In general, a payment received in forged paper or in any base
coin is not good, and if there be no negligence in the party, he
may recover back the consideration paid for them or sue upon his
original demand.
But this principle does not apply to a payment made
bona
fide to a bank in its own notes which are received as cash and
afterwards discovered to be forged.
Effect of acceptances where the handwriting of the drawer has
been forged.
Bank notes are a part of the currency of the country; they pass
as money, and are a good tender unless specially objected to.
In case of such a payment upon general account, an action may be
maintained by the party paying the notes if there is a balance due
him from the bank upon their general account, either upon an
insimul computassent or as for money had and received.
This was an action of assumpsit brought by the plaintiffs in
error, the President, &c., of the Bank of the United States,
against the defendants in error, the President, &c., of the
Bank of the State of Georgia, in which the plaintiffs declared for
the balance of an account stated and for money had and received to
their use. At the trial, the plaintiffs offered evidence to prove,
that mutual dealings existed between the parties in the course of
which, each being in the receipt of the bills of the other, they
mutually paid in or deposited the bills of the other party at
intervals as
Page 23 U. S. 334
each found the bills of the other party had accumulated to any
considerable amount in their respective vaults, and upon each of
such payments or deposits the amount thereof was entered as so much
"cash" in the customer's book of the party depositing, by the
proper officer of the bank receiving the same, from which said book
of the plaintiffs, which was given in evidence, it appeared that
the sum of $6,900 was the balance due from the defendants to the
plaintiffs at the time of instituting this action. The plaintiffs
also offered evidence that the transactions between the parties
were almost exclusively in the deposits of their respective bills
as aforesaid. And the defendants, to maintain their said defense,
offered evidence to prove that in one of the said deposits so made
by the plaintiffs in the bank of the defendants and so entered in
the said book of the plaintiffs by the proper officer of the
defendants at the time the said deposit was made, to-wit, on 25
February, 1819, and which is one of the items comprised in the
account upon which the balance was claimed by the plaintiffs, there
were paid in 38 bills of the defendants' own issues or notes, of $5
each, which had been fraudulently altered by some person or persons
unknown, from the denomination of $5 to that of $50; and 40 bills
of the defendants' own issues or notes of $10 each which had in
like manner been fraudulently altered by some person or persons
unknown to that of hundreds, making together the sum of $5,900
demanded by the plaintiffs
Page 23 U. S. 335
in this action, which said bills or notes had been subsequently
tendered by the defendants to the plaintiffs before the institution
of this action and by the plaintiffs refused. The plaintiffs then
offered evidence to prove that no notice or intimation of the said
fraudulent alteration aforesaid was given by the defendants to the
plaintiffs until 16 March, 1819, and that the tender to return the
said altered notes to the plaintiffs by the defendants was not made
until 17 March, 1819, nineteen days after the receipt of the said
notes by the defendants from the plaintiffs and the entry of the
same in the customer's book of the plaintiffs. The defendants
further offered evidence to prove that the said altered bills, so
deposited by the plaintiffs and received by the defendants, had
been received by the plaintiffs from the Planters' and Merchants'
Bank of Huntsville, concerning which notes a correspondence had
taken place between the plaintiffs and the said Planters' and
Merchants' Bank of Huntsville, subsequently to the detection of the
said fraudulent alteration, in the following words and figures,
to-wit:
"
OFFICE BANK U. STATES"
"Savannah, 17 March, 1819"
"EDWARD RAWLINS, Esq., Cashier P. and Merchants' Bank of
Huntsville."
"SIR -- Upon a more minute investigation of the bills received
last month from Mr. Hobson, of your bank, it turns out that 40 of
the $100 notes of the state bank of this place were altered
Page 23 U. S. 336
from $10, and 58 of the $50 notes of the same bank were altered
from $5 dollar, producing against us a difference in the $100 notes
of $3,600, and in the $50, $2,610, making the whole difference
$6,210. By the person which we shall in a few days send to your
place, as heretofore intimated, we will forward these altered bills
for the purpose of getting you to exchange them for other
money."
"ELEAZAR EARLY,
Cashier"
"P.S. Herein I enclose for your future security the official
notice of the Banks of Georgia pointing out the difference between
the genuine and altered bills."
"E. E.,
Cashier"
"
OFFICE BANK U. STATES"
"Savannah, 25 March, 1818"
"LE ROY POPE, Esq."
