notice prior to making any acknowledgment to the Capital City Bank of the receipt of this certificate for collectiion, and in the letter of acknowledgment stated the facts.
On March 28, 1872, Opdyke & Co. returned the forged certificate to defendant, with proofs'of the forgery. The defendant received ; the certificate, credited the amount thereof to Opdyke & Co., and charged it to the plaintiffs, and tendered to them the forged certifi
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cate. The plaintiffs refused to receive the certificate, and denied the right of defendant to charge the amount thereof to their account.
On April 8, 1873, the plaintiffs had to their credit with defendant, as per their pass book, eighteen thousand two hundred and forty-four dollars and fifty-four cents. Plaintiffs claim that the amount should be greater by the amount of the forged certificate, or twenty-four thousand four hundred and forty-four dollars and fifty-four cents in all;
Plaintiffs allege that the defendant refuses to account for or pay to them, or to them order, the sum of six thousand two hundred dollars out of the alleged balance of twenty-four thousand four hundred and forty-four dollars and fifty-four cents, and brings this action to recover such sum of six thousand two hundred dollars.
No demand upon defendant is proved, nor any refusal to pay any check.
The plaintiffs claim that the long established rule of law (followed since the case of Price v. Neal, was decided in the court of King’s Bench, 1763),“ That a drawee is presumed to know the handwriting of the drawer and it is incumbent upon him to satisfy himself that the signature of the drawer is genuine ; ” and if he accepts or pays a bill in the hands of a bona fide holder for value, he is concluded by the act, although the bill should prove to be a forgery, is applicable to this case.
The defendant claims the application of another well established rule. “ That money paid by one pa/rty to another under a mutual mistake of facts may be recovered back." To which the former rule is an exception. Held, that this exception or former rule is not applicable to the facts in the case at bar ; but that the general rule should apply, so far as practicable. That the defendant had fully performed its obligations to the plaintiffs, and the defendant’s exceptions should be sustained, and the verdict directed for the plaintiffs should be set aside and a new trial ordered.
Before Monell, Oh. J., and Freedman, J.
Decided February 28, 1874.
Case of a verdict directed by the court below for plaintiffs. Exceptions directed to be heard in the first instance at the general term.
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On March 26, 1872, the plaintiffs, who were doing business in the city of New York, as bankers, under the firm name of Allen, Stephens & Co., received by mail, for collection, from one of their correspondents, the Capital City Bank of Des. Moines, Iowa, a certificate of deposit purporting to have been made by George Opdyke & Co., of the city of New York, of which the following is a copy :
( TJ. S. Int. Rev. )
*j Stamp canceled, j
“ (Certificate of Deposit.)
“ Banking House of George Opdyke & Go.
“ $6,200. - New TorTc, March 20, 1872.
“ Charles Wood has deposited with us sixty-two hundred dollars, in currency, payable to order of himself, in like funds, on the return of this certificate properly endorsed.
“No. 331. (Signed) Geobgke Opdyke & Co..”
This paper bore the following indorsements, “Charles Wood,” “A. L. West, Cashier” (the latter being that of the cashier of the said Capital Bank of Des Moines, Iowa), and on the day of its receipt the plaintiffs indorsed it for. credit and collection, and, in pursuance of the custom of bankers in such cases, deposited it in the Fourth National Bank of the City of New York, with whom they kept an account, and who credited them with the amount thereof in their passbook. It was included in item thirteen thousand three hundred and thirty-three dollars and sixty-one cents, of deposits entered in said pass-book under date oí March 26, 1872.
The Fourth National Bank also acted as a clearing bank for the firm of George Opdyke & Co., and on March 27, 1872, it sent to the said firm of George Opdyke & Co. a statement of the amount of commercial paper which it had taken up on that day for their account at the clearing house, and the amount of this certificate of deposit was included in such statement,
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although it had not been presented by the defendant to the clearing house on that day. The said firm thereupon sent to the defendant a check for the total amount of such statement, including the amount of the certificate, and received from the defendant the paper so cleared by it, together with this certificate.
