1. The payee of a check before it is accepted by the drawee
cannot maintain an action upon it against the latter, as there is
no privity of contract between them.
So held where a check
of the Treasurer of the United States upon a national bank duly
designated as a depositary of the public money, having been paid
upon an unauthorized endorsement of the name of the payee, suit to
recover the amount of the check was brought by its true owner
against the bank.
2. The rights of the parties are not changed by the fact that,
on a settlement of accounts between the Treasurer and the bank, the
check, on the supposition that it had been properly paid, was
credited to the bank. Such an error does not affect the real state
of the accounts; when it is discovered, they are open to
correction.
3. Payment to a stranger upon an unauthorized endorsement does
not operate as an acceptance of the check, so as to authorize an
action by the real owner to recover its amount as upon an accepted
check.
The facts are stated in the opinion of the Court.
Mr. JUSTICE HUNT delivered the opinion of the Court.
This action is brought against the First National Bank of
Washington to recover the amount of a check drawn upon it by Mr.
Spinner, Treasurer of the United States, for $3,414, dated March 9,
1867. The check is in this form,
viz.:
Draft No. 9,243 on War Warrant No. 915
"$3,414] TREASURY OF THE UNITED STATES"
"WASHINGTON, March 9, 1867"
"Pay to the order of Mrs. E. S. Kimbro, three thousand three
hundred and fourteen dollars. No. 9,243. Registered March 9,
1867."
"Issued on requisition No. ___. $3,414."
"S. B. COLBY"
"
Register of the Treasury"
"F. E. SPINNER"
"
Treasurer of the United States"
"To the First National Bank of Washington, D.C. "
Page 94 U. S. 344
It was endorsed in the name of Mrs. Kimbro without authority,
and the amount of it was paid by the bank to an unauthorized
holder. It appears from the testimony of Mr. Tayler, First
Comptroller of the Treasury, that the funds of the government
deposited by the Treasurer in a national bank are treated by the
government, for the purposes of keeping accounts, as in the
Treasurer's own charge and custody; that they are charged to him,
and that payments made are credited to him, and that he is
chargeable precisely as if the funds had been in his own office,
and that he had power to make the check in question.
We may therefore simplify the case by eliminating from its
consideration all reference to the United States, and consider the
transaction as between Mr. Spinner, as an individual, and the bank,
as his depositary, and Mrs. Kimbro, as the payee of his check.
The question is this: can the payee of a check, whose
endorsement has been forged or made without authority, and when
payment has been made by the bank on which it was drawn, upon such
unauthorized endorsement, maintain a suit against the bank to
recover the amount of the check? We think it is clear, both upon
principle and authority, that the payee of a check unaccepted
cannot maintain an action upon it against the bank on which it is
drawn. The careful and well reasoned opinion of Mr. Justice Davis
in delivering the judgment of this Court in
Bank of
the Republic v. Millard, 10 Wall. 152, leaves
little to add upon this subject by way of illustration or
authority. In that case a paymaster of the army made his check on
the Bank of the Republic to the order of Captain Millard for $859,
due to him for arrears of pay as an officer of the army. The bank
paid the amount of the check upon a forged endorsement of Millard's
name. Recovering the check and exposing the forgery, Millard
demanded payment to himself, and, upon refusal, brought his action
against the bank. This Court held that the action could not be
maintained, upon the principle that there was no privity between
the bank and Millard. The bank's contract was with the paymaster
only, and to him only was its duty. It received no money from
Millard. It never promised Millard to pay him any money. It
Page 94 U. S. 345
had no money belonging to him. It received money from the
paymaster, upon an agreement that it would return it to him when
called for by him in person, or that it would pay it upon his
checks. But it made no such agreement, or any agreement, with
Millard. For a failure of duty in this respect it was responsible
to the paymaster, with whom it made the contract, and to no one
else. If the check was not paid, the arrears of pay to Millard were
not paid, and his claim upon the government or the paymaster was
not impaired by the giving of the check, which, being presented in
due time, was not paid. He was still entitled to demand his
arrears.
That case is a perfect and complete authority upon the question
stated.
See also Artuer v. Bank, 46 N.Y. 82.
Nor is this principle confined to checks or bills. Thus, in
Ashley v. Dixon, 48 N.Y. 430, it was held that if A. be
under a contract to sell property to B., and C. persuade A. to sell
the property to him, no action lies by B. against C. There is no
privity of contract between C. and B., but the remedy of the latter
is against A. only.
