If a bank, upon which a check is drawn payable to a particular
person or order, pays the amount of the check to one presenting it
with a forged endorsement of the payee's name, both parties
supposing the endorsement to be genuine, a right of action to
recover back the money accrues at the date of the payment, and the
statute of limitations begins to run from that date.
The original action was brought December 7, 1877, by the
Merchants' National Bank of the City of New York against the
Leather Manufacturers' National Bank to recover back the sum of
$17,500 paid on March 10, 1870, to the defendant, the holder of a
check drawn upon the plaintiff for that amount, with interest from
June 20, 1877. The defendant, among other defenses, pleaded the
statute of limitations, and also that the plaintiff never demanded
repayment or tendered the check to the defendant until long since
the commencement of this
Page 128 U. S. 27
action. At the trial before a jury, the following facts were
proved or admitted:
On March 9, 1870, the Bank of British North America, having a
larger amount on deposit with the Merchants' Bank, drew upon that
bank a check for $17,500, payable to Margaret G. Halpine or order,
and delivered it to Thomson & Ramsay, and this check, with the
names of Mrs. Halpine and of William C. Barren endorsed thereon,
came to the hands of Hooves & Macy, private bankers, who
deposited it with the Leather Manufacturers' Bank. On March 10,
1870, the Merchants' Bank paid the amount of the check to the
Leather Manufacturers' Bank through the clearinghouse and charged
the amount on its own books to the Bank of British North America.
By the usual course of dealing between the Bank of British North
America and the Merchants' Bank, the passbook containing entries of
the deposits made by the one and of the payments made by the other
on account thereof was written up and returned to the Bank of
British North America fortnightly, together with the checks and
other vouchers for such payments, and on March 17, 1870, the
passbook, containing the charge of the payment of the check in
question, was so balanced and returned with the check. The account
between the Bank of British North America and the Merchants' Bank
continued to exist until February 21, 1881, the day of the trial of
the action brought by the former bank against the latter, mentioned
below.
At the time of the payment by the Merchants' Bank to the Leather
Manufacturers' Bank, both parties believed Mrs. Halpine's
endorsement to be genuine, whereas in fact it had been forged by
Barren, the second endorser, who afterwards absconded. Hooves &
Macy failed in 1873.
The Bank of British North America, on or about January 24, 1877,
first learned that Mrs. Halpine contended that her endorsement was
forged, and on January 26, 1877, notified that fact to the
Merchants' Bank, and on June 2, 1877, demanded of that bank payment
of the amount of the check, and left the check with it that it
might look into the matter. On the same day, the Merchants' Bank
showed the check to the
Page 128 U. S. 28
Leather Manufacturers' Bank, informed it that the Bank of
British North America had demanded repayment of the money because
the endorsement of Mrs. Halpine's name was a forgery, and made a
like demand upon the Leather Manufacturers' Bank, which declined to
pay.
On June 20, 1877, the Merchants' Bank returned the check to the
Bank of British North America, and that bank again demanded of the
Merchants' Bank payment of the amount, and tendered it the check,
and it refused to pay.
On August 10, 1877, the Bank of British North America gave
written notice to the Merchants' Bank that it had been sued for the
amount of the check by reason of the Merchants' Bank having paid
the same upon a forged endorsement and that, in the event of being
held liable for the amount, it should hold the Merchants' Bank to
its strict legal liability. The action against the Bank of British
North America is reported as
Thomson v. Bank of British North
America, 82 N.Y. 1.
On November 7, 1877, the Bank of British North America brought
an action in a court of the state of New York against the
Merchants' Bank for the amount of the check upon the ground that
the payment thereof by the Merchants' Bank had been made upon a
forged endorsement of the payee's name, and that the amount had
been demanded of the Merchants' Bank by the Bank of British North
America on June 20, 1877, and refused, and still remained to its
credit. In that action, the Merchants' Bank pleaded that the
endorsement was genuine, and that the cause of action was barred by
the statute of limitations; and, before that case came to trial,
gave written notice of its having been so sued to the Leather
Manufacturers' Bank in order that it might defend the suit or
protect its rights as it might deem proper and that the judgment,
if adverse, might be conclusive upon it. On March 7, 1881, the Bank
of British North America recovered judgment against the Merchants'
Bank, which was affirmed by the Court of Appeals. 91 N.Y. 106.
The Merchants' Bank, on January 25, 1883, paid the amount of
that judgment and received the check from the Bank of
Page 128 U. S. 29
British North America, and on March 15, 1883, gave notice to the
Leather Manufacturers' Bank of having so paid, and tendered the
check to it, and demanded payment of that amount, with interest
from June 20, 1877, which was refused.
In the present action, the defendant, at the close of the whole
evidence, asked the court to instruct the jury to return a verdict
for the defendant upon the grounds "that the cause of action, if
complete, did not accrue within six years before the commencement
of this action," and "that the cause of action, if a demand and
tender were necessary, had not accrued when the suit was
commenced." The court declined so to instruct the jury, directed a
verdict for the plaintiff for the amount of the check, with
interest from June 20, 1877, and gave judgment thereon. The
defendant sued out this writ of error.
