State National Bank v. Bank of Magdalena

OPINION OP THE COURT. HANNA, J. (after stating the facts as above.) — It is contended by appellant that by reason of the fact that the plaintiff, without any actual fault or negligence upon its part, paid to- the defendant the amount of the checks under a mistaken belief of both parties- in their genuineness, and because the defendant was negligent in failing to make either further inquiry or investigation, before purchasing from a strange laborer the two large checks (aggregating $580), both dated the same day, and purporting to be drawn by a man other than his employer, that under the general rule that money paid under excusable mistake of fact may be recovered, the plaintiff is entitled to recover in this case the amount of money so paid, or in any event, by reason of the negligence of the defendant who took the checks from the forger, and afterwards received the money from the plaintiff, a recovery of the amount from such negligent party, or defendant, should be permitted. There is no controversy, and there can oe none, concerning the general rule that money paid under a mistake of fact may be recovered back. But, as stated iu the ease note following the case of First National Bank of Lisbon v. Bank of Wyndmere, reported in 10 L. R. A. (N. S.) 49, at page 73, an exception to this general rule is recognized : “Where payment was made by a drawee of a forged cheek or draft under the mistaken supposition that the signature thereto was genuine, based upon the theory that a drawee has better facilities for acquainting himself with the handwriting of his correspondent or depositor, than has one into vthose hands the paper has fallen incidentally in the course ci business; and that, therefore, where he has recognized the drawer’s signature by payment or acceptance, he is estopped to assert that it is a forgery.” This exception to the rule -is favored by the great weight of authority, although distinguished courts, in able opinions, and several text-writers, find occasion to differ with the exception and favor the right to recovery under the circumstances referred to. The case referred to in 10 L. R. A. is from the Supreme Court of North Dakota; one of the courts refusing to follow the general rule. The cases following the general rule are collected in the case note referred to, and also in a case note following the case of Spokane & Eastern Trust Co. v. Huff, reported in Ann. Cas. 1912D, at page 491. See, also, State Bank of Chicago v. First National Bank of Omaha, 87 Neb. 351, 127 N. W. 244, 29 L. R. A. (N. S.) 100. and case note collecting cases. The general rule is thus stated in Michie on Banks and Banking, vol. 2, p. 1496: “Since tke case of Price v. Neal (3 Burrows, 1354), tke general rule kas keen, and is, tkat, wken tke dawee of a check, draft, or bill of exchange pays the same to a bona fide holder, such drawee cannot recover tke money back upon discovering suck check, draft, or bill to be a forgery. Tke drawee is presumed to know tke signature of-the drawer, and if, when the' check or bill is presented to tke drawee for payment, he pays tke same, and it afterwards turns out to be a forgery, he cannot recover tke money back from.the person to whom he paid it.’ We are not unmindful of the fact that the exception to the general rule of the right to recover money when paid through mistake is severely criticized by eminent text-writers, and we have made a careful study of the criticisms urged. The question is ably discussed by Mr. Daniel in his work on Negotiable Instruments (6th ed.) § 1361, p. 1536. It is evidently that distinguished author’s opinion that when the holder has received a bill after its acceptance the acceptor stands towards him as a warrantor of its genuineness, in which event the acceptor should be absolutely bound, and that the reverse of this rule is true, in a case of unaccepted bills presented to the drawee for acceptance or payment. While there is considerable merit in the objection urged to the rule, which has met with general favor, as is evidenced by the long line of authorities following it, we believe that the text-writers and authorities departing from this rule, which is -really an exception to a general rule favoring the recovery of money paid under mistake, lose sight of the fact that checks and other mediums of exchange have become more common agencies of the business world than even the use of money, and were the takers of checks or bills of exchange required to stop and make an investigation or otherwise proceed at their peril, this medium of exchange would be so prejudiced in the eyes of the business world as to bring about a condition that would shortly prove intolerable. We do not overlook the fact that the so-called exception to the general rule is not without qualification, and it has been generally considered that the holder takes upon himself the duty of exercising some material precaution to prevent fraud, and where he has by negligent conduct contributed to induce the drawee to act upon the paper as genuine, and'"to advance money upon it he is barred of recovery. We are not confronted with this qualification, however, because the court found in the case at bar that the defendant bank had not been negligent. . This finding, after an examination of the record, we find to be supported by the evidence. We do not deem it necessary to lengthen this opinion by discussing the numerous cases pro and con upon the question here presented. They are sufficiently referred to- and discussed in the several notes to which we have made reference, and in the numerous cases collected therein. • We deem it only necessary to say that we find no reason for departing from the rule which has seemed to meet with quite general favor in nearly all the jurisdictions of this country, and we therefore conclude that where a bank, in good faith and for value, purchases from an indorser and forwards the same to its collection agency for its collection, and the same is presented by the collection agency to the drawee bank, and is paid by the drawee bank, the drawee bank, upon thereafter discovering the check to be a forgery, cannot recover the money back from the bank to whom it was paid, in the absence of negligence by.the latter. This statement of the law covers the facts of this case precisely, as the defendant forwarded the two checks to the First National Bank of Albuquerque for collection, by which hank the checks were presented to the plaintiff bank, appellant here, and by that bank paid without protest. It is pointed out that under the Uniform Negotiable Instruments Act, which has been adopted in this jurisdiction, the question under consideration would necessarily be settled in the manner in which we have passed upon it, and we are inclined to agree with this contention. The Supreme Court of Oklahoma, in an early case, declined to follow the general rule, but after the adoption of the Negotiable Instruments Act in that jurisdiction held that by 'the act it was evidently intended to adopt the' law-as''dedared in Price v. Neal. See Bank v. Trust Co., 33 Okl. 342, 125 Pac. 464. In the same connection it is laid down by Mr. Daniels, in his work, on Negotiable Instruments (6th ed.) 1868, that: “In the case of checks is seems generally to be held that the states which have enacted the statute have adopted the rule announced in Price v. Neal, * * * and under that rule where a drawee bank pays a check to a bona fide holder, such drawee cannot recover the money back upon discovering such check to be a forgery.” We therefore conclude that the right of recovery of the plaintiff bank, appellant here, would necessarily be denied under either the general rule or the under the Negotiable Instruments Act. ■ Our conclusion makes it necessary to affirm the judgment of the trial court, and it is so ordered. Roberts, C. J., and Parker, J., concur.