United States v. National Bank of Commerce of Seattle, Wash.

• Decision Date: 19 May 1913
• Docket Number: 2,190.
• Parties: UNITED STATES v. NATIONAL BANK OF COMMERCE OF SEATTLE, WASH.
• Court: U.S. Court of Appeals — Ninth Circuit

205 F. 433

UNITED STATES v. NATIONAL BANK OF COMMERCE OF SEATTLE, WASH.

No. 2,190.

United States Court of Appeals, Ninth Circuit.

May 19, 1913

M. P McCoy was an examiner of public surveys and special disbursing agent of the United States, with headquarters at Seattle. His duties required him to run over one in every ten of the lines established by surveyors of public lands in certain states under government contracts in order to check up their work. To pay for his expenses in so doing moneys to his credit were deposited from time to time with the defendant, a national depositary. McCoy was authorized to use the money only for the purpose of paying such expenses. When he made a payment, he was required to give the payee a check for the amount and to take his signature to a voucher therefor. Each week he sent a report to the government covering his work, and each quarter he submitted an expense account to which were attached the vouchers, and coincident with these reports the defendant bank sent to Washington the canceled checks included in the quarterly account. McCoy instead of doing the work on the surveys in 1907, 1908, and part of 1909, falsified his reports to the government, and made fraudulent checks purporting to pay for work which was not performed. He forged vouchers for the amounts of the checks in the names of fictitious persons, made the checks payable to the same names, forged the names of the fictitious payees to the indorsements of the checks, and deposited the checks in other banks to the credit of the fictitious payees. He assumed two fictitious names. Under the name of J. G. King he opened accounts with the Columbia Valley Bank of Washington and the Montana National Bank of Montana by correspondence, sending the checks to those banks by mail. With the Seattle National Bank he opened an account under the name of F. M. Clark, and he went personally to the bank for that purpose. None of the banks required that the payee named in the checks be identified. Those banks forwarded the forged checks to the defendant, and the defendant paid them. McCoy obtained the money out of these other banks by forging checks in the fictitious names of the depositors therein.

In September, 1909, a special agent of the government discovered these frauds. At that time the fraudulent checks for the months of July and August, 1909, were still in the possession of the defendant. The special agent obtained those checks from the defendant, notified it that they were all fraudulent, gave it a history of the transactions, and returned the checks to it. On March 4, 1910, the district attorney of the United States for the Western District of Washington demanded of the defendant the repayment of $15,129.81, according to an attached list of the checks and their description. The defendant inspected the checks, but refused to pay the money. To the complaint which was filed to recover judgment for that sum the defendant answered, setting up two affirmative defenses. The substance of the second was that the deposit with the defendant was made in the usual and ordinary manner, and it was not the bank's duty to inquire as to the name of payees of McCoy's checks; that the checks bore his genuine signature; that the bank rendered monthly statements showing the amount of each check, both to the government and to McCoy, and that no complaint of the payment of the checks reached the bank until March 5, 1910; that it was the plaintiff's duty to examine the account and promptly notify the defendant of the forgeries; and that by its failure so to do, within a reasonable time, the plaintiff was barred and estopped from bringing the action. The plaintiff demurred to this affirmative defense, and the demurrer was overruled. The defendant in an amended answer added to that defense the allegation that by reason of the failure of the government to notify the bank of McCoy's fraud, within a reasonable time, it had lost its right against the various banks through which the checks had been forwarded for payment. At the close of the plaintiff's testimony, the trial court granted a nonsuit on the ground that a return to the bank of the fraudulent checks was a condition precedent to the plaintiff's cause of action.

B. W. Coiner, U.S. Atty., of Tacoma, Wash., and C. F. Riddell, Asst. U.S. Atty., of Seattle, Wash.

James A. Kerr and Evan S. McCord, both of Seattle, Wash., for defendant in error.

Before GILBERT and MORROW, Circuit Judges, and WOLVERTON, District judge.

GILBERT Circuit Judge (after stating the facts as above).

We are unable to sustain the judgment of nonsuit on the ground that a tender of the checks to the defendant was a necessary preliminary to the commencement of the action, or to assent to the proposition that the possession of those checks by the defendant was necessary in order to enable it to maintain actions against the banks through which it received the same. The defendant made no demand for the checks, and made no offer to pay the money due the government on condition that the checks be returned to it. Its refusal to pay was absolute and unconditional.

Its cause of action against the banks through which it received the checks with the forged indorsements arose immediately upon its payment thereof. Said the court in Leather Manf. Bank v. Merchants' Bank, 128 U.S. 26-35, 9 Sup.Ct. 3, 4 (32 L.Ed. 342):

'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. * * * 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.'

The language so quoted was approved in United States v. Nat. Exchange Bank, 214 U.S. 302, 29 Sup.Ct. 665, 53 L.Ed. 1006, 16 Ann.Cas. 1184. In United States v. National Park Bank of N.Y. (D.C.) 6 Fed. 852, a case in which the defendant had collected from the United States the amount of a draft which it had received from another bank for collection, and upon which draft the payee's name had been forged, the court said:

'I think there was no obligation on the part of the plaintiff to surrender or tender to the defendant upon the trial this draft. The possession of it was not necessary to a recovery over.'

In a similar case, United States v. Onondaga County Sav. Bank (D.C.) 39 F. 259, in an opinion by Judge Coxe, which was commended by the Supreme Court in United States v. Nat. Exchange Bank, 214 U.S. 319, 29 Sup.Ct. 665, 53 L.Ed. 1006, 16 Ann.Cas. 1184, it was said:

'The refusal to surrender the drafts after the defendants had agreed to repay the money was perhaps ill advised and discourteous, but the defendants lost no advantage by reason thereof. There was no legal obligation to return the drafts. The defendants

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