Case Name: The Bank of Charleston, South Carolina, vs. The President and Directors of the Bank of the State of South Carolina
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1866-05
Citations: 13 Rich. 291
Docket Number: 
Parties: The Bank of Charleston, South Carolina, vs. The President and Directors of the Bank of the State of South Carolina.
Judges: Dunkin, C. J., and Inglis, J., concurred.
Reporter: South Carolina Law Reports
Volume: 47
Pages: 291–315

Head Matter:
The Bank of Charleston, South Carolina, vs. The President and Directors of the Bank of the State of South Carolina.
Money had and received — Currency— Valuable Consideration— Fraud — Due Course of Business — Mistake.
The teller of B, a bank, haying abstracted from his till and fraudulently used the money of his bank, in order to return the same, and escape detection, borrowed the money of A, another bank, from the teller thereof, and secretly placed it in his, the borrower’s, till, where it became mingled with the money of his bank, was on the same day counted by the cashier as the bank’s money, and was afterwards used by the teller for his bank in its current transactions. Neither teller bad the right to borrow, on the one hand, .nor to lend, on the other, money for his bank, and the transaction was fraudulent on the part of both tellers. By means of the money thus obtained, the teller of B escaped detection for some time, and when he left his bank, bis cash was counted and found correct: — Held, that A was not entitled to recover from B the amount thus restored to it by its teller.
Where money (including bank bills and other negotiable paper which circulate as money) is stolen and then passed in currency to one who receives it bona fide, for valuable consideration and in due course of business, the loser has no right of action against such receiver, or any subsequent holder.
Where a teller is indebted to his bank for money fraudulently abstracted from his till, and secretly replaces it with the money of another dishonestly obtained by him, and the money thus replaced is counted by the cashier as the bank’s money, and used by the teller in the current business of his bank, it will be held to have passed to the bank, in currency, to have been received by it bona fide, for valuable consideration and in due course of business.
A credit given on an account is a valuable consideration for the receipt of money.
The teller of B, a bank, being indebted to his bank for money fraudulently abstracted from his till in order to square his account, induced the teller of A, another bank, to enter on his, the teller of B’s, passbook a fictitious credit to B for a largo sum of money, by means whereof B afterwards received so much money from A. The transaction was in the usual course of business, but was fraudulent on the’part of both tellers. By means of the false entry, the teller of B escaped detection for some time, and when the fraud became known his cash was counted and found correct: — Held, that A was entitled to recover from B the amount paid by reason of the false entry in the pass-book, as for so much money paid by mistake.
Where B has already lost money by the- dishonesty of his agent, he cannot shuffle off the loss on A, by taking advantage of a payment made by the latter on a security, prima facie valid and binding on him, but which had, in fact, been fraudulently concocted between the agent of B and an agent of A, with a view to conceal the previous loss — both principals being at the time of the payment entirely innocent parties.
BEFORE WITHERS, J., AT CHARLESTON, JULY TERM, 1859.
Tbe report of bis Honor, tbe presiding Judge, is as follows :
“ Tbe Bank of Charleston sued tbe Bank of tbe State of South Carolina, in assumpsit, for money bad and received, and specified the demand in a bill of particulars, as follows:
“Bank of the State of South Carolina
To Bank of Charleston Dr.
“1857. “¡Sept. 2d. Vv To amount delivered by John M. C. Johnson to William Miller, teller, and by him paid over to the Bank of the State of South Carolina, without authority...................$15,000 00
“1857. “ Sept 2d. To amount delivered by Couturier to W. Miller, and by him paid over to Bank of State of South Carolina, without authority............ 12,000 00
$27,000 00
Deduct the sum returned by Wm. Miller to Couturier, and by him restored to Bank of Charleston.. 6,500 00
$20,500 00
" The following statement will exhibit the circumstances out of which the demand arose :
“Johnson and Couturier, above named, were tellers in the Bank of Charleston; Miller was a teller in the Bank of the State of South Carolina. In the Bank of Charleston there were three tellers, and each had charge of the matter of daily settlements with certain banks in the city. Couturier dealt, in that particular, with the Bank of the State, represented in such daily mutual settlements by Miller, its teller. Banks in Charleston habitually received and paid checks drawn on each other for accommodation of their customers; and it was the duty of the teller, assigned to the business, to call, every day, upon the close of banking hours, upon the corresponding teller of another bank, checks on which had been paid, to settle for them. Balance of the day’s business being ascertained, and each bank having p>ass-books (so called) in the hands of its teller, the teller of the bank, found to be debtor, entered the balance ascertained in the pass-book of the bank, found to be creditor, which operated as an acknowledgment of so much deposited by the creditor in the debtor bank. It was in this way that one teller, when so disposed, was able, by a fictitious credit in the pass-book, to afford another, ' short’ of money, the means of squaring his accounts with his own bank; and it was in evidence, by a free and positive declaration on the part of Miller, and a reluctant acquiescence in the fact by Couturier, (both of whom were examined,) that such mutual accommodation between the three tellers already mentioned had been granted by each to the other, Miller affirming that it had been frequent for a space of two years or more, and that he had often accommodated each of the other two tellers in such way. On the 2d September, 1857, Miller obtained from- Couturier, in the pass-book of the Bank of the State, an entry of credit for an aggregate sum of $18,881.77; (aggregate credits alone were entered in the passbooks.) Of that aggregate $12,000 was a fictitious sum; though, as it appeared on the pass-book of the Bank of the State, Miller had rendered to Couturier, of checks paid, on that day, by the Bank of the State for the Bank of Charleston $18,881.77, and this enabled Miller to account for a disposition on that day of so much money intrusted to him by his cashier. The entry of this item appeared in the books of both banks; and, so far as the officers of either bank knew, or could reasonably suspect, the transaction was founded in truth, and was in the ordinary course of business.