"President bank Huntsville"
"SIR -- Will you suffer me to introduce to your acquaintance and
kindness, the bearer, Mr. Heinemann, our teller, whose objects have
already been imparted to you in my letters of 23 February, and 13
inst. (copies in Mr. H.'s possession) and which we doubt not will
receive every facility from your institution. Mr. Heinemann is also
instructed to lay before you formal notice of a claim which we
shall make on your bank for the spurious notes received from Mr.
Hobson in the event of our being cast in the suit about to be
brought between the Bank of Georgia and ourselves
Page 23 U. S. 337
in the case. It has been deemed a better course than that
proposed in our cashier's letter to Mr. Rawlins, your cashier, of
17 inst. and will, no doubt, be more agreeable to you,"
"Your obedient servant,"
"R. RICHARDSON,
President"
"
PLANTERS AND MERCHANTS' BANK OF HUNTSVILLE"
"4 May, 1819"
"SIR -- Your favor under date of the 25th, has been handed me by
Mr. Heinemann, wherein you give me notice that your bank holds this
institution bound to make good the amount of the spurious notes
which you say was received from Mr. Hobson in the event of your
being cast in a suit about to be brought between the Bank of
Georgia and yourselves. I am directed by the board of directors to
state to you that they highly approve of the course your bank has
adopted in regard to these spurious notes, and we shall cheerfully
acquiesce with the decision of the court, let that be what it
may."
"I am, respectfully,"
"Your obedient servant,"
"LE ROY POPE,
President"
"R. RICHARDSON, Esq."
"President, Office Bank United States, Savannah."
And the plaintiffs further offered evidence to prove that the
officers of the defendants, at the time of receiving the said
altered notes, had in their possession a certain book, called the
bank
Page 23 U. S. 338
note register of the said Bank of the State of Georgia, wherein
were registered and recorded the date, number, letter, amount, and
payees' name, of all the notes ever issued by the said bank, by
means of which, and by reference whereto, the forgeries or
alterations aforesaid could have been promptly and satisfactorily
detected, and further that so far as related to the said notes
purporting to be the notes of $100, all the genuine notes of the
defendants of that amount in circulation on the said 25 February,
1819, were marked with the letter A., whereas twenty-three of the
notes of $100 each so received by the defendants as genuine notes
when in fact they were altered notes bore the letters B., C. or
D.
And the defendants further offered evidence to prove that the
alteration in the said notes consisted in extracting the ink of
certain printed figures and words which expressed the amount of
said notes and substituting therefor other printed figures and
words, the signatures and every other part of said notes remaining
unaltered. Whereupon, the parties having offered the above
evidence, the plaintiffs prayed the court
1. To instruct the jury that if it believed the said evidence,
the said plaintiffs were entitled to recover of the said defendants
the whole sum of $6,900, being the balance so exhibited by their
customer's book aforesaid, and as due from the said defendants to
the said plaintiffs, which instruction the judges aforesaid, being
divided
Page 23 U. S. 339
in opinion, refused to give, and the counsel for the plaintiffs
excepted to the refusal.
2. The plaintiffs prayed the court to instruct the jury that if
it believed the evidence so given, the plaintiffs were entitled to
recover of the defendants the sum of $690, being the original value
of the altered notes, which instruction the said judges, being
divided in opinion, did not give, to which refusal the said counsel
for the plaintiffs excepted.
3. The plaintiffs prayed the court to instruct the jury that if
it believed the evidence so given, the plaintiffs were entitled to
recover of the defendants the whole sum of $6,900, being the
balance so exhibited by their customer's book aforesaid as due from
the defendants to the plaintiffs, with legal interest thereon from
the day of instituting their action aforesaid, which instruction
the judges aforesaid, being divided in opinion, refused to give, to
which refusal the counsel for the plaintiffs excepted.
Judgment being rendered upon this bill of exceptions for the
defendants in the court below, the cause was brought by writ of
error to this Court.
It was insisted, on the part of the plaintiffs that the judgment
ought to be reversed, on the following grounds:
1. That what took place on 25 February, 1819, between the
parties was not only equivalent to payment, but was payment itself,
and the defendants are in all respects to be considered
Page 23 U. S. 340
as if they were suing to recover back the money.
2. That if understood only as an acceptance or agreement to pay,
the principle would still be the same.
3. That in either case, the plaintiffs were entitled to
recover.
MR. JUSTICE STORY delivered the opinion of the Court.
