Case Name: THE NATIONAL BANK OF COMMERCE IN NEW YORK, Plaintiffs and Respondents, v. THE NATIONAL MECHANICS BANK OF NEW YORK, Defendants and Appellants
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1873-02-01
Citations: 3 Jones & S. 282
Docket Number: 
Parties: THE NATIONAL BANK OF COMMERCE IN NEW YORK, Plaintiffs and Respondents, v. THE NATIONAL MECHANICS BANK OF NEW YORK, Defendants and Appellants.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 35
Pages: 282–301

Head Matter:
THE NATIONAL BANK OF COMMERCE IN NEW YORK, Plaintiffs and Respondents, v. THE NATIONAL MECHANICS BANK OF NEW YORK, Defendants and Appellants.
On the fifteenth day of February, 1870, one A. J. Greenleaf procured from Messrs. Vermilye & Co., bankers, of this city, a bank check of that date, drawn by them, payable to his order, on the plaintiffs, for $56.75.
This check for $56.75 was presented to plaintiffs, and was certified in the usual manner by one of their tellers (Mr. Adriance), writing his name across the lower end thereof in front.
After being thus certified, the check was fraudulently altered, by changing the date thereof from February 15th, to February sixteenth,—and by changing the amount thereof from $56.75 to $15,006.
On the 16th o£ February, 1870, the check thus fraudulently altered was deposited by Greenleaf with the defendants, and was passed by them to his credit on their books.
Said Greenleaf, on the same day, drew from the defendants, by his check on them, §17,981.25, leaving to his credit am apparent balance of §2,626.24. The check thus fraudulently altered was on the next day (17th February, 1870), according to custom of banks in the city of New York, presented by defendants at the Clea/ring Home, and was there accounted for as a genuine check, in ail respects, and the amount of §56,006, to which it had been so fraudulently altered, was, according to the system practised at the Clearing Home, and in ignorance of the forgery, taken from the funds of the plaintiffs, and paid to the defendants.
Mr. Sherman, the teller of plaintiffs, to whose hand the check, thus altered, came after it had been so paid, finding no entry in the certificate book on the 16th of February (the date which had been forged on the check) of any certification on that date for §15,006, and recognizing the autograph of Mr. Adriance on the check, supposed that an entry of it on that date had been omitted by accident. The forgery deceived him, and, not doubting the genuineness of the contents of the check, and knowing Mr. Adriance’s signature, he entered it as of February 16th.
The bank book of Vermilye & Go. with plaintiffs, was written up, and sent to them, by plaintiffs, with 715 vouchers, including the forged check, on the 24th of February, 1870, and the fraudulent alteration of this check, and the payment thereof by mistake, were discovered by Vermilye & Co. on the 1st of March, 18-70.
On the day last named, they informed the plaintiffs thereof, and the plaintiffs thereby first learned of such fraudulent alteration, and payment by mistake, and forthwith gave notice thereof to defendants, and required repayment from them of the amount so erroneously paid.
Upon these facts, and it not appearing that plaintiffs were guilty of any negligence or laches in the premises that worked to the injury of defendants, held that plaintiffs are entitled to recover the difference between the original amount of the check, and the amount of the same as altered and by mistake paid by plaintiffs.
This main question, and the question of negligence in like cases, and the authorities relating thereto, fully discussed in the opinion of the court by Vak Vobst, J., and in the dissenting opinion by Sedgwick, J.
Before Monell, Sedgwick and Van Vorst, JJ.
Decided February 1, 1873.
Appeal by defendants from a judgment entered upon a verdict of a jury under the direction of the judge before whom the case was tried, and from an order denying a new trial.
The action was brought to recover the sum of $14,-949.25, claimed to have been paid by plaintiffs to defendants under a mistake of facts.
The case shows that Vermilye & Co. were dealers with plaintiffs, depositing money with them, and drawing checks against the same. On the 15th day of February, 1870, they drew a check Ho. 101 on the plaintiffs for $56.75. The check was made payable to the order of A. J. Greenleaf, to whom, or to whose use, it was delivered by Vermilye & Co. on the day on which it was. drawn. The check was taken on the same day to the plaintiffs, by a person purporting to be Greenleaf, the-payee, and presented to Thomas B. Adriance, the receiving teller, to be certified. But who on that day acted as paying teller in the temporary absence of the paying teller % Adriance certified the check.
