Espy v. Bank of Cincinnati - 85 U.S. 604 (1873)
U.S. Supreme Court
Espy v. Bank of Cincinnati, 85 U.S. 18 Wall. 604 604 (1873)
Espy v. Bank of Cincinnati
85 U.S. (18 Wall.) 604
A check drawn by S. & M. on the bank for $26.50 in favor of H. was raised to $3,920, and the payee's name changed to E. H. & Co., and offered to the latter by a stranger in payment for bonds and gold purchased by him. E. H. & Co. sent the check for information to the bank, whose teller replied "It is good," or "It is all right." In a suit brought by the bank against E. H. & Co., a judgment was given for plaintiff. On error to this Court, it was held:
l. That where money is paid on a raised check by mistake, neither party being in fault, the general rule is that it may be recovered back as paid without consideration.
2. But that if either party has been guilty of negligence or carelessness by which the other has been injured, the negligent party must bear the loss.
3. That where a party to whom such a check is offered sends it to the bank on which it is drawn for information, the law presumes that the bank has knowledge of the drawer's signature and of the state of his account, and it is responsible for what may be replied on these points.
4. That unless there is something in the terms in which information is asked that points the attention of the bank officer beyond these two matters, his response that the check is good will be limited to them, and will not extend to the genuineness of the filling-in of the check as to payee or amount.
5. Quaere would the endorsement of the word "good," with the officer's initials, under such circumstances, make the bank liable beyond the genuineness of the signature and the possession of funds to meet the check as certified?
6. Where a check is certified for the purpose (known to the bank) of giving it credit for negotiation or circulation, to be used as money, and it is so passed into the hands of third persons, the bank would be bound, though the case might be otherwise when it was only certified to give the party presenting it assurance that it was good for his own satisfaction in taking it.
7. But a verbal reply that a check is good, given for the information of the party about to receive it, extends only to matters of which the bank had knowledge, or is presumed to have by the law, unless he is told that more extended information is expected or asked for as to the validity of the check.
Stall & Meyer were grocers of Cincinnati, and kept a deposit account in the First National Bank there. Espy, Heidelbach & Co., were brokers in the same city, dealing in government bonds and gold. On the 26th of April, 1870, a well looking stranger entered the office of these last and proposed to purchase of them certain bonds and a specified quantity of gold. They agreed to sell both to him at a price named, $3,920. He then told them that he would go to Stall & Meyer, with whom he represented that he had dealings, get their check for the amount, and return in about two hours. He went away and returned in about two hours with a check of Stall & Meyer, drawn apparently to the order of Espy, Heidelbach & Co., and for the sum of $3,920, which he offered to them for the bonds and gold that he had bought. The firm sent one of their clerks, named Snarenberger, to the bank with directions to ascertain if the check was good and to say that it was presented by a stranger. Snarenberger presented the check to the teller of the bank, a person named Sanford, who examined it, looked at the account of Stall & Meyer on the bank books, and said to Snarenberger, "It is good," or "It is all right" (the witnesses did not agree which), "send it through the clearinghouse."
According to Snarenberger's account, he told Sanford that the check was offered by a stranger. Sanford denied that he was told this, but he asserted notwithstanding that he told Snarenberger that if the check was offered to Espy, Heidelbach & Co. by a stranger, he would advise them to have nothing to do with him, no matter how well looking he was.
After this interview, examination, and answers, Snarenberger went back to the office of Espy, Heidelbach & Co. and informed them that the teller had said, "It is all right, send it through the clearinghouse." They thereupon delivered to the stranger the bonds and the gold that he had contracted for, and he went his way and was no more heard of.
The check was put through the clearinghouse and paid. But on the next day it was discovered that it was an altered or "raised" check; that the stranger had gone to Stall & Meyer professing to purchase some groceries for a Mrs. E. Hart; that having purchased $23.50 worth, he handed them a $50 bill in payment, asking them to pay him the difference, $26.50, by a check of their own, so that Mrs. Hart might see that he had taken no commission, which they accordingly did, the check being drawn to the order of Mrs. E. Hart; and that the stranger had very ingeniously altered the instrument by substituting as the sum to be paid $3,920 instead of $26.50, and by substituting the name of Espy, Heidelbach & Co. for that of Mrs. E. Hart as payee.
Espy, Heidelbach & Co. not being willing to pay back the money got upon the check, the bank sued them in assumpsit to recover the amount improperly paid.
On the trial, the plaintiff called one Goodman, who, having testified that he had been a banker in Cincinnati all his life and was familiar with the customs and usages of banks and bankers there, was asked,
"When a check is sent by a bank, to which it is offered, to the bank upon which it is drawn, to know whether it is good or not, and the answer is, 'That is good,' or 'All right,' has that answer . . . acquired any peculiar or limited meaning? If so, state what that meaning is, and to what it is limited."