This is a case of great importance in a practical view, and has
been very fully argued upon its merits. The Bank of Georgia having
originally
Page 23 U. S. 341
issued the bank notes in question, they were in the course of
circulation fraudulently altered, and having found their way into
the Bank of the United States, the latter presented them to the
former, which received them as genuine and placed them to the
general account of the Bank of the United States as cash by way of
general deposit. The forgery was not discovered until nineteen days
afterwards, upon which notice was duly given and a tender of the
notes was made to the Bank of the United States and by it refused.
Both parties are equally innocent of the fraud, and it is not
disputed that the Bank of the United States was holder
bona
fide for a valuable consideration. Under these circumstances,
the question arises which of the parties is to bear the loss, or in
other words whether the plaintiffs are entitled to recover in this
action the amount of this deposit.
Some observations have been made as to the form of the action,
the declaration embracing counts for the balance of an account
stated as well as for money had and received, &c. But if the
plaintiffs are entitled to recover at all, we see no objection to a
recovery upon either of these counts. The sum sued for is the
balance due upon the general account of the parties, and it is
money had and received to the use of the plaintiffs, if the
transaction entitled the plaintiffs to consider the deposit as
money. It is clearly not the case of a special deposit, where the
identical thing was to be restored by the defendants; the notes
were paid as money upon general account
Page 23 U. S. 342
and deposited as such, so that according to the course of
business and the understanding of the parties, the identical notes
were not to be restored, but an equal amount in cash. They passed,
therefore, into the general funds of the Bank of Georgia and became
the property of the bank. The action has therefore assumed the
proper shape, and if it is maintainable upon the merits, there is
no difficulty in point of form.
We may lay out of the case at once all consideration of the
point how far the defendants would have been liable if these notes
had been the notes of any other bank deposited by the plaintiff in
the Bank of Georgia as cash. That might depend upon a variety of
considerations, such as the usages of banks and the implied
contract resulting from their usual dealings with their customers
and upon the general principles of law applicable to cases of this
nature. The modern authorities certainly do in a strong manner
assert that a payment received in forged paper or in any base coin
is not good, and that if there be no negligence in the party, he
may recover back the consideration paid for them or sue upon his
original demand. To this effect are the authorities cited at the
bar, and particularly
Markle v. Hatfield, 2 Johns. 455;
Young v. Adams, 6 Mass. 182; and
Jones v. Ryde, 5
Taunt. 488. But without entering upon any examination of this
doctrine, it is sufficient to say that the present is not such a
case. The notes in question were not the notes of another bank or
the security of a third person, but
Page 23 U. S. 343
they were received and adopted by the bank as its own genuine
notes in the most absolute and unconditional manner. They were
treated as cash and carried to the credit of the plaintiff in the
same manner and with the same general intent, as if they had been
genuine notes or coin.
Many considerations of public convenience and policy would
authorize a distinction between cases where a bank receives forged
notes purporting to be its own and those where it receives the
notes of other banks in payment or upon general deposit. It has the
benefit of circulating its own notes as currency, and commanding
thereby the public confidence. It is bound to know its own paper
and provide for its payment, and must be presumed to use all
reasonable means, by private marks and otherwise, to secure itself
against forgeries and impositions. In point of fact it is well
known that every bank is in the habit of using secret marks and
peculiar characters for this purpose and of keeping a regular
register of all the notes it issues, so as to guide its own
discretion as to its discounts and circulation and to enable it to
detect frauds. Its own security, not less than that of the public,
requires such precautions.
Under such circumstances, the receipt by a bank of forged notes
purporting to be its own must be deemed an adoption of them. It has
the means of knowing if they are genuine; if these means are not
employed, it is certainly evidence of a neglect of that duty which
the public has a right to require. And in respect to persons
Page 23 U. S. 344
equally innocent where one is bound to know and act upon his
knowledge and the other has no means of knowledge, there seems to
be no reason for burdening the latter with any loss in exoneration
of the former. There is nothing unconscientious in retaining the
sum received from the bank in payment of such notes which its own
acts have deliberately assumed to be genuine. If this doctrine be
applicable to ordinary cases, it must apply with greater strength
to cases where the forgery has not been detected until after a
considerable lapse of time. The holder under such circumstances may
not be able to ascertain from whom he received them, or the
situation of the other parties may be essentially changed. Proof of
actual damage may not always be within his reach, and therefore to
confine the remedy to cases of that sort would fall far short of
the actual grievance. The law will therefore presume a damage,
actual or potential, sufficient to repel any claim against the
holder. Even in relation to forged bills of third persons received
in payment of a debt there has been a qualification engrafted on
the general doctrine that the notice and return must be within a
reasonable time, and any neglect will absolve the payer from
responsibility.
