Source: https://supreme.justia.com/cases/federal/us/128/26/
Timestamp: 2019-04-23 02:13:01+00:00

Document:
If a bank, upon which a check is drawn payable to a particular person or order, pays the amount of the check to one presenting it with a forged endorsement of the payee's name, both parties supposing the endorsement to be genuine, a right of action to recover back the money accrues at the date of the payment, and the statute of limitations begins to run from that date.
On March 9, 1870, the Bank of British North America, having a larger amount on deposit with the Merchants' Bank, drew upon that bank a check for $17,500, payable to Margaret G. Halpine or order, and delivered it to Thomson & Ramsay, and this check, with the names of Mrs. Halpine and of William C. Barren endorsed thereon, came to the hands of Hooves & Macy, private bankers, who deposited it with the Leather Manufacturers' Bank. On March 10, 1870, the Merchants' Bank paid the amount of the check to the Leather Manufacturers' Bank through the clearinghouse and charged the amount on its own books to the Bank of British North America. By the usual course of dealing between the Bank of British North America and the Merchants' Bank, the passbook containing entries of the deposits made by the one and of the payments made by the other on account thereof was written up and returned to the Bank of British North America fortnightly, together with the checks and other vouchers for such payments, and on March 17, 1870, the passbook, containing the charge of the payment of the check in question, was so balanced and returned with the check. The account between the Bank of British North America and the Merchants' Bank continued to exist until February 21, 1881, the day of the trial of the action brought by the former bank against the latter, mentioned below.
At the time of the payment by the Merchants' Bank to the Leather Manufacturers' Bank, both parties believed Mrs. Halpine's endorsement to be genuine, whereas in fact it had been forged by Barren, the second endorser, who afterwards absconded. Hooves & Macy failed in 1873.
Leather Manufacturers' Bank, informed it that the Bank of British North America had demanded repayment of the money because the endorsement of Mrs. Halpine's name was a forgery, and made a like demand upon the Leather Manufacturers' Bank, which declined to pay.
On June 20, 1877, the Merchants' Bank returned the check to the Bank of British North America, and that bank again demanded of the Merchants' Bank payment of the amount, and tendered it the check, and it refused to pay.
On August 10, 1877, the Bank of British North America gave written notice to the Merchants' Bank that it had been sued for the amount of the check by reason of the Merchants' Bank having paid the same upon a forged endorsement and that, in the event of being held liable for the amount, it should hold the Merchants' Bank to its strict legal liability. The action against the Bank of British North America is reported as Thomson v. Bank of British North America, 82 N. Y. 1.
On November 7, 1877, the Bank of British North America brought an action in a court of the state of New York against the Merchants' Bank for the amount of the check upon the ground that the payment thereof by the Merchants' Bank had been made upon a forged endorsement of the payee's name, and that the amount had been demanded of the Merchants' Bank by the Bank of British North America on June 20, 1877, and refused, and still remained to its credit. In that action, the Merchants' Bank pleaded that the endorsement was genuine, and that the cause of action was barred by the statute of limitations; and, before that case came to trial, gave written notice of its having been so sued to the Leather Manufacturers' Bank in order that it might defend the suit or protect its rights as it might deem proper and that the judgment, if adverse, might be conclusive upon it. On March 7, 1881, the Bank of British North America recovered judgment against the Merchants' Bank, which was affirmed by the Court of Appeals. 91 N.Y. 106.
British North America, and on March 15, 1883, gave notice to the Leather Manufacturers' Bank of having so paid, and tendered the check to it, and demanded payment of that amount, with interest from June 20, 1877, which was refused.
In the present action, the defendant, at the close of the whole evidence, asked the court to instruct the jury to return a verdict for the defendant upon the grounds "that the cause of action, if complete, did not accrue within six years before the commencement of this action," and "that the cause of action, if a demand and tender were necessary, had not accrued when the suit was commenced." The court declined so to instruct the jury, directed a verdict for the plaintiff for the amount of the check, with interest from June 20, 1877, and gave judgment thereon. The defendant sued out this writ of error.
brought within six years after the cause of action accrues. Code of 1855, § 91; Code of 1877, § 382.
The question, then, is whether if a bank upon which a check is drawn payable to a particular person or order pays the amount of the check to one presenting it with a forged endorsement of the payee's name, both parties supposing the endorsement to be genuine, the right of action of the bank to recover back the money from the person so obtaining it accrues immediately upon the payment of the money, or only after a demand for its repayment.
In order to avoid confusion in dealing with this question, it is important to keep in mind the difference between the liability of a bank to a depositor and the liability to the bank of a person who has received money from it upon a forged check or order. It is true that the liability, in either case, is that of debtor, not that of trustee or bailee, but there the resemblance ceases.