“ Couturier said that, on the 2d September, when he accommodated Miller in swelling the aggregate of 'checks received from the Bank of the State of South Carolina’ by a fictitious addition of $12,000, he took for this last sum a check signed by Miller, as teller, on the cashier of the Bank of tbe State, payable to Couturier; that afterwards (he seemed to think on the 15th September) Miller substituted, in lieu of that check, two others, the one for $6,500 and the other for $5,500. (The last was produced on the trial, and bore date September 15th, 1857, payable to Couturier, ‘bearer,’ in the printed form being erased, signed by Miller, ‘teller.’) He said that, in an aggregate credit, given by Miller in the passbook of the Bank of Charleston, on the 17th September, 1857, of $25,235.17, was included the other check for $6,500 ; in that way Miller refunded to Couturier so much of the $12,000. Miller was very confused in his efforts to detail the step's taken in this transaction. He did not remember the check for $12,000 at all. So much will serve to explain the transaction with Couturier.
“As to that with Johnson, it can be stated very succinctly. On the 2d September Miller applied to him for $15,000 in money, during banking hours, and obtained it, giving his check, as teller, for that sum, in favor of Johnson, ‘bearer’ being struck out, (I believe.) Miller ^testified that it was a loan to him, in reciprocation of like favor often yielded by him to Johnson; that Johnson well knew it to be so; that he was trusting hitn, and not the Bank of the State; that this sum in bank bills went into the mass of other, funds he had, as teller; was used in the current business — that is, paid out to checks, or otherwise disposed of, as other money intrusted to him, and to be .accounted for by him. Miller said, as to both Johnson and Couturier, ‘They knew I needed the money,, and lent it to me. I lost money, and borrowed this •to make up my cash, else I should have been found a defaulter. I had aided them in the same way, and for the same purpose.’
“Mr. Waring, cashier of the Bank of the State, was examined, and we learned from him that Miller had no authority to sign checks for the Bank of the State, or borrow money for it, in any form; that the directors, considering the fund in bis custody too large, ordered it to be reduced; that, by the accounts of the bank with Miller, he had in hand, on the 2d September, 1857, more than $120,000, (figures given were $120,220.92;) that he transferred to him $55,000, in notes of his own bank; this was under seal and found to be correct; that in coupons he had about $35,000; he had advanced for the Exchange Bank, for dividend account, $3,007; had paid for the Charlotte and South Carolina Railroad, $20,000; leaving in his hands, for the business of the next day, about $12,960, $10,000 or $11,000 of which were in bills of the Bank of the State. The next day, September 3d, Miller received for the bank $25,000 in collections; deposits, $6,500; general deposits, i. e., bills received from other banks, $16,000 ; his checks amounted to $83,000; received, on that day, in all, $54,000 and over, and paid out over $84,000. He stated that, between the 2d and 19th September, 1857, (on which last day Miller’s connection with the bank ceased,) there had passed through his hands, as funds of the bank, perhaps as much as $750,000. Between those periods there had been various settlements with Miller, as teller; and on the 20th September his cash was counted, and in good assets (money, checks, coupons, &c.) the sum of $69,252.46 was found, which settled his account with the Bank of the State, with which his connection, as teller, ceased the day before.
“ Mr. Waring said (with the book of Miller before him) that he could not say whether the $15,000 obtained from Johnson went into the bank, or not; that there was no record of it. On the 20th September, few of the bills of the Bank of Charleston were found in his box. (It will be recollected that Miller said the $15,000 in bills were mingled with his other money, and passed into his current transactions.)
“Neither bank seems to have known the state of affairs heretofore described until after Miller left the Bank of the State, (or was dismissed, for I do not know whether he quit voluntarily or not.) It was in evidence that Miller had made an attempt on his own life, and this led a few days after to some movement in the Bank of Charleston, of which Mr. Lowndes was then acting president. Johnson’s and Couturier’s cash was counted, and then were found the two checks of Miller, heretofore referred to, the one for $15,000, and the other for $5,500 — the first in favor of Johnson, and the other of Couturier; they were presented to the Bank of the State, two or three days after Miller had left it, payment demanded and refused; and this action followed.
