Clearfield Trust Co v. United States, No. 490

CourtUnited States Supreme Court
Writing for the CourtDOUGLAS
Citation318 U.S. 744,87 L.Ed. 838,318 U.S. 363,63 S.Ct. 573
PartiesCLEARFIELD TRUST CO. et al. v. UNITED STATES
Docket NumberNo. 490
Decision Date01 March 1943

318 U.S. 363
63 S.Ct. 573
318 U.S. 744
87 L.Ed. 838
CLEARFIELD TRUST CO. et al.

v.

UNITED STATES.

No. 490.
Argued and Submitted Feb. 5, 1943.
Decided March 1, 1943.
As Amended Mar. 15, 1943.

Page 364

Mr. Paul A. Freund, of Washington, D.C., for respondent.

Mr. Roswell Dean Pine, Jr., of New York City, for petitioners.

Mr. Justice DOUGLAS delivered the opinion of the Court.

On April 28, 1936, a check was drawn on the Treasurer of the United States through the Federal Reserve Bank of Philadelphia to the order of Clair A. Barner in the amount of $24.20. It was dated at Harrisburg, Pennsylvania and was drawn for services rendered by Barner to the Works Progress Administration. The check was placed in the mail addressed to Barner at his address in Mackeyville, Pa. Barner never received the check. Some unknown person obtained it in a mysterious manner and presented it to the J. C. Penney Co. store in Clearfield, Pa., representing that he was the payee and identifying himself to the satisfaction of the employees of J. C. Penney

Page 365

Co. He endorsed the check in the name of Barner and transferred it to J. C. Penney Co. in exchange for cash and merchandise. Barner never authorized the endorsement nor participated in the proceeds of the check. J. C. Penney Co. endorsed the check over to the Clearfield Trust Co. which accepted it as agent for the purpose of collection and endorsed it as follows: 'Pay to the order of Federal Reserve Bank of Philadelphia, Prior Endorsements Guaranteed.'1 Clearfield Trust Co. collected the check from the United States through the Federal Reserve Bank of Philadelphia and paid the full amount thereof to J. C. Penney Co. Neither the Clearfield Trust Co. nor J. C. Penney Co. had any knowledge or suspicion of the forgery. Each acted in good faith. On or before May 10, 1936, Barner advised the timekeeper and the foreman of the W.P.A. project on which he was employed that he had not received the check in question. This information was duly communicated to other agents of the United States and on November 30, 1936, Barner executed an affidavit alleging that the endorsement of his name on the check was a forgery. No notice was given the Clearfield Trust Co. or J. C. Penney Co. of the forgery until January 12, 1937, at which time the Clearfield Trust Co. was notified. The first notice received by Clearfield Trust Co. that the United States was asking reimbursement was on August 31, 1937.

This suit was instituted in 1939 by the United States against the Clearfield Trust Co., the jurisdiction of the federal District Court being invoked pursuant to the provisions of § 24(1) of the Judicial Code, 28 U.S.C. § 41(1), 28 U.S.C.A. § 41(1). The cause of action was based on the express guaranty of prior endorsements made by the Clearfield Trust Co.

Page 366

J. C. Penney Co. intervened as a defendant. The case was heard on complaint, answer and stipulation of facts. The District Court held that the rights of the parties were to be determined by the law of Pennsylvania and that since the United States unreasonably delayed in giving notice of the forgery to the Clearfield Trust Co., it was barred from recovery under the rule of Market Street Title & Trust Co. v. Chelten T. Co., 296 Pa. 230, 145 A. 848. It accordingly dismissed the complaint. On appeal the Circuit Court of Appeals reversed. 3 Cir., 130 F.2d 93. The case is here on a petition for a writ of certiorari which we granted, 317 U.S. 619, 63 S.Ct. 258, 87 L.Ed. —-, because of the importance of the problems raised and the conflict between the decision below and Security-First Nat. Bank v. United States, 103 F.2d 188, from the Ninth Circuit.

We agree with the Circuit Court of Appeals that the rule of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, does not apply to this action. The rights and duties of the United States on commercial paper which it issues are governed by federal rather than local law. When the United States disburses its funds or pays its debts, it is exercising a constitutional function or power. This check was issued for services performed under the Federal Emergency Relief Act of 1935, 49 Stat. 115, 15 U.S.C.A. §§ 721—728. The authority to issue the check had its origin in the Constitution and the statutes of the United States and was in no way dependent on the laws of Pennsylvania or of any other state. Cf. Board of Commissioners v. United States, 308 U.S. 343, 60 S.Ct. 285, 84 L.Ed. 313; Royal Indemnity Co. v. United States, 313 U.S. 289, 61 S.Ct. 995, 85 L.Ed. 1361. The duties imposed upon the United States and the rights acquired by it as a result of the issuance find their roots in the same federal sources.2 Cf. Deitrick v. Greaney, 309 U.S. 190, 60 S.Ct. 480, 84 L.Ed. 694;

Page 367

D'Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956. In absence of an applicable Act of Congress it is for the federal courts to fashion the governing rule of law according to their own standards. United States v. Guaranty Trust Co., 293 U.S. 340, 55 S.Ct. 221, 79 L.Ed. 415, 95 A.L.R. 651, is not opposed to this result. That case was concerned with a conflict of laws rule as to the title acquired by a transferee in Yugoslavia under a forged endorsement. Since the payee's address was Yugoslavia, the check had 'something of the quality of a foreign bill' and the law of Yugoslavia was applied to determine what title the transferee acquired.

