Source: https://supreme.justia.com/cases/federal/us/214/302/
Timestamp: 2019-04-21 20:17:29+00:00

Document:
The United States can recover from a bank presenting pension checks to, and receiving the money therefor from, a sub-treasury where the names of the payees have been forged, and the right to recover is not conditioned upon either demand or the giving of notice of the discovery of facts which, by the operation of the legal warranty, were presumably within the knowledge of the bank.
of the vast numbers of persons entitled to receive pensions, and the exceptional rule as to certain classes of commercial paper that the person having knowledge of the genuine signature of the payee whose signature is forged is negligent in paying on such an indorsement and therefore cannot recover does not apply to the United States in regard to pension checks. Leather Manufacturers' Bank v. Merchants' National Bank, 128 U. S. 2, approving White v. Continental National Bank, 64 N.Y. 316, followed.
Quaere, and not decided, whether government pension checks are not official warrants, but checks, and, as such, subject to the general rules of commercial paper as between private parties.
This action was brought by the United States to recover the sum of payments made at the sub-treasury in Boston upon 194 pension checks, the signatures or marks of the persons to whom the checks were payable having been forged. The National Exchange Bank of Boston was originally sole defendant, but in legal effect the National Exchange Bank of Providence was substituted as defendant, and the issues were made up between it and the United States. We shall hereafter refer to that bank as the Exchange Bank.
Upon receipt of pension vouchers, regular in form and purporting to be executed by the pensioners named therein, but which in fact were forgeries, the United States pension agent at Boston drew the checks in question upon the sub-treasury at Boston, aggregating $6,362.07, in favor of the pensioners named in the vouchers, and transmitted such checks by mail directly to the address of each pensioner as given in the vouchers, in accordance with the provision of § 4765, Rev.Stat. Of the persons named in the checks, fifteen had died, and the others were the widows of soldiers, who had remarried, and whose right to a pension had ceased, all the names, however, as we have said, having been forged. With but two exceptions, the checks were either for $24 or $36.
In May, 1897, a special examiner of the Pension Bureau was detailed at Providence to investigate the case of one Mooy, a deceased pensioner, in whose name three of the checks here in question, each for $36, had been issued and paid in 1896. On June 18, 1897, the examiner reported to the bureau the forgery of the name of the deceased payee, and that it had probably been done by one William A. Munson. December 18, 1897, notice was given to the Exchange Bank by the United States Attorney at Providence that the indorsements of Mooy's name to said checks were forged, and that at a proper time reclamation would be made for the money paid to the bank upon the checks. The remaining forgeries were discovered at different times during the months of February, March, April, and May, 1898, and in December, 1898, Munson, who was undergoing imprisonment upon a sentence imposed June 22, 1898, for forging a pension check, with which presumably this case is not concerned, admitted that he had forged the signatures of the payees on the checks in suit.
On July 22, 1898, the United States Attorney at Providence made written demand upon the Exchange Bank to be refunded the sums paid, except as to checks aggregating $351.27, for which no demand for repayment was made other than by the bringing of this action. The bank refusing to repay, this action was commenced on August 27, 1901.
Each of the 194 checks was made the subject of two counts. An indebtedness of the defendant bank to the United States was averred in the first count to have arisen from the fact that a described check had been lawfully issued by a United States pension agent, drawn upon the Assistant Treasurer of the United States, that a signature, purporting to be that of the payee, was thereafter forged upon the check, and that the Exchange Bank indorsed said check and presented it for payment to the Assistant Treasurer, who paid the amount thereof. The second count was the common count for money received by the defendant to the use of the United States. In substance, the defenses interposed in the answer of the bank were that, if the facts averred in the declaration were established by the proof, the bank was yet not liable, because the action had not been brought within a reasonable time after the alleged payments of the drafts, nor had prompt notice been given of the discovery of the forgeries. It was also averred that the United States had been negligent in not verifying the signatures of the payees of the checks in suits by comparing them with signatures of the payees in its possession.
Upon the agreed facts, the circuit court entered judgment against the bank for the full amount claimed, with interest. The appellate court, however, reversed this judgment, and remanded the cause with directions to enter judgment for the Exchange Bank (151 F. 402), and this writ of error was thereupon prosecuted.
"The precise form of only one of the so-called checks is shown by the record, as follows:"
" United States Pension Agency No. 297073"
" Boston, Mass. Mch. 5, 1892"
" Assistant Treasurer of the United States, Boston, Mass."
" Pay to the order of Mahala B. Jaques 9492 B81"
" Thirty-six /1000 Dollars $36"
"Pay Nat. Bank of the Republic, Boston, or order, for collection, for account of First National Bank, Providence, R.I."
" Nat'l Bank of the Republic, Boston"
be observed, however, that no indorsement by the Exchange Bank appears on the sample shown in the record, and whatever indorsement there is is simply 'for collection.'"
"with the forged signatures thereon were cashed by the defendant, who immediately indorsed the said checks to a national bank in Boston for collection."
these assignments, but insists that the claim of the United States to recover was rightfully rejected because the duty was on it not only to give prompt notice of the discovery of the forgeries, but also to discover cover the forgeries promptly after payment -- a contention which is controverted by the government.
In order to simplify the issue for decision, we concede, for the sake of the argument only, that the forged instruments were not official warrants, as contended by the government, but, in a generic sense, are to be classed as negotiable commercial paper, and that, in a case coming within the exceptional rule referred to, the laches of the authorized agents of the government can be imputed to it. But, assuming the instruments to be negotiable paper, the question yet remains whether the right of the United States to recover from the Exchange Bank is controlled or limited by the exceptional rule referred to.
out that the acceptance was a forgery, the exceptional rule was applied.
