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.
Page 85 U. S. 605
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.
Page 85 U. S. 606
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
Page 85 U. S. 607
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
Page 85 U. S. 608
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
Page 85 U. S. 609
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.
Page 85 U. S. 614
MR. JUSTICE MILLER delivered the opinion of the Court.
Stall & Meyer, customers and depositors with the First
National Bank of Cincinnati, made their check on that bank for the
sum of $26.50, payable to the order of Mrs. E. Hart, and delivered
it to a stranger to all the parties to the transaction, out of
which this controversy arose. This man erased the name of the payee
and the amount for
Page 85 U. S. 615
which it was given and inserted the name of Espy, Heidelbach
& Co., bankers and brokers, and also the sum of $3,920, and
passed it to Espy, Heidelbach & Co., in payment of bonds and
gold which he purchased from them. The check was paid by the bank
through the clearinghouse, and the next day the fraud was
discovered, and the bank made a demand on Espy, Heidelbach &
Co., for the amount as paid through a mistake.
If this were all the case, there could be no doubt of their
right to recover. The principle that money so paid under a mistake
of the facts of the case can be recovered back is well settled, and
in the case of raised or altered checks so paid by banks on which
they were drawn there are numerous well considered cases where the
right to recover has been established when neither the party
receiving nor the party paying has been in any fault or blame in
the matter. Of course, if there is fault on the part of the party
receiving pay for such a check, it strengthens the right of
recovery.
But in the case before us, the rights of the parties are to be
determined by what took place between themselves before the check
was paid. It appears by the bill of exceptions that the man who
perpetrated the fraud, having ascertained from Espy, Heidelbach
& Co. the price of the bonds and gold which he proposed to buy
of them, told them that he had dealings with Stall & Meyer and
would get their check for the amount, and after an absence of two
or three hours returned with the check in question. Not wishing to
take it from this stranger without further information, they sent
Mr. Snarenberger, one of their clerks, to the bank with
instructions to ascertain if the check was good and to say that it
was presented by a stranger. Snarenberger presented it to Mr.
Sanford, the proper officer of the bank, who, after examining the
check and the state of Stall & Meyer's account, said, "It is
good," or "It is all right; send it through the clearinghouse."
There is a slight disagreement between Snarenberger and Sanford
as to the precise words used, but we do not deem the difference of
any importance. But there is difference in
Page 85 U. S. 616
another point between these two, which with the jury might have
had some weight. Snarenberger testifies that he told Sanford that
the check was offered to his house by a stranger, which Sanford
denies, and Sanford says that he told Snarenberger that if the
check was offered by a stranger, he would advise them to have
nothing to do with him; that he would be careful and not pay so
large a check to a stranger, no matter how good-looking he was.
On the return of Snarenberger, Espy, Heidelbach & Co.
delivered the bonds and gold to the stranger and received the check
in payment, and in the language of the record, the stranger went
his way and was heard of no more. Espy, Heidelbach & Co.
endorsed the check, and it was paid, as stated already, through the
clearinghouse.
In a suit brought by the bank to recover the money it had a
judgment, to reverse which this suit is brought.
The defendants excepted to the admission of certain testimony
given by the plaintiffs on the trial for the purpose of proving
that the words "all right," "it is good," when used in reference to
a check presented at the bank on which it is drawn, had, by the
custom and usages of the bankers of Cincinnati, acquired a limited
and well understood meaning -- namely that it had reference
exclusively to the genuineness of the drawer's signature and to the
state of his account at the bank. The objections made to this
evidence were that in its nature it was inadmissible; that the
person testifying showed his want to knowledge on the subject, and
that the expressions "all right" and "it is good" were not the
precise expressions used. But we need not inquire whether the court
was right in admitting this testimony, because in the subsequent
progress of the trial it became immaterial. The court refused to
charge the jury, as requested by the plaintiffs in their fifth and
sixth prayers, that if there was such an understanding among
bankers as to the use of the terms mentioned, it limited the
responsibility of the bank to these two matters, and in the charge
of the court of its own motion it placed the case beyond the
influence of such testimony by instructing the jury that, as matter
of law, such
Page 85 U. S. 617
was the effect of the words supposed when used under the
circumstances suggested by the interrogations of plaintiff's
counsel in regard to the understanding of them among bankers.