“I have condensed the case made in the evidence as well as I can, in what has been written. It contains, I hope, all that is material for the Appeal Court. It will be convenient and agreeable to me to supply any thing else appearing on my notes, that either party may suggest. Perhaps I ought to add the description given of a ' pass-book’ by Mr. Phillips, an acting, teller in the Bank of Charleston, and what it contains, and what purposes it subserves. It was as follows: ‘ A pass-book contains a credit for the checks sent by one bank to another. The entries there are transferred to the teller’s day-'book, and the bookkeeper transfers them to his book, and makes up the accounts between the banks. A register of checks is kept by the teller who deals with the bank, (serving them,) and that contains the checks seriatim. The pass-book and the teller’s day-book contain only the aggregate of checks.’ He meant checks drawn on one bank which another bank had paid; in effect one bank collected, for customers, checks drawn in their favor on funds in another bank.
“It is obvious that the sum of $27,000 of funds raised by Miller, teller, on the 2d September, 1857, and raised by collusion with two tellers of the Bank of Charleston, was the work and fraudulent confederacy of the three, being agents of two different principals. In the fact that the agents of principals were, on both sides, concerned in concocting and executing a bad transaction, unfaithful to their respective principals, the latter being both equally innocent, and the transaction resulting in damage to one of them, made a diversity, in circumstance, between this case and that in which the agent of one person should collude directly with a third person, or impose on him, such third person dealing with his own funds, to the end and purpose of deluding the agent’s principal. But if what was done by Couturier, in acknowledging a fictitious deposit for Miller’s accommodation, was within the scope of. his authority, (and it clearly was,) and the design was that a third person should treat it as a genuine and real transaction in the ordinary course of such business, and such person did so treat it and act on it, dealing with his own agent, so as to change his relation to that agent for the worse if the transaction be set aside, I suppose this case, and the one suggested, would range themselves under the'same principle of law. It was manifest that the party intended to he benefitted was Miller, not the Bank of the State; equally manifest that the party intended to be lulled into a false and dangerous sense of security, and into a continuation of confidence in bis undeserving-agent, and who was, in reality, induced to continue trust in bis agent, settling accounts witb him, twice or more, on the faith of Couturier’s entry, was the Bank of the State; and it is moreover manifest that but for the act of the agent of the Bank of Charleston, within the scope, though an abuse, of bis authority, so far as bis principal was concerned, tbe Bank of tbe State might have discovered the defalcation of its agent, (Miller,) and have resorted to any available redress.
“I therefore'held (touching the item of $5,500) that the credit given by Couturier to tbe Bank of tbe State in its pass-book, being an act clearly witbin tbe scope of bis authority, became, in legal contemplation, tbe act of tbe Bank of Charleston, and irrevocable by it, wben tbe Bank of tbe State might act on tbe faitb of such entry, so as to be damaged by its revocation ; and that if such was the situation of the Bank of the State, then the Bank of Charleston could not disaffirm that act of its agent, even though Miller had incited to the act. The question of fact involved in such instruction, with a reference to Waring’s testimony relating to it, was submitted to the jury.
“Touching the sum of $15,000, in bank bills, obtained by Miller from Johnson, I instructed the jury that the legal standard by which that part of the case was to be determined was this: if the bank received, in the ordinary course of business, the money, the same being currency, in discharge of a debt owing to it by Miller, the bank was not affected by the circumstance under which Miller procured it, so as to make it liable to the Bank of Charleston; and I held, also, that when the bank and Miller came to an adjustment of their accounts, and Miller was called on to produce and render up the money of the bank with which he had been intrusted, they were in a condition such as to make Miller a debtor to the bank; and, when he paid it in bank bills, the bank was a receiver of currency in discharge of his debt; and it was good law that a creditor receiving currency from his debtor in discharge of his debt was not answerable for the mala Jides by which his debtor acquired it.
“Much was said to the jury, which I could not, and, I presume, need not, repeat, by way of undisputed subsidiary and illustrative propositions of law, especially that touching principal and agent, and relations between themselves and both, or either, and third persons. They arose in a case of rather novel impression, and I hope such a case may never become familiar to us; and much was suggested by an argument which, for fulness, force, and acuteness, on both sides, vindicated the highest pretension to professional ability. But the controlling principles upon which the cause was submitted to the jury were those which are above set forth; and I hope, as I expect, that the Court of Appeals will have the benefit of the argument heard on. circuit, and may be led to review all the law submitted properly arising out of the facts of the ease.
“ The verdict was for the defending bank.”
