55 Barb. 87 | N.Y. Sup. Ct. | 1869
Lead Opinion
It appears from the complaint that not only the amount and name of the payee of the bill or draft was altered, but also that the name or words “Wm. Bidgely, cashier,” purporting to be the signature of the cashier of the drawer to the altered draft or bill, was forged, or counterfeited. The case, therefore, made by the complaint, is within the rule laid down by Lord Mansfield in Price v. Neale, (3 Burr. 1354.) This decision was not overruled in Smith v. Mercer, (6 Taunt. 76,) but was recognized by a majority of the judges. Neither in Smith v. Mercer nor in Cocks v. Masterman (9 B. & C. 902) were the plaintiffs the drawees, but they were the bankers of the drawees. The rule laid down in Price v. Neale was fully recognized in Canal Bank v. Bank of Albany, (1 Hill, 287;) Bank of Commerce v. Union Bank, (3 N. Y. Rep. 230;) Goddard v. Merchants’ Bank, (4 id. 147;) and United States Bank v. Bank of Georgia, (10 Wheat. 333.) The elaborate and able brief submitted by the counsel for the plaintiff has failed to satisfy me that I would be justified, either by precedent or authority, in so altering or qualifying the rule as laid down in Price v. Neale that it will not include the
I. The general rule of law is, that money paid under a mistake of fact can be recovered back in an action for money had and received.
There is no doubt that the plaintiff paid this money to the defendant under the common mistake of all parties as to the facts. The Park Bank paid this draft under three mistakes of fact. 1st. As to the genuineness of the signature of the drawer. 2d. In ignorance of the change in the name of the payee. 3d. In ignorance of the change in the amount.
II. But the defendant claims that the case of a forged draft paid by the drawee is an exception to the above mentioned general rule. It claims the rule to be, that such drawee is estopped from denying the signature of. his drawer, and if he pays a forged bill he cannot under any circumstances recover the money, no matter how careless the holder may have been, and no matter whether or not the recovery would put the holder in a worse position than if the payment had never been made.
III. We, on the other hand, claim that the party paying a forged draft can recover in two cases: 1st. Where the holder or party receiving has himself beén careless or in fault; that is, that the loss must fall where the first carelessness has been in point of time. -2d. Where, although there has been no fault on the part of the holder, yet the recovery will put him in no worse position than if the payment had never been made. That is to say, where the drawee has done any act to give currency to the paper (as by acceptance, &c.) on the faith of which the holder has taken it, or the condition of the holder will be altered for the worse in any way, as where he received the draft
V. These are the four cases on which all the law rests. They rest on the negligence of the party paying, and that negligence consists in the neglect of the “ means of knowledge.” The drawee is supposed to have a superior means of knowledge, in that he has paid other drafts of his correspondents, and by comparing the signatures and by other means can detect the forgery. ¡Now there have been two English cases decided since 1840, which entirely overrule the doctrine that a payment of this kind is such laches as precludes the party paying from recovering in the cases where no harm is done to the holder. These cases are Kelly v. Solari, (9 Mees. & Wels. 54,) and Townsend v. Crowdy, (8 Com. Bench, [N. S.] 477.) The first of these cases decides that even forgetfulness of facts which were once known does not have this effect. In Kelly v. Solari, a policy of life insurance had lapsed and become void, for failure to pay the premium. The directors were informed of this, and actually marked the policy “lapsed,” but forgetting the fact, paid a loss under it, and
VII. There is one great principle of law by which the right of the defendant to retain this money should be tested, and unless it can apply that principle to us we should recover. This principle is the doctrine of estoppel in pais. The doctrine of Price v. Neale is entirely opposed to the general doctrine of estoppel in pais. That doctrine is, that no one is estopped from denying the existence of a fact, or retracting a statement which he has made, unless the other party has acted upon it and will be injured by allowing the truth of the admission, or the existence of the fact, to be disproved. The right of an acceptor to resist the payment of a bill which he has accepted, and his right to recover back the amount of a bill which he has paid, rest on precisely the same grounds; for the court
VHI. Thus stands the case upon principle, aüd the authority of later cases and text books is also against the doctrine of Price v. Neale. First, we have Kelly v. Solari, and Townsend v. Crowdy, cited above. Then Chitty, in the last edition of his Treatise on Bills, (12th ed. 1854,) at marginal page 431, says: “It has been contended that a payment to a bona fide holder of a forged draft cannot be recovered, because the drawee was bound to know the handwriting of the drawer and the genuineness of the bill; and because the holder, being ignorant of the forgery, ought to have the benefit of the payment by mistake. But, on the other hand, it may be observed that the holder who obtained payment cannot be considered as having shown sufficient circumspection. He might, before he discounted or received the instrument in payment, have made more inquiries as to the signatures and genuineness of the instrument, even of the drawer or indorsers themselves, and if he thought fit to rely on the bare representation of the party from whom he took it, there is no reason that he should profit by the accidental payment, when the loss has already attached upon himself, and where the payment to him has not altered his situation or prejudiced him. Of late, these considerations have influenced the courts in their decisions.” So Chitty says, at same place: “ Gibbs, Ch. J., alone placed the decision in Smith v. Mercer (6 Taunt. 76) on the true ground, to wit, ‘that the plaintiff’s delay in making the discovery destroyed the remedy over the defendant.’ ” In Goddard v. Merchants’ Bank (2 Sand. 253) the court fully indorse these remarks of Chitty, and say that the decision of the court (afterwards affirmed) was much influenced by it. So the language of