The court allowed the question under objection and exception, and the witness having testified that this language had acquired a peculiar or limited signification, and was understood to refer to the genuineness of the signature, and whether the money was in bank to meet the check; and on cross-examination, that he had never heard the meaning of the terms discussed, or any question made as to the same, or known of any transaction requiring a decision as to their meaning before April 26, 1870 -- and having further testified that the terms "It is good," or "It is all right; send it through the clearinghouse," had not acquired any peculiar or limited meaning -- the defendants moved to exclude the
answer given to the question last aforesaid, as incompetent and irrelevant, which motion the court overruled, and the defendants excepted.
Similar evidence from other witnesses was received, under objection and exception.
The plaintiff made ten requests for charges, including as a fifth and sixth, these two:
"Fifth. If the defendants, before receiving this check, sent their messenger to the plaintiffs' bank to examine the check carefully, and if it appears from the evidence that among bankers at that time such a request was understood to refer to the genuineness of the signature and state of the account, this inquiry must be presumed to be intended to refer to those parts of the check to which they had the means of giving accurate information, and nothing else; and if as to these matters true answers were given, and the plaintiffs' teller gave his honest judgment as to the general character of the check, and had no knowledge of and could not readily discover this alteration by an inspection of the check, then the plaintiffs are not estopped from recovering this money."
"Sixth. If at the time of this transaction, the words 'good' or 'all right' among bankers was simply understood to refer to the genuineness of the signature and the state of the account, and the said words were so used and intended to be used by Mr. Sanford at that time when he said the check was 'good' or 'all right,' and if the said check had a fraudulent alteration, so skillfully done as not to be readily discovered by an inspection, and which was not known to either party at the time the said check was presented to Mr. Sanford, and if the signature of the check was genuine, and the account good, then the plaintiffs are not estopped from recovering the said money in this action by reason of the said answer given by Mr. Sanford."
The two, thus above given, were refused.
The defendants made eight requests for charges, including this one as a fourth, which the court gave.
"Fourth. A verbal certification of a check is equally valid with a written certification, and constitutes a contract, obligatory on the party giving the certification, the consideration of
which is the property parted with by the party receiving the certification on the faith of the certification."
The whole ten instructions requested by the plaintiff were given, with the exception of the fifth and sixth ones, quoted supra, p. 85 U. S. 607, which two, as already said, were refused.
On the other hand, the eight instructions requested by the defendants were refused (or granted only in modified forms), with the exception of the fourth one, as above quoted.
To the grant of the eight requests of the plaintiff granted, and to the refusal (or grant only in modified forms) of the seven not granted or only so granted, and requested absolutely by the defendants, the defendants excepted.
However, neither the instructions which, at the plaintiff's request, were granted nor those which in face of the defendants' request were denied, or granted only in modified forms, need here to set out, since the court of its own motion summed up (as this Court considered) the substance of every instruction given at the request of the plaintiff, and of all its denials of requests by the defendants, in certain propositions made thus in a charge of its own:
"1. If the object of the defendants in sending the check to the plaintiff was to have them examine the same and pass upon the genuineness of the signature of the drawers, and the state of their account with them, and the plaintiff so understood their object, and returned to them the answer, that 'It is good,' or 'All right, send it through the clearinghouse,' such answer would be a parol certification of the check as to the genuineness of the signature and that the drawers had funds in their hands to meet it, and the plaintiff by such parol certification would be estopped from denying either that the signature was genuine or that the drawers had funds to meet the check."
"2. If the defendants, in order to test the genuineness of the signature of the drawers, that they had funds in their hands to meet it, and to test its genuineness in all other respects, sent it to the plaintiff for inspection and examination, and the plaintiff, knowing the full extent of the object for which it was sent, sent back the reply, 'It is good,' or 'It is all right,' and if the defendants relied upon that answer and were induced to act
upon it and parted with their bonds and gold upon the assurance of the answer, the plaintiff will be estopped from setting up the fact that the check was a raised check."
"3. If the defendants had no suspicion of the check being a raised check, and sent the check to the plaintiff for the purpose of examination, without specifying the particulars to which they wished the examination directed, the plaintiff had a right to presume that such examination was desired in relation to such points of which the law presumed them to have knowledge, to-wit, the genuineness of the drawers' signature and the state of their account, and if in good faith they made examinations in regard to these points and they had no knowledge of the raising of the check, or had no particular means not common to the defendants of knowing that it had been raised, their answer to the inquiry must be confined to the genuineness of the signature of the drawers and the state of their account, and cannot be extended as an assurance or guarantee that the check is not a raised check, and plaintiffs are not estopped from setting up such fact."
"4. If the defendants and the plaintiffs were mutually ignorant of the fact of the raising of the check, and neither party had any suspicion that it had been so raised, and the parties having within their power equal means of ascertaining that fact, the law did not impose upon the plaintiff more than upon the defendant the duty of calling upon the drawers to ascertain whether such check had been so raised, and if the plaintiff under such circumstances paid the amount of said check to the defendants, such payment is not an adoption of the check as genuine, and the plaintiffs are not bound by said payment, and are not estopped from showing that the check was so raised."
To the part three of these instructions the defendants excepted.