The certificate turned out to be forged, and on the evening of the same day the firm of Opdyke & Co. notified the plaintiffs of such forgery, and also telegraphed notice thereof to the Capital City Bank of Des Moines, Iowa. The next day, March 28, the certificate was returned to the defendant, and the, defendant credited the amount of it back to Opdyke & Co. The defendant thereupon counter-charged the amount to plaintiffs and returned the said certificate to them with notice that Opdyke & Co. had declared it to be a forgery, and that the amount of it had been counter-charged to plaintiffs.
The plaintiffs declined to take it back, and protested against such proceeding on the part of the defendant.
On April 8, following, the pass-book of the plaintiffs with the defendant was balanced by the latter, and in so doing the defendant deducted the amount of the said certificate of deposit, making the balance then due the plaintiffs eighteen thousand two hundred and forty-four dollars and fifty-four cents, instead of twenty-four thousand four hundred and forty-four dollars and fifty-four cents which it would have been if the amount of such certificate of deposit had not been deducted, a difference of six thousand two hundred dollars, to recover which this action was brought.
On the trial, before the court and a jury, defendant’s counsel moved, at the close of plaintiffs’ case, for a dismissal of the complaint on the ground that the plaintiffs had not proved a demand on the defendant. The motion .was denied, and defendant excepted.
At the close of the whole evidence, defendant’s
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counsel moved for judgment for the defendant, and that the complaint.-be dismissed for lack of proof; motion denied, and defendant excepted.
Defendant’s counsel asked the court to direct the jury to find a verdict for the defendant; motion denied; exception by defendant.
Plaintiffs’ counsel asked the court to direct a verdict for the plaintiffs.
The court directed the jury to find a verdict for the plaintiffs for six thousand eight hundred and eighty-five dollars and ninety-six cents ; to which ruling and decision the defendant then and there duly excepted.
The court'then directed that the exceptions be heard in the first instance at general term, and that in the mean time and until the decision of the general term all proceedings of the plaintiffs be stayed; and that defendant have thirty days within which to make and serve a proposed case.
Morris & Billings, plaintiffs’ attorneys.
Coles Morris, and Michael H. Cardoso, of counsel. —I.
For more than a century it has been held and decided without question, that it is incumbent upon the drawee of a bill to be satisfied that the signature of the drawer is genuine. And if he accepts or pays a bill in the hands of a bona fide holder for value, he is concluded by the act, although the bill turns out to be a forgery. If he has accepted, he must pay, and if he has paid, he cannot recover the money back. This is an exception to the general rule, that money paid under a mistake of fact, may be recovered back, and the exception is fully established (Price v. Neal, 3 Burr. 1354 ; Archer v. Bank of England, 3 Bougl. 639 ; Smith v. Mercer, 6 Taunt. 76 ; Wilkinson v. Johnson, 3 Barn. & C. 438; Cook v. Masterman, 7 Id. 903; Cooper v. Meyer, 10 Id. 468; Saunderson v. Coleman,
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4 M. & G. 209 ; Smith v. Chester, 1 D. & E. 655; Bass v. Clive, 4 M. & S. 15 ; Bank of Commerce v. Union Bank, 3 Comst. 230 ; Goddard v. Merchants’ Bank, 4 Id. 149; Canal Bank v. Bank of Albany, 1 Hill, 287 ; National Park Bank v. Ninth National Bank; Same v. Fourth National Bank, 46 N. Y. 79 ; Levy v. Bank of the United States, 1 Binn. 27 ; affirmed, 4 Ball. 234; Bank of the United States v. Bank of Georgia, 10 Wheat. 333 ; Nationl Bank of the Commonwealth v. Grocers’ National Bank, 35 How. Pr. 412 ; National Bank of Commerce v. National Mechanics’ Banking Association, in court of appeals, not yet reported), (a.) This principle will apply with more strength to cases in which the forged paper has been paid by the party by whom it purports to be payable, for he ought to know better than any other his own signature (Bank of United States v. Bank of Georgia, supra). (b.) And it is entirely immaterial how short a time intervenes between the acceptance or payment of a forged bill and the discovery of the forgery. The party accepting or paying is equally concluded whether such interval be long or short (Levy v. Bank of United States, 1 Binn. 27 ; 4 Dall. 234 ). (c.) A rule so well established, and so firmly rooted and grounded in the jurisprudence of the country, ought not to be overruled or disregarded. It has become a rule of right and of action among commercial men, and, as Judge Ruggles, in Goddard v. Merchants’ Bank,* supra, well says, “it should not be departed from or frittered away by exceptions resting on slight grounds, and cannot be overruled without overthrowing valuable and well settled principles of commercial law.”
