293 U.S. 340 (1934), 120, United States v. Guaranty Trust Company of New York

Docket Nº:No. 120
Citation:293 U.S. 340, 55 S.Ct. 221, 79 L.Ed. 415
Party Name:United States v. Guaranty Trust Company of New York
Case Date:December 10, 1934
Court:United States Supreme Court

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293 U.S. 340 (1934)

55 S.Ct. 221, 79 L.Ed. 415

United States


Guaranty Trust Company of New York

No. 120

United States Supreme Court

Dec. 10, 1934

Argued November 13, 14, 1934




1. By the law of the District of Columbia, a forged signature of the payee on a check is inoperative to pass to a subsequent bona fide holder for value, either the title to the instrument, or the right to enforce payment, or the right to retain the proceeds if payment is made in ignorance of the forgery. P. 345.

2. Under settled principles of conflict of laws, the validity of a transfer of a chattel brought into a country by consent of the owner is governed by the law of that country, and this rule applies to negotiable instruments. P. 345.

3. The principle applies in the present case to a government check, drawn and payable in the District of Columbia, but which was

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mailed by the Government from the District to the payee at his residence in Yugoslavia, and was negotiated in that Kingdom. P. 346.

4. By the law of Yugoslavia, as stipulated in this case, the transferee of a check who takes it in good faith and for value without notice that the endorsement of the payee's name was forged or notice of other defect, and without negligence or fraud on his own part, acquires title to the instrument and the right to collect it and retain the proceeds. Held that a holder of a check acquired by transfer under these circumstances in Yugoslavia had the right in this country to enforce payment and to retain the proceeds as against the drawer, although, by the law of the District of Columbia, where the check was drawn and made payable and was delivered by mailing, a forged endorsement is inoperative, the check having been sent by the drawer to the payee in Yugoslavia with the presumed intention that it should be negotiated there according to the law of that country. P. 346.

5. An express guarantee of prior endorsements means no more than what is implied by every unrestricted endorsement -- namely, that the endorsements were effective to give legal title and the right to enforce payment. P. 348.

6. A Treasury circular declared that the handling of Government checks by Reserve Banks should be "subject to examination and payment by the Treasurer of the United States," and a circular of a Reserve Bank declared that, as the Government exercised the right of returning at any time checks which, for any cause, were not considered good, the Bank, as fiscal agent, as a condition of receiving checks on the Treasury, reserved the right to charge back and return them unconditionally. Held that collection of a government check through the agency of the Bank with knowledge of these provisions does not imply consent that the Government may demand restitution irrespective of its obligation to make the payment. P. 349.

7. As against the United States, the rights of the holder of its checks drawn upon the Treasurer are the same as those accorded by commercial practice to the checks of private individuals. P. 350.

69 F.2d 799 affirmed.

Certiorari to review the reversal of a judgment recovered by the United States in an action for money paid

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on a check bearing a forged endorsement of the payee's name.

BRANDEIS, J., lead opinion

MR. JUSTICE BRANDEIS delivered the opinion of the Court.

On September 5, 1929, the United States brought in the federal court for Southern New York this action to recover from the Guaranty Trust Company $160 with interest. That sum was claimed as damages resulting from the payment to the Trust Company, through the Federal Reserve Bank of New York acting as fiscal agent of the United States, of a check, payable to Louis Macakanja drawn on the Treasury of the United States by the disbursing clerk of the United States Veterans' Bureau. The complaint alleged that the letter containing the check had been mailed to the payee in Yugoslavia, that neither the "payee of said check nor anyone on his behalf had ever received or endorsed the same," and that

the letter containing the check was taken or received in Yugoslavia by some person other than the payee thereof, and that thereafter the name of Louis Macakanja was written on the back of the said check by some person other than the payee thereof, and by a person who was not authorized to sign the name of said payee and who had no right, title, or interest in and to said check, with possession

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thereof, and no right or authority to receive, endorse or dispose of the same.

The answer set up as a special defense that the "check was negotiated and transferred in the Kingdom of Yugoslavia;" that, under its law,

upon the negotiation and transfer of a check, every transferee, if he takes without actual notice of any alleged forgery or other defect, in the absence of fraud or gross negligence, obtains a good title to the instrument, even if the endorsement of the payee is forged, and acquires the right to collect and retain the proceeds;


each of the transferees of the check mentioned in the complaint gave valuable consideration and took without notice of any alleged forgery or other defect, and without fraud or negligence, and thereby obtained a good title to the instrument and acquired the right to collect and retain the proceeds;

and that the "defendant under the law of Yugoslavia, duly obtained title to said check, as aforesaid, and duly collected and retained the proceeds."1

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The case was tried before a jury. The evidence consisted of an agreement as to facts [55 S.Ct. 223] and the cancelled check. The agreement recited, among other things, that the purported indorsement of the payee was a forgery, made in Yugoslavia; that, on or about November 30, 1921, the check was transferred...

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