7 of notes taken by his agent, and indorsed by him as agent, cannot deny the agent's authority to make the indorsement. The ratification by the payee of an indorsement made on a note, by one assuming to act as his agent without authority, operates as an assignment only from the time of the ratification.8 § 130. Forgery as a defense. 9 10 An acceptor of a bill warrants the genuineness of the signature of the drawer and he cannot, therefore, resist payment of the bill as against a bona fide holder if the drawer's name be forged." An indorser of a negotiable instrument admits that, at the time of his indorsement, the instrument is valid and subsisting," and he is, therefore, bound by his indorsement to subsequent parties.12 And it has been held that a bank is entitled to recover against the second indorser of a note, although the indorsement of the name of the payee is a forgery, and although the note was offered for discount by the maker and not by the second indorser.13 ranty of the acceptor only extends to the genuineness of the signature, and not to the matters contained in the bill itself; it follows, therefore, that if the forgery consists in altering the amount to be paid under the bill the acceptor will not be bound thereby, and he may recover any amount paid thereon.14 An indorser, however, by his indorsement contracts with the subsequent bona fide holder of the instrument, that the instrument itself, and all the signatures prior to his indorsement are genuine; 15 and the 7. Third Nat. Bank v. Butler Colliery Co., 59 Hun (N. Y.), 627, 14 N. Y. Supp. 21. 8. Clark v. Peabody, 22 Me. 500. 9. Neg. Inst. L. (N. Y.), § 112. See $82, (d), ante. 10. Bank of United States v. Bank of Georgia, 10 Wheat. (U. S.) 333, 6 L. Ed. 334; United States v. Bank of United States, 4 Dall. C. C. (U. S.) 235. 11. Neg. Inst. L. (N. Y.), § 116. See § 86, (a), (b), ante. 12. Star Ins. Co. v. Bank, 60 N. H. 445; Choquette v. Leclaire, Rap. Jud. Que., 19 C. S. (Can.) 521. 13. State Bank v. Fearing, 16 Pick. (Mass.) 533. 14. The drawees of a bill are only held to a knowledge of the signatures of their correspondents, the drawers; by accepting and paying the bill they only vouched for the genuineness of such signatures, and were not held to The war a knowledge of the want of genuineness of any other part of the instru ment, or of any other names appearing thereon, or of the title of the holder. White v. Continental Nat. Bank, 64 N. Y. 316; National Park Bank v. Ninth Nat. Bank, 46 N. Y. 77. 15. Where a holder of a bill presents it for payment and indorses it to the acceptor, he will be held to a knowledge of the validity of his own title, and the genuineness of the indorsements, and of every part of the bill other than the signature of the drawers, within the general principle which makes every party to a promissory note or bill of exchange a guarantor of the genuineness of every preceding indorsement, and of the genuineness of the instrument. Erwin v. Downs, 15 N. Y. 575; Turnbull v. Bowyer, 40 N. Y. 456; Lennon v. Grauer, 159 N. Y. 433, 54 N. E. 11. fact that the name of the maker was forged will not affect his liability." 16 A maker stands in a different position from that of an indorser. His obligation is only to the bona fide and true owner or holder of the instrument.17 If the signature of the payee be forged upon a note and it is thus transferred unlawfully to a third person, the title of the payee to the note is not diverted, and no action could be maintained by such person against the maker. Payment made to a person who is not the true owner or holder of the note will not relieve the maker or acceptor. 18 § 131. Recovery of money paid on forged instrument. a. In general.— It is well settled that money paid under a mistake of fact may be recovered back, however negligent the party making the mistake may have been, unless the payment has caused such a change in the position of the other parties that it would be contrary to equity to compel him to pay.19 The most generally received exception to this rule is that the acceptor of a bill of exchange, or the banker upon whom a check has been drawn, may not recover back from a bona fide holder money paid upon such a bill or check by reason of the forged name of the drawer. b. Forged signature of drawer. The drawee of a bill or the banker upon whom a check is drawn is bound to know the signature of his drawer;20 and if he pays the bill or check to a bona fide holder, after he has inspected or had an opportunity to inspect the signature, he cannot recover the amount so paid.21 16. Lennon v. Grauer, 159 N. Y. 433, 54 N. E. 11. This 19. Keener on Quasi Contracts, chap. II. See Germania Bank v. BouNotes, tell, 60 Minn. 189, 62 N. W. 327, 27 L. R. A. 635. 