If, indeed, we were to apply the doctrine of negligence to the
present case, there are circumstances strong to show a want of due
diligence and circumspection on the part of the Bank of Georgia. It
appears from the statement of facts that all the genuine notes of
that bank of the denomination
Page 23 U. S. 345
of $100 in circulation at this time were marked with the letter
A, whereas twenty-three of the forged notes of $100 bore the marks
of the letter B, C, and D. These facts were known to the defendants
but unknown to the plaintiffs, so that by ordinary circumspection
the fraud might have been detected.
The argument against this view of the subject derived from the
fact that the defendants have received no consideration to raise a
promise to pay this sum, since the notes were forgeries, is
certainly not of itself sufficient. There are many cases in the law
where the party has received no legal consideration, and yet in
which, if he has paid the money, he cannot recover it back, and in
which, if he has merely promised to pay, it may be recovered of
him. The first class of cases often turns upon the point whether in
good faith and conscience the money can be justly retained; in the
latter whether there has been a credit thereby given to or by a
third person whose interest may be materially affected by the
transaction. So that to apply the doctrine of a want of
consideration to any case, we must look to all the circumstances
and decide upon them all.
Passing from these general considerations, it is material to
inquire how in analogous cases the law has dealt with this matter.
The present case does not, indeed, appear to have been in terms
decided in any court, but if principles have been already
established which ought to
Page 23 U. S. 346
govern it, then it is the duty of the Court to follow out those
principles on this occasion.
The case has been argued in two respects -- first as a case of
payment, and secondly as a case of acceptance of the notes.
In respect to the first, upon the fullest examination of the
facts, we are of opinion that it is a case of actual payment. We
treat it in this respect exactly as the parties have treated it --
that is, as a case where the notes have been paid and credited as
cash. The notes have not been credited as notes or as a special
deposit, but the transaction is precisely the same as if the money
had been first paid to the plaintiffs and instantaneously the same
money had been deposited by them. It can make no difference that
the same agent is employed by both parties, the one to receive and
the other to pay and credit. Upon what principle is it, then, that
the Court is called upon to construe the act different from the
avowed intention of the parties? It is not a case where the law
construes an act done with one intent to be a different act for the
purpose of making it available in law; to do that,
cy
pres, which would be defective in its direct form. Here the
parties were at liberty to treat it as they pleased, either as a
payment of money or as a credit of the notes. In either way it was
a legal proceeding, effectual and perfect, and as no reason exists
for a different construction, we think that the parties, by
treating it as a cash deposit, must be deemed to have considered it
as paid in money and then deposited, since that is the only
Page 23 U. S. 347
way in which it could legally become or be treated as cash. Nor
is there any novelty in this view of the transaction. Bank notes
constitute a part of the common currency of the country, and
ordinarily pass as money. When they are received as payment, the
receipt is always given for them as money. They are a good tender
as money, unless specially objected to, and, as Lord Mansfield
observed in
Miller v. Race, 1 Burr. 457, they are not,
like bills of exchange, considered as mere securities or documents
for debts. If this be true in respect to bank notes in general, it
applies
a fortiori to the notes of the bank which receives
them, for they are then treated as money received by the bank,
being the representative of so much money admitted to be in its
vaults for the use of the depositor. The same view was taken of
this point in the case of
Levy v. Bank of the United
States, 4 Dall. 234 [omitted],
S.C. 1 Binn. 27, where
a forged check had been accepted by the bank and carried to the
credit of the plaintiff (a depositor) as cash, and upon a
subsequent discovery of the fraud, the bank refused to pay the
amount. The Court there said
"It is our opinion that when the check was credited to the
plaintiff as cash, it was the same thing as if it had been paid; it
is for the interest of the bank that it should be so taken. In the
latter case, the bank would have appeared as plaintiffs, and every
mistake which could have been corrected in an action by them may be
corrected in this action, and none other."
The case of
Bolton v. Richards,
Page 23 U. S. 348
6 D. & E. 138, is not in all its circumstances directly in
point, but there the court manifestly considered the carrying of a
check to the credit of a party was equivalent to the transfer of so
much money in the hands of the banker to his account.
