Bank of Commerce v. . Union Bank

Ruggles, J. delivered the opinion of the court. The payment of a bill of exchange by the drawee -is: Ordinarily an admission of the drawer’s signature, which he is not afterwards, in a controversy between himself and the holder, at liberty to dispute; and therefore if the drawer’s signature is on a subsequent day discovered to be a forgery, the drawee can not compel the holder to whoiri he paid the bill, to restore the money, unless the holder be in some way implicated- in the fraud. (Price, v. Neal, 3 Bur. 1354.) This rule is founded on the supposed negligence of the drawee in failing by an examination of the signature, when the bill is presented, to detect the forgery and refuse payment. The drawee is supposed to know *235 the hand-writing of the drawer, who is usually his customer or correspondent. As between him, therefore, and an innocent holder, the payer, from this imputed negligence must bear the loss. In Price v. Neal, the plaintiff had paid to Neal the holder two bills of exchange, purporting to be drawn on him by Sutton, whose name was forged. On discovery of the forgery, Price brought his action against Neal, to recover back the money as paid by mistake. Lord Mansfield in delivering the opinion of the court in favor of the defendant, said, “ it was incumbent upon the plaintiff to be satisfied that the bill drawn upon him, was the drawer’s hand before he accepted or paid it, but it was not incumbent upon the defendant to inquire into it.” “ Whatever neglect there was, was on his side. It is a misfortune which has happened' without the defendant’s fault or neglect.” In Wilkinson v. Lutwidge, (1 Srange, 648,) Lord Chief Justice Pratt was of opinion that “ acceptance was a sufficient acknowledgment of the drawer’s hand-writing on the part of the acceptor, who must be supposed to know the hand of his own correspondent.” So the acceptance of a bill whether general, or for honor, or supra protest, after sight of the bill) admits the genuineness of the signature of the drawer; and consequently if the signature of the drawer turns out to be a forgery, the acceptance will nevertheless be binding and entitle a bona fide holder for value and without notice to recover thereon according to its tenor. (Story on Bills, § 262.) But it is plain that the reason on which the above rule is founded does not apply to a case where the forgery is not in counterfeiting the name of the drawer, but in altering the body of the bill. There is no ground for presuming the body of the bill to be in the drawer’s hand-writing, or in any hand-writing, known to the acceptor. In the present case, that part of the bill is in the hand-writing of one of the clerks in the office of the Canal and Banking Company in New Orleans. The signature was in the name and hand-writing of the cashier. The signature is genuine. The forgery was committed by altering the date, number, amount and payee’s name. No case goes *236 the length of saying that the acceptor is presumed to know the hand-writing of the body of the bill, or that he is better able than the indorsers to detect an alteration in it. The presumption that the drawee is acquainted with the drawer’s signature, or able to ascertain whether it is genuine, is reasonable. In most cases it is in conformity with the fact. But to require the drawee to know the hand-writing of the residue of the bill, is unreasonable. It would, in most cases, be requiring an impossibility. Such a rule would be not only arbitrary and rigorous but unjust. The drawee would undoubtedly be answerable for negligence in paying an altered bill, if the alteration were manifest on its face. Whether it was so or not, in this case was properly submitted to the jury, who found that it was paid by mistake and without knowledge of, or reason to suspect the fraudulent alterations. It would have been difficult to find otherwise upon the evidence, the bill having passed through the defendants’ bank, and the Charleston bank without suspicion. If the forgery had been in the name of the drawer, it might not perhaps have been incumbent on those banks to scrutinize the bill, because they might have relied on the drawee’s better knowledge of the hand; but the forgery being in the body of the bill the plaintiffs were not more in fault than the defendants. The greater negligence in a case of this kind is chargeable on the party who received the bill from the perpetrator of the forgery. So far as respects the genuineness of the bill each indorsee receives it on the credit of the previous indorsers; and it was the interest and duty, in the present case, of the Bank of Charleston, to satisfy itself that the bill was genuine, or that its immediate indorser was able to respond in case the bill should prove to be spurious. The party who fraudulently passed the bill can not avoid his liability to refund on the pretence of delay in detecting the forgery, or in giving notice of it; and if reasonable diligence is exercised in giving notice after the forgery comes to light it is all that any of the parties can require. (Canal Bank v. The Bank of Albany, 1 Hill, 287, 292, 3.) In Smith v. Mercer, (6 Taunt. 76,) in Cocks v. Masterman, (9 Barn. & Cres. 902,) and in Price v. Neal, (3 Burr. *237 1354,) the plaintiffs who paid the forged bills, being chargeable with a knowledge of the signature of the drawer, (which was forged,) were held to have paid it negligently and without due caution and examination, and on that ground it was that, the defendants to whom they paid the money were held not liable without immediate notice of the forgery. But in the present case, no such negligence is imputable to the plaintiffs, the plaintiffs being no more capable of detecting the forged alteration by inspection of the bill, than either of the other parties. This action is not founded on the bill as an instrument containing the contract on which the suit is brought. The acceptor can never have recourse on the bill against the indorsers. But the plaintiffs’ right of recovery rests on equitable grounds. In the Canal Bank v. The Bank of Albany, the principle was recognized that money paid by one party to another through mutual mistake of facts in respect to which both were equally bound to inquire, may be recovered back. The defendants here as in that case have obtained the money of the plaintiffs without right and on the exhibition of a forged title as genuine, the forgery being unknown to both parties. The de-‘ fendants ought, not in conscience to retain the money, because it does not belong to them; and for the further reason that the defendants and the previous indorsers have, each, on the same principle, their remedy over against the party to whom they respectively paid the money, until the wrongdoer is finally made to pay. If that party should be irresponsible, or if he can not be found, the loss ought to fall on the party who, without due caution, took the bill from him. In cases where no negligence is imputable to the drawee in failing to detect the forgery, the want of notice within the ordinary time to charge the previous parties to the bill, is excused, provided notice of the forgery be given as soon as it is discovered. Judgment affirmed.