The plaintiff appealed, and now moved this Court for a new trial, on the grounds and for the reasons following:
1. As to the sum of $5,500, balance of $12,000, credited to the Bank of the State by fraud and collusion, to the injury of the Bank of Charleston, his Honor charged that the Bank of Charleston could not repudiate their teller’s act, because the other teller had got credit in his account with his principal for that sum; whereas it is submitted that an act which is void for fraud and want of consideration cannot be confirmed and made valid by any but the party who is entitled to avoid it — that is, the party injured, and no other.
2. As to the same point, his Honor charged tbe jury that the Bank of the State could take credit for this sum- of $5,500 charged against the Bank of Charleston, notwithstanding the fraud and collusion of the agents, viz., the teller of the Bank of Charleston and the teller of the Bank of the State, because the teller of the Bank of Charleston was authorized to make entries in the pass-book between the two banks, and the teller of the Bank of the State was not authorized to borrow money; whereas it is submitted, as the true view of the question, that the false entry was knowingly obtained, through the fraud and connivance of the Charleston teller, By the teller of the Bank of the State, in the name of, and for the benefit of, his principal; and that if the Bank of the State rejected the act of the person who used their name for their benefit, they must reject the benefit of the act also.
3. As to the $15,000 abstracted from the Bank of Charles ton by the teller of tbe Bank of the State in collusion with a teller of the Bank of Charleston, for the use of the Bank of the State, his Honor charged, that it could not be followed to the Bank of the State, because they received it in the course of business from a third party, viz., their teller; whereas it is contended that the possession of William Miller, as far as depended on him, was the possession of the bank, and nothing passed between him and the Bank of the State to constitute either a payment or a purchase; and the counting of the money, which is the only fact relied on to raise a consideration for the bank as a purchaser, or as creditor receiving a debt, in the course of business, was a mere misrepresentation by their own agent of the state of their own affairs. And the case is no better than if their agent, after wasting their money, had stolen other money, and by means of false keys introduced it into their strong box.
4. That his Honor charged the jury that, if the situation of the Bank of the State would be changed for the worse by the collusion between their teller and the teller of the Charleston Bank, in case of their refunding, then they had a right to retain,; whereas it is submitted that their right to retain depended on the fact, whether the property in the money could be changed by the act of Miller, without any new consideration given or loss sustained by the bank.
5. That even upon the principle laid down by his Honor, the jury should have found for the plaintiff, because in fact the condition of defendant in case of refunding would be no worse than it was before the fraud was committed.
Petigrn & King, Yeaclon, Gonnor, were of counsel for the plaintiff
Mitchell, Hayne, Memrainger, Wilkinson for the defendant.
The following argument, which had been prepared, by Petigru & Kang, was before the Court.
This is an action for money had and received, brought by the Bank of Charleston against the Bank of the State, to recover $20,500, money belonging to the Bank of Charleston, which the other bank got and refuses to return, under the following circumstances:
On the 2d September, 1857, William Miller, a teller in the Bank of the State, being deficient in his cash, got from John Moultrie Clement Johnson, a teller in the Bank of Charleston, $15,000, and gave him his check in the words following:
“ Cashier of the Bank of the State of So. Oa. — Pay to J. M. 0. Johnson, 15,000 dollars.
"WM. MILLER, Teller.”
On the same day he got from Isaac Robert Ellis Couturier, another teller of the Bank of Charleston, credit on the passbook for $18,881.71, though he deposited only $6,881.71; and for the excess gave Couturier a check for $12,000. His cash was counted the same day; the $15,000 from Johnson were mixed with the money which he produced. The false entry was counted to his credit, and his cash found correct. On the 15th September, the check for $12,000 was divided into two checks; one for $6,500 was entered on the 17th in the pass-book, to the credit of the Bank of Charleston ; the other, for $5,500, remained in Couturier’s possession till the catastrophe, and is in these words:
“ Cashier of the Bank of the State of So. Ca. — Pay to I. R. E. Couturier, 5,500 dollars.
“WM. MILLER, Teller.”
On the 19th September, Miller attempted his life. On the 20th his cash was counted, and found correct; but the story got out about the checks, and his connection with the bank was not resumed after that day. The Bank of the State disclaims the checks, and retains the money which came from Johnston, and the benefit of the error of Couturier on the pass-book.
The action is for money had and received. The question is, whether the Bank of the State can retain the money of the Bank of Charleston which has thus got into their possession.
Some things are plain. Miller had no right to borrow, and Johnson had no right to lend. The check is void, and the loan is void. The property is not changed; the $15,000 did not belong to Miller; he had no more right to those dollars than if he had stolen them. If the bank can retain that money, they might equally do so if their teller had acquired it by larceny.
If the question had reference to specific property, the right of the true owner to recover his own from him to whose possession it is traced would be too plain for argument. The defence of purchaser in market overt is an exception. Nor does the rule which obtains in favor of ostensible title apply. The principle is, that between two innocent persons who have been wronged by the act of a third, he who enabled that third to commit the wrong must bear the loss. Wright vs. Campbell, 4 Bur. 2046.