The plaintiffs kept a record of certified checks, and a book for the purpose, and in this book Adriance entered the check for $56.75 in question, as certified on that day. Greenleaf, the payee of the check, was a dealer with the defendants. He had been introduced to its cashier as a banker and broker by a customer of the bank, and left with the defendants his card, with the number of his office thereon, as 70 Broadway. He opened an account with the bank on the first of February, 1870, and from that time down to the 16th day of February, 1870, he had made divers deposits amounting in the aggregate to over $56,000, and upon which he had from time to time drawn checks, so that on the 16th of February, when his account was balanced, there was standing to his credit only $1.49.
On the day last named, and after his account had been balanced, Greenleaf deposited with the defendant the check of Vermilye & Co., which had been certified on the 15th February by Adriance, but which after its certification had been fraudulently changed in its date from the 15th to the 16th February, and altered in its amount from $56.75 to $15,006. The check was received by the defendants as genuine, and credited to Green-leaf’s account at the sum of $15,006. Greenleaf after-wards, on the same day, further deposited with the defendants the sum of $5,600 (his last deposit), and on the same day drew out of the bank by his checks the sum of $17,981.25, leaving an apparent balance in his favor on that day of $2,626.24.
The defendants, having no knowledge of the forgery in the body of the check, deposited the same in the clearing-house on the morning of the 17th day of February, where the same was paid to the defendants by the plaintiffs, as a check for $15,006 through the exchanges in the clearing-house, in the ordinary way in which the accounts of banks are there adjusted, and the same actually came to the plaintiff’s banking house on the morning of the 17th February with other vouchers. The check came from the clearing-house to William W. Sherman, who was the regular paying teller of plaintiff’s bank, who was absent from the bank on the 15th, the day the check was certified. It was brought to Sherman by the check clerk, as not being entered as a certified check on the certificate book. Sherman looked at the book and saw no entry of the check. He made no inquiries of Vermilye & Co., nor of anybody in the bank, but knowing the signature of Adriance, and supposing the check to be genuine and regularly certified, and its entry on the 16th accidentally •omitted, he entered the same upon the book as a check certified of the 16th for $15,006, and the same was charged to the account of Vermilye & Co.
In this condition the affair remained until the 24th of February, when the account of Vermilye & Co. with the plaintiffs was written up, and the vouchers, including the check of $15,006, were returned to Vermilye & Co. On the 1st March, Vermilye & Co., having in the meantime examined the vouchers, called upon the plaintiffs, produced the check, and notified the bank that the check had been altered after drawn by them, from $56.75 to $15,006. Whereupon the plaintiffs addressed to the defendants a letter in these words :
“National Bankoe Commerce.
“New York, Miweh 1, 1870.
“M. Chandieb, Esq., Cashieb National Mechanics’ Banking Association. '
“Deab Sib:—I enclose herewith check ofVermilye & Co. upon this bank, No. 101, to order of A. J. Greenleaf, purporting to be for fifteen thousand and six dollars ($15,006) received for that amount through the clearing-house exchange from your bank, as per your slip, also inclosed herewith, which check we have this day learned has been altered from $56.75, the amount for which it was drawn, and certified by us, and I therefore hereby claim and require repayment to us of the difference of $14,949.25.
“ Yours very respectfully,
“H. F. Vail, Cashier.”
This was the first actual notice the defendants had of the forgery. The defendants’ cashier immediately sent a clerk to 70 Broadway to make inquiries for Greenleaf, but he was not to be found there. The office was closed and no person on hand. The balance in the hands of the defendants, $2,626.24, has since the 17th' day of February been attached.
At the close of the testimony the defendants’ counsel requested the court to submit to the jury the question, whether the defendants had been injured by the laches or negligence of the plaintiffs in notifying the defendants of the alleged mistake.
The court refused, and the defendants excepted.
The court directed a verdict for plaintiffs for the sum of $14,949.25 with interest, being the difference between the amount for which the check was originally drawn and certified, and the altered amount. Defendants excepted to such direction.
Defendants moved for a new trial, which was denied.
James Emott, for appellants.
Benjamin D. Silliman, for respondents.

Opinion:
By the Court.—Van Vorst, J.
