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The House of Lords has held that the drawer or indorser of a bill who pays it is a quasi-surety for the acceptor, and that the analogy is sufficiently close to entitle him to the benefit of any securities deposited by the acceptor with the holder, and retained by the holder at the time of the dishonour of the bill. Suppose the drawer or indorser after payment again indorses the bill away. Would
the indorsee be entitled to the benefit of the securities ? This raises a difficulty which was not adverted to in the case.
When a bill is paid wholly or in part by the drawer or by an indorser, and the holder retains possession of the bill, he holds it as trustee for such drawer or indorser, as regards the amount received ;? provided that, when the acceptor of a bill becomes bankrupt, any payment made by the drawer or an indorser to the holder must be deducted from the amount for which the holder is entitled to prove against the acceptor's estate. 3
The right of the holder to retain the bill when he has been paid by the drawer or an indorser depends on the arrangement between them. In France and other countries where the civil law is followed, payment by the drawer or an indorser discharges the bill. See Pothier, No. 106.
(3) Where an accommodation bill is paid in Payment of due course by the party accommodated the bill is tion bill. discharged.
ILLUSTRATION. A bill is accepted for the accommodation of the drawer. The drawer negotiates the bill, and then takes it up at maturity. Subsequently he re-issues it. The holder cannot sue the acceptor, for the bill is discharged.
1 Duncan, Fox & Co. v. N. di S. Wales Bank (1880), 6 App. Cas. 1 H. L.
? Jones v. Broadhurst (1850), 9 C. B. at p. 183 ; Cook v. Lister (1863), 32 L. J. C. P. at p. 127, Willes, J. ; Thornton v. Maynard (1875), L. R. 10 C. P. 695. See ante, p. 123, as to the effect of this, if bolder sues.
3 Ex parte Taylor (1857), 26 L. J. Bank. 58 ; Ex parte Maxoudof (1868), L. R. 6 Eq. 582.
4 Jones v. Broadhurst (1850), 9 C. B. at p. 183 ; cf. Woodward v. Pell (1868), L. R. 4 Q. B. 55, as to a lien for costs; and Duncan, Fox & Co. v. N. & S. Wales Bank (1880), 6 App. Cas. at pp. 17, 18.
• Cook v. Lister (1863), 32 L. J. C. P. p. 127, Willes, J. ; see also Lazarus v.Cowie (1842), 3 Q. B. 459, criticised but followed in Jewell v. Parr (1853), 13 C. B. 909, apparently approved, Parr v. Jewell (1855), 16 C. B.
Recovery by payor of money paid by mistake.
See note to sect. 28, defining “accommodation bill.” The discharge may be supported on the ground adopted by Willes, J., that the person accommodated pays as the acceptor's agent, or on the ground that the bill has been paid by the party ultimately liable. See post, p. 218, as to principal and surety; and sect. 36 (2), ante, p. 116, as to equities attaching to overdue bill.
Recovery by Payor of Money paid by Mistake. Where payment of a bill or note is made by mistake to a person who is not entitled to receive payment, and who cannot give a discharge, the money so paid may be recovered back by the payor as follows: (1) The payor of a forged, altered, or cancelled bill,
who has been led to pay it by the negligence of his correspondent or customer, and has not himself been guilty of negligence, can recover the money so paid from such correspondent or cus
tomer. For example :1. A. draws a cheque on his bankers for 507., carelessly leaving a blank
space before the words and figures " fifty.” The holder fills it up as a cheque for 1501., and obtains payment. The banker can charge A. with the amount so paid."
2. A. draws in the ordinary way a cheque for 507. It is altered to 1501. The alteration is not apparent. Ā.'s banker pays it. He can only charge A. with 501.2
3. A. draws a bill on B., and indorses it in blank. Subsequently, intending to cancel it, he tears it into four pieces, and throws the pieces away. C. picks up the pieces, pastes thein together, and presents the bill to B. and obtains payment. If the marks of cancellation are apparent, B. cannot recover the money so paid from A.3 Aliter if the marks be not apparent.“
4. A bill held under a forged indorsement is presented to for acceptance. B. accepts it payable at his bankers. The bankers pay it. They cannot charge B. with the amount.5 684, at p. 709, Parke, B.; Ex. Ch. ; Jones v. Broadhurst (1850), 9 C. B. at pp. 181 and 189 ; Ralli v. Dennistoun (1851), 6 Exch. 483 ; 36th plea and judgment at p. 493 ; Strong v. Poster (1855), 17 C. B. at p. 222; Re Oriental Bank (1871), L. R. 7 Ch. at p. 102.
1 Young v. Grote (1827), 4 Bing. 253, as explained by Arnold v. Cheque
Hall v. Fuller (1826), 5 B. & C. 750.
(2) A banker who, as drawee, pays a genuine cheque
held under a forged or unauthorized indorse-
drawer or debit him with it in account.
person who received it when such person did not
act bonâ fide in demanding payment of the bill.?
banker in the case of a crossed cheque, the payor
notification thereof. For example:-
2. A bill, purporting to be drawn by A. on B. is paid by B. Subsequently B. discovers that A.'s signature was a forgery. B. cannot recover the money from the holder to whom he paid it.”
3. C., the holder of a bill purporting to be accepted payable at a bank, indorses it to D. for collection. D. obtains payment, and hands the money over to C. A week after the payment the bank discovers that the acceptance was a forgery.
The bank cannot recover the money from C.6
4. A bill, purporting to bear the indorsement of C., is held by F. It is dishonoured. X. pays it supra protest for C.'s honour. The same day he discovers that C.'s indorsement was a forgery, and gives notice to F. X. can (perhaps) recover the money from F.7
5. C., the indorser of a bill, pays D., the holder, in ignorance that he has been discharged by D.'s omission to present it for payment. A week after he discovers this fact. 0. can recover the money he paid from D.8
1 Sect. 60, and 16 & 17 Vict. c. 59, $ 19, post, p. 336.
? Martin v. Morgan (1819), 3 Moore, 635; Kendal v. Wood (1871), L. R. 6 Ex. 243.
