130 F.2d 93 (3rd Cir. 1942), 7979, United States v. Clearfield Trust Co.

Docket Nº:7979.
Citation:130 F.2d 93
Party Name:UNITED STATES v. CLEARFIELD TRUST CO. et al.
Case Date:July 29, 1942
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 93

130 F.2d 93 (3rd Cir. 1942)

UNITED STATES

v.

CLEARFIELD TRUST CO. et al.

No. 7979.

United States Court of Appeals, Third Circuit.

July 29, 1942

Argued May 22, 1942.

Paul A. Sweeney, of Washington, D.C. (Francis M. Shea, Asst. Atty. Gen., Charles F. Uhl, U.S. Atty., and George Mashank, Asst. U.S. Atty., both of Pittsburgh, Pa., and George F. Foley and Robert Kaplan, Attys., Department of Justice, both of Washington, D.C., on the brief), for petitioner.

Roswell Dean Pine, Jr., of New York City (Gwinn & Pell, of New York City, and Reed, Smith, Shaw & McClay, and F. T. Ikeler, all of Pittsburgh, Pa., on the brief), for respondent.

Before BIGGS, MARIS, and GOODRICH, Circuit Judges.

GOODRICH, Circuit Judge.

This is an action by the United States to recover the amount of a check drawn by it from the defendant endorsee who received it under a forged endorsement and by whom it had been paid. The check was drawn upon the Treasurer of the United States, payable through the Federal Reserve Bank of Philadelphia and bore date April 28, 1936. It was made payable to the order of Clair A. Barner for W.P.A. services rendered by him and was placed in the mail properly addressed to the payee at Mackeyville, Pennsylvania. Some unknown person obtained the check, forged the payee's name and cashed it at the store of J. C. Penney Company in Clearfield Pennsylvania, who paid value in good faith. J. C. Penney Company endorsed the check to the Clearfield Trust Company which collected it from the plaintiff through the Federal Reserve Bank of Philadephia. Shortly after this Clair A. Barner notified the timekeeper and the foreman of the W.P.A. project on which he was engaged that he had not received the check just described. It was not, however, until January 12, 1937 that notice was given the defendant of the alleged forgery and not

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until August 31, 1937 that the defendant was first notified that the plaintiff was asking reimbursement upon the check. Suit was brought against the Clearfield Trust Company on November 16, 1939 and J. C. Penney Company subsequently intervened. The court below gave judgment for the defendant, giving as its reason the delay on the part of the plaintiff in giving notice of the forgery.

If the rights of the plaintiff are to be determined by Pennsylvania decisions the judgment of the lower court was right. It seems to us clear that under the Pennsylvania rule the rights of a drawer to recover against one who has received payment of a check under a forged endorsement are conditioned upon his giving prompt notice of the forgery. Market St. Title & Trust Co. v. Chelton Trust Co., 1929, 296 Pa. 230, 145 A. 848. We do not think the force of this rule can be avoided by describing it as a rule of laches and, therefore, not operative against the United States. If it applies at all it precludes recovery for it is hardly arguable here that notice to the defendant was given with reasonable promptness.

The most difficult point in the case is whether the plaintiff's rights are to be limited by the rule of diligence declared by the Pennsylvania courts. The learned trial judge concluded that they were and cited United States v. Guaranty Trust Company of New York, 1934, 293 U.S. 340, 55 S.Ct. 221, 79 L.Ed. 415, 95 A.L.R. 651, for the conclusion. That case, however, only declared a conflict of laws rule as to the title acquired in a foreign country by a transferee under a forged endorsement. It does not settle this case.

We think the question is rather whether the rule of Erie R. Co. v. Tompkins, 19...

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