II. Applying these principles to the facts of the case at bar, it is clear that the firm of Opdyke & Co., could not have compelled the defendant to receive back the certificate of deposit in question, on March 28, 1872,
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or to refund to them the amount thereof. The conditional payment which that firm made of the certificate before 12 m. on the preceding day, became absolute' by their passing it, after inspection, as genuine, and retaining it beyond the close of bank hours on that day. This would be so, without reference to the agreement between these parties, the terms of which, however, are so positive as to preclude all doubt on that point. The promptitude with which the firm of Opdyke & Co., gave notice to the plaintiffs of the forgery, after they had so paid, the forged certificate, would not have availed them in an action brought by them against the defendant to recover back the money paid. The question whether or not the defendants or the plaintiffs, for whom they were acting, had been prejudiced by the mistake of Opdyke & Co., in'making such payment, is wholly immaterial. If there was ever any doubt on that point, it was set at rest by the decisions of the court of appeals in National Park Bank ®. Ninth National Bank, and Same v. Fourth National Bank, ubi supra.
III. The defendants then, who undertook to collect this paper, as our agents, received payment thereof from Opdyke & Co., on March 27, 1872, and voluntarily, and in spite of our protest, returned the money to that firm on the following day. They had no right to waive the condition of the agreement between them and Opdyke & Co., to our prejudice, and their doing so amounted to a conversion of our money in their hands. But irrespective of that agreement, the case shows that the defendants credited the plaintiffs with the amount of this certificate of deposit, as so much cash. The defendants allege, and it is admitted, that this credit was subject to a right of counter charge, if the paper should prove to be not good, and be returned to the plaintiffs in compliance with the usage of banks in respect to the time and manner of. return in sücTb
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cases. No evidence whatever was offered by the defendants to show within what time such return should have been made; and the burden of proving that fact was on them, their defense being that they did make such counter charge in pursuance of the alleged custom. Ei incumbid probatio qui dicit, non qui negat (1 Greenl. Ev. § 74). In the absence of such evidence, the credit given by the defendants for the amount of the certificate must be deemed to have become an irrevocable payment.
Miller, Feet Opdyfce, defendant’s attorneys.
Livingston K. Miller, of counsel:—I.
The motions to dismiss the complaint should have been granted,, and the direction to the jury to find a verdict for the plaintiffs was erroneous. Ho demand having been made, the plaintiffs could not recover, (a.) A banker cannot be sued for money until after the customer has drawn for it, or in some way required its repayment (Downs v. Phenix, 6 Hill, 297 ; Payne v. Gardiner, 29 N. Y. 146 ). (b.) All the plaintiffs proved, or offered to prove, was, that defendant had made a charge against plaintiffs upon its books, which plaintiffs claim, was unwarranted, and have declined or omitted to change it. This gives no right of action, even if the charge be proved erroneous. The books of a bank are'not public records, to be controlled by the courts. An erroneous entry on such books works no wrong or damage to the customer.
II. But, even if the demand had been made;, the plaintiffs were not entitled to claim against the defendant the amount of the forged certificate left by plaintiffs with defendant for credit and collection. Any such claim must rest, either upon the ground that the defendant has, in fact, collected the said certificate of
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deposit, or upon the ground that defendant had neglected some duty assumed by it in the premises. We will consider these grounds separately.
1. The defendant has not, in fact, collected the certificate of deposit, (a.) The check received from Op-dyke & Co. was sent before receipt or inspection of the vouchers, upon a bare memorandum of the amount of the clearances, to which defendant had added the amount of this certificate; and Opdyke & Co. had a right to reclamation, after inspection of the vouchers. As to the amount of the “clearances” proper, the time within which this reclamation could be made was limited (if the defendant should insist upon its rights, under its agreement) to bank hours of the same day. But this certificate of deposit did not come from the Clearing House, and was not subject to the provisions of the agreement as to the clearances. It formed an independent transaction between the defendant and Opdyke & Co. ; and, in regard to this certificate, the bank was bound to allow the reclamation, as against the memorandum check sent them, upon rules entirely independent of the agreement as to clearances. As to what these rules should be, we say :