3 See sect. 82, post, p. 259. 4 Cf. Chambers v. Miller (1862), 32 L. J. C. P. 30. 5 Price v. Neal (1762), 3 Burr. 1355. 6 Smith v. Mercer (1815), 6 Taunt. 76. 7 Wilkinson v. Johnson (1824), 3 B. & C. 428 ; but cf. Phillips v. im Thurn (1866), L. R. 1 C. P. 463.
8 Milnes v. Duncan (1827), 6 B. & C. 671 ; cf. Kelly v. Solari (1841), 9 M. & W. at p. 59.
6. C. is the holder of a bill purporting to be accepted by B., payable at his bankers. The bankers pay the bill. Next day they discover that the acceptance was a forgery, and give notice to C. They cannot recover the money from C.
7. A bill held by C., and purporting to be accepted by B., is presented to B. for payment. B. inspects and pays it. Subsequently he discovers that his signature was forged. He cannot recover the money from C.?
8. A genuine bill fraudulently altered in amount from 101. to 1001. is subsequently accepted and paid. Four months afterwards the acceptor discovers the fraud and gives immediate notice to the holder he paid. He can (probably) recover the money.3
9. The acceptor of a bill held under a forged indorsement pays it on the 19th of August to a person who has taken it in good faith and for value. The forgery is discovered six weeks afterwards. The acceptor cannot recover the money so paid.*
The reasons given for the decisions are very conflicting. Illustrations 2, 3, and 6 might well be supported on the ground that the payor is bound to recognize the signature of his own correspondent or customer, this being matter peculiarly within his own knowledge ; but, apart from this, it seems on principle that a person presenting a bill for payment ought to warrant its genuineness and his right to receive payment, just as a transferor by delivery warrants genuineness and his right to transfer. There are dicta to this effect, but the point must be regarded as very doubtful.5 The above rules do not affect the right of the true owner to recover the proceeds from the person who has wrongfully received them.
60. When a bill payable to order on demand? ing demand draft whereon is drawn on a banker, and the banker on whom indorsement is forged.
1 Cocks v. Masterman (1829), 9 B. & C. 902.
3 White v. Cent. Nat. Bank (1876), 64 New York R. 316 ; cf. Burchfield v. Moore (1854), 23 L. J. Q. B. 261.
4 London & River Plate Bank v. Bank of Liverpool, (1896) 1 Q. B. 7.
5 Cf. Wilkinson v. Johnson (1824), 3 B. & C. at p. 437 ; Woods v. Thiedemann (1862), 1 H. & C. at p. 495, per Bramwell, B. ; sed contra, East India Co. v. Tritton (1824), 3 B. & C. at p. 291.
6 Ogden v. Benas (1874), L. R. 9 C. P. 513 ; Arnold v. Cheque Bank (1876), 1 C. P. D. 578; Bobbett v. Pinkett (1876), 1 Ex. D. 368 ; cf. McEntire v. Potter (1889), 22 Q. B. D. at p. 441.
7 By sect. 73 a cheque is a bill. See sect. 10, defining what bills are in legal effect payable on demand, and sect. 3, defining bill of exchange.
it is drawn' pays the bill in good faith? and in the ordinary course of business, it is not incumbent on the banker to show that the indorsement of the payee or any subsequent indorsement was made by or under the authority of the person whose indorsement it purports to be, and the banker is deemed to have paid the bill in due course, although such indorsement has been forged or made without authority.
ILLUSTRATIONS. 1. A cheque is drawn payable to C. or order. It is stolen, and C.'s indorsement is forged by the thief. The bankers on whom it is drawn pay it. They can debit the drawer's account with the amount of the cheque.“
2. A cheque is drawn payable to C.'s order, and handed to an agent of C.'s in payment of a debt due to C. The agent, who has no authority to indorse cheques, indorses it “per proc.” for C., obtains payment and keeps the money. The loss falls on C. He has no remedy against the drawer or the bankers.5
3. A crossed cheque payable to order is stolen from the payee. The thief forges his indorsement, and the bank on which it is drawn pays it in contravention of the crossing. The bank cannot debit the drawer's account with the cheque.“
This section constitutes an exception to sect. 24. It does not protect the banker when the drawer's signature has been forged.? The cases cited in the illustrations were decided upon the 16 & 17 Vict. c. 59, $ 19 (set out post, p. 336), which is reproduced in this section. That enact
1 As to person acting in double capacity, e.g., as banker and as treasurer to a board of guardians, see Halifax Union v. Wheelwright (1875), L. R. 10 Ex. 183.
2 See sect. 90, post, p. 272, defining good faith.
4 Cf. Charles v. Blackwell (1877), 2 C. P. D. 151, at pp. 156, 157, C. A. If the cheque were stolen before it left the drawer's hands, it seems he can recover the amount from the person who presented it : Ogden v. Benas (1874), L. R. 9 C. P. 513.
6 Charles v. Blackwell (1877), 2 C. P. D. 151, C. A. ; cf. Bissell v. Pox (1885), 53 L. T. N. S. 193, C. A.
6 Cf. Smith v. Union Bank (1875), L. R. 10 Q. B. at p. 296 ; ibid. 1 Q. B. D. at p. 35, per Lord Cairns. Such payment would not be " in the ordinary course of business." As to the payee's remedy, see sect. 79 (2). 7 Cf. Orr v. Union Bank (1854), 1 Macq. H. L. Ca. 513. c.