In our choice of the applicable federal rule we have occasionally selected state law. See Royal Indemnity Co. v. United States, supra. But reasons which may make state law at times the appropriate federal rule are singularly inappropriate here. The issuance of commercial paper by the United States is on a vast scale and transactions in that paper from issuance to payment will commonly occur in several states. The application of state...

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867 practice notes
  • Separate Parts In This Issue Part II Treasury Department, Fiscal Service,
    • United States
    • Federal Register April 23, 2003
    • April 23, 2003
    ...rights. Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321, 3327, 3328, 3331, 3334, 3343, 3711, 3712, 3716, 3717; 332 U.S. 234 (1947); 318 U.S. 363 Subpart A--General Provisions Sec. 240.1 Scope of regulations. (a) The regulations in this part prescribe the requirements for indorsement a......
  • Checks drawn on U.S. Treasury; indorsement and payment,
    • United States
    • Federal Register April 23, 2003
    • April 23, 2003
    ...rights. Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321, 3327, 3328, 3331, 3334, 3343, 3711, 3712, 3716, 3717; 332 U.S. 234 (1947); 318 U.S. 363 Subpart A--General Provisions Sec. 240.1 Scope of regulations. (a) The regulations in this part prescribe the requirements for indorsement a......
  • Calhoun v. Yamaha Motor Corp., U.S.A., No. 93-1736
    • United States
    • U.S. Court of Appeals — Third Circuit
    • December 7, 1994
    ...this question as being quite similar, if not identical, to the preemption analysis articulated in Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), and its progeny, see, e.g., United States v. Little Lake Misere Land Co., 412 U.S. 580, 594, 93 S.Ct. 238......
  • Tipton v. Secretary of Educ. of US, Civ. A. No. 2:90-0105.
    • United States
    • United States District Courts. 4th Circuit. Southern District of West Virginia
    • June 21, 1991
    ...defendants subject to the students' claims and defenses under the Clearfield Trust doctrine. See Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 In Clearfield Trust, the United States Supreme Court held that federal law governs questions involving the rights ......
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851 cases
  • Calhoun v. Yamaha Motor Corp., U.S.A., No. 93-1736
    • United States
    • U.S. Court of Appeals — Third Circuit
    • December 7, 1994
    ...this question as being quite similar, if not identical, to the preemption analysis articulated in Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), and its progeny, see, e.g., United States v. Little Lake Misere Land Co., 412 U.S. 580, 594, 93 S.Ct. 238......
  • Tipton v. Secretary of Educ. of US, Civ. A. No. 2:90-0105.
    • United States
    • United States District Courts. 4th Circuit. Southern District of West Virginia
    • June 21, 1991
    ...defendants subject to the students' claims and defenses under the Clearfield Trust doctrine. See Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 In Clearfield Trust, the United States Supreme Court held that federal law governs questions involving the rights ......
  • Birbeck v. Southern New England Production Credit, Civ. No. H-84-593.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Connecticut)
    • March 29, 1985
    ...of claims governed by federal common law under the jurisdictional grant of 28 U.S.C. § 1331, Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943); Illinois v. City of Milwaukee, 406 U.S. 91, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972), it must first be decided whe......
  • Gabel v. Hughes Air Corp., Civ. A. No. 71-1595-PH
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • October 12, 1972
    ...Co. v. Jefferson Electric Co., 317 U.S. 173, 176-177, 63 S.Ct. 172, 173, 174, 87 L.Ed. 165; cf. Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838. The case is therefore one arising under a law regulating commerce of which the federal courts are given jurisdicti......
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5 books & journal articles
  • FORD MOTOR CO. V. MONTANA EIGHTH JUDICIAL DISTRICT COURT AND 'CORPORATE TAG JURISDICTION' IN THE PENNOYER ERA.
    • United States
    • Case Western Reserve Law Review Vol. 72 Nbr. 1, September 2021
    • September 22, 2021
    ...general common law differs from what is now called "federal common law." In the seminal case of Clearfield Trust Co. v. United States, 318 U.S. 363 (1943), the Supreme Court announced a federal-common-law rule as to which party bore the burden of loss on a forged endorsement of a check issu......
  • Rethinking the Supreme Court’s Interstate Waters Jurisprudence
    • United States
    • Georgetown Environmental Law Review Nbr. 33-2, January 2021
    • January 1, 2021
    ...426 U.S. 128, 145 (1976); United States v. Standard Oil Co., 332 U.S. 301, 305, 308 (1947); Clearf‌ield Trust Co. v. United States, 318 U.S. 363, 366 (1942). They have occasionally preempted “hostile” or “aberrant” state laws targeting sibling states and/or the Union. See United States v. L......
  • HORIZONTAL CHOICE OF LAW IN FEDERAL COURT.
    • United States
    • University of Pennsylvania Law Review Vol. 169 Nbr. 8, August 2021
    • August 1, 2021
    ...does not apply to this action," even though it essentially applied the prevailing Erie method. See Clearfield Trust Co. v. United States, 318 U.S. 363 (1943) (internal citation omitted); see also Clermont, supra note 29 ("[T]he Clearfield problem[] is no more than a restatement of the Erie ......
  • EQUITY AND THE SOVEREIGN.
    • United States
    • Notre Dame Law Review Vol. 97 Nbr. 5, May 2022
    • May 1, 2022
    ...its rights."). (61) Utah Power & Light Co. v. United States, 243 U.S. 389, 409 (1917); cf. Clearfield Tr. Co. v. United States, 318 U.S. 363, 366 (1943) (applying federal common law to preempt a state law laches defense in a suit brought by the United (62) Leiter Mins., Inc. v. United S......
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