1. .Opdyke & Co. had a reasonable time. It was not a case of recognition by them of their signature and payment upon such recognition. It is not proved that any partner of Opdyke & Co. saw it until 5:30 p. m. The cashier saw it and handed it to the book-keeper, who discovered the forgery as soon as he made the necessary comparison with the book entries.
2. Opdyke & Co. had at least the whole day. They, for the defendant, notified the plaintiffs, and both, through the plaintiffs, and also directly, notified the plaintiffs’ principals, during the day of the forgery, and that they refused to pay the certificate ; so that the reclamation was, in fact, made that day as effectively as possible.
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• 3. We admit here fully the rule of Price v. Neal, 3 Burr. 1354, that a drawee paying a draft upon him, cannot afterwards dispute the genuineness of drawer’s signature, but say that the• exception made by that rule to the usual right to recover back money paid under mistake, is not to be extended so as to make a conditional payment an absolute one, and consequently an estoppel, before such time as some change in the position of the parties had taken place. Here the officers of the Capital City Bank parted with its money to a stranger and a forger, and they are out of their money. The plaintiffs receive it for collection, and are notified of the forgery before they pay any money for it. The defendant recognizes the right of Opdyke & Co. to reclaim against their memorandum check before payment has been made to the Capital City Bank. We say, that plaintiffs cannot complain of this. (6.) Even if this certificate formed part of the clearances, or if the defendant might for other reasons have refused, as against Opdyke & Co., to take back the certificate and charge it to the plaintiffs, still, the defendant was not bound as against the plaintiffs to insist upon the enforcement of its absolute rights. Unless the plaintiffs can show that they are themselves prejudiced by the defendant’s relinquishment to Opdyke & Co. of some of its rights against them, the plaintiffs cannot object. In this case they show no loss, nor could there have been any loss to them, unless they, in their own wrong, had paid the Capital City Bank for the certificate after information of the forgery, (e.) Even if Opdyke & Co. had paid this certificate, the defendant was compelled to repay it, as money paid under mistake. We do not dispute the rule in Price v. Neal, but say that it does not apply. The reason of the rule fails.
4. The defendant has neglected no duty. The defendant received the certificate on March 26, and pre
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sen ted March 27. This was in time. If not paid, defendant was bound to notify parties, and for this have another day—viz: March 28. They gave notice on this day ; notice had also been given on the 27th.
III. The return of the certificate to the plaintiffs on the morning of 28th inst., especially in connection with the notice given them by Opdyke & Co., for defendant, on the 27th inst., was in due time, under the custom shown in stipulation. It was to be returned if “not good,” in compliance with the usage of banks, in respect to time and manner of such return. This usage not being proved, it must be assumed to be a reasonable one. In view of the magnitude of the daily transactions of New York banks, a return on the next day after discovery of error is as soon as could be reasonably required. If usage required an earlier return, plaintiff should have shown it. Besides the term, “not good, means that there is an insufficiency. of funds to cover it.” A “ forged ” paper stands in another category, and can always be returned, and a recovery had upon the indorsement.
IV. We cite a few. authorities in support of our general propositions (Goddard v. Merchants’ Bank, 4 Comst. 147; see Judge Rugóles’ opinion át p. 152). A payment made by mistake, the party paying having done so without seeing the drawer’s signature was not estopped thereby from recovering. See also, Canal Bank v. Bank of Albany, 1 Hill, 287 ; Wilkinson v. Johnson, 3 Barn, & Or. 428; Merrill v. Tyler, Selden's Notes, No. 2, 47 ; Wetherall v. Irving Bank, 36 N. Y. 335 ; where payment was not considered an estoppel: Continental Bank v. Bank of Commonwealth, 50 N. Y. 575 , where the plaintiff was not permitted to recover, because by its declarations it had given credit, owing to which the relations of other parties had been changed, and clearly intimating that the reverse of the proposition can be maintained, viz: if no change in the rela
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tions of parties had taken place, as in the case at bar, the rule would not apply.

