A drawee who pay a draft drawn to the drawer's order, upon which
the drawer's signature, as well as his endorsement, is forged,
cannot recover the money from a bona fide
value, guilty of no bad faith or negligence contributing to the
success of the forgery. P.
252 U. S. 493
In order to recover money a paid under mistake of fact, the
plaintiff must how that the defendant cannot in good conscience
retain it. Id.
250 F. 105 affirmed.
The case is stated in the opinion.
Page 252 U. S. 490
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
Plaintiff in error sued the defendant bank at law to recover
money paid out under mistake of fact. The complaint alleged:
"First. That at all the times hereinafter mentioned, the
plaintiff was and is a corporation sovereign, and the defendant was
and is an association organized for and transacting the business of
banking in the city, state, and Southern District of New York,
under and pursuant to the provisions of the acts of Congress in
such case made and provided;"
"Second. That on or about the 18th day of December, 1914, the
defendant presented to the Treasurer of the United States at
Washington, D.C., for payment, a draft in the sum of $3,571.47,
drawn on the Treasurer of the United States, payable to the order
of E. V. Sumner, 2d Lt., 2d Cav., A.Q.M., and purporting to be
drawn by E. V. Sumner, Acting Quartermaster, U.S.A. and to be
endorsed by E. V. Sumner, 2d Lt., 2d Cav., A.Q.M., the
Page 252 U. S. 491
Howard National Bank, and the defendant; a copy of said draft
and the indorsements on the back thereof is hereto attached and
market Exhibit A *
and made a part hereof; "
Page 252 U. S. 492
"Third. That, at the date of the presentation of said draft by
the defendant to the Treasurer of the United States, the defendant
was a depository of the funds of the United States of America, and
payment of said draft to the defendant was thereupon made by the
plaintiff by passing a credit for the amount of said draft to the
defendant upon the accounts of the defendant, as depository for the
funds of the plaintiff;"
"Fourth. That the name of said E. V. Sumner, 2d Lt., 2d Cav.,
A.Q. M., indorsed upon the back of said draft, was forged, and had
been wrongfully and fraudulently written upon the same by a person
other than the said E. V. Sumner, without his knowledge or consent,
and no part of the proceeds of said draft were ever received by
"Fifth. That the payment of said draft made by the plaintiff to
the defendant, as described in paragraph three of this complaint,
was made under a mistake of fact and without knowledge that the
signature of the said E. V. Sumner, 2d Lt., 2d Cav., A. Q.M., payee
thereof, had been forged upon the back of said draft;"
"Sixth. That the plaintiff has duly requested the defendant to
repay to it the amount of said draft, to-wit, $3,571.47, but the
defendant has failed and refused to pay the same or any part
thereof to the plaintiff."
"Wherefore, the plaintiff demands judgment against the defendant
in the sum of $3,571.47, with interest thereon from the 18th day of
December, 1914, together with the costs and disbursements of this
The bank denied liability and, among other things, claimed that
the same person wrote the name E. V. Sumner upon the draft both as
drawer and indorser. The facts were stipulated.
It appears: Lieutenant Sumner, quartermaster and disbursing
officer at Ft. Ethan Allen, near Burlington, Vermont, had authority
to draw on the United States Treasurer. Sergeant Howard was his
finance clerk, and so
Page 252 U. S. 493
known at the Howard National Bank of Burlington. Utilizing the
official blank form, Howard manufactured in toto
in question -- Exhibit A. Having forged Lieutenant Sumner's name
both as drawer and indorser, he cashed the instrument over the
counter at the Howard National Bank without adding his own name.
That bank immediately indorsed and forwarded it for collection and
credit to the defendant at New York City; the latter promptly
presented it to the drawee (the Treasurer), received payment and
credited the proceeds as directed. Two weeks thereafter, the
Treasurer discovered the forgery and at once demanded repayment,
which was refused. Before discovery of the forgery, the Howard
National Bank withdrew from the Chase National Bank sums
aggregating more than its total balance immediately after such
proceeds were credited, but additional subsequent credit items had
maintained its balance continuously above the amount of the
Both sides asked for an instructed verdict without more. The
trial court directed one for the defendant (241 F. 535) and
judgment thereon was affirmed by the circuit court of appeals. 250
F. 105. If important, the record discloses substantial evidence to
support the finding necessarily involved that no actual negligence
or bad faith, attributable to defendant, contributed to success of
the forgery. Williams v. Vreeland, 250 U.
