United States v. National Exchange Bank of Providence

• Citation: 214 U.S. 302,29 S.Ct. 665,53 L.Ed. 1006,16 Ann. Cas. 1184
• Decision Date: 01 June 1909
• Docket Number: No. 90,90
• Parties: UNITED STATES, Plff. in Err., v. NATIONAL EXCHANGE BANK OF PROVIDENCE
• Court: United States Supreme Court

214 U.S. 302

29 S.Ct. 665

53 L.Ed. 1006

UNITED STATES, Plff. in Err.,

v NATIONAL EXCHANGE BANK OF PROVIDENCE.

No. 90.

Argued and submitted January 25, 26, 1909.

Decided June 1, 1909.

This action was brought by the United States to recover the sum of payments made at the subtreasury in Boston upon 194 pension checks, the signatures or marks of the persons to whom the checks were payable having been forged. The National Exchange Bank of Boston was originally sole defendant, but in legal effect the National Exchange Bank of Providence was substituted as defendant, and the issues were made up between it and the United States. We shall hereafter refer to that bank as the Exchange Bank.

The cause was tried upon an agreed statement, and the material facts may be thus summarized:

Upon receipt of pension vouchers, regular in form and purporting to be executed by the pensioners named therein,—but which in fact were forgeries,—the United States pension agent at Boston drew the checks in question upon the subtreasury at Boston, aggregating $6,362.07, in favor of the pensioners named in the vouchers, and transmitted such checks by mail directly to the address of each pensioner as given in the vouchers, in accordance with the provision of § 4765, Revised Statutes, U. S. Comp. Stat. 1901, p. 3285. Of the persons named in the checks fifteen had died, and the others were the widows of soldiers, who had remarried, and whose right to a pension had ceased, all the names, however, as we have said, having been forged. With but two exceptions the checks were either for $24 or $36.

The checks with the forged indorsements thereon of the payees were cashed by the Exchange Bank, and immediately indorsed to a national bank in Boston for collection. The checks were presented by the collecting bank at the subtreasury of the United States in Boston. The collecting bank received payment of the same, and accounted for such payment to the Exchange Bank.¹

In May, 1897, a special examiner of the Pension Bureau was detailed at Providence to investigate the case of one Mooy, a deceased pensioner, in whose name three of the checks here in question, each for $36, had been issued and paid in 1896. On June 18, 1897, the examiner reported to the bureau the forgery of the name of the deceased payee, and that it had probably been done by one William A. Munson. December 18, 1897, notice was given to the Exchange Bank by the United States attorney at Providence that the indorsements of Mooy's name to said checks were forged, and that at a proper time reclamation would be made for the money paid to the bank upon the checks. The remaining forgeries were discovered at different times during the months of February, March, April, and May, 1898, and in December, 1898, Munson, who was undergoing imprisonment upon a sentence imposed June 22, 1898, for forging a pension check, with which presumably this case is not concerned, admitted that he had forged the signatures of the payees on the checks in suit.

On July 22, 1898, the United States attorney at Providence made written demand upon the Exchange Bank to be refunded the sums paid, except as to checks aggregating $351.27, for which no demand for repayment was made other than by the bringing of this action. The bank refusing to repay, this action was commenced on August 27, 1901.

Each of the 194 checks was made the subject of two counts. An indebtedness of the defendant bank to the United States was averred in the first count to have arisen from the fact that a described check had been lawfully issued by a United States pension agent, drawn upon the Assistant Treasurer of the United States, that a signature, purporting to be that of the payee, was thereafter forged upon the check, and that the Exchange Bank indorsed said check and presented it for payment to the Assistant Treasurer, who paid the amount thereof. The second count was the common count for money received by the defendant to the use of the United States. In substance, the defenses interposed in the answer of the bank were that, if the facts averred in the declaration were established by the proof, the bank was yet not liable, because the action had not been brought within a reasonable time after the alleged payments of the drafts, nor had prompt notice been given of the discovery of the forgeries. It was also averred that the United States had been negligent in not verifying the signatures of the payees of the checks in suits by comparing them with signatures of the payees in its possession.

Upon the agreed facts the circuit court entered judgment against the bank for the full amount claimed, with interest. The appellate court, however, reversed this judgment, and remanded the cause with directions to enter judgment for the Exchange Bank (80 C. C. A. 632, 151 Fed. 402); and this writ of error was thereupon prosecuted.