As a general rule, money paid by one party to another through a mutual mistake of facts, may, on equitable grounds, be recovered. The mistake must not only be a mutual one, but must relate to a fact in respect to which both parties were equally bound to inquire. As thus stated, the principle applies to bills of exchange and other negotiable paper.

Hence in the Bank of Commerce v. Union Bank 3 Comst. 230, the drawee, who had innocently and before the receipt of advices, paid to the defendant a draft that had been raised in amount after it had been issued, was permitted to recover the money thus paid.

So in Goddard v. Merchants’ Bank, 4 Comst. 147, it was held, that the plaintiffs, who were not the drawees of the bill, but who stood in precisely the same position, having, as friends and correspondents of the supposed drawers, paid the bill for their honor to the notary who had the bill for protest and notice, were not chargeable with negligence, for the reason that when they left théir check at the office of the said notary, they did not have the opportunity of inspecting the instrument, and that consequently, on discovery of the forgery of the drawer’s signature, they were entitled to recover their money as paid under a mistake.

The drawee, however, is presumed to know the handwriting of the drawer, who is usually his customer or correspondent, and it is incumbent upon him to satisfy himself that the bill drawn upon him is the drawer’s hand, before he accepts or pays it, while it is not incumbent upon a dona fide holder to inquire into it. Heneé the acceptance or payment of a bill of exchange by the drawee, after opportunity for inspection, is an admission of the genuineness of the drawer’s sig

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nature, which the drawee is not afterwards, in a controversy between himself and the holder, at liberty to dispute ; and if the drawer’s signature is on a subsequent day discovered to be a forgery, the drawee can not compel the holder to whom he paid the bill, to restore the money, unless such holder was in some way implicated in the fraud. In 1762 this principle was distinctly laid down by the court of king’s bench in the case of Price v. Neal, 3 Burrows, 1354, and since that time it has been so uniformly followed, that it has become a rule of right and of action among commereial and business men. In the language of Allen, J., who delivered the opinion of the court of appeals in the cases of The National Park Bank v. The Ninth National Bank, and The Same v. The Fourth National Bank, 46 N. Y. 77 , a rule so well established, and so firmly rooted and grounded in the jurisprudence of the country, ought not to be overruled or disregarded. The rule is founded on the supposed negligence of the drawee in failing, by an examination of the signature when the hill is presented, to detect the forgery and to refuse acceptance or payment. It is an exception to the general rule that money paid under a mistake of fact may be recovered.

The same principle applies with equal, if not greater, force, to a case in which the forged paper has been paid by the party by whom it purports to be payable, for he ought to know better than any other his own signature' (Bank of United States v. Bank of Georgia, 10 Wheat. 333 ).

The difficulty in the case at bar arises in the application of the principle to" the peculiar facts of the case.

Allen, Stephens & Co., the plaintiffs, received from the Capital City Bank of Des Moines, Iowa, for collection, a certificate of deposit purporting to have been issued by-the firm of George Opdyke & Co., of the city

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of New York, and on March 26, 1872, deposited it for credit and collection in The Fourth National Bank, with which they kept' an accouiit. This deposit was made pursuant to a custom or usage which the counsel for the respective parties, by written stipulation, admitted to be as follows:

“It is a custom and usage among banks and bankers to credit their depositors with all checks, drafts, and certificates of deposit deposited with them ; but such credit is subject to a counter charge, if the paper so deposited proves to be not good, and is returned to the party depositing it, in compliance with the usage of banks in respect to time and manner of return in such cases.”