When the check, in the altered condition in which it had been taken by the defendants as genuine, came back to the cashier of the plaintiffs' bank on the 17th day of February, it was there also received as genuine, and its payment through the exchanges at the clearing-house was adopted and ratified, and as a valid check it was charged to the account of Vermilye & Co., the drawers of the same.
The alteration being in the body of the instrument, and not in the signature of their customer, which they were presumed to know, they are not, by the act of recognition and payment of it as valid, under an honest belief that it was so, disentitled from establishing that the instrument was a forgery, or from recovering back the money paid (Bank of Commerce v. Union Bank, 3d Coms. 230).
The plaintiffs, on the 17th day of February, were deceived by the fraudulent alteration of the check, as the defendants themselves had been on the 16th, and the recognition by each bank of the check as valid was made under a clear mistake of facts. Ho effect can be given to the certification of the check on the 15th of February by Adriance, the clerk of plaintiffs, other than that the signature was genuine, and that the check was good for $56.75, the amount for which it was drawn (Farmers and Mechanics Bank v. Butchers and Drovers Bank, 16 N. Y. 135); and the money paid by plaintiffs over and above that sum they are entitled to recover back from the defendants, unless there be such facts and circumstances peculiar to this case as would justify the defendants, according to equity and conscience, to detain it from the plaintiff. The defendants claim that the plaintiffs have "been guilty of laches, which has resulted in loss to them, and that this negligence of plaintiffs should defeat a recovery. It was urged on the argument Tby defendants' counsel that it was negligence in the plaintiffs not to have entered the check when certified Tby its number, in addition to its date and amount; that the entry of the number would have aided in detecting the forgery; and further, that when the check came back to them on the 17th of February, they did not make sufficient inquiry in regard to its genuineness before accepting it as a true instrument.
The defendants urge substantially that the plaintiffs could and should have detected the forgery on the 17th of February, and should have immediately given notice thereof. The evidence on the trial was to the effect that it was not customary to enter certified checks on the books by their number, but that memoranda of the dates and amounts were sufficient for the purposes for which the book was kept.
The question as to whether or not the omission of plaintiffs in this respect was negligence, was not submitted to the jury, nor was any request made that it should be ; and it cannot be said as matter of law that the plaintiffs were bound to make such entry, and that a failure to do so is negligence. But that the plaintiffs did not make all the inquiry and examination on the return of the check which the defendants now demand, affords no good reason why the plaintiffs should not recover in this action.
It was without doubt formerly the rule that if a party pays money under a mistake of fact, and no laches is imputable to him in respect of his omitting to avail himself of the means of knowledge within his power, he might recover back the money (Milnes v. Duncan, 6 B. & C. 671). But the limitation of the rule with respect to laches in such cases, has been modified (Kelly v. Solari, 9 M. & W. 54).
In this case, one Solari had an insurance on his life in the plaintiffs' company. He had made default in the payment óf a .premium due on the 3d of September, by which the policy lapsed. The actuary advised two of the directors of the default. One of them, " Clift," wrote on the policy the word "lapsed." After the death of Solari, which happened in October next after the default, Ms wife, who had entered upon the administration of Ms estate, made a demand on the company for the amount of the policy. Three of the directors, including the two who had known of the default, and the lapsing of the policy in September previous, and the one who had made the entry of the word " lapsed," paid the amount. After discovering the mistake, an action was brought against the executrix to recover the money. The two directors on the trial testified that at the time of the payment, they had entirely forgotten that the policy had lapsed. The plaintiff was non-suited on the trial. The chief baron deciding that if the directors had had knowledge, or the means of knowledge, of the policy having lapsed, the plaintiffs could not recover, and their afterwards forgetting it could make no difference. But a new trial was ordered. Baron Parke saying, " that if money be paid under the impression of the truth of a fact, which is untrue, it may, generally speaking, be recovered back, however careless the party may have been in omitting to use diligence to inquire into the fact." In that case, the counsel for the defendants, in opposing the motion for a new trial, urged that the defendant was an executrix, that the money paid had become assets of the estate, and that if plaintiff succeeded the loss would fall upon her.
In Townsend v. Crondy, 8 C. B. N. S. 477, it was held that the mere fact that the person who paid the money had at the time of payment means of knowledge of which he neglected to avail himself, will not disentitle him to recover the money back, if it was paid under a real mistake (Lucas v. Warwick, 1 Moody and Robinson R. 293; Daily v. Floyd, 12 B. R. 531; 2 Smith's Leading Cases, edition of 1873, Marriote v. Hampton, and cases cited, marginal page 402).