20. First Nat. Bank v. Northwestern Nat. Bank, 152 Ill. 296, 38 N. E. 739, 26 L. R. A. 289. 21. Germania Sav. Bank v. Boutell, 60 Minn. 189, 62 N. W. 327, 27 L. R. A. 635; Bernheimer v. Marshall, 2 Minn. 78, 72 Am. Dec. 79. 18. In the case of Graves v. American Exchange Bank, 17 N. Y. 205, it was held that the drawee of a bill must, at his peril, pay it to the genuine payee, or a person authorized by him to receive payment; and hence, where the drawee of a bill paid it to the holder under an indorsement by The rule that a drawee of a bill a person of the same name as the is bound to know the handwriting of payee, he is liable to the payee for the drawer and that he cannot rethe amount of the bill, though the cover back money paid to a bona fide payment was made in good faith in holder of a forged bill, applies, in the ordinary course of business, and general, to a party who intervenes with nothing to excite suspicion. See and takes up a protested bill for the also Depau v. Browne, Harp. (S. C.) honor of the drawer. If he pays the 254; Chism v. First Nat. Bank, 96 bill after seeing it, he is concluded by Tenn. 641, 36 S. W. 387. the act, and cannot recover the money, rule does not control where it can be shown that the party receiving the money, although a bona fide holder, contributed by his negligence to the successful consummation of the fraud, or to the mistake of fact under which the payment was made.22 The de though the bill is a forgery. Goddard to the success of the fraud, or the v. Merchants' Bank, 4 N. Y. 147. See mistake of fact under which the payalso Salt Springs Bank v. Syracuse Sav. Bank, 62 Barb. (N. Y.) 101; White v. Continental Bank, 64 N. Y. 316, 21 Am. Rep. 612; Vogel v. Ball, 69 Tex. 604, 7 S. W. 101; Johnston v. Commercial Bank, 27 W. Va. 343, 55 Am. Rep. 315. 22. Rebuttal of presumption as to signature; negligence.-National Bank of North America v. Bangs, 106 Mass. 441, 8 Am. Rep. 349; First Nat. Bank of Danvers v. First Nat. Bank of Salem, 151 Mass. 280, 24 N. E. 44. In the latter case a forged check, purporting to be drawn upon a bank by a firm which was one of its customers, was made payable to a payee named or bearer. Another bank, of which the firm was not a customer, when the check was presented to it by an unknown person, without attempting to identify him, and upon his indorsing it in the payee's name, cashed it, and was credited with the amount as money by the drawee. The drawee negligently failed to discover the forgery for a month or two, but then immediately notified the bank cashing the check, which was not prejudiced by the delay. It was held that the bank cashing the check must bear the loss. The court said: "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 it 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 efected. This presumption is only conclusive when the party receiving the money has in no way contributed ment has been made. In the absence of absolute 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. Citing National Bank of North America v. Bangs, 106 Mass. 441, 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 fraud 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. 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." Citing Ellis v. Ohio Ins. & Trust Co., 4 Ohio St. 628; Rouvant v. San Antonio Nat. Bank, 63 Tex. 610; First Nat. Bank of Quincy v. Ricker, 71 Ill. 439. In the case of People's Bank v. Franklin Bank, 88 Tenn. 299, 12 S. W. 716, 6 L. R. A. 724, the court held, where one bank accepts and cashes a check drawn on a bank in another county, to which the signatures of the drawer and payee have both been forged, without either requiring identification of the parties to whom payment is made, or taking steps to preserve any evidence of their identity, that the bank on which it was drawn positor whose signature has been forged to a check owes to the bank the duty of examining his vouchers and reporting the forgery to it; and if this duty is not performed the bank can hold the depositor liable for all damages occasioned by such failure.23 It has been held that if one pays a forged note, supposing the signature to be his own, he may maintain an action to recover the money so paid, provided he proceeds promptly on discovering the forgery, although the defendant at the time of such payment had surrendered to him a mortgage which he in good faith had received as collateral security for the note, but which had been executed as security for another note, of which the forged note was a copy.24 c. Forged indorsement.