#### * The Manufacturers’ and Mechanics’ Bank *versus*Jeremiah Gore and Joseph D. Grafton.

Where one of two copartners obtained money upon a note, signed by him with the name of the firm, and purporting to be endorsed by a third person, payable at a future day, — and before the maturity of the note, it was discovered that the name of the supposed endorser had been forged; it was holden, that the lender of the money was entitled to his action *immediately,*as for money received to his use; and that the action well lay against both the partners, although the other knew nothing of the forgery; the money having gone to the use of the copartnership.

Assumpsit for money had and received, money lent and accommodated, &c.

The habits of business of these defendants are stated in the report of the preceding case. In addition to the facts recited in that report, it appeared, in the trial of this action before *Jackson,*J., at the last November term in this county, that the defendants had an account open at the plaintiffs’ bank, and kept their cash there ; but *Grafton*always attended to that part of the business, and drew all checks for money on the bank. *Gore*professed not to take any charge of that part of the business, nor to know, from time to time, what money they had in the bank; and sometimes, when creditors called at the shop for payment of money lent, or other debts, *Gore,*if he had not cash enough to pay the debt, would desire the person to wait until *Grafton*should come in, to draw on the bank ; and *Gore*always declined to draw checks himself.

The plaintiffs claimed to recover, in this action, the amount of three promissory notes, which they had received and discounted in the following manner: The said *Grafton,*in the name of his *75said house applied to the bank in the common mode, to know if they would discount a certain note, signed by the defendants, and endorsed by *Thomas Cushing*and by *Charles Scudder.*Having received an affirmative answer, he produced a note subscribed by himself in the name of his said house, on which he had forged the names of the said *Cushing*and Scudder, as endorsers. This was handed, as usual, to the discount clerk of the bank, who, seeing on it all the proposed names, and having no suspicion of the forgery, took the note, and caused the amount to be immediately passed to the credit of the defendants in their account with the bank. The note was then covered with an envelope, and filed with others of the like description ; where it remained until it was reported that the said * *Grafton*had been detected in other sim- [ ilar forgeries; and being then examined, was discovered to have been forged, as above stated. The other two notes were offered and discounted in like manner, and the like endorsements on both were forged by the said *Grafton,*and the amount of each passed to the credit of the defendants, in their account with the bank. There was no suggestion that the defendant *Gore*had any knowledge of the said forgeries. According to the tenor of the said notes, neither of them had become payable until after this action was commenced.

Each of these notes was offered for discount, by way of renewal for others which had been previously discounted by the plaintiffs; and the names of the said two endorsers had been forged on each of them by the said *Grafton.*It is customary with the bank to take, and keep in a book, the signatures of all persons who have an account with them, that they may not be defrauded by a forged check. Neither the said *Cushing*nor *Scudder*ever kept any account with the plaintiffs’ bank ; but some notes with *Scudder’s*signature had passed through the bank. His signature was badly imitated on the notes in suit; and the imitation of *Cushing’s*was not very good.

The defendant *Gore*contended that, upon these facts, he was not liable in this action. But the judge proposed to save that question for the consideration of the whole Court, and the trial proceeded. The defendant *Gore*stated that the money so paid by the plaintiffs, on discounting the said notes, had never come to the use of *Gore Grafton,*but had been appropriated by *Grafton*to his own purposes. To prove this, he offered the books cf account of the defendants, kept in their shop, and proved by a clerk or apprentice, who had been in the shop from June, 1816, to theii failure in January, 1817. The plaintiffs objected to this evidence , *76but the judge admitted it, reserving the question for the consideration of the whole Court.

From these books it appeared that, on the 24th of April, 1816, when the partnership commenced, each of the defendants * brought into the common stock the sum of 3000 dollars. *Gore*paid in that sum in cash, and *Grafton*put-in goods to the amount of 9533 dollars *88*cents. *Grafton*was accordingly credited, in his account with the company, with the excess he had so brought in. He immediately took to his own use the 3000 dollars paid in by *Gore,*which left 3533 dollars 88 cents still due to him from the house.

Between that time and the 18th January, 1817, when *Grafton*absconded, and the house stopped payment, *Grafton*had received, of the stock and property of the house, a further sum of 7722 dollars 60 cents, and he had paid debts due from the house to the amount of 7616 dollars 88 cents, leaving the sum of 105 dollars 72 cents, which he had received more than he had paid. This sum being deducted from the aforesaid balance of 3533 dollars 88 cents, would leave him still a creditor of the house for the sum of 3428 dollars 16 cents.