We are relieved also, by an attentive consideration of the
instructions given by the court, from another very grave question
much discussed by counsel in this Court -- this is whether a verbal
statement by the proper officer to certify checks that the one
presented is good is or is not the equivalent of a written
certification of the check in the usual manner. For the fourth
instruction asked by the defendants and granted by the court is
precisely what is claimed by counsel here as to the effect of such
verbal statement, as will be seen at once by its inspection. It is
as follows:
"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 plaintiff in error, against whom the jury rendered their
verdict, notwithstanding the instruction thus given, must be held
to have had the benefit of the principle thus asserted with the
jury, whether the court was right in giving it or not.
The plaintiffs on the trial below prayed ten distinct
instructions to the jury, all of which were granted except the
fifth and sixth, which we have considered. The defendants prayed
eight instructions, all of which were refused or modified except
the fourth, to which attention has just been called. Upon all these
rulings of the court as well as upon the charge of the court of its
own motion, errors are assigned.
But we are of opinion that the whole case turns upon the latter
charge of the court. This consisted of four distinct
propositions:
1. That if defendants below sent the check to the bank for the
purpose of having the latter pass upon the genuineness of the
signature and the state of the account of the drawer, the statement
that it was good, or all right, would
Page 85 U. S. 618
estop them from denying that the signature was genuine and there
were funds to meet it.
2. If defendants sent the check for the purpose of testing the
genuineness of the signature of the drawers, the state of their
account, and to test its genuineness in all other respects, and
plaintiff knowing the full extent of the object for which it was
sent, replied "It is good," or "It is all right," plaintiff is
estopped to set up that the check was raised.
3. That if the defendants had no suspicion that the check was
raised, and sent it to plaintiffs for examination without
specifying the particulars to which they wished the examination
directed, the plaintiffs had a right to presume that it was desired
in relation to such points as the law presumed them to have
knowledge -- namely the genuineness of the drawer's signature and
the state of his account -- and if they answered in good faith and
had no means other than those of defendants of knowing that the
check was raised, they were not estopped from setting up that
fact.
4. That if the parties were mutually ignorant and unsuspicious
concerning the check's being raised, the law did not impose upon
plaintiffs more than the defendants the duty of calling on the
drawers for information on that subject.
The plaintiffs in error, defendants below, can have no cause to
complain of the first and second proposition laid down by the court
below.
If the bank officers had their attention turned to the matter of
the raising of the check, or even had notice that in applying to
them for information the parties presenting it did so for the
purpose of getting information which would include that subject,
they could have limited their general statement that it was good so
as to exclude its application to that point, or might have declined
answering altogether. If, with this notice, says the court, they
gave a general statement that the check was good, or all right,
these words must be held to have reference to all the matters on
which they knew that the other party asked or desired their
opinion. Unless we are prepared to hold to the fullest extent the
principle asserted by the plaintiffs in error, that the
Page 85 U. S. 619
general statement that the check is good binds the party making
it as to everything connected with its validity, this charge of the
court is as favorable to them as them as it should have been, and
is only doubtful as it militates against the bank.
We think it is equally clear on principle that there was no
error in the fourth proposition of the court. Undoubtedly where
there exists a suspicion that the check has been altered in the
amount or in the name of the payee, the proper party to be inquired
of is the maker of the check. He and he alone has the means of
settling that question conclusively. The bank, as a general rule,
can know this no better than the party to whom it is presented for
negotiation. It is the latter who first parts with his money or
property on the faith of the check, and he is as much bound to
diligent inquiry on that question as the bank. The latter is held
by the law to know the drawer's signature and the state of his
account. He is no more bound to know or to answer beyond these two
matters than the party who presents it for information. So if there
be no suspicion of the fraud in raising the check, the parties are
equally innocent, and no question of the relative degree of
diligence in making inquiry on that subject arises between them.
This is certainly true unless the bank, if it consents to give any
information at all about the validity of the check, is bound to
answer as to everything which may affect its validity. As this
contention is the turning point of the case and is the one which is
responded to in the third of the propositions laid down by the
court, we turn now to consider that.
