United States v. Bank of New York, Nat. Banking Ass'n

• Decision Date: 15 December 1914
• Docket Number: 84.
• Citation: 219 F. 648
• Parties: UNITED STATES v. BANK OF NEW YORK, NAT. BANKING ASS'N.
• Court: U.S. Court of Appeals — Second Circuit

219 F. 648

UNITED STATES v. BANK OF NEW YORK, NAT. BANKING ASS'N.

No. 84.

United States Court of Appeals, Second Circuit.

December 15, 1914

H Snowden Marshall, U.S. Atty., of New York City (Gordon Auchincloss, of New York City, of counsel), for the United States.

Satterlee Canfield & Stone, of New York City (Karl T. Frederick and Huger W. Jervey, both of New York City, of counsel), for defendant in error.

Before COXE, WARD, and ROGERS, Circuit Judges.

ROGERS Circuit Judge.

This action was brought by the United States to recover from defendant the amount of a draft paid by plaintiff to defendant on March 19, 1912, together with interest from date of payment.

The complaint alleges that defendant on or about March 14, 1912 presented to the Treasury Department at Washington, D.C., a draft dated Rosario (Argentine Republic), February 8, 1912, for $463.73, drawn on the Secretary of the Treasury, payable to the order of the British Bank of South America, Limited, and purporting to be signed by Robert T. Crane, American Consul, and bearing the indorsement of the British Bank of South America, Limited, followed by the indorsement of defendant as the last indorsement on the back thereof; that, without Crane's knowledge, Crane's signature to the draft had been forged; and that on March 19, 1912, the Secretary of the Treasury, under a mistake of fact and in ignorance that Crane's signature was a forgery, paid defendant the amount of the draft which sum defendant has refused to return to plaintiff, though requested so to do.

A copy of the instrument follows:

Consulate of the United States of America.

Rosario, February 8th, 1912.

No. 5.

Fifteen days after sight (acceptance waived and indorsements by procuration, excepted) of this sole of exchange.

$463.73

Pay to the order of the British Bank of South America, Limited, four hundred, sixty-three dollars, seventy-three cts., U.S. gold

Dollars

Value received and charge the same to account for Relief of Seamen and balance of salary.

To the Secretary of Treasury.

(Seal)

Washington D.C.

Robert T. Crane, American Consul.

The indorsements upon the back of the instrument are not herein set forth as they are not involved.

It is true that in some cases where a person has been induced by fraud to make payment of a bill or note such payment may be recovered back. And in like manner under some circumstances one who has paid a bill under a mistake of fact is allowed to recover the amount thereof. So under some circumstances a party who has made a payment on a forged instrument may be permitted to recover it back from the party receiving it. Welch v. Goodwin, 123 Mass. 71, 25 Am.Rep. 24 (1877); Goddard v. Merchants' Bank, 4 N.Y. 147 (1850).

But if one accepts forged paper purporting to be his own and pays it to a holder for value, the Supreme Court has said that it is undoubtedly true as a general rule of commercial law that he cannot recall the payment. What he has done amounts to an adoption of the paper as genuine. He is presumed to know his own signature. Cooke v. United States, 91 U.S. 389, 396, 23 L.Ed. 237 (1875). So it is incumbent upon the drawee of a bill or check to be satisfied that the signature of the drawer is genuine. He must know, is conclusively presumed to know, whether the signature of the drawer is genuine.

The case of Price v. Neale, 3 Burrows, 1354, decided in 1762, established the principle that the drawee of a draft, having accepted or paid it, cannot compel repayment of the money upon discovering that his drawer's name was forged. And for more than a century and a half it has been settled law that the drawee of a bill must be presumed to know as matter of law the handwriting of his correspondent the drawer of the bill, and that it is incumbent upon him to be satisfied of the genuineness of the drawer's signature. If he accepts or pays a bill to which the drawer's name has been forged, he is thereby estopped by his act and cannot thereafter repudiate his acceptance or recover back the money he has paid. The principle applies as well to the case of a bill paid upon presentment as to one accepted and afterwards paid. See National Park Bank v. Ninth National Bank, 46 N.Y. 77 (1871).