The judge, intending to reserve the general question before stated for the consideration of the whole Court, instructed the jury that, if *Gore*knew that the money of the house was kept at the plaintiffs’ bank, and permitted *Grafton*to take the whole charge of it, and to draw it out from time to time,—the payment made as above stated by the plaintiffs, by passing the money to the credit of the defendants in that account, was a payment to the defendants, or to their use ; and that, if *Gore*thought proper not to examine the account, his want of information as to the state of it would not affect the plaintiffs. And further that, if the money obtained from the plaintiffs by *Grafton,*in the fraudulent manner above mentioned, did come to the use of the house, both of the partners were liable in this action for the amount so received.

The jury returned a verdict for the plaintiffs, for the amount of the three notes, with interest; and if, in the opinion of the Court, they were not entitled to recover upon these facts, they agreed to become nonsuit, or suffer a general verdict to be entered for the defendants.

* *Gallison,*for the defendants.

1. No action lies in this case, because the cause of action arises out of a felony committed by *Grafton,*who cannot be considered as acting for *Gore.*2. This latter, being an innocent party, if liable at all, is only so in the form in which his partner undertook to bind him. He is not to be affected by the fraud. 3. Plaintiffs cannot recover *77on the general money counts, as the parties undertook to make a special contract. No cause of action existed at the commencement of the suit, the notes not being payable until afterwards. 4. *Gore,*Deing wholly innocent of the fraud, ought not to suffer from the negligence and inattention of the plaintiffs, ■ and especially since there is no evidence in the case that the money came at all to his use.

*G. Sullivan*for the plaintiffs.

Parker, C. J.,

delivered the opinion of the Court. — We think the principle, that when, by means of a felony, one has been deprived of his property, the civil remedy is merged in the felony, if existing in full force in this country, in the manner laid down in some of the *English*authorities, does not apply to this action; which is not founded upon a felony, but upon a common contract for the loan of money, in which the lender has been deceived by the borrower, and deprived of the security upon which the loan was assented to. How far the principle may be applicable to a different class of these unfortunate cases, which have been argued at the present term, we do not determine ; as those actions are too important in their consequences to be decided while a particle of doubt remains in the minds of any of the Court.

The facts in this case show that the defendant *Grafton*proposed to the bank to present a note, in which he and his partner should be promisors, and Mr. *Gushing*and Mr. *Scudder*endorsers, for discount ; that, the proposal being agreed to, a note was made by *Grafton,*in the name of the house of *Gore 8f Grafton,*purporting to be payable to *Thomas Gushing;*that Grafton, having forged the names of the supposed endorsers, presented it to the bank for discount; *and that the amount, deducting the discount, was passed, in the bank books, to the credit of *Gore &/• Grafton,*they being indebted to the bank on other notes previously given in the same manner, on which similar forgeries had been committed by *Grafton.*

The bank, finding the security upon which they had agreed to make the loan had failed, by reason of the forgery of the names of the endorsers, and that they had thus been defrauded of a large sum of money, commenced this action, declaring for money had and received, and for money lent and accommodated, although the term of credit agreed upon the loan had not expired. They do not claim through the crime of *Grafton;*and it is immaterial to them, for the purposes of this suit, whether the security failed because of the forgery, or because the ability of the endorsers was not such as may have been represented, to induce them to make the loan.

*78It is a case, as respects the plaintiffs, of money obtained from them by misrepresentation and fraud ; and we think the only question is, whether, upon a loan thus obtained, although upon credit, the bargain may not be disaffirmed by the lender, and an action presently commenced for money so obtained, as had and received, in a legal view, to his use. And upon this point *we*have no doubt; and we believe the doctrine has been generally received and practised upon in this commonwealth, that, when goods are purchased upon credit, or money borrowed, and the security agreed upon by the parties turns out to be of no value, and different from what it was represented to be by the debtor, it may be treated as a nullity, and an action will lie immediately for the sum it was intended to secure. (a)

This practice is undoubtedly founded upon certain decisions known to have taken place, and upon the justice and reason of the case. For if one gets possession of another’s goods or money by means of a fraudulent misrepresentation as to the value of the security which is the basis of the credit, it would be' absurd to consider the bargain f binding, to the prejudice of him who has been deceived, and to the advantage of the receiver.

