This action was brought, as appears by the complaint, upon the theory that the defendant bank had participated in the fraud by which William E. Gray Co. procured a loan from the plaintiffs of their two checks, amounting to $40,000. The proof entirely failed to sustain that theory, and the action is now sought to be sustained upon a very different one. What that is will appear from a short statement of the case.
Gray, on the 10th of December, 1869, borrowed of the plaintiffs their check for $30,000, and, a few minutes later, another for $10,000. These loans were made upon collaterals *Page 480
of the apparent value of $44,000, consisting, in appearance, of United States and New York State bonds. The checks were drawn on the Bank of the State of New York, were payable to the order of Gray Co., were good, and were certified to be good by the bank. These checks were deposited by Gray Co. in the ordinary way of business, to the credit of their bank account with the defendant, in which bank they had for some months kept a bank account. They were taken by the defendant and placed to Gray Co.'s credit as cash, and the defendant received the money upon them in due course from the Bank of the State of New York, and there is no ground for saying that the defendant had, or had any reason to have, any suspicion in respect to Gray Co.'s right to these checks, or to the money which they represented. Indeed, being certified to be good, and having been actually paid, they are to be regarded as money for all purposes. (First National Bank v.Leach,
On the night of the tenth, Gray absconded. It will be observed that nothing had occurred to excite the least suspicion in respect to any of the items which had gone to Gray Co.'s credit in the bank account with the defendant. Nor, so far as the case discloses, did the plaintiffs come to suspect that they had been imposed upon until some time after; for it appears that it was not until the thirteenth of January, or a day or two before, that the plaintiffs applied to the defendant on the subject. On that day they proposed to transfer to the defendant the securities, genuine and forged, which they had received from Gray Co., and demanded that it should pay the $40,000 which it had received from the plaintiffs' checks. It had turned out in fact, that of the $44,000 of securities, the plaintiffs had received $7,000 genuine United States coupon bonds, and two New York State bonds, originally genuine, and for $1,000 each, and which had been altered to $10,000. On these facts the plaintiffs now seek to recover substantially for money had and received by the defendant to their use. In support of this claim they now *Page 483
insist that the same rules shall be applied to the defendant's right to retain the money which it has received, as would have been applicable if Gray Co. had, by the same fraud, obtained their promissory notes and had passed them to the defendant under the same circumstances as the checks were passed, and the defendant was now prosecuting them on the notes. In this supposition the plaintiffs are mistaken. They are the parties who were cheated by Gray Co.; and the loss by the fraud on them cannot be transferred to the defendant, an entirely innocent party. The money which the defendant has received, came in the regular course of business, in a form as current as if it had been bank notes or United States currency. If it can be followed by reason that the party who paid it procured it fraudulently, for aught I see, the transaction of business must stop, for no inquiry and no precaution could guard the receiver from responsibility. There is a class of cases of which Van Alen v.American National Bank (
In the absence of trust or agency I take the rule to be that it is only to the extent of the interest remaining in the party committing the fraud that money can be followed as against an innocent party having a lawful title founded upon consideration; and that, if it has been paid in the ordinary course of business, either upon a new consideration or for an existing debt, the right of the party to follow the money is gone. As was said by PARKER, Ch. J., in Mason v. Waite (
But if it should be deemed essential to the defendant's right to retain the money received on these checks, that it should be a holder for value, I think it should be so regarded. It parted with and gave up the $10,000 bounty bond, and the two altered $1,000 bonds which the State agent said were good for their original amount, and which, undoubtedly, in favor of an honest holder, would have been recognized to that extent by the State. It, moreover, actually paid out $26,079.35 on checks subsequently presented, which would not have been paid save for the credit which Gray Co. *Page 485 obtained by the deposit of these checks; for, obviously, if their account had not been credited with these checks, that for $20,000 drawn by them to pay the bank for the residue of the $30,000 loan would still have been paid, and the failure would have fallen upon the checks afterward presented.
The defendant, also, in reliance on this money, was led to abstain from any attempt at securing itself in other ways by the arrest or pursuit of Gray. To allow this claim to be set up so long after the transaction took place seems to me, in a high degree, inequitable. (Continental Bank v. Nat. Bank ofCommonwealth,
I am of the opinion, therefore, upon these grounds, that the defendant is entitled to be protected in its dealings with Gray Co. to the extent of its interest; and that, in respect to the balance remaining to Gray Co.'s credit, as no question was made in respect to that at the trial, nor the attention of the court called to it in any way, it cannot now be availed of to disturb the judgment.
The judgment should be affirmed.
All concur.
Judgment affirmed.