But there is no law that binds a principal by the acts of his agent beyond his ostensible ownership or his real authority. The custody of a teller is not an ostensible ownership, and his employment confers no authority to give away or lend the owner’s money. Such is the case as to property that passes by tradition.
But in favor of commerce the transfer of negotiable paper is still more favored. Though it be stolen, the owner cannot recover it from a bona fide holder without notice; and money is like negotiable paper. Miller vs. Race, 1 Bur. 452.
But money can be followed into the hands of the thief; 2 Haw. Cap. 23, Appeal, § 55; 21 Hen. 8 Cap. 11, P. L. 46; or of a pei*son to whom it has been given, if it did not belong to the giver; 1 Sal. 289 ; or a person to whom it was paid by him that embezzled it, upon a contract of illegal insurance; Clarke vs. Snee, Cow. 197.
Where money or notes are paid bona fide upon a valuable consideration, they shall never be brought back by the true owner, but, where they come mala fide into a person’s hands, they are in the nature of specific property; and if their identity be traced and ascertained, the party has a right to recover. It is of public benefit and example that it should be so. Per Lord Mansfield, 1 Cow. 200. In case of money stolen, the true owner cannot recover it, after it has passed in currency, after it has been paid away fairly and honestly upon a valuable and bona fide consideration; but, before money has passed in currency, an action may be brought for the money itself. Miller vs. Race, 1 Bur. 452.
An action will lie against the holder of a bank note, (and this is not at all denied,) but not after it has been paid away in currency. Ib. 458; Buller, 130. Money won of the defendant’s clerk, at play, may be recovered by the owner. Allen vs. Watson, 2 Hill, 319, 323.
Apply the principle to the present case. In Miller’s hands it was the plaintiff’s money. 'Miller could not have retained it against them for a moment. He did not pass it as currency, nor pretend to do so ; but pretended to his principal that he held it as his agent.
The principal may reject the'contract when his agent exceeds his authority, but he cannot -reject the contract and keep the consideration. The distinction is between suing on the contract, and a suit founded on the recission of the con tract. 2 Com. on Con. 81, and cases cited; Gilbert vs. Ross, 1 Strob. 289.
The distinction in favor of currency is on account of commerce. But commerce is a dealing between man and man, not between a man and himself or his agent. There was no payment, for the bank claimed no debt. They claimed their money in their agent’s possession, and took if as he represented it to be. If the money was theirs, there was no debt. If it was not theirs, they had no right to it. They did not give any thing for it. If Miller had died with this money in his possession, mixed with their money, they would have taken it as their money, not as money of Miller. It would not have gone into Miller’s assets. Their whole case depends on the fact of Miller’s mixing our money with theirs. The counting ivas nothing. It would have been as much theirs if he had died before they ever counted it. After mixing it with the bank’s money, it would not have gone to his executor as assets.
To call the act of the bailees in returning the deposit, or subject of bailment, a payment, is to confound a plain distinction.
Commerce is essential to the commonwealth, and the freedom of commerce requires that a creditor’s right to payment should be ample; but the freedom of commerce does not require that the principal may avail himself of his agent’s fraud.
It is not for the benefit of commerce that the agent shall be at liberty to steal for his principal, to cover his own default.
The tradesman is not bound for a customer’s honesty; the principal is responsible for his agent. He that has obtained money by fraud may be a good customer. But the principal puts his agent in his place, “ qui facit per alium facit per se.” And if the agent could do this, the principal himself could do it. If he could keep this money, he might take any money in his agent’s possession, whether his or not.
But again: it is not a bona fide transfer, because the knowledge of the agent is the knowledge of the principal. Pritchett & Allen vs. Sessions, 10 Rich. Eq. 293. The duty of Miller was to keep the plaintiff’s money and 'to account. He accounted as the agent, and the bank could honestly take the money in no other light than as their own; and of course their right was no greater after the counting than it was before. When money is paid in the way of business, the parties stand at arm’s length. The payer pays as little, the receiver receives as much as possible. Between principal and agent, there is identity of obligation towards the rest of the world ; and the principal has no more right to take the benefit of his agent’s fraud than of his own. If he receives of his agent money, fraudulently obtained by the agent, as his own money, he cannot afterwards say he did not receive it in that light, and call it a payment, for he cannot affirm, his agent’s act in part, and reject it in part. Paley, 145.
It is said, in argument, that payment by the agent binds the principal, and payment of the agent to the principal binds the true owner. But, in truth, fraud of the agent, though it may bind, can never benefit the principal. The conclusion is, that the difference between money and specific property grows out of the exigencies of commerce, but, between principal and agent, neither can take the benefit of the fraud of the other, whether the fraud consists in obtaining goods or money. And this is the decision of Chief Justice Shaw, and the Supreme Court of Massachusetts. See Monthly Law Reporter, August, 1858, vol. iv. page 232; Atlantic Bank vs. Merchants' Bank.