"upon the broad ground that there was an acceptance of the notes as genuine, and that it falls directly within the authorities which govern the cases of acceptances of forged drafts."
"It is, undoubtedly, also true, as a general rule of commercial law, that, where one accepts forged paper purporting to be his own, and pays it to a holder for value, he cannot recall the payment. The operative fact in this rule is the acceptance, or, more properly, perhaps, the adoption, of the paper as genuine by its apparent maker. Often the bare receipt of the paper, accompanied by payment, is equivalent to an adoption within the meaning of the rule, because, as every man is presumed to know his own signature, and ought to detect its forgery by simple inspection, the examination which he can give when the demand upon him is made is all that the law considers necessary for his protection. He must repudiate as soon as he ought to have discovered the forgery; otherwise he will be regarded as accepting the paper. Unnecessary delay, under such circumstances, is unreasonable, and unreasonable delay is negligence, which throws the burden of the loss upon him who is guilty of it, rather than upon one who is not. The rule is thus well stated in Gloucester Bank v. Salem Bank, 17 Mass. 45:"
"The party receiving such notes must examine them as soon as he has opportunity, and return them immediately; if he does not, he is negligent, and negligence will defeat his action. "
"where each party enjoys the same chance of knowledge, no case demands anything more than reasonable diligence in giving notice after the discovery of the forgery."
however, was cited on this proposition, nor was any intimation given by the court as to whether, even if there had been negligence in giving notice, recovery would not be permitted if no damage had been occasioned by the delay to the party to whom the payment had been made. A later case in New York enforced a principle which we deem applicable to the present controversy. The case is White v. Continental Nat. Bank, 64 N.Y. 316. The facts were these: a customer of the firm of White & Company drew a draft on that firm for $27. After the delivery of the draft to the payee, it was raised to the sum of $2,750. The raised draft came into the possession of the Continental National Bank of New York City, who took the same from a customer, who was credited with and drew the amount. The Continental Bank presented the draft to White & Company, and that firm accepted the same, payable at the Leather Manufacturers' National Bank. When due, the Leather Manufacturers' Bank paid the Continental Bank, and debited the account of White & Company. This payment was made in August. Monthly accounts passed between White & Company and its correspondent by whom the draft had been drawn, but the August account, which was rendered in the early part of September, was not examined. When the next account came along and was examined, the alteration of the draft was discovered, and White & Company, evidently being bound to the Leather Manufacturers' Bank by the payment made by that bank at the request of White & Company, and for their account, notified the Continental Bank, demanded repayment, and, on refusal, brought suit to recover. The trial court enforced the exceptional rule and denied the right of White & Company to recover. The Court of Appeals, while substantially conceding that, if the forgery had been of the name of the drawer of the draft, White & Company, because of their presumed knowledge of such signature, would have been, by their acceptance, brought within the exceptional rule, decided that the rule was not applicable, because the forgery concerned not the signature, but the body of the draft, of which White & Company were not presumed to have knowledge.
"But, waiving the question as to the responsibility of the defendant for the genuineness of the instrument, and taking the most favorable view for the defendant, which is to regard it as the case of a mutual mistake, in respect to which neither was in fault, and in that view and upon that theory, the case is within the principles decided in Bank of Commerce v. The Union Bank, 3 Comst. 230; Kingston Bank v. Eltinge, 40 N.Y. 391."
"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 indorsement of the payee's name, both parties supposing the indorsement 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."
"But, as between the bank and the person obtaining money on a forged check or order, the case is quite different. The first step in bringing about the payment is the act of the holder of the check in assuming and representing himself to have a right, which he has not, to receive the money. One 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. Jackson, 5 R.I. 218; White v. Continental Nat. 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."
the defendant after the discovery of the mistake or upon any demand by the plaintiff upon the defendant, or by the depositor or any other person upon the plaintiff, but it was to recover back the money, as paid without consideration, and had and received by the defendant to the plaintiff's use. That right accrued at the date of the payment, and was barred by the statute of limitations in six years from that date."
as are these considerations, the case does not alone depend upon them, since we think legislation of Congress in reason precludes the conception that it was contemplated that the United States (or its agents) had actual knowledge of the signatures of pensioners, and, in paying pensions, was bound to all the world under such an assumption.
representations as to the verity of such proof had been made by it to such third parties. The rights, therefore, of the bank as the apparent acquirer of the pension checks are to be governed by the nature and character of the instruments, and cannot be enlarged so as to relieve the bank from the obligation of warranty implied in the presentation of checks and the collecting of the amount. The subject is aptly illustrated in the opinion by Coxe, Judge, in United States v. Onondaga County Savings Bank, 39 F. 259, affirmed by the Circuit Court of Appeals for the Second Circuit in 64 F. 703.
which invalidated the bill and its title to the moneys represented by it."
Under these conditions, the warranty of genuineness implied by the presentation and collection of the checks bearing the forged indorsement having been broken at the time the checks were cashed by the United States, and the cause of action having therefore then accrued, the right to sue to recover back from the Exchange Bank was not conditioned upon either demand or the giving of notice of the discovery of facts which, by the operation of the legal warranty, were presumably within the knowledge of the defendant.
The conclusion to which we have thus come renders it unnecessary to consider whether, if the facts presented merely a case of mutual mistake, where neither party was in fault, and reasonable diligence was required to give notice of the discovery of the forgery, if there was lack of such diligence, it would operate to bar recovery by the United States, although the Exchange Bank was not prejudiced by the delay.
The judgment of the circuit court of appeals must be reversed and the judgment of the Circuit Court affirmed.

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