The case of *Stedman*vs. *Gooch, 1 Esp. Rep. 3,*is full to this point. A milliner had sold goods and taken three promissory notes in payment, payable at the house of one *Browne.*On application there for payment, *Browne*said that *Finlay,*the maker of the notes, had no effects there. It was objected that, the notes having been taken in payment, no action would lie until they became payable; for they might be paid at the time stipulated. But Lord *Kenyon*ruled against the defence, and said that the law was clear that if, in pay*79ment of a debt, a bill or note is taken payable at a future day, the creditor cannot legally commence an action until such bill or note become payable, or default be made in the payment; but that, if such bill or note be of no value, — as if, for example, drawn on a person who has no effects, and who therefore refuses it, — the creditor may consider it as waste paper, and resort to his original demand, and sue the debtor upon it.

There is no difference in principle between this case and the case at bar. For, admitting the note to be good, as evidence of a promise by *Gore & Grafton,*yet it is not what it purported to be, *viz.,*a note payable to *Cushing*or order, and endorsed by him ; and therefore it may be treated as waste paper, and an implied promise immediately arises with the debtor, to pay the money instantly which has been thus obtained.

In the case of *Puckford*vs. *Maxwell,*6 *D. & E.*52, the same doctrine received the sanction of the whole Court of King’s Bench. There, *Puckford*having arrested *Maxwell for*a debt, the latter gave a draft for a part of the sum, and said he would settle the rest in a few days. The draft was dishonored, and it was held that a second arrest for the same debt was justifiable. The draft was treated as a nullity.

These cases were cited and recognized as law by this Court, in the case of *Young*vs. *Adams,*6 *Mass. Rep.*182.

* Indeed, there can be no question of the soundness of the principle, or of its applicability to this action. Here the credit was obtained upon an offer of adequate security. The security was wholly worthless. The consideration for the credit therefore failed, and the money thus wrongfully obtained could not, for an instant, be conscientiously retained. *Ex cequo et bona,*then, it ought to be returned ; and that is the foundation of the action for money had and received.

The case, then, is too clear to be doubted, as it respects *Grafton,*in the enormous frauds committed upon those with whom he dealt. How does it stand with respect to *Gore,*the innocent victim ?-• We regret to say, equally clear. The partnership was general. *Grafton*was the business man out of the store ; all the business at the banks, and in obtaining credits of individuals, was managed by him. He had full right to bind the firm to any extent, in contracts for the use of the partnership. The proceeds of these very notes were placed to the credit of the house in the books of the bank, and actually went to their use, to pay preexisting debts in the bank. So the jury must have found; and the facts warrant the finding. We consider the direction of the judge on both points correct in *80point of law, and that the verdict was a necessary result from the facts proved in the case.

*Judgment on the verdict.*

(a)

**Care must be taken to distinguish between cases where an agreement has been made for time for the payment, independently of the security given, and the common cases in which goods are sold, and a bill taken in payment, payable at a future day, without any express agreement for time for the payment of the goods. In the last-mentioned case, if the bill be dishonored, the drawer may be sued immediately upon the original cause of action, without any regard being had to the time the bill has to run — because, there being no agreement as to time, the party takes the bill as payment, and therefore, if it turn out to be good for nothing, the creditor has not received that which the other undertook to give him, and may therefore pursue his remedy immediately.— 1 *Selw.N. P.*p. 75, 8th *Lond.*ed. — *Stedman vs.*Gooch, 1 *Esp.*c. 5. — *Puckford*vs. Maxwell, 6 *T. R.*52. — *Owenson*vs. Morse, 7 *T. R.*64. — *Everett*vs. Collins, 2 *Camp.*515. *—Dutton*vs. Solomonson, 3 *B. & Pul.*582.— *Young*vs. Adams, 6 *Mass. Rep.*182. — *Salem Bank*vs. *The Gloucester*Bank, 17 *Mass. Rep.*1.— *Gloucester Bank*vs. *Salem Bank.*17 *Mass. Rep.*33. If an *assumpsit*be brought for goods sold, before the time of credit is expired, the action cannot be maintained, although it should appear that the purchaser, at the time of the contract, fraudulently intended not to pay tor the goods. But in such case, it seems the vendor may treat the contract as a nullity, and bring trover immediately, and before the expiration of the credit, for the value of the goods. — *Ferguson*vs. Carrington, 9 *B. & C.*59.