Considering, then, the credit in this case as a payment of the
notes, the question arises whether, after a payment, the defendants
would be permitted to recover the money back; if they would not,
then they have no right to retain the money, and the plaintiffs are
entitled to a recovery in the present suit.
In
Price v. Neale, 3 Burr. 1355, there were two bills
of exchange which had been paid by the drawee, the drawer's
handwriting being a forgery; one of these bills had been paid when
it became due without acceptance; the other was duly accepted and
paid at maturity. Upon discovery of the fraud, the drawee brought
an action against the holder to recover back the money so paid,
both parties being admitted to be equally innocent. Lord Mansfield,
after adverting to the nature of the action, which was for money
had and received, in which no recovery could be had unless it be
against conscience for the defendant to retain it, and that it
could not be affirmed that it was unconscientious for the defendant
to retain it, he having paid a fair and valuable consideration for
the bills, said
"Here was no fraud, no wrong. It was incumbent upon the
plaintiff to be satisfied that the bill drawn upon him was the
drawer's hand before he accepted or paid it.
Page 23 U. S. 349
But it was not incumbent upon the defendant to inquire into it.
There was notice given by the defendant to the plaintiff of a bill
drawn upon him, and he sends his servant to pay it and take it up.
The other bill he actually accepts, after which the defendant,
innocently and
bona fide, discounts it. The plaintiff lies
by for a considerable time after he has paid these bills, and then
found out that they were forged. He made no objection to them at
the time of paying them. Whatever neglect there was was on his
side. The defendant had actual encouragement from the plaintiff for
negotiating the second bill from the plaintiff's having, without
any scruple or hesitation, paid the first, and he paid the whole
value
bona fide. It is a misfortune which has happened
without the defendant's fault or neglect. If there was no neglect
in the plaintiff, yet there is no reason to throw off the loss from
one innocent man upon another innocent man. But in this case, if
there was any fault or negligence in anyone, it certainly was in
the plaintiff, and not in the defendant."
The whole reasoning of this case applies with full force to that
now before the Court. In regard to the first bill, there was no new
credit given by any acceptance, and the holder was in possession of
it before the time it was paid or acknowledged. So that there is no
pretense to allege that there is any legal distinction between the
case of a holder before or after the acceptance. Both were treated
in this judgment as being in the same predicament, and entitled to
the same equities. The case of
Neal v.
Page 23 U. S. 350
Price has never since been departed from, and in all
the subsequent decisions in which it has been cited it has had the
uniform support of the court and has been deemed a satisfactory
authority. The case of
Smith v. Mercer, 6 Taunt. 76, was a
stronger application of the principle. There, the acceptance was a
forgery, and it purported to be payable at the plaintiff's, who was
a banker, and paid it, at maturity, to the agent of the defendant,
who paid it in account with the defendant. A week afterwards, the
forgery was discovered and due notice given to the defendant. But
the court, Mr. Justice Chambre dissenting, decided that the
plaintiff was not entitled to recover. Two of the judges proceeded
upon the ground that the banker was bound to know the handwriting
of his customers and that there was a want of caution and
negligence on the part of the plaintiff. The Chief Justice, without
dissenting from this ground, put it upon the narrower ground that
during the whole week the bill must be considered as paid, and if
the defendant were now compelled to pay the money back, he could
not recover against the prior endorsers, so that he would sustain
the whole loss from the negligence of the plaintiff. The very case
occurred in
Gloucester Bank v. Salem Bank, 17 Mass. 33,
where forged notes of the latter had been paid to the former and,
upon a subsequent discovery, the amount was sought to be recovered
back. The authorities were there elaborately reviewed both by the
counsel and the court, and the conclusion to
Page 23 U. S. 351
which the latter arrived was that the plaintiffs were not
entitled to recover, upon the ground that by receiving and paying
the notes, the plaintiffs adopted them as their own, that they were
bound to examine them when offered for payment, and if they
neglected to do it within a reasonable time, they could not
afterwards recover from the defendants a loss occasioned by their
own negligence. In that case no notice was given of the doubtful
character of the notes until fifteen days after the receipt, and no
actual averments of forgery until about fifty days. The notes were
in a bundle when received, which had not been examined by the
cashier until after a considerable time had elapsed. Much of the
language of the court as to negligence is to be referred to this
circumstance The court said
"The true rule is that the party receiving such notes must
examine them as soon as he has opportunity, and return them
immediately. If he does not, he is negligent, and negligence will
defeat his right of action. This principle will apply in all cases
where forged notes have been received, but certainly with more
strength when the party receiving them is the one purporting to be
bound to pay. For he knows better than any other whether they are
his notes or not, and if he pays them or receives them in payment
and continues silent after he has had sufficient opportunity to
examine them, he should be considered as having adopted them as his
own."
