Merchants' National Bank v. National Eagle Bank

Colt, J. This action is brought by the plaintiffs to recover the amount of a check drawn upon them and paid by them through the agency of the Boston Clearing House, there being no funds of tb 3 drawer in their hands at the time of the pay ment. [285] It is well settled by recent decisions that money paid to the holder of a check or draft drawn without funds may be recovered back, if paid by the drawee under a mistake of fact. And though the rule was originally subject to the limitation that it must be shown that the party seeking to recover back had been guilty of no negligence, it is now held that the plaintiff in such case is not precluded from recovery by loches in not availing himself of the means of knowledge in his power. It is otherwise if the money is intentionally paid without reference to the truth or falsehood of the fact, and with the intention that the payee shall have the money at all events. Appleton Bank v. Mc Gilvray, 4 Gray, 518. Kelly v. Solari, 9 M. & W. 54. Townsend v. Crowdy, 8 C. B. (N. S.) 477. This right to recover back the money, however, will in no case be permitted to prejudice the payee who has suffered any damage or changed his situation in respect to his debtor by reason of the loches of the plaintiff, or his failure to return the check within a reasonable time. It is plain, in the case here presented, that if the plaintiffs had paid this check at their own counter under a mistake of fact, they could have maintained this action to recover it back. . Is there anything in the manner in which the payment was in fact made, or in the relation of the parties to each other as members of the Clearing House Association, which prejudicially affects this right ? It is declared by the articles, which were signed by the plaintiff and defendant banks, to be the object of the association to effect at one time and place the daily exchanges between the several associated banks, and the payment of the balances resulting from such exchanges. An early hour is fixed for making these exchanges, and a later time in the day for the receipt and payment of balances from the debtor and creditor banks. These settlements are made, not from an examination in detail of the vouchers presented, but from memoranda and tickets accompanying them. And any mistakes resulting from this mode of settlement are to be adjusted directly between the banks which are parties therein. It is further provided that “ whenever checks [286] are sent through the Clearing House which are not good, they shall be returned, by the banks receiving the same, to the banks from which they were received, as soon as it shall be found that said checks are not good; and in no case shall they be retained after one o’clock.” Under this arrangement, the payment required of the Clearing House to a creditor bank, upon a check presented, must be regarded as only provisional until the hour of one o’clock, to become complete only in case the check is not returned at that time. And if by any mistake of fact the return of the check is not so made, then, as between the two banks, it is to be treated as a payment made under 'a mistake of fact, precisely to the same extent, and with the same right to reclaim, which would have existed if the payment had been made by the simple act of passing the money across the counter directly to the payee on the presentation of the check. The manifest purpose of the provision is, to fix a time at which the creditor bank may be authorized to treat the check as paid, and be able to regulate with safety its relations to other parties. We cannot adopt the theory that a failure to present a bad check, before the time named, to the bank sending it through the dealing House, works an absolute forfeiture, and is in itself a perfect bar to any action to recover the amount of such check. The whole arrangement, in all its provisions and declared purposes, is to be construed together. And the law will not construe any portion so as to subject parties to a penalty or forfeiture of their rights, where other reasonable interpretation can be given which will give effect and consistency to the whole. The parties have in terms affixed no penalty or forfeiture to the stipulation under consideration, and a failure to comply with its terms must leave the parties in the same position and precisely as they would stand when a payment is made under a mistake of fact in the ordinary way. After one o’clock, the defendants, upon the failure to return the check, had the right to consider it paid, and to treat it so in their dealings with others. The report finds that the delay in its return was occasioned by a mistake or the part of the messenger, a mistake which was quite as much a mistake of fact as if it had been produced by the false time of a [287] clock which was relied on. And no suggestion is made that there has been any change of circumstances, after the time when the defendants had a right to treat the check as paid, and before it was returned, which would now subject the defendants to damage or loss, and render it unjust for the plaintiffs to recover. We have considered the case as if the agreement required the return of the check to the bank from which it was received before or at one o’clock; but it will be noticed that the stipulation is, that the check shall in no case be retained after one o’clock. If it were necessary to save a penalty or a forfeiture, it might be held that the delivery of it to a messenger before one o’clock, to be returned to the bank depositing it, with sufficient time, in the absence of any accident or mistake, to reach the bank before that hour, would be a compliance with its terms, although it was not in fact delivered until some minutes after. Judgment on the verdict for the plaintiffs.