Page 128 U. S. 33
MR. JUSTICE GRAY, after stating the facts as above, delivered
the opinion of the Court.
The principal question argued is whether this action was barred
by the statute of limitations of New York, by which any action upon
a contract, obligation, or liability, expressed or implied, except
a judgment or a sealed instrument, must be
Page 128 U. S. 34
brought within six years after the cause of action accrues. Code
of 1855, § 91; Code of 1877, § 382.
The question, then, is whether if a bank upon which a check is
drawn payable to a particular person or order pays the amount of
the check to one presenting it with a forged endorsement of the
payee's name, both parties supposing the endorsement to be genuine,
the right of action of the bank to recover back the money from the
person so obtaining it accrues immediately upon the payment of the
money, or only after a demand for its repayment.
In order to avoid confusion in dealing with this question, it is
important to keep in mind the difference between the liability of a
bank to a depositor and the liability to the bank of a person who
has received money from it upon a forged check or order. It is true
that the liability, in either case, is that of debtor, not that of
trustee or bailee, but there the resemblance ceases.
The specific money deposited does not remain the money of the
depositor, but becomes the property of the bank, to be invested and
used as it pleases; its obligation to the depositor is only to pay
out an equal amount upon his demand or order, and proof of refusal
or neglect to pay upon such demand or order is necessary to sustain
an action by the depositor against the bank. The bank cannot
discharge its liability to account with the depositor to the extent
of the deposit except by payment to him or to the holder of a
written order from him, usually in the form of a check. If the bank
pays out money to the holder of a check upon which the name of the
depositor, or of a payee or endorsee, is forged, it is simply no
payment as between the bank and the depositor, and the legal state
of the account between them, and the legal liability of the bank to
him, remain just as if the pretended payment had not been made.
Bank v. Whitman, 94 U. S. 343.
But as between the bank and the person obtaining money on a
forged check or order, the case is quite different. The first step
in bringing about the payment is the act of the holder of the check
in assuming and representing himself to have a right, which he has
not, to receive the money. One
Page 128 U. S. 35
who, by presenting forged paper to a bank, procures the payment
of the amount thereof to him, even if he makes no express warranty,
in law represents that the paper is genuine, and if the payment is
made in ignorance of the forgery, is liable to an action by the
bank to recover back the money which, in equity and good
conscience, has never ceased to be its property. It is not a case
in which a consideration which has once existed fails by subsequent
election or other act of either party, or of a third person, but
there is never at any stage of the transaction, any consideration
for the payment.
Espy v. Bank of
Cincinnati, 18 Wall. 604;
Gurney v.
Womersley, 4 El. & Bl. 133;
Cabot Bank v. Morton,
4 Gray 156;
Aldrich v. Butts, 5 R.I. 218;
White v.
Continental Bank, 64 N.Y. 316.
Whenever money is paid upon the representation of the receiver
that he has either a certain title in property transferred in
consideration of the payment or a certain authority to receive the
money paid when in fact he has no such title or authority, then,
although there be no fraud or intentional misrepresentation on his
part, yet there is no consideration for the payment, and the money
remains in equity and good conscience the property of the payer,
and may be recovered back by him without any previous demand as
money had and received to his use. His right of action accrues, and
the statute of limitations begins to run, immediately upon the
payment.
Thus, in the early case of
Bree v. Holbech, 2 Doug.
654, where an administrator received the amount of the mortgage
money upon his assignment of a mortgage purporting to be made to
the deceased, but in fact a forgery, of which both parties were
ignorant, it was held by Lord Mansfield and the Court of King's
Bench that the right of action to recover back from the
administrator the money so paid was barred by the statute of
limitations in six years from the time of the payment.
So in
Utica Bank v. Van Gieson, 18 Johns. 485, where a
promissory note payable at the Bank of Geneva was left by the
endorsers with the Utica Bank for collection and sent by it to the
Bank of Geneva for that purpose, and the amount was afterwards paid
by the Utica Bank to the endorsers upon
Page 128 U. S. 36
the mistaken supposition that it had been paid to the Bank of
Geneva by the maker, when in fact it had not, and it was not
pretended that the Utica Bank had been guilty of any negligence,
the Supreme Court of New York held that notice of the fact that the
note had not been paid by the maker was unnecessary to maintain an
action by the Utica Bank to recover back the money from the
endorsers, and Chief Justice Spencer said:
"The plaintiffs' ground of action, then, is that the money was
paid to the defendants under a mistake of facts. The defendants are
not bailees or trustees of the money thus received. It was paid and
received as their money, and not as money to be kept for the
plaintiffs. In such a case, it was not necessary to make a demand
prior to the suit, for a request was not essential to the
maintenance of the action, nor did the defendants' duty to return
the money erroneously paid arise upon request."