IX. Now let us apply these authorities and principles to the case at bar.
Here, the Lexington National Bank bought this bill outright from Fanchon, who was cognizant of the forgeries ; in other words, he was the forger. They then sent it on here to the defendant, to whom we paid it. We paid it on April 12th, 1867, and did not discover the forgery and give notice until May 10th, 1867. If we are allowed to recover this money, will the defendant be any worse off than if we had refused payment on April 12th? We say not. In the first place, it will be said that if we had refused payment on April 12th, the bill would have been protested and the indorser and drawer held, and that they are released by our negligence. But this is not so; no protest, or notice of protest, was necessary to enable the defendant to have its full remedy against all previous parties. The drawer is not discharged, because there is no drawer, the name being forged; or rather, there is a drawer only as to the $14.20, and that we are liable for. The defendant does not need any protest or notice to enable it to recover against the Lexington City Bank. If it held it for collection, it can recover against its principal, as on money paid by mistake. (See Goddard v. Merchants’ Bank, 4 N. Y. Rep. 151.) If the defendant bought it from the Lexington bank, it can recover on the implied warranty that the instrument is genuine, and the Lexington bank need no notice to enable it to recover against the forger, Fanchon. (See 4 N. Y. Rep. 151.) The principle that there is no need of notice of dishonor to enable each party to recover against all those whose names were on the bill when he took it, is perfectly well settled. (See Jones v. Ryde, 5 Taunt. 493; Gompertz v. Bartlett, 24 Eng. Law and Eq. 156; Herrick v. Whitney, 15 John.
X. ¡Next, we claim the right to recover on this further ground. That no matter what loss to the defendant be alleged and proved as a consequence of our delay, yet where both sides are guilty of carelessness, the loss must fall upon the party who has been guilty of the first negligence in point of time, and we claim as a matter of fact that this is the defendant. And our argument here is, that whatever may have been the case at the time that Price v. Neale &c. were decided, yet the rule and practice now are, that a bank presenting paper to another bank for payment is supposed to have made proper inquiries as to its genuineness, and to have satisfied itself as to the character of the parties &c. from whom it was received. That it is well understood among banks, that the bank paying relies much upon this supposed scrutiny of its predecessors, and that to use the words of Abbott, Ch. J., in Wilkinson v. Johnson, “the circumstances of the call upon the drawee, may reasonably lessen his attention.” The bank presenting the paper for payment, thus (according to the custom of banks in their dealing with each other) taking some part of the responsibility, is, in the case of a forged bill, guilty of the prior negligence, and comes within the cases which hold that the party paying can recover where all the negligence has not been on its side. Wilkinson v. Johnson goes the entire length of holding that the party guilty of the prior negligence must bear the loss. The case goes upon the doctrine that presentment of a bill for payment for honor is an assertion in fact, if not in words, that the bill is all right. We say that, under the modern system of banking, the presentation by one bank to another, is a representation that it is all right. (See also Chitty on Bills, 431.) Byles on Bills, 9th edition, (1866,) 324 and 325, says: “ Money paid under a mistake of fact, may be recovered back. But any fault or negligence on the part of him who
XI. But it may be said that although as a general rule no man is estopped from repudiating his acts or words unless the other party has suffered damage therefrom, yet the credit of negotiable paper requires a different and peculiar rule. To this we answer, 1st. That in no case is this rule put upon the peculiar nature of negotiable paper. 2d. That the credit and free circulation of negotiable paper is not promoted by the rule that a drawee who pays a
XII. Although this precise point, i. e., the point involved in Price v. Neale, has never been decided ih this State, yet the tendency has been in favor of the plaintiff recovering in such cases. Thus in Bank of Commerce v. Union Bank, (3 N. Y. Rep. 230,) the court held that the drawee could recover when the alteration was in the body of the instrument. And in Goddard v. Merchants' Bank, (4 N. Y. Rep. 147,) they hold that a person who pays for honor without looking at the hill can recover, and surely the negligence of one who pays without looking at the bill is greater than that of one who looks and is deceived by the nicety of the forgery. These cases, as stated above, certainly assumed the rule to be as claimed by the defendant; though Judge Buggies, in his opinion, at p. 152, recognizes and admits the doctrine of “ actual damage,” which we contend for. But the point was not involved, and the cases show a tendency to make exceptions to the supposed rule, and it is