In Price v. Neale two bills of exchange had been paid by the drawee, the signature of the drawer having been forged. One bill was paid when it became due, without acceptance. The other was accepted and paid at maturity. When the forgery was discovered, an action was brought to recover back the money paid; it being admitted that both parties were equally innocent. The action was for money had and received, in which no recovery could be had unless it was against conscience for defendant to retain it. Lord Mansfield said that in such a case as the one then before him it could not be affirmed that it was unconscientious for defendant to retain the money he having paid a fair and valuable consideration for the bills. He continued:

'Here was no fraud, no wrong; it was incumbent upon the plaintiff to be satisfied, that the bill drawn upon him was the drawer's hand, before he accepted or paid it; but was not incumbent upon defendant to inquire into it. There was notice given by the defendant to the plaintiff, of a bill drawn upon him, and he sends his servant to pay it, and take it up; the other bill he actually accepts, after which the defendant, innocently and bona fide, discounts it; the plaintiff lies by for a considerable time after he has paid these bills and then found that they were forged. He made no objection to them at the time of paying them; whatever of neglect there was, was on his side. The defendant had actual encouragement from the plaintiff for negotiating the second bill, from the plaintiff's having without any scruple or hesitation paid the first; and he paid the whole value bona fide. It is a misfortune which has happened without the defendant's fault or neglect. If there was no neglect in the plaintiff, yet there is no reason to throw off the loss from one innocent man upon another innocent man. But in this case if there was any fault or negligence in any one, it certainly was in the plaintiff and not in the defendant.'

It is true that it has been held in one case at least that the doctrine of Price v. Neale should not be adhered to in cases where the holder of an unaccepted bill presents it to the drawee for acceptance or payment, and that in such cases the unrestricted indorsement and presentation of the draft to the drawee is a representation on the part of the holder and indorser that the signature of the drawer is genuine. Ford & Co. v. People's Bank of Orangeburg, 74 S.C. 180, 54 S.E. 204, 10 L.R.A. (N.S.) 63, 114 Am.St.Rep. 986, 7 Ann.Cas. 744 (1906). And in North Dakota the doctrine of Price v. Neale has been rejected in its entirety. First National Bank v. Bank of Wyndmere, 15 N.D. 299, 108 N.W. 546, 10 L.R.A. (N.S.) 49, 125 Am.St.Rep. 588 (1906). But the two cases last cited are without support in the decisions of the English courts and have little, if any, support in the American decisions.

Indeed, the principle established by Price v. Neale has been incorporated into the uniform Negotiable Instruments Act which has been adopted in the District of Columbia and was in force there at the time this payment was made. That act provides that the acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance and admits 'the existence of the drawer, the genuineness of his signature, his capacity and authority to draw the instrument. ' As payment is equivalent to acceptance, the United States under the act admitted the genuineness of the drawer's signature (Act Jan. 12, 1899, c. 47, 30 St.at L.P. 785, Sec. 62), if the bill was negotiable.

As early as 1825, the Supreme Court applied the principle of Price v. Neale in United States Bank v. Bank of Georgia, 10 Wheat. 333, 6 L.Ed. 334. The Supreme Court, through Mr. Justice Story, in United States Bank v. Bank of Georgia, referred approvingly to Price v. Neale, saying:

'The case of Price v. Neale has never since been departed from; and in all the subsequent decisions in which it has been cited, it has had the uniform support of the court, and has been deemed a satisfactory authority.'

Price v. Neale goes upon the same theory as do those which hold that a bank is bound to know its customer's signature, and has no remedy where it has paid or certified a forged check to a bona fide holder for value. The presumption is that it has greater means and better opportunities to become familiar with the handwriting of depositors than are afforded the holder.

The courts have in a number of cases held that the rule that the drawee is presumed to know the signature of his drawer does not apply if the holder by his negligence has contributed to the success of the fraud practiced. Myers v. Southwestern National Bank, 193 Pa. 1, 44 A. 280, 74 Am.St.Rep. 672; Woods v. Colony Bank, 114 Ga. 683, 40 S.E. 720, 56 L.R.A. 929 (1902); Brennan v. Merchants', etc Bank, 62 Mich. 343, 28 N.W. 881 (1886). But in this case the government makes no claim that defendant has been guilty of any negligence contributory to the fraud practiced. Counsel for the government comes into court with the statement that the Secretary of the Treasury of the United States is not presumed to know the signatures of such agents of the United States as are authorized to draw on him. It is argued that the United States is entitled to greater protection than an individual from the unauthorized and fraudulent acts of its agents. And it is said that to charge the government with knowledge of the genuineness of the signatures of those of its servants who may be entitled to...