But if the defence fails as to the $15,000, it breaks down entirely in the attempt to retain the benefit of the $5,500 which has been abstracted by a false entry. It is impossible here for defendants to deny the act of their agent. There is no figment of a payment, or a third person. This money never was in any intermediate hands, but came directly out of our coffers into •their s; and the exigencies of commerce have nothing to do with it.
Even if they could, set up a semblance of title through some third party, they cannot convert this entry into a negotiable instrument, but must take it with all the equities that exist between original parties. Da Costa vs. Shrewsbury, 1 Bay, 211; Maybin vs. Kirby, 4 Rich. Eq. 105; Holbrook vs. Colburn, 6 Rich. Eq. 289. It is equally impossible to say that the entry of Couturier was authorized because it was within the scope of his employ to keep an account between the two banks. To say that a false entry will bind the party to whose injury it is made is to ignore the first principles of justice. 2 Com. on Con. 43.
Let the argument by which the nakedness of the defence is covered be examined.
1. It is said that the acceptor of a forged bill is bound, and cannot recover from an indorsee the money paid by mistake. This is decided in Price vs. Neal, 3 Bur. 1354. But the reason is that, though both parties were equally innocent, the acceptor was not as clear of negligence as the indorsee, because he was bound to know — he was of all men the person who should know — the handwriting of the drawer.
Price and JVmi was followed in Smith vs. Mercer, where, by three judges to one, it was held that the banker was bound to know the handwriting of the acceptor, for whom he paid the bill; 6 Taun. 76. And some stress is laid on the circumstance, that the indorsee who received the money from the' bankers of the supposed acceptor, would have no recourse against the prior indorsers; notice of the dishonor of the bill not having been given in time. But Jones and Ryde, 5 Taun. 488, Cripps and Read, 6 T. R. 606, are direct authorities that money paid by the discounter of a forged bill can be recovered back. See also Wilkinson vs. Johnson, Sel. N. P. 100.
That the receipt of forged notes is no payment of a debt is shown in the elaborate judgment of Chancellor Kent, in Markle vs. Hatfield, 2 John. 455.
A receipt in full is no bar, if the money is not actually paid. Tobey vs. Barker, 5 John. 58; 2 T. R. 64; 1 Mad. Rep. 89; 2 Sal. 442; 15 John. 247.
Without discussing the point, whether money had and received, without consideration, by the fraud of a third person, can be retained, if, by refunding, the party would thereby be placed in a worse situation than he was when he received it, it is sufficient to say that such a defence requires proof of some new consideration, or the parting with some available security. But there is no pretence of any change at all in the situation of the defendants. They rely on the circumstance that Miller obtained the money and the false credit on the 2d September, and continued in their employ until the 20th of that month. But not a dollar was lost by him in the interval. It is said that the possibility of loss is a consideration. The proposition is that, if a loss occurs, the party whose acts led to the loss, by enabling another to commit the wrong, shall answer; the inference contended for is that, if no loss occurs, he shall answer all the same. The connection between the premises and the conclusion does not appear.
What is meant by the proposition may be seen by Buller vs. Harrison, Cow. 565. The agent, who has received money, paid by mistake, on account of his principal, cannot defend himself from refunding, by passing it to the credit of the principal, who was indebted to him, or by making a rest in his account. There was no new credit, no new consideration, moving from the defendant to Miller. It was the same credit, the same confidence that he had had for years, that he retained from the 2d to the 20th September.
There was no release of any security. In Smith vs. Mercer, the parties against whom the indorser could have resorted in case the forged bill had been protested were the prior indorsers. Here, the parties against whom the bank could have proceeded if Miller’s cash had been found insufficient on the 2d September were his sureties. But his sureties are not released. The Bank of the State has the same remedy against them as ever, if the account be rectified — that is to say, if the plaintiff recovers.
So far from the bank having been deprived, by the circumstances, of their redress against the sureties of Miller, the real question to be decided is, on whose sureties the loss shall fall. And, in reference to them, the point is, whether the law favors the party robbed, or the robber; and that is just the question between the two banks.
The Reporter regrets his inability to state which of the counsel engaged in the case were heard in the Court of Appeals.

Opinion:
The opinion of the Court was delivered by
Wardlaw. J.
The two demands brought under consideration in this case are essentially different, and must be treated separately. »
1. As to the $15,000. This was lent by Johnson to Miller and by Miller passed to his bank, the defendant. In the loan and attending circumstances, neither of the banks, parties to this suit, was engaged, by agent or otherwise. Johnson had no authority from the plaintiff to lend; Miller no authority from the defendant to borrow. Each of these tellers acted for himself only: both knew that they were dealing with the money of others, and doing so dishonestly, in breach of their official duty. The case is, in effect, that the two, having conspired to aid each other in execution of their fraudulent purpose, Johnson purloined the money from the Bank of Charleston, and Miller stealthily introduced it into his till in the Bank of the State of South Carolina.
