Leather Manuf Rs Nat Bank v. Merchants Nat Bank

• Decision Date: 22 October 1888
• Citation: 9 S.Ct. 3,128 U.S. 26,32 L.Ed. 342
• Parties: LEATHER MANUF'RS NAT. BANK v. MERCHANTS' NAT. BANK
• Court: U.S. Supreme Court

128 U.S. 26

9 S.Ct. 3

32 L.Ed. 342

LEATHER MANUF'RS NAT. BANK v. MERCHANTS' NAT. BANK.

October 22, 1888.

John E. Parsons, for plaintiff in error.

[Statement of Case from pages 26-30 intentionally omitted] J. E. Burrill, for defendant in error.

[Argument of Counsel from pages 30-33 intentionally omitted] Mr. Justice GRAY, after stating the facts as above, delivered the opinion of the court.

The principal question argued is whether this action was barred by the statute of limitations of New York, by which any action upon a contract, obligation, or liability, expressed or implied, except a judgment or a sealed instrument, must be brought within six years after the cause of action accrues. Code 1855, § 91; Code 1877, § 382. The question, then, is whether if a bank, upon which a check is drawn payable to a particular person or order, pays the amount of the check to one presenting it with a forged indorsement of the payee's name, both parties supposing the indorsement to be genuine, the right of action of the bank to recover back the money from the person so obtaining it accrues immediately upon the payment of the money, or only after a demand for its repayment. In order to avoid confusion in dealing with this question, it is important to keep in mind the difference between the liability of a bank to a depositor, and the liability to the bank of a person who has received money from it upon a forged check or order. It is true that the liability, in either case, is that of debtor, not that of trustee or ballee; but there the resemblance ceases. The specific money deposited does not remain the money of the depositor, but becomes the the property of the bank, to be invested and used as it pleases; its obligation to the depositor is only to pay out an equal amount upon his demand or order; and proof of refusal or neglect to pay upon such demand or order is necessary to sustain an action by the depositor against the bank. The bank cannot discharge its liability to account with the depositor to the extent of the deposit, except by payment to him, or to the holder of a written order from him, usually in the form of a check. If the bank pays out money to the holder of a check upon which the name of the depositor, or of a payee or indorsee, is forged, it is simply no payment as between the bank and the depositor; and the legal state of the account between them, and the legal liability of the bank to him, remain just as if the pretended payment had not been made. Bank v. Whitman, 94 U. S. 343. But as between the bank and the person obtaining money on a forged check or order the case is quite different. The first step in bringing about the payment is the act of the holder of the check in assuming and representing himself to have a right, which he has not, to receive the money. One who, by presenting forged paper to a bank, procures the payment of the amount thereof to him, even if he makes no express warranty, in law represents that the paper is genuine; and, if the payment is made in ignorance of the forgery, is liable to an action by the bank to recover back the money which, in equity and good conscience, has never ceased to be its property. It is not a case in which a consideration, which has once existed, fails by subsequent election or other act of either party, or of a third person; but there is never, at any stage of the transaction, any consideration for the payment. Espy v. Bank, 18 Wall. 604; Gurney v. Womersley, 4 El. & Bl. 133; Bank v. Morton, 4 Gray, 156; Aldrich v. Butts, 5 R. I. 218; White v. Bank, 64 N. Y. 316.

Whenever money is paid upon the representation of the receiver that he has either a certain title in property transferred in consideration of the payment, or a certain authority to receive the money paid, when in fact he has no such title or authority, then, although there be no fraud or intentional misrepresentation on his part, yet there is no consideration for the payment, and the money remains, in equity and good conscience, the property of the payer, and may be recovered back by him, without any previous demand, as money had and received to his use. His right of action accrues, and the statute of limitations begins to run, immediately upon the payment. Thus, in the early case of Bree v. Holbech, 2 Doug. 654, where an administrator received the amount of the mortgage money upon his assignment of a mortgage purporting to be made to the deceased, but in fact a forgery, of which both parties were ignorant, it was held by Lord MANSFIELD and the court of king's bench that the right of action to recover back from the administrator the money so paid was barred by the statute of limitations in six years from the time of the payment. So in Bank v. Van Gieson, 18 Johns. 485, where a promissory note payable at the Bank of Geneva was left by the indorsers with the Utica Bank for collection, and sent by it to the Bank of Geneva for that purpose, and the amount was afterwards paid by the Utica Bank to the indorsers upon* the mistaken supposition that it had been paid to the Bank of Geneva by the maker, when in fact it had not, and it was not pretended that the Utica Bank had been guilty of any negligence, the supreme court of New York held that notice of the fact that the note had not been paid by the maker was unnecessary to maintain an action by the Utica Bank...