First Nat. Bank of Danvers v. First Nat. Bank of Salem

• Citation: 24 N.E. 44,151 Mass. 280
• Parties: FIRST NAT. BANK OF DANVERS v. FIRST NAT. BANK OF SALEM.
• Decision Date: 28 February 1890
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

151 Mass. 280

24 N.E. 44

FIRST NAT. BANK OF DANVERS v. FIRST NAT. BANK OF SALEM.

Supreme Judicial Court of Massachusetts, Suffolk.

February 28, 1890

COUNSEL

Charles T. Gallagher and Hollis R. Bailey, for plaintiff.

George B. Ives, for defendant.

OPINION

DEVENS J.

In the case at bar the plaintiff seeks to recover from the defendant the amount of a forged check in the name of one of the plaintiff's customers, for which it had given the defendant credit as money. In the usual course of business if a check purporting to be signed by one of its depositors is paid by a bank to one who, finding it in circulation, or receiving from the payee by indorsement, took it in good faith, for value, the money cannot be recovered back on the discovery that the check is a forgery. It is presumed that the bank knows the signature of its own customers, and therefore is not entitled to the benefit of the rule which, in cases of forgery, permits a party to recover back money paid under a mistake of fact as to the character of the instrument by which the fraud has been effected. This presumption is conclusive only when the party receiving the money has in no way contributed to the success of the fraud or the mistake of fact under which the payment has been made. In the absence of actual fault on the part of the drawee, his constructive fault in not knowing the signature of the drawer, and detecting the forgery, will not preclude his recovery from one who took the check, under circumstances of suspicion, without proper precaution, or whose conduct has been such as to mislead the drawee, or induce him to pay the check without the usual security against fraud. Bank v. Bangs, 106 Mass. 445. Where a loss which must be borne by one of two parties, alike innocent of the forgery, can be traced to the neglect or fault of either, it is reasonable that it should be borne by him, even if innocent of any intentional fraud, through whose means it has succeeded. Gloucester Bank v. Salem Bank, 17 Mass. 33. To entitle the holder to retain money obtained by a forgery, he should be able to maintain that the whole responsibility of determining the validity of the signature was placed upon the drawee, and that the vigilance of the drawee was not lessened, and that he was not lulled into a false security by any disregard of duty on his own part, or by the failure of any precautions which, from his implied assertion in presenting the check as a sufficient voucher, the drawee had a right to believe he had taken. Ellis v. Insurance Co., 4 Ohio St. 628; Rouvant v. Bank, 63 Tex. 610; Bank v. Ricker, 71 Ill 439.

In the case at bar, it is found that the defendant was guilty of negligence in cashing the check without more inquiry as to its genuineness, and this finding is fully supported by the facts. The person who presented the check to the defendant bank was not known to either of its officers, and was not one of its customers. No attempt to have him identified was made and, without identification, the money was paid over upon his indorsement on the check of the name of "JOEL KIMBALL," the check being payable to "Joel Kimball or bearer." The nominal drawer of the check, whose name was forged, was not a customer of the defendant. It is altogether probable that if the defendant, before it cashed the check, had made proper inquiry, the utterer of it would not have remained to encounter any such...