- A different rule exists in the case of a forged indorsement. The drawee of a bill, or the bank upon which a check is drawn, is not chargeable with knowledge of any other signature on the bill or check than that of the drawer, and by accepting or paying the bill or check does not admit the genuineness of any indorsement on it.25 And even if a drawee draws a bill or check payable to himself or his own order, and at once indorses it, an acceptance or payment admits only the genuineness of the drawer's original signature, but not the genuineness of his indorsement.26 It has, therefore, been held that the drawee of a bill, who, without notice of any forgery, has paid a draft to the holder to whom it was negotiated by the forged indorsement of and by which it is paid upon its transmission thereto by the former bank can, upon discovering the forgery, recover back the amount so paid. 23. Duty to examine vouchers.First Nat. Bank v. Allen, 100 Ala. 476, 14 South. 335, 27 L. R. A. 426. In New York the cases are to the effect that the most that can be claimed against a depositor by reason of his failure to discover the forgery of checks is that retaining his account without obiection after a reasonable time is deemed an acquiescence, and an admission of its correctness as by account stated, but that is only prima facie and not conclusive. Weisser v. Denison, 10 N. Y. 68, 61 Am. Dec. 731; Welsh v. German-American Bank, 73 N. Y. 424, 29 Am. Rep. 175; Frank v. Chemical Nat. Bank, 84 N. Y. 209, 38 Am. Rep. 501. And see, generally, Leather Mfrs.' Nat. Bank v. Morgan, 117 U. S. 96, 29 L. Ed. 811; Janin v. London & S. F. Bank, 92 Cal. 14, 27 Pac. 1100, 14 L. R. A. 320. 24. Welch v. Goodwin, 123 Mass. 71, 25 Am. Rep. 24. 25. First Nat. Bank v. Northwestern Bank, 152 Ill. 296, 38 N. E. 739, 26 L. R. A. 289. See also Marine Nat. Bank v. National City Bank, 59 N. Y. 67, 17 Am. Rep. 305; Canal Bank v. Bank of Albany, 1 Hill (N. Y.), 287. 26. Beeman v. Duck, 11 Mees. & W. (Eng.) 251; Williams v. Drexel, 14 Md. 566; First Nat. Bank v. National City Bank, 152 Ill. 296, 38 N. E. 739, 26 L. R. A. 289. the payees' names, may recover of the holder the money paid upon the draft.2 27 66 27. Where prior indorsement is drawer's signature, but not of the inforged. In the case of Star Fire Ins. dorser's, made subsequent to the isCo. v. New Hampshire Nat. Bank, 60 suing of the draft and before acceptN. H. 442, the court said: "The de- ance or payment; and the payment fendants' indorsement was a represen- by the drawer to one who holds by a tation that they had paid or ac- forged indorsement of the payee's counted, or would pay and account, to name entitles him to recover the sum the payees for what they might re- paid, if reasonable notice of the forceive upon it. Relying upon their in- gery is given." See also Mills v. Bardorsement and the representations ney, 22 Cal. 240; Merchants' Bank v. which it legally carried, the plaintiffs Marine Bank, 3 Gill (Md.), 96, 43 Am. paid the draft, and the defendants re- Dec. 300; Carpenter v. Northborough ceived the money or an equivalent Nat. Bank, 123 Mass. 66; Talbot v. credit, through their correspondents, Bank of Rochester, 1 Hill (N. Y.), who collected it. With knowledge or 295. In the last case it was also notice of the forgery, the plaintiffs held that the laches of a holder of might have resisted payment. They the note prior to the defendant, in had no knowledge or notice or even not giving the defendant notice of suspicion of the character of the first the forgery, will not affect the right indorsement, and were in no fault for of the person transmitting the note not knowing it. They had a right to to recover of the defendant. See rely on the defendants' indorsement; and with that reliance they paid the draft, and the defendants received the money paid through an innocent mistake. * * An acceptance of the draft warrants the genuineness of the * also Goddard V. Merchants' Bank, 2 Sandf. (N. Y.) 247; Holt v. Ross, 54 N. Y. 472, 13 Am. Rep. 615; Lewis v. White's Bank, 27 Hun (N. Y.), 396; Shaffer v. McKee, 19 Ohio St. 526. |