. XIII. U. S. Bank v. Bank of Georgia (10 Wheat. 333) is an authority against us. But that case rests upon Price v. Neale, and if the modern decisions and principles have upset that case, the case just cited must fall also. Moreover, that case was a case of one receiving that which he had issued as money, and there are reasons of public policy well set forth in 10 Wheaton, pages 345 and 347, which make a distinction between the case of money and bills of exchange. One practical reason why a bank which has received what purports to be its own bills issued as money , should not be allowed afterwards to repudiate them is, that in most cases it would be impossible to trace back money, and to remember when and from whom it had been received, which is not the case with bills of exchange. But on the principles above, set forth we deny the soundness of the rule, even as to money. Levy v. U. S. Bank (Dall. 234) is a nisi prius case, and not at all considerable, and can be of but small authority. Young v. Adams (6 Mass. R. 187) is also a ease of money. But the best answer to all these cases is that they rest on Price v. Neale, and that that case, as authority for the rule to the extent contended for by the defendant, has been much weakened, and in many cases overruled by subsequent decisions, as above stated. That it has not been overruled in England is, it is believed, because the question has not been presented for decision of late years. The case of the National Bank of the Commonwealth v. Grocers’ National Bank (35 How. Pr. 412) will, no doubt, be cited against us. But that case involved only a small amount, and does not seem to have been very thoroughly argued; and, moreover, it was rested distinctly upon Price v. Neale, without any examination into its principle, and upon dicta of the Court of Appeals.
As to Judge Sutherland’s opinion in this case at special term, we respectfully submit, that it is hardly correct to say that the doctrine of Price v. Neale was adopted by a majority of the judges (if that is meant by the word “recognized,” used by Judge Sutherland) in Smith v. Mercer. Chambre, J., distinctly repudiates it, and Gibbs, Ch. J., neither assents nor dissents from this doctrine, but puts the case on the ground of a discharge of indorsers, which ground does not exist in this case. Dallas, J., also gives the element of actual loss and change in the holder’s condition a prominent place in his decision. The fact that the plaintiffs in Smith v. Mercer, and Cocks v. Masterman, were not the drawees, but the bankers of the drawees, is, we think we have shown above, immaterial. The recognition of the doctrine of Price v. Neale in Canal Bank v. Bank of Albany; Bank of Commerce v. Union Bank, and Goddard v. Merchants’ Bank, is wholly obiter, as has been above shown. Judge Sutherland puts the case wholly on authority, and does not discuss it on principle, and he wholly overlooks our point (elaborated below) that we are not within Price v. Neale, inasmuch as all the negligence in our case is not on the part of the plaintiff. The case of The Commercial National Bank v. The First National Bank of Baltimore, in the Maryland Court of Appeals, (Transcript, March 27,1869,) may be cited as an authority for the defendant. But in that case the defendant did not pay the forger the money until the plaintiff had paid the cheek. The payment to the forger was on the faith of the act of the drawee. Here the Lexington Bank paid the money to the forger before we ever saw the check; and this is the distinction, and a vital one. The case cited merely lays down the law as we admit it to be. It is rather an authority for than against us. The court say distinctly in the