Against the pressure of these authorities there not a single
opposing case, and we must
Page 23 U. S. 352
therefore conclude that both in England and America, the
question has been supposed to be at rest. The case of
Jones v.
Ryde, 5 Taunt. 488, is clearly distinguishable, as it ranged
itself within the class of cases where forged securities of third
persons had been received in payment.
Bruce v. Bruce, 5
Taunt. 495, is very shortly and obscurely reported, but from what
is there mentioned, as well as from the notice taken of it by Lord
Chief Justice Gibbs in
Smith v. Mercer, 6 Taunt. 77, it
must have turned on the same distinction as
Jones v. Ryde,
and was not governed by
Price v. Neal.
But if the present case is to be considered, as the defendants'
counsel is most solicitous to consider it, not as a case where the
notes have been paid, but as a case of credit, as cash, upon the
receipt of them, it will not help the argument. In that point of
view the notes must be deemed to have been accepted by the
defendants as genuine notes, and payment to have been promised
accordingly. Credit was given for them as cash by the defendants
for nineteen days, and during all this period no right could exist
in the plaintiffs to recover the amount against any other person
from whom they were received. By such delay, according to the
doctrine of Lord Chief Justice Gibbs in
Smith v. Mercer, 6
Taunt. 76, the prior holders would be discharged; and the case of
the
Gloucester Bank v. Salem Bank, 17 Mass. 33, adopts the
same principle, so that there would be a loss produced by the
negligence of the defendants.
Page 23 U. S. 353
But, waiving this narrower view, we think the case may be justly
placed upon the broad ground that there was an acceptance of the
notes as genuine, and that it falls directly within the authorities
which govern the cases of acceptances of forged drafts. If there be
any difference between them, the principle is stronger here than
there, for there the acceptor is presumed to know the drawer's
signature. Here,
a fortiori, the maker must be presumed
and is bound to know his own notes. He cannot be heard to aver his
ignorance, and when he receives notes, purporting to be his own,
without objection, it is an adoption of them as his own.
The general question as to the effect of acceptances has
repeatedly come under the consideration of the courts of common
law. In the early case of
Wilkinson v. Luteridge, 1 Str.
648, the Lord Chief Justice considered that the acceptance of the
bill was, in an action against the acceptor, a sufficient proof of
the handwriting of the drawer; but it was not conclusive. In the
subsequent case of
Jenys v. Faucler, 2 Str. 946, the Lord
Chief Justice would not suffer the acceptor to give the evidence of
witnesses that they did not believe it the drawer's handwriting,
from the danger to negotiable notes, and he strongly inclined to
think that actual forgery would be no defense, because the
acceptance had given the bill a credit to the endorsee. Subsequent
to this was the case of
Price v. Neal, already commented
on, in which it was thought that the acceptor ought to be
conclusively bound
Page 23 U. S. 354
by his acceptance. The correctness of this doctrine was
recognized by Mr. Justice Buller in
Smith v. Chester; (1 D.
& E. 655) by Lord Kenyon, in Barber v. Gingell, (3 Esp. 60)
where he extended it to an implied acceptance; and by MR. JUSTICE
Dampier, in Bass v. Cline, 4 M. & Selw. 15, and it was
acted upon by necessary implication by the court in
Smith v.
Mercer, 6 Taunt. 76. In
Levy v. Bank of the United
States, 1 Binn. 27, already referred to, where a forged check
drawn upon the bank had been accepted by the latter and carried to
the credit of the plaintiff, and on the refusal of the bank
afterwards to pay the amount the suit was brought, the court
expressly held the plaintiff entitled to recover upon the ground
that the acceptance concluded the defendant. The case was very
strong, for the fraud was discovered a few hours only after the
receipt of the check, and immediate notice given. But this was not
thought in the slightest degree to vary the legal result. "Some of
the cases," said the court,
"decide that the acceptor is bound because the acceptance gives
a credit to the bill, &c. But the modern cases certainly notice
another reason for his liability, which we think has much good
sense in it -- namely that the acceptor is presumed to know the
drawer's handwriting, and by his acceptance to take this knowledge
upon himself."