The money belonged to the Bank of Charleston when Miller opened his till to introduce it. Has the right of that bank to recover it been taken away ? If so, how and when ?
The plaintiff's right to recover other money of equal value from Miller is yet perfect. If, instead of money, the property abstracted from the plaintiff had been an ordinary chattel, the plaintiff's right to recover, against a purchaser from Miller, the chattel or its value, would still subsist; for be, having no title, could have transferred none. But certain negotiable papers and money (including bank bills, which are in most respects regarded as money) constitute an important exception to the general rule respecting acquisitions from persons who have no title. For the interests of commerce and safety of the every-day transactions of life, the free circulation of the mediums of exchange is so far encouraged by the law that the title to money passes with it to every one who honestly becomes possessed of it as his own. When a thief has -parted with it, the inquiry, in a contest between the former owner and the now possessor, is, Did the money pass in currency to the latter, (or to some other person through whom he claims,) bona fide, for valuable consideration, in the due course of business ? If it did, no recovery can be had by the former owner, either in an action looking to the very pieces of coin or very bills that were stolen, or in an action claiming equivalent damages. Miller vs. Race, 1 Burr. 452.
In the case before us, Miller received the sum of $15,000 September 2, and immediately placed it in the till, which, as teller of the defendant-bank, he used, mingling it with other money of his bank, which, as teller, he had received from the cashier or from customers. He, as teller, paid from the whole mass in his hands $84,000 next day; and in the course of the two subsequent weeks more than $700,000 passed through his hands. In the mean time various settlements, two or more, were made between him and the cashier, and September 20, the day after he left the bank, his cash, being counted, was found correct.
Did the money pass in currency to 'the defendant, that is was it transferred as cash from Miller to the defendant-bank? Miller, after the money reached his till, treated it in all respects as the bank's money. Like the money intrusted to him by the cashier, it was used to meet demands presented at the counter of the bank, and thus to go into general cir- dilation. The evidence makes it certain that much of it was paid out by him : the probability is that, at the time of his departure, very few of the bills which were abstracted from the Bank of Charleston remained in the Bank of the State of South Carolina: if any did, they were in no way distinguishable from other money of the latter bank.
Is the bona fieles of the defendant-bank, in the transaction, subject to just suspicion? On this head nothing has been imputed besides the constructive notice to the bank, which has been supposed to arise from the knowledge of the fraud possessed by its officer, Miller. But this knowledge was not acquired or used by Miller in the course of his agency as teller. It was involved in his own misconduct, and served only his own unworthy purpose. It would be as just to estop the plaintiff by the guilty knowledge of Johnson as to affect the defendant by the secrets shut up in'Miller's breast.
Did the defendant-bank give valuable consideration for the money ? Miller, as teller, was short of cash; he obtained this money, and with it and other means made square his account. After the bank got this money, it had no more than it ought to have had: without this, it would have had so much less than its due. The consideration then was the same which applies wherever money is received in part payment of the balance of an account for advances made. With regard to the account between them, the bank and its teller had adverse interests, and stood towards each other as individuals dealing at arm's length. The case of Swift vs. Tyson, 15 Pet. 22, makes it now clear that a credit, entered in an account of preceding indebtedness, is á valuable consideration for the receipt of money. If a teller be called a bailee, he is a bailee of money to be disbursed and accounted for, and for a balance unaccounted for mast be a debtor.
Was the money received by the defendant-bank from its teller in due course of business ?
That the bank should have a teller, that an account should be kept of moneys advanced to Mm, and moneys disbursed by him, that he should be called to frequent settlements, that the balance of cash in his hands should be subjected to actual counting, and that he should be held debtor for any deficiency, are all incidents in the due course of business, and all occurred in this case. It is, however, said that the teller was in default, that his defalcation was unknown to the bank, and therefore that the $15,000 was not received by the bank in payment. In regard to the course of business and not to the base means by which the teller supplied his deficiencies, it was more regular that his cash should correspond with the balance in account against him, than that it should fall short; that he should appear to his employers to be accurate and faithful than that his errors and embezzlements should be manifest. The question is as to the bank's right to retain the money which he furtively substituted for a like sum intrusted to him by the bank, which in some way he had dissipated. How could the bank know of the substitution ? What safety could there be in money transactions, if the right sum in the right place, honestly believed to be the bank's own, and dealt with as its own, should be held to have been irregularly received, because the motives and conduct of its teller from whom it came were skilfully concealed ?
By whatever name we may call the transfer of this money to the defendant-bank, made by the teller in reduction of the balance against him — a payment, a restitution, or a concealment — there was nothing in the transaction between him and the bank out of the ordinary course of business. The more artful his conduct, the less the grounds of suspicion against him, the more plain is the fair dealing of the bank.