This custom, therefore, formed an important and es: sential part of the contract for collection, by which the rights of the parties are to be determined. Ordinarily the relation between banker and depositor, is that of debtor and creditor. The banker, on receipt of the money, becomes the debtor of the depositor for the amount deposited, and the title to the deposit immediately passes to the banker (Ætna National Bank v. Fourth National Bank, 46 N. Y. 82 ; Oddie v. National City Bank of New York, 45 N. Y, 735 ; Bank of the Republic v. Millard, 10 Wallace, 152). But in this case the parties, by contracting ■with' reference to an existing custom, have adopted a somewhat different rule, and the question, therefore, is, whether the Fourth National Bank has performed its obligations to the plaintiffs under the said special contract.

It further appears from the stipulations of the parties:

I. That- there was, during the year 1872, an agreement between the defendant, the said Fourth National Bank, and the firm of George Opdyke & Co., to the effect, that the defendant should take up, each day, at the Clearing House in the city of New York, all com

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mercial paper drawn upon said firm of Opdyke & Co., which should be presented there by the other banks belonging to the association of the Clearing House; that, upon being notified by the defendant of the amount of the paper so taken up, the said Opdyke & Co. should forthwith send a check for the amount so taken up, and thereupon receive such paper ; and that, if any portion of the paper so taken up should prove, upon inspection, not to be good, the said Opdyke & Co., upon sending back to the bank through which it came, before the close of the bank hours on the same day, should be entitled to a credit for the amount.

II. That on March 27, 1873, the defendant sent to George Opdyke & Co. a statement of the amount of commercial paper which defendant had received upon that day through the Clearing House for account of George Opdyke & Co., and which had been charged on the books of the Clearing House to the defendant, and that the amount of the alleged certificate of deposit described in the answer herein was included in such statement, although such alleged certificate had not been presented by the defendant at the Clearing House on that day ; that thereupon George Opdyke and Co. sent to the defendant a check for the total amount of ■such statement, including the amount of such alleged certificate ; that the defendant then delivered the paper so cleared with the said alleged certificate to the said George Opdyke & Co., before twelve o’clock, noon, on the said March 27, 1872.

The evidence further shows, that upon the receipt of the certificate, Opdyke & Co.’s cashier inspected it and passed it as genuine to the bookkeeper, and that between half past five and six o’ clock on that day, it was discovered by said bookkeeper, from an examination of the stubs of the certificate of deposit book, that the firm had never issued any such certificate. It was found that the signature of George Opdyke & Co.

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thereto had been so skillfully forged, that the forgery conld not have been detected without an examination of the said book. Opdyke & Go. thereupon gave notice of the forgery to the plaintiffs the same evening, and also telegraphed notice thereof to the Capital City Bank of Des Moines.

William A. Stephens and Herman Blennerhassett, two of the plaintiffs, had previously been members of the firm of George Opdyke & Co., and consequently were well aware of the arrangement existing between said firm and the Fourth National Bank. If, with knowledge of the fact that, as between said parties, Opdyke & Co. had until the close of the bank hours (the precise time meant by this term does not appear), on March 27, to return the certificate as not good, and that up to said time the same had not been returned, the plaintiffs had assumed that the Fourth National Bank had completed the collection, and, acting upon such assumption, had done some act by which they would have incurred a liability to the Capital City Bank, the Fourth National Bank, unless authorized under the special contract with the plaintiffs, would, perhaps, have been estopped from relieving Opdyke & Co. from the consequences of their failure to detect the forgery within the bank hours of March 27. But the plaintiffs indulged in no such assumption ; they committed no such act, and incurred no such liability. They knew that' the Fourth National Bank had the right to return the certificate to them, if not good, and they were cautious enough not to commit themselves. They received Opdyke & Co.’s notice of the forgery prior to the making of any acknowledgment of the receipt of the certificate to the Capital City Bank ; and in the letter of acknowledgment which they subsequently did send, they stated the fact of the forgery. Consequently, the arrangement which existed between the Fourth National Bank and Opdyke & Co. as to the

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return of worthless paper, cannot be held to have enured to the benefit of the plaintiffs, and it therefore was competent for said bank to waive a provision as to mere time, which was intended for its own exclusive benefit and protection. For it must be borne in mind, that the check sent by Opdyke & Co. to said bank on March 27, was not an absolute, but a conditional payment, which was to become absolute thereafter upon the happening of a certain event, and at the option of the bank. It was competent, therefore, on .the morning of March 28 for the bank to permit Opdyke & Co-, to return the certificate, with proof of the forgery, and to credit the amount thereof back to said firm.