After some research, we have not been able to find a single case
in which the general doctrine thus asserted has been
Page 23 U. S. 355
shaken or even doubted, and the diligence of the counsel for the
defendants on the present occasion has not been more successful
than our own. Considering, then, as we do that the doctrine is well
established that the acceptor is bound to know the handwriting of
the drawer and cannot defend himself from payment by a subsequent
discovery of the forgery, we are of opinion that the present case
falls directly within the same principle. We think the defendants
were bound to know their own notes, and having once accepted the
notes in question as their own, they are concluded by their act of
adoption and cannot be permitted to set up the defense of forgery
against the plaintiffs.
It is not thought necessary to go into a consideration of other
cases cited at the bar to establish that the acceptor may show that
the accepted bill was void in its origin, as made in violation of
the Stamp Act, &c., for all these cases admit the genuineness
of the notes and turn upon questions of another nature, of public
policy, and a violation of the laws of the land. Nor are the cases
applicable in which bills have been altered after they were drawn,
or of forged endorsements, for these are not facts which an
acceptor is presumed to know. Nor is it deemed material to consider
in what cases receipts and stated accounts may be opened for
surcharge and falsification. They depend upon other principles of
general application. It is sufficient for us to declare that we
place our judgment in the present case upon the ground that the
defendants were bound to know their
Page 23 U. S. 356
own notes, and having received them without objection, they
cannot now recall their assent. We think this doctrine founded on
public policy and convenience, and that actual loss is not
necessary to be proved, for potential loss may exist, and the law
will always presume a possible loss in cases of this nature.
The remaining consideration is whether there has been a legal
waiver of the rights of the plaintiffs derived under the cash
deposit -- or in other words whether they have consented to treat
it as a nullity. There is nothing on which to rest such a defense
unless it is to be inferred from the letter of Mr. Early, the
cashier of the Bank of the United States under date of 17 March,
1819, addressed to the cashier of the Bank of Huntsville. That
letter contains information of the forgery of the notes, and then
proceeds,
"By the person which we shall in a few days send to your place
as heretofore intimated, we will forward these altered bills for
the purpose of getting you to exchange them for other money."
Now there is no evidence that this letter was ever shown to the
Bank of Georgia or its contents ever brought to the cognizance of
its officers. It states no agreement to take back the notes or to
transmit them, on account of the Bank of the United States, to
Huntsville. For aught that appears, the intention may have been to
transmit them on account of the Bank of Georgia, under the
expectation that the latter might desire it. But what is almost
conclusive on this point is that on the same day, the Bank of
Georgia
Page 23 U. S. 357
had made a tender of the notes to the plaintiffs which had been
refused. This is wholly inconsistent with the notion that they had
agreed to take them back or to treat the previous credit as a
nullity. Assuming, therefore, that the cashier had a general or
special authority for the purpose of extinguishing the rights of
the plaintiffs growing out of the prior transactions (which is not
established in proof), it is sufficient to say that it is not shown
that he exercised such an authority. And the case of
Levy v.
Bank of the United States affords a very strong argument that
a waiver, without some new consideration, upon a sudden disclosure,
and under a mistake of legal rights ought not to be conclusive to
the prejudice of the party where, upon further reflection, he
refuses to acquiesce in it. The subsequent letter of 25 March
demonstrates that the intention of waiving the rights of the bank,
if ever entertained, had been at that time entirely abandoned.
The letter from the Huntsville Bank of 4 May cannot vary the
legal result. What might be the rights of the plaintiffs against
that bank in case of an unsuccessful issue of the present cause it
is unnecessary to determine. The contract, whatever it may be, is
res inter alios acta from which the defendants cannot and
ought not to derive any advantage.
It only remains to add that if the plaintiffs are entitled to
recover the principal, they are entitled to interest from the time
of instituting the suit.
Page 23 U. S. 358
Upon the whole it is the opinion of the Court that the circuit
court erred in refusing the first and third instructions prayed for
by the plaintiffs, and for these errors the judgment must be
reversed, with directions to award a
venire facias de
novo. On the second instruction asked by the plaintiffs it is
unnecessary to express any opinion.
Judgment reversed accordingly.