, 250 U. S.
The complaint placed the demand for recovery solely upon the
forged indorsement; neither negligence nor bad faith is set up. If
the draft had been a valid instrument with a good title thereto in
some other than the collecting bank, nothing else appearing, the
drawee might recover as for money paid under mistake.
11 How. 177, 52 U. S. 183
But here, the whole instrument was forged, never valid, and nobody
had better right to it than the collecting bank.
Page 252 U. S. 494
Price v. Neal
(1762), 3 Burrows, 1354, 1357, held that
it is incumbent on the drawee to know the drawer's hand, and that,
if the former pay a draft upon the latter's forged name to an
innocent holder not chargeable with fault, there can be no
"The plaintiff cannot recover the money unless it be against
conscience in the defendant to retain it. . . . But it can never be
thought unconscientious in the defendant to retain this money when
he has once received it upon a bill of exchange indorsed to him for
a fair and valuable consideration which he had bona fide
paid without the least privity or suspicion of any forgery."
And the doctrine so announced has been approved and adopted by
this Court. Bank of United States v. Bank
10 Wheat. 333, 23 U. S. 348
Hoffman v. Bank of
12 Wall. 181, 79 U. S. 192
Leather Mfgs. Bank v. Morgan, 117 U. S.
, 117 U. S. 109
United States v. National Exchange Bank, 214 U.
, 214 U. S.
In Bank of United States v. Bank of Georgia,
Mr. Justice Story, this Court said concerning Price v.
"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; but it was not
incumbent upon the defendant
Page 252 U. S. 495
to inquire into it. There was a 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.
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 any one, 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
Price v. Neal
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
Does the mere fact that the name of Lieutenant Sumner was forged
as indorser as well as drawer prevent application here of the
established rule? We think not. In order to recover, plaintiff must
show that the defendant cannot retain the money with good
conscience. Both are
Page 252 U. S. 496
innocent of intentional fault. The drawee failed to detect the
forged signature of the drawer. The forged indorsement puts him in
no worse position than he would occupy if that were genuine. He
cannot be called upon to pay again, and the collecting bank has not
received the proceeds of an instrument to which another held a
better title. The equities of the drawee who has paid are not
superior to those of the innocent collecting bank who had full
right to act upon the assumption that the former knew the drawer's
signature, or at least took the risk of a mistake concerning it.
Bank of England v. Vagliano Bros.,
107; Dedham Bank v. Everett Bank,
177 Mass. 392, 395;
Deposit Bank v. Fayette Bank,
90 Ky. 10; National Park
Bank v. Fourth National Bank,
46 N.Y. 77, 80; Howard v.
28 La.Ann. 727; First National Bank v. State
107 Ia. 327; Bank v. Trust Co.,
168 N.C. 606; 4
Harvard Law Review 297, article by Prof. Ames. And see Cooke v.
United States, 91 U. S. 389
91 U. S.
The judgment of the court below is
MR. JUSTICE CLARKE dissents.
* Exhibit A:
"Office of the Quartermaster"
"Fort Ethan Allen, Vermont"
"Quartermaster 15, 1914"
"Thesaur Amer (Shield) 444"
"(Shield) Treasurer of the United States 15-51"
"Pay to the order of E. V. Sumner, 2d Lt., 2d Cav., A.Q.M.,
"Thirty-five hundred seventy-one & 47/100 dollars."
"Object for which drawn: Vo. No. Cash transfers."
"E. V. Sumner"
"Acting Quartermaster, U.S.A. 21739
"Form Approved by the"
"Comptroller of the"
"January 27, 1913."
"This check must be indorsed on the line below by the person in
whose favor it is drawn, and the name must be spelled exactly the
same as it is on the face of the check."
"If indorsement is made by mark (X), it must be witnessed by two
persons who can write, giving their place of residence in
"E. V. Sumner"
"(Sign on this line)"
"2d Lt., 2 Cav., AQM.
"Pay Chase National Bank"
"New York, or Order"
"Restrictive indorsements guaranteed"
"Howard Nat'l Bank"
"58-3 Burlington, Vt. 58-3"
"M. T. Rutter, Cashier"
"Received payment from"
"The Treasurer of the United States"
"Dec. 16, 1914"
"1-74 The Chase National Bank 1-74"
"Of the City of New York"