XIV. Heretofore we have treated this case as if the draft were a simple case of a forged draft, and we submit that we have shown that principle and good sense, and all the modern authorities are in favor of our right to recover even in that case. But let us now look at the particular facts and circumstances of this ease. We claim to have established that the rule of Price v. Neale is at least not to be extended, and that the tendency of all the later cases, even where they do not overrule Price v. Neale, is to restrict it by exceptions and distinctions. The eases of the Bank of Commerce v. The Union Bank (3 N. Y. Rep. 230) and Goddard v. Merchants’ Bank (4 id. 147) are instances of this tendency. In the first named case it was decided that the drawee may recover the money paid where the alterations are in the body of the bill, inasmuch as the drawee is not responsible for such alterations. How we shall be told that the principles of the Bank of Commerce v. Union Bank cannot apply to us at all, because this is not the case of an altered bill, but of a bill forged de novo. But let us consider the reasons why this should not be considered the case of a simply forged bill. In the first place it may be reasonably argued that the drawer’s signature is to all intents and purposes genuine. “William Bidgely, cashier,” wrote his name on this draft with the intention of binding the Bidgely bank to the extent of $14.20, and the Bidgely bank has actually received the $14.20 from the person who bought the draft, and is equitably bound to allow, and has in fact allowed, us to charge them with that amount. The name having been written with the intention of binding the Bidgely bank to the extent of $14.20, the fact that the forger took out the name does not destroy the effect of this intention. Any holder could recover the
XY. But even if we are wrong in this argument, that the drawer’s signature, after having undergone the treatment which it has in this case, is wholly equivalent to a genuine signature; yet, we earnestly submit that it would be unjust to consider it as wholly equivalent to a forged signature. If not genuine, it has many elements which make it fall short of a forgery. The defendant claims that all the written parts of the draft having been taken out by the forger, the case is to be considered precisely as if the draft had been written on an entirely new and fresh piece of paper. Row this will not do, for when you bear in mind that the supposed objection to our recovery is the case of
An estoppel never makes a fact more than true. The doctrine that we cannot dispute the signature of our drawer, that we are estopped from denying it, cannot surely have a greater effect than to make true the fact which we are estopped from denying, and yet if the fact were true, i. e., the drawer’s signature genuine, we could recover. The defendant seeks to give this mysterious effect to the doctrine of estoppel: that it does not merely make true the fact which we are estopped from denying— that is, make the drawer’s signature genuine—but also has
Again, I have a perfect right to recognize the signature of a drawer as a genuine one, (although I know it to be forged,) without subjecting myself to any other loss than legitimately belongs to the falsity of the signature. For instance, suppose a drawee knows that the forgery (of the name of the drawer) is by his (the drawee’s) own son, and chooses to adopt it, and pay the draft, rather than expose him; cannot he do this without also adopting an alteration in amount which some other forger has chosen to put on it subsequently ? I suppose there would be no doubt of this. How, in our case, it is probable that both the forgery or alteration of the signature of the drawer, and the alteration in the name of the payee and the amount, were made by the same persons, (though this does not appear;) but this certainly cannot change the principle.
XVI. But we are not within the doctrine of Price v. Neale at all. Considering this draft as what it is, a draft altered in three respects, let us see what are the consequences which follow. It is a well settled principle of law that every person who transfers a piece of mercantile paper, or any other chattel to another, impliedly warrants that it is genuine, and what it purports to be. This is so, whether the party transferring indorses the paper or not. (Gibbs, Ch. J., in Jones v. Ryde, 5 Taunt. 488. Gompertz v. Bartlett, 24 Eng. Law and Eq. 158. Young v. Cole, 3 Bing. N. C. 730.) Although there is not always an implied warranty as to quality, there is always such a warranty that the thing purported to be conveyed has an existence—■ that it is what it purports to be. For instance, that what purports to be a horse, is a horse; that the horse purported to be conveyed is in existence; that what is transferred, as the note of John Doe, was made by John Doe, &c. That the genuineness of the drawer’s signature is not guaran
XVII. blow, the defendant will say, that although it is true that if the drawer’s signature had been genuine, the defendant would have been bound to repay to us the money paid, because it is responsible for alterations in the body of the instrument, yet the rule does not apply where the drawer’s name is also forged. Let us see how much reason there is in any such restriction of the rule.
