Sandy River National Bank v. Miller

Virgin, J. Assumpsit on a joint and several promissory note for $1000, dated March 24, 1888, payable to the plaintiff or order in ninety days, signed by one Russell as principal and by one Holmes and this defendant as sureties ; which note the plaintiff discounted on March 26, when $500 were indorsed thereon, thus making it practically a note for $500. Shortly after the note matured, to wit, on July 9,1888, Russell presented to the plaintiff for discount a note of that date, for $1200, payable to the plaintiff or order in four months, signed by Russell as principal and purporting to be signed by Holmes and this defendant as sureties; whereupon the bank, at the request of Russell, with full belief that the signatures of the sureties were genuine, gave up to him the note in suit bearing thereon the bank’s stamp of having been paid, and paid him in cash the balance after deducting the amount of the note in suit and the discount of that of July 9. Thereupon, Russell took the note in suit to the defendant, who drew a line through his signature and returned it to Russell, who took it to the other surety for a like purpose. [143] The signatures of the sureties on the note of July 9, were, forged. If these were all the facts in the case this action might be maintained. For the general rule of law is clear and undisputed, that money paid by mistake of fact may be recovered back; and this general rule applies where a new note is given in payment of another and the former is void for any reason and especially when the signatures of the new note are forged. In such case the new note being worthless it does not operate as an extinguishment or payment of the original. Robinson v. Bland, 2 Burr. 1077; Bell v. Buckley, 11 Exch. 631; Baxter v. Duren, 29 Maine, 434, 440 ; Hussey v. Sibley, 66 Maine, 192 ; Ritter v. Singmaster, 73 Pa. St. 400. And the action may be maintained on the original. Eagle Bank v. Smith, 5 Conn. 71; Goodrich v. Tracy, 43 Vt. 314. This general rule, however, like most others, is vexed with one or more exceptions ; one of which is that, money cannot be thus recovered back where restitution cannot be made without legal prejudice to some other party affected by the mistake. Williamson v. Johnson, 3 Barn. & Cr. 428, 434; Mer. Nat. Bank v. Nat. Eagle Bank, 101 Mass. 281; Welch v. Goodwin, 123 Mass. 71; Nat. Bank of Commerce v. Nat. M. B. Asso., 55 N. Y. 211. Or applying the rule to the case at bar: The plaintiff cannot be permitted to maintain an action on the note which was once marked paid and delivered up, if by reason of the laches of the plaintiff in the pnemises, the defendant has lost the opportunity of securing or indemnifying himself against his principal. Baker v. Briggs, 8 Pick. 122, 131. It is evident that mere negligence in making the mistake is not sufficient to preclude the plaintiff who made it from demanding its correction ; for such negligence should not warrant the defendant in retaining the benefits of the mistake, unless his circumstances have been thereby so changed as to render it unjust and prejudicial to his legal interests. Nat. Bank of Com. v. Nat. M. B. Asso., supra; Lawrence v. Am. Nat. Bank, 54 N. Y. 433. To be sure, it was the duty of the plaintiff to exercise due diligence in discovering the forgery and notify the defendant [144] thereof, to the end that he might if possible save himself from the natural consequences of the mistake. The early English cases narrowed down the delay of discovery and notice to a very short space of time. But no abstract rule as to the time which, in all cases, will preserve the right of correcting the mistake, — except the one of reasonable time, — can be laid down. Each case has its own peculiar circumstances. In cases where notice to prior indorsers is involved and some others found in the -books, the time may be very short. But the common sense doctrine of modern decisions seems to be that, while notice of the forgery and demand for restitution or correction should be made within a reasonable time, still the mere space of time is not necessarily an important factor, so long as it shall clearly appear that the defendant will in nowise be legally damnified by the correction of the mistake. 2 Dan. Neg. Instr. § 1372, and cases cited; Allen v. Fourth Nat. Bank, 64 N. Y. 12. The plaintiff is a small bank in a flourishing country village. The forged note was received by it July 9. Its officers had at the same time the genuine note before them with the same names thereon. It had been in the habit for more than a year of discounting similar notes for its customer Russell, with the defendant’s name thereon. When the officers first discovered the forgery does not affirmatively appear, although the case finds that they suspected it on November 2, — four months less seven days after it was received, — and had their suspicions confirmed the next day by the defendant. While, perhaps, the defendant cannot strictly speaking be considered the bank’s customer, whose signature they were bound to know, still in the absence of any explanatory circumstances, it is difficult to understand how the new note could have thus passed the inspection of the officers of the bank with such facilities for detection before them, and have slumbered in its files so long and the forgery remain undiscovered for such a length of time. It seems to us unreasonable. But conceding that delay in the abstract cannot deprive the plaintiff of recovery: We do not think it clearly appears that the correction of the mistake after such a long delay will not injure the defendant; but that on the contrary if he had been [145] seasonably notified of the forgery and demand made on him to pay the note, he possibly might have obtained payment or indemnity from Russell. On July 9, when the forged note was received by the bank, Russell had property in his hands valued at over $14,000. After that date he paid out $3,800. To be sure, his creditors put him into insolvency on November 27, following; but if he had known of the mistake within fifteen days after it occurred, he might have obtained indemnity from Russell which his insolvency could not have affected. Moreover, on November 3, the bank took from Russell a mortgage of insurance policies amounting to $4,000 on which his estate realized $3,600 and on the 24th of November wrote “paid” across the face of the note and did not demand payment of the defendant until December 8. Under these circumstances, — the negligent delay on the part of the bank and the possible injury to the legal interests of the defendant, we are of opinion that there should be Judgment for defendant. Peters, C. J., Wanton, Foster and Haskell, JJ., concurred.