On the day last referred to, the Fourth National Bank returned to the plaintiffs the certificate in question with a notice, that Opdyke & Co. had pronounced it a forgery, and that the amount thereof had been charged back to plaintiffs’ account. The plaintiffs declined to receive it or to recognize the right of the bank to charge back the amount, and they brought this action.

There is no allegation or suggestion of negligence in this case. The action is not founded upon any such theory. The plaintiffs claim the right to recover solely and purely upon the ground, that the Fourth National Bank actually collected from Opdyke & Co. the amount of the certificate; that under the rule first laid down in Price *. Neal, Opdyke & Co., after payment, could not set up the forgery, and that, consequently, the bank refunded to Opdyke & Co. the money in its own wrong. This would, perhaps, be so, provided the payment by Opdyke & Co. had been an absolute and unqualified one; and it would unquestionably be so, if an absolute and unqualified payment had been made after an inspection of the instrument. But it has already been shown, that the alleged payment was not only made before inspection, but that it was made

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under a special arrangement ais a conditional and qualified one ; that, after the lapse of a certain time, it was, as between the parties to the arrangement, to become absolute at the option of the bank ; and that, as long, as the rights of third parties were not affected by an extension of time, it was competent for the bank to enlarge the time. The rule in Price v. Neal has never been extended to such a case. It applies whenever the drawee, after an opportunity for inspection, has actually and absolutely parted with his money to a bona fide holder, and brings suit to recover it, or has unreservedly obligated himself by an unqualified acceptance to pay, and resists payment. But it has never been applied so as to make a conditional payment an absolute one, and thus to create an estoppel, before a change in the position of the parties has taken place. On the contrary, as hereinbefore pointed out, even drawees, whose neglect to ascertain the forgery before payment was excusable, consistent with the existence of the rule, have been permitted to recover the money as paid under a mistake of fact.

The contract between the plaintiffs and the Fourth National Bank for the collection of the certificate being a special one, as above stated, the credit received by the plaintiffs in their pass book was a conditional one. The condition was, that it should be subject to a counter charge, if the certificate should prove to be not good. For the purpose of ascertaining whether or not it was good, the bank, according tofthe written admission of the parties, had all the time allowed by the usage of banks, in such a case. What such usage is or was, was not proved. But the fact being admitted that such a usage existed and formed part of the contract-, this court is bound to 'assume, in the absence cf evidence, that the time given by it was a reasonable one. Plaintiffs had the certificate only for collection,' and wanted no recourse. Notice to the Capital City

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Bank could serve no purpose, because the certificate was a forgery, and because Charles Wood, who had fraudulently passed the certificate to said bank, was liable to it without notice. The party who fradulently puts forged paper in circulation, cannot avoid his liability to refund on the pretense of delay in detecting the forgery, or in giving notice of it. If reasonable dilligence is exercised in giving notice after the forgery cotoes to light, it is all'that any of the parties can require, and this rule applies not only to indorsers, but also to drawees to whom uo negligence is imputable in failing to detect the forgery (Bank of Commerce v. Union Bank, 3 Comst. 330; Canal Bank v. Bank of Albany, 1 Hill, 387 ). Upon the evidence as disclosed by the case, the Fourth national Bank returned the certificate with notice of its fraudulent character, and countercharged the amount within a reasonable time. Having secured by special contract the right to do this, the plaintiffs have no cause of complaint. If the usage required an earlier return than was made in point of fact, the plaintiffs, who proceeded upon the theory of an actual collection within the time contemplated by the special contract, should have shown it.

As the case stoocl, at the close of the evidence on both sides, the defendant had fully performed its obligations to the plaintiffs, and had not actually collected the'amount of the certificate, and consequently it was error to direct a verdict for the plaintiffs.

Defendant’s exceptions should be sustained, and the verdict should be set aside and a new trial ordered, with costs to the defendant to abide the event.

Monell, Ch. J., concurred.

Cases cited