It is not to be doubted, however, that it is within the power of
the bank to render itself liable to the holder and payee of the
check. This it may do by a formal acceptance written upon the
check, in which case it stands to the holder in the position of a
drawer and acceptor of a bill of exchange.
Merchants'
Bank v. State Bank, 10 Wall. 604;
Espy v.
Bank of Cincinnati, 18 Wall. 604.
It may accomplish the same result by writing upon it the word
"good," or any similar words which indicate a statement by it that
the drawer has funds in a bank applicable to the payment of the
check, and that it will so apply them.
Cook v. State Bank of
Boston, 52 N.Y. 96. And such certificate, it is said,
discharges the drawer. As to him, it amounts to a payment.
Bank
v. Leach, 52 N.Y. 350;
Meads v. Merchants' Bank, 25
id. 143; 9 Met. 311; 2 Duer 121. Whether this certificate
be obtained by the drawer before the check is delivered, and is
thus made an inducement to the payee to receive the same, or
whether it is made upon the application of the payee for his
security, is of no importance. It is a contract recognized by the
law, valid in its character, which essentially
Page 94 U. S. 346
changes the position of the parties. The privity of contract
with the drawee, which before pertained to the drawer alone, is now
imparted to the payee, and the duty which before existed only to
the drawer now exists to the payee.
It is said that this fact of a contract between the payee and
drawee exists in the present case. The testimony of Mr. Arnold is
referred to, to the effect that in April, 1867, the bank made its
weekly statement to Mr. Spinner of deposits received and payments
made, returning the draft of Mrs. Kimbro as paid on the 22d of that
month, and that in the statement the amount of the draft was
entered to the credit of the bank.
There is no suggestion in the evidence that either the bank or
Mr. Spinner knew that the endorsement of the payee was
unauthorized. The bank, we assume, would not knowingly subject
itself to the dangers and liabilities resulting from making payment
to one not authorized to receive it. We assume also, as we are
bound in justice to it to do, that it would not ask Mr. Spinner to
give credit for a payment that it knew to have been illegally made,
and that it would not attempt to deceive him into the belief that a
pretended endorsement was a real one. It comes to this, then, that
upon a settlement of accounts between them, a credit was by mistake
allowed to the bank to which it was not entitled. The law is, that
neither party is to be benefited or to be injured by the mistake.
The bank must refund the amount by handing over the sum, or by
crediting the same to Mr. Spinner in his next account. Mistakes in
bank accounts are not uncommon. They occur both by unauthorized or
pretended payments, as well as by the omission to give credit for
sums deposited. When discovered, the mistake must be rectified, and
an ordinary writing up of a bank book, with a return of vouchers or
a statement of accounts, precludes no one from ascertaining the
truth and claiming its benefit. Story, Eq.Pl., secs. 799-801;
Story, Eq.Jur., secs. 523, 527;
Buchlin v. Chaplin, 1
Lans. 443;
Bruen v. Hone, 2 Barb. 586;
Bullock v.
Boyd, 2 Edw. 293. We cannot perceive that such a mistaken
recognition of the validity of the payment of this check can create
an additional or different contract between the bank and the owner
of the draft.
Page 94 U. S. 347
It is further contended that such an acceptance of the check as
creates a privity between the payee and the bank is established by
the payment of the amount of this check in the manner described.
This argument is based upon the erroneous assumption that the bank
has paid this check. If this were true, it would have discharged
all of its duty, and there would be an end of the claim against it.
The bank supposed that it had paid the check, but this was an
error. The money it paid was upon a pretended and not a real
endorsement of the name of the payee. The real endorsement of the
payee was as necessary to a valid payment as the real signature of
the drawer, and in law the check remains unpaid. Its pretended
payment did not diminish the funds of the drawer in the bank or put
money in the pocket of the person entitled to the payment. The
state of the account was the same after the pretended payment as it
was before.
We cannot recognize the argument that a payment of the amount of
a check or sight draft under such circumstances amounts to an
acceptance, creating a privity of contract with the real owner. It
is difficult to construe a payment as an acceptance under any
circumstances. The two things are essentially different. One is a
promise to perform an act, the other an actual performance. A
banker or an individual may be ready to make actual payment of a
check or draft when presented, while unwilling to make a promise to
pay at a future time. Many, on the other hand, are more ready to
promise to pay than to meet the promise when required. The
difference between the transactions is essential and inherent.
Without discussing the other questions argued, we are of the
opinion, for the reasons given, that the plaintiff below was not
entitled to recover.
Judgment reversed, and cause remanded for a new trial, or
for such further proceedings as the parties may be advised to
take.