The specific money deposited does not remain the money of the depositor, but becomes the property of the bank, to be invested and used as it pleases; its obligation to the depositor is only to pay out an equal amount upon his demand or order, and proof of refusal or neglect to pay upon such demand or order is necessary to sustain an action by the depositor against the bank. The bank cannot discharge its liability to account with the depositor to the extent of the deposit except by payment to him or to the holder of a written order from him, usually in the form of a check. If the bank pays out money to the holder of a check upon which the name of the depositor, or of a payee or endorsee, is forged, it is simply no payment as between the bank and the depositor, and the legal state of the account between them, and the legal liability of the bank to him, remain just as if the pretended payment had not been made. Bank v. Whitman, 94 U. S. 343.
who, by presenting forged paper to a bank, procures the payment of the amount thereof to him, even if he makes no express warranty, in law represents that the paper is genuine, and if the payment is made in ignorance of the forgery, is liable to an action by the bank to recover back the money which, in equity and good conscience, has never ceased to be its property. It is not a case in which a consideration which has once existed fails by subsequent election or other act of either party, or of a third person, but there is never at any stage of the transaction, any consideration for the payment. Espy v. Bank of Cincinnati, 18 Wall. 604; Gurney v. Womersley, 4 El. & Bl. 133; Cabot Bank v. Morton, 4 Gray 156; Aldrich v. Butts, 5 R.I. 218; White v. Continental Bank, 64 N.Y. 316.
Whenever money is paid upon the representation of the receiver that he has either a certain title in property transferred in consideration of the payment or a certain authority to receive the money paid when in fact he has no such title or authority, then, although there be no fraud or intentional misrepresentation on his part, yet there is no consideration for the payment, and the money remains in equity and good conscience the property of the payer, and may be recovered back by him without any previous demand as money had and received to his use. His right of action accrues, and the statute of limitations begins to run, immediately upon the payment.
Thus, in the early case of Bree v. Holbech, 2 Doug. 654, where an administrator received the amount of the mortgage money upon his assignment of a mortgage purporting to be made to the deceased, but in fact a forgery, of which both parties were ignorant, it was held by Lord Mansfield and the Court of King's Bench that the right of action to recover back from the administrator the money so paid was barred by the statute of limitations in six years from the time of the payment.
"The plaintiffs' ground of action, then, is that the money was paid to the defendants under a mistake of facts. The defendants are not bailees or trustees of the money thus received. It was paid and received as their money, and not as money to be kept for the plaintiffs. In such a case, it was not necessary to make a demand prior to the suit, for a request was not essential to the maintenance of the action, nor did the defendants' duty to return the money erroneously paid arise upon request."
"If the thousand dollars claimed as damages were paid to the bank at the time the bill of exchange was taken up, then the cause of action to recover the money (had it been well founded) accrued at the time the mistaken payment was made, which could have been rectified in equity, or the money recovered back by a suit at law."
was sold for a certain sum by the square foot, and the purchaser, relying on the vendor's statement of the number of feet, made payment accordingly, and afterwards discovered that the number had been overstated, but disclaimed all charge of fraud or fraudulent concealment on the part of the vendor, it was held that the right of action to recover back the excess paid accrued immediately, without any previous demand, and was barred by the statute of limitations in six years from the date of the payment. See also Earle v. Bickford, 6 Allen 549; Blethen v. Lovering, 58 Me. 437. The judgment of the circuit court in the present case appears to have been based upon the decision in Merchants' Bank v. First National Bank, 4 Hughes 1, which proceeds upon grounds inconsistent with the principles and authorities above stated, and cites no case except the very peculiar one of Cowper v. Godmond, 9 Bing. 748; 3 Moore & Scott 219, in which the right of action to recover back money paid for a grant of an annuity the memorial of which was defective was held not to accrue until the grantor elected to avoid it on that ground -- the annuity apparently being considered as not absolutely void, but as voidable only at the election of the grantor. See Churchill v. Bertrand, 3 Q.B. 568; 2 Gale & Dav. 548.
Although some of the opinions of the Court of Appeals of New York, in the cases cited at the bar, contain dicta which, taken by themselves and without regard to the facts before the court, might seem to support the position of the defendant in error, yet the judgments in those cases, upon full examination, appear to be quite in accord with the views which we have expressed.
The cases of Thomson v. Bank of British North America, 82 N.Y. 1, and Bank of British North America v. Merchants' Bank, 91 N.Y. 106, were actions by depositors against their respective bankers, and were therefore held not to be barred until six years after demand.
90 N.Y. 227, it was adjudged that money paid by mistake but received with full knowledge of all the facts might be recovered back without previous demand, and what was said in either opinion as to the necessity of a demand where both parties act under mistake was obiter dictum.
Two other cases in that court were decided together, and on the same day as Bank of British North America v. Merchants' Bank, above cited. In one of them, the defendants, who had innocently sold to the plaintiffs a forged note as genuine, and, upon being informed of the forgery and requested to pay back the purchase money, had expressly promised to do so if the plaintiffs should be obliged to pay a third person to whom they had in turn sold the note, were therefore held not to be discharged from their liability to refund by the plaintiffs' having awaited the determination of a suit by that person against themselves before returning the note to the defendants. Frank v. Lanier, 91 N.Y. 112.
In the other case, a bank which had paid a check upon a forged endorsement supposed by both parties to be genuine was held entitled to recover back the money, with interest from the time of payment; necessarily implying that the right of action accrued at that time. Corn Exchange Bank v. Nassau Bank, 91 N.Y. 74.
Judgment reversed and case remanded to the circuit court with directions to set aside the verdict and to order a new trial.
MR. JUSTICE BLATCHFORD did not sit in this case or take any part in the decision.
MR. CHIEF JUSTICE FULLER and MR. JUSTICE LAMAR were not members of the Court when the case was argued, and took no part in its decision.

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