There is no rule that because a party has the means of knowledge he has the knowledge itself, or that as a condition to a recovery he should have actually possessed himself of the knowledge within his reach. Nor can it be maintained that the omission by a party to do everything in the conduct of his own business, the performance of which might prevent loss to himself or others, is necessarily negligent.
But in Kingston Bank v. Eltinge (40 N. Y. 391), it was held, that " Care and diligence are not controlling elements in the case. It is a question of fact merely. The inquiry is, were the parties mutually in error, and did they act upon such mutual mistake, not whether they ought to have so acted. If, in consequence of such mutual mistake, one party has received the property of another, he must refund, and this without reference to vigilance or negligence." In the Union Bank of Troy v. The Sixth National Bank (43 N. Y. R. 452), it was objected by the defendants, to tho plaintiff's right of recovery, that he had been negligent in an omission to make inquiries, and to use the means at hand for arriving at correct information of the facts, before parting with the money; but it was held in that case, that it is no defence that the mistake arose from a want of care on the part of the plaintiff (see also Canal Bank v. Bank of Albany, 1 Hill, 287).
Before taking this check from Greenleaf, on the 16th February, the defendants were as much bound to make inquiries in regard to its genuineness, as the plaintiffs were before accepting it, on the following day. The defendants had means of inquiring within its reach. They used nona And before sending it to the clearing- i house, they impressed upon it the sanction of their own stamp, as an evidence of their belief in the trueness of the paper.
In such condition, it came to, and was accepted by, the plaintiffs as true. Viewed in a moral light, each party was guiltless ; in the law, the negligence of the one is no greater than that of the other, and for this reason it is inequitable in the defendant to detain the money paid by the plaintiff, under a mistake common to each.
At the close of the evidence, the defendants' counsel asked the judge before whom the trial was had, to submit to the jury the question, whether the defendants had been injured by the laches or negligence of the plaintiffs, in notifying the defendants of the alleged mistake, and that the court refused, and the defendants excepted.
The defendants' request assumed that there was negligence in respect to the notification. Negligence is neither to be assumed nor presumed. It is true that negligence is often a question of mingled law and fact. But, in this case, whether the plaintiffs had omitted such duties, or had failed to exercise such care and diligence as amounted to negligence, were facts to be determined by the jury. The fact that there was negligence in the plaintiffs, should have been found before they should have been called upon to consider its consequences to the defendants.
The forgery was not discovered by the plaintiffs until the first of March, when Vermilye & Co. returned the check ; immediate notice was then given to the defendants, and a demand of payment made.
The position of the defendants, if not earlier, was fixed on the 17th of February, when, through the exchanges of the clearing-house, the checks of Greenleaf on them to an amount exceeding $17,000 were paid. This took from the defendants more than .the amount of the forged paper. The plaintiffs were under a duty, without doubt, to notify the defendants of the forgery as soon as it was discovered by them; and had the forgery been brought to the plaintiffs' knowledge before the defendants parted with the credit they had given Greenleaf on the faith of thé forged check, and there had been a culpable omission to give notice in time to save them from loss, it might well be that the plaintiffs should not recover in this action.
The remedy of the defendants is against Greenleaf now, as it would have been on the 17th February, had the forgery been then discovered by the plaintiffs, and they had then refused the check ; under such circumstances, the plaintiffs would have made immediate reclamation on the defendants for the amount paid through the clearing-house, and the defendants would have proceeded against Greenleaf. This course is still open to them. Of the deposits made by Greenleaf on the 16th February, there still remains with the defendants, undrawn, a balance of $2,626.24, which has been attached, by whom, or upon what ground, it has been seized, and whether before or since the discovery and notice by plaintiffs of the forgery, does not appear. But in the view taken of this case, this attachment cannot be interposed by defendants to affect, in any way, the plaintiffs' right of recovery, and it would be difficult to conceive how any creditor of Greenleaf could make a claim to this balance which was placed to his credit on the faith of a check which proved to be a forgery.
Upon the facts, this money still belongs to the defendants ; Greenleaf himself can make no valid claim to it, and no creditor can have a better right to the money than Greenleaf himself.
The judgment should be affirmed.