XVIII. If it be said that had we done our duty, and detected the forgery of the drawer’s signature, the draft would not have been paid at all, and there would have been no loss, we answer that had the defendant and those behind it done their duty, and detected the alterations in the amount and payee when the draft first came into their haiids, there would have been no loss at all, for the whole swindle would have been detected at the outset. The legal effect of the whole transaction is this: The defendant comes to us with this draft, and says (as the law implies) “it is all right as to the body thereof; is the signature correct?” We thereupon say, “the signature is correct.” It appearing afterwards that we are both wrong, the defendant coolly says, “ you misled us; you ought to have detected the forgery of the drawer’s name; you were negligent, and you must bear the loss.” Did not it mislead us ? Did it not say that the body of the bill was all right ? Was it not negligent ? And is it not somewhat impudent for it to invoke in its behalf a case wherein “ all the neg
XIX. The defendant’s argument'is this: It admits that had the signature of the drawer been genuine, we could undoubtedly have called the defendant to account for the alterations in the body, on the doctrine of the Bank of Commerce v. Union Bank, (supra,) but the drawer’s name being forged, we cannot, they say, raise any objection to the rest of the bill. How, we have clear authority for the position that the forgery of the name of the drawer does not preclude the acceptor, or party paying, from disputing any other point about the bill. In 2 Parsons on Bills, 590, it is said: “If the drawer’s signature be forged, the acceptor must yet pay the bill; but if he suspect some indorsement to be spurious, he may yet (i. e., in spite of the drawer’s signature being forged) require the holder to show title through a genuine transfer.” In Beeman v. Duck, (11 Mees. & Wels. 251,) the defendants accepted a bill purporting to have been drawn on them by Bradshaw & Williams, to the drawer’s own order. Bradshaw & Williams were a real firm, and the signature of both the drawers and indorsers were forgeries. It was held, that where the party purporting to be the drawer was a real person, (not fictitious,) the acceptor, although he was estopped from setting up the forgery of the drawers named, could question the indorsement. In Cooper v. Meyer, (10 Barn. & Cress. 468,) Lord Tenderden says the same thing of cases where the drawer is a real person, but makes a distinction in the case of a bill drawn and indorsed by a person having no real existence. This distinction is no doubt proper, because one who accepts a bill of course knows whether the drawer is a real person; and
XX. We respectfully ask that a decision be given upon all the points presented, to wit: 1st. That where there has been any negligence on the part of the party receiving, the plaintiff may recover; i. e., that the loss must fall where the first negligence in point of time has been. 2d. That even where all the negligence is on the part of the party paying, we may recover unless actual damage has occurred from change of circumstances. We ask the court to complete the work which other courts or text books have partly done, and to authoritatively upset, or rather modify, the doctrine of Price v. Neale 3d. That even if both these propositions are wrong, yet this is an altered draft, wherein the signature is genuine to all intents and purposes for $14.20, as originally drawn. 4th. And even if it be not a genuine signature of the drawer, yet we are only responsible for the original amount, and the defendant for the alterations) That the
I agree that the drawee of a draft is bound to know the handwriting of the drawer; and when he pays a draft on which the name of the drawer has been forged, he is bound to bear the loss to the same extent he would have been if the signature had been genuine. But the liability extends no farther; and where the genuine draft has been altered, not only in the name, but in the amount to be payable, I do not think that rule should hold the drawee liable for any more than the amount of the original draft; and for the balance the plaintiff should recover.
It must be a very rare occurrence, that a genuine draft should have the name of the drawee removed, and then forged to the same instrument; but I think the rules, as heretofore settled, viz., that the drawee is bound to know the handwriting of the drawer, and is liable for a draft which he pays, although forged; and the other, that where the body of the draft is altered, the drawee may recover the amount from the person receiving it, may both be applied to this case, and should lead to the result before stated.
I am therefore in favor of reversing the judgment.
Clerke, P. J., concurred.
Dissenting Opinion
I have nothing ’to add to my opinion below, in this case, except this: The case of Jenys v. Fancier (2 Str. 946) was alluded to by the counsel for the plaintiff in Price v. Neale, as reported in 3 Bur.
Judgment reversed, and demurrer overruled.
Clerke, Ingraham and Sutherland, Justices.]