This case is distinguished from the Massachusetts case of The Atlantic Bank vs. The Merchants' Bank, 10 Gray's Rep. 532, in this, that there the identical bills remained in the teller's till, when they were demanded by the bank from which they had been fraudulently obtained. The circum stance is, however, not material, for if the bills had been transferred bona fide from the teller to his bank, it mattered not whether afterwards they were kept identically as they were received, or were passed from the bank into general circulation. There is, however, another ground of distinction, which is material. There, in the opinion of the Court, supported by a majority of the Judges, it was held that the bills had not passed from the teller to the bank, for his intention was, after exhibiting them to be counted, to return them to the bank from which they were brought; and they remained, before and after the counting, under his control, capable of direct identification. Here there can be no doubt that Miller intended to pass the bills to the bank of which he was teller, and actually did so, however hopeful he may have been that, at some future day, he would have been able to contrive the return of a like sum to his confederate in the Bank of Charleston.
The conclusion of this Court is, that in respect to the $15,000 the verdict is right.
2. As to the $5,500. This sum got to the defendant-bank, through Couturier's false acknowledgment of a deposit in the plaintiff-bank to the credit of the defendant-bank. This acknowledgment was procured by Miller and given by Couturier, in the course of a settlement of checks which it was the business of these tellers to make every day between their two banks. There was not in the fraudulent transaction a usurpation of authority on the part of either teller, but a most shameful abuse of it. Their contrivance in known violation of their duty, being within the scope of the .agency in which they were employed, was valid as to third persons, but void and worthy of punishment as between each of them and his principal whom he cheated. By means of it, money passed between the banks, not through the hands of an intermediate wrong-doer, but directly from one party to the other. The case, stripped of the embarrass ment which surrounds artificial persons that can act only through agents, becomes that of one banker paying money to another, according to a statement of accounts made by their respective clerks duly authorized. Error in the statement which arose from mistake would be clearly subject to correction in ,au action for money had and received; and shall the mutual fraud of the clerks be more sacred than their honest mistake ?
This branch of the case does not fall within the principles of policy which decided the other. Here there was no consideration for the receipt of the money by the defendant from the plaintiff. It is true that through the false acknowledgment of Couturier, Miller obtained a credit in his account with the defendant-bank. That shows that Miller is still debtor to the extent of this credit, but is merely collateral to the payment made by the plaintiff to the defendant. Eor the payment there was no gain to the plaintiff, and no loss to the defendant, which in any way influenced either of the parties. Suppose Miller had passed in payment to his bank amóte direct from the plaintiff to the defendant, which as teller he had -fraudulently procured the plaintiff to give. Betwéen immediate parties the consideration of a negotiable paper is subject to inquiry, and, in an action by this defendant against this plaintiff on this note, the fraud would have constituted a valid defence. Recovery back of money paid on the note would have encountered difficulties which the plaintiff does not here meet; for here is an entry in a pass-book, not a negotiable paper, and here is in effect an error in an account, and not the payment of a single distinct demand. Johnson's agency and knowledge in the whole affair avail no more against the plaintiff than do Miller's against the defendant. A fraud, in which a party's agent has concurred, cannot be more obligatory upon the party ignorant of it than the party's own mistake would be. If we relieve both of these parties from the- effect of notice had by their faithless agents, the case exhibits money paid under mutual mistake, induced by the fraud of third persons. To the condition in which matters stood before the mistake they should be now'restored. The superior equity of the plaintiff outweighs the possession of the defendant. See Ancher vs. Bank of England, Doug. 615; Kelly vs. Solari, 9 M. & W. 54.
The defendant's loss by reason of Johnson's acknowledgment regularly made has been much insisted upon. Eor damage thereby occasioned, even to the extent of the whole payment made under the acknowledgment, the defendant's right to retain is not denied. But, so far as appears, the whole consequences of the acknowledgment which affected the defendant were, that thereby the defendant's funds were increased, and Miller was retained as teller half a month longer than he would otherwise have been, during which time his conduct was unexceptionable. Here is not an instance where a loss must fall upon one of two innocent parties, for here a loss had been already sustained by one party, and the question concerns the propriety of shuffling that loss upon the other. In accuracy, as in probity, a mercantile community may well expect examples from their banks, but a superstitious reverence for bank books and bank entries should not induce forgetfulness of-the triumph which artful villany sometimes achieves over all the- exertions of human sagacity and care. Of the fallibility of banks, both of these parties must have a strong sense in the remembrance that both of them, ably and diligently managed, have been deceived by their subordinate officers.
The verdict, in respect to the $5,500, being, in the opinion of this Court, wrong, a new trial is ordered.
Dunkin, C. J., and Inglis, J., concurred.
Motion granted.