In
Bank of United States v. Daniel, the acceptor and
endorsers, upon taking up a bill of exchange for $10,000, which had
been duly protested for nonpayment, paid ten percent as damages
under a mistake as to the local law upon the subject. Upon a bill
in equity to relieve against the mistake, and recover back the
money, this Court, while holding that such a mistake gave no ground
for relief, also held that, if it did, the statute of limitations
ran, in equity as well as at law, from the time of the payment;
saying:
"If the thousand dollars claimed as damages were paid to the
bank at the time the bill of exchange was taken up, then the cause
of action to recover the money (had it been well founded) accrued
at the time the mistaken payment was made, which could have been
rectified in equity, or the money recovered back by a suit at
law."
37 U. S. 12 Pet. 32,
37 U. S. 56. In
Dill v. Wareham, 7 Met. 438, the Supreme Judicial Court of
Massachusetts, speaking by Chief Justice Shaw, held that a party
receiving money in advance on a contract which he had no authority
to make, and afterwards refused to fulfill, was liable to the other
party in an action for money had and received, without averment or
proof of any previous demand. And in
Sturgis v. Preston,
134 Mass. 372, where land
Page 128 U. S. 37
was sold for a certain sum by the square foot, and the
purchaser, relying on the vendor's statement of the number of feet,
made payment accordingly, and afterwards discovered that the number
had been overstated, but disclaimed all charge of fraud or
fraudulent concealment on the part of the vendor, it was held that
the right of action to recover back the excess paid accrued
immediately, without any previous demand, and was barred by the
statute of limitations in six years from the date of the payment.
See also Earle v. Bickford, 6 Allen 549;
Blethen v.
Lovering, 58 Me. 437. The judgment of the circuit court in the
present case appears to have been based upon the decision in
Merchants' Bank v. First National Bank, 4 Hughes 1, which
proceeds upon grounds inconsistent with the principles and
authorities above stated, and cites no case except the very
peculiar one of
Cowper v. Godmond, 9 Bing. 748; 3 Moore
& Scott 219, in which the right of action to recover back money
paid for a grant of an annuity the memorial of which was defective
was held not to accrue until the grantor elected to avoid it on
that ground -- the annuity apparently being considered as not
absolutely void, but as voidable only at the election of the
grantor.
See Churchill v. Bertrand, 3 Q.B. 568; 2 Gale
& Dav. 548.
Although some of the opinions of the Court of Appeals of New
York, in the cases cited at the bar, contain
dicta which,
taken by themselves and without regard to the facts before the
court, might seem to support the position of the defendant in
error, yet the judgments in those cases, upon full examination,
appear to be quite in accord with the views which we have
expressed.
The cases of
Thomson v. Bank of British North America,
82 N.Y. 1, and
Bank of British North America v. Merchants'
Bank, 91 N.Y. 106, were actions by depositors against their
respective bankers, and were therefore held not to be barred until
six years after demand.
In
Southwick v. First National Bank, 84 N.Y. 420, the
decision was that there was no such mistake as entitled the party
paying the money to reclaim it, and in
Sharkey v.
Mansfield,
Page 128 U. S. 38
90 N.Y. 227, it was adjudged that money paid by mistake but
received with full knowledge of all the facts might be recovered
back without previous demand, and what was said in either opinion
as to the necessity of a demand where both parties act under
mistake was
obiter dictum.
Two other cases in that court were decided together, and on the
same day as
Bank of British North America v. Merchants'
Bank, above cited. In one of them, the defendants, who had
innocently sold to the plaintiffs a forged note as genuine, and,
upon being informed of the forgery and requested to pay back the
purchase money, had expressly promised to do so if the plaintiffs
should be obliged to pay a third person to whom they had in turn
sold the note, were therefore held not to be discharged from their
liability to refund by the plaintiffs' having awaited the
determination of a suit by that person against themselves before
returning the note to the defendants.
Frank v. Lanier, 91
N.Y. 112.
In the other case, a bank which had paid a check upon a forged
endorsement supposed by both parties to be genuine was held
entitled to recover back the money, with interest from the time of
payment; necessarily implying that the right of action accrued at
that time.
Corn Exchange Bank v. Nassau Bank, 91 N.Y.
74.
In the case at bar, as in the case last cited, the plaintiff's
right of action did not depend upon any express promise by the
defendant after the discovery of the mistake, or upon any demand by
the plaintiff upon the defendant, or by the depositor or any other
person upon the plaintiff, but it was to recover back the money as
paid without consideration and had and received by the defendant to
the plaintiff's use. That right accrued at the date of the payment,
and was barred by the statute of limitations in six years from that
date. For this reason, without considering any other ground of
defense, the order must be
Judgment reversed and case remanded to the circuit court
with directions to set aside the verdict and to order a new
trial.
Page 128 U. S. 39
MR. JUSTICE BLATCHFORD did not sit in this case or take any part
in the decision.
MR. CHIEF JUSTICE FULLER and MR. JUSTICE LAMAR were not members
of the Court when the case was argued, and took no part in its
decision.