Assistant Attorney General Fowler for plaintiff in error.

[Argument of Counsel from pages 305-307 intentionally omitted] Mr. Theodore Francis Green for defendant in error.

Statement by Mr. JusticeWhite [Argument of Counsel from pages 307-309 intentionally omitted] Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:

A preliminary matter needs to be noticed. In the opinion of the circuit court of appeals it is said (italics ours):

'The precise form of only one of the socalled checks is shown by the record, as follows:

United States Pension Agency, No. 297073.

Boston, Mass., Mch. 5, 1892.

Assistant Treasurer of the United States, Boston, Mass.

Pay to the order of Mahala B. Jaques 9492 B81

Thirty-six Dollars. $36

36 100

Interior

W. H. Osborne,

U. S. Pension Agent.

Paid Mar. 12, 1892,

Asst. Treas., Boston.

'Indorsements:

Mahala B. Jaques,

Payee.

M. M. Angell.

Pay Nat. Bank of the Republic, Boston, or order, for collection, for account of First National Bank, Providence, R. I.

C. E. Lapham,

Cashier.

Indorsement Guaranteed.

Nat'l Bank of the Republic, Boston.

'This is, however, understood to be a sample of the remaining checks. As they were drawn by the pension agent on the Assistant Treasurer of the United States, the question naturally arises whether, after all, they were anything more than official warrants,—a question which we will turn to later. It will be observed, however, that no indorsement by the Exchange Bank appears on the sample shown in the record, and whatever indorsement there is is simply 'for collection."

The sample check thus referred to is also set out in the opinion delivered in the circuit court. But no such check is in the record, nor is it embraced in the list of checks collected by the Exchange Bank, and for which recovery is sought by the United States. Presumably the stated sample check must have been inadvertently taken from the record in an action against some other bank. At all events, as it is not in argument questioned that the Exchange Bank was the holder of the checks sued for, when they were paid by the United States, we shall assume the correctness of the recital in the agreed statement of facts, that the checks 'with the forged signatures thereon were cashed by the defendant, who immediately indorsed the said checks to a national bank in Boston for collection.'

The circuit court of appeals reversed the judgment in favor of the United States upon the ground that, by the operation of an exceptional rule, said to prevail, under certain conditions, as to commercial paper, the United States could not recover for the mistaken payments, as there had been unreasonable delay in giving notice to the Exchange Bank after the discovery of the forgeries. The correctness of this action is assailed in the assignments of error, the government contending that the pension checks in question were mere Treasury warrants, not commercial paper in the true sense of that term, and hence not controlled by the so-called exceptional commercial rule; but that, even if the checks were commercial paper, and governed by such rule, mere negligent delay in giving notice of the discovery of the forgery would not prevent recovery unless the Exchange Bank established by proof that it had thereby suffered damage. It is besides claimed that if the agents of the government were negligent in giving notice of the discovery of the forgeries, their laches cannot be imputed to the United States. The Exchange Bank not only traverses these assignments, but insists that the claim of the United States to recover was rightfully rejected, because the duty was on it not only to give prompt notice of the discovery of the forgeries, but also to discover cover the forgeries promptly after payment,—a contention which is controverted by the government.

In order to simplify the issue for decision we concede, for the sake of the argument only, that the forged instruments were not official warrants, as contended by the government, but, in a generic sense, are to be classed as negotiable commercial paper, and that, in a case coming within the exceptional rule referred to, the laches of the authorized agents of the government can be imputed to it. But, assuming the instruments to be negotiable paper, the question yet remains whether the right of the United States to recover from the Exchange Bank is controlled or limited by the exceptional rule referred to.

That, in certain classes of cases, an exceptional rule is enforced in England as to commercial paper, by which, under particular circumstances, such paper is taken out of the operation of the general rule relating to the recovery of money paid by mistake, is not subject to question. Price v. Neale, 3 Burr. 1354; Smith v. Chester, 1 T. R. 654; Smith v. Mercer, 6 Taunt. 76; Wilkinson v. Johnson, 3 Barn. & C. 428; Cocks v. Masterman, 9 Barn. & C. 902. The decisions referred to, however, show that the exception was limited to cases where the person who paid a forged instrument, and who sought recovery of the amount paid, was charged...