This assumes that neither party had any suspicion that the check
was raised and that no special reference was made to that point in
the inquiry of the defendants below. It is also to be considered
that the bank was not asked to certify it in the usual way by
endorsing it as good, and that the party who asked information was
the one whose name was in the check as payee. We do not propose to
decide here what would have been the legal effect in the present
case if the bank officer had, under precisely these
circumstances,
Page 85 U. S. 620
been requested to endorse the check as good and had done so,
affixing his name or his initials in the ordinary way.
The strong argument of the plaintiff in error is that such an
endorsement would bind the bank for the entire validity of the
check, and that what was said verbally by Sanford was the legal
equivalent of such an endorsement. If this latter point were
conceded, no case precisely in point has been produced where this
would be held to bind the bank under the circumstances of the
present case. The authorities relied on are mainly acceptances of
drafts or bills of exchange, and it is the same class of cases that
are relied on to show that a verbal acceptance or promise to accept
is equivalent to a written acceptance. The highest courts in this
country and England have regretted the decisions which gave
original sanction to this latter proposition. [
Footnote 1]
Bank checks are not bills of exchange, and though the rules
applicable to each are in many respects the same, they differ in
important particulars. [
Footnote
2] Among these particulars is that a check is drawn against
funds on deposit with the banker, and the endorsement that it is
good implies that when the endorsement is made, there was funds
there to pay it. A bill of exchange is not drawn on such deposits
necessarily, and its acceptance raises no implication that the
drawer has such funds to meet it. It is a new promise by the
acceptor to pay, funds or no funds. In both cases, the bank is
supposed to know the signature of its correspondent, and cannot,
after endorsing it as good or accepted, dispute the signature. But
as one of the main elements of utility in a bill of exchange is
that it shall circulate freely, and it may thus pass through many
hands on the faith of the acceptor's signature, it may possibly be
that he should be responsible for the promise contained in it, as
it came from his hands, for it was drawn on no special fund, and
the possession of such fund by him does not affect his liability.
By such acceptance, he becomes primarily liable, as if he were
Page 85 U. S. 621
the maker of a promissory note. How far these reasons should be
applied to a certification that a check was good seems extremely
doubtful, both on principle and authority. Where the object is to
use the endorsement to put the check in circulation, or raise money
on it, or use it as money, and this object is known to the
certifying bank, it may be argued with some force that the bank
should, as in the case of an acceptance of a bill of exchange, be
held responsible for the validity of the check as it came from the
hands of the certifying bank. Such a rule would seem to be just
when checks are certified, as we know they often are, without
reference to the presence of funds by the drawer, and when the well
known purpose is to give the drawer a credit by enabling him to use
the check as money by putting it in circulation.
But such a verbal statement as was made in the present case
cannot come within that principle. There was no design or intent on
the part of the bank to assume a responsibility beyond the funds of
the drawer in their hands, nor to enable the payee of the check to
put it into circulation. Nothing was said or done by the bank
officer which could be transferred with the check as part of it to
an innocent taker of it from the payee. Such subsequent taker would
have no right to rely on what was said by the bank officers, any
further than the payee would.
We are of opinion that the court was entirely right in treating
the case as one in which information was sought and obtained by
Espy, Heidelbach & Co. for their own use, and to govern their
own action. For such information as the bank was willing to give
and did give, it was no doubt responsible, because it had reason to
believe that the other party would act upon it. But only to this
extent and only on this principle is it liable. It is not liable as
for accepting or endorsing a draft or check with intent that it
might go upon the market for general use and negotiation with the
credit of its name attached to the paper, just as it was placed on
the market.
Under these circumstances, we are of opinion that the circuit
court was right in holding that in the absence of anything
Page 85 U. S. 622
tending to direct his attention to other matters, the bank
officer had a right to suppose that information was desired of him
only in regard to the signature of the drawers and the state of
their account. These were material facts to be known which both
common sense and commercial law presumed to be within his
knowledge. The answer he gave that the check was good or was all
right must be supposed to be responsive only to these two points.
The genuineness of the payee's name and of the sum filled in the
body of the check were as well known and as easily ascertainable by
the payees themselves as by the bank officer, and unless the
inquiry was so framed as to call his attention to these points, he
had no reason to suppose, in the nature of the transaction, that he
was expected to give information in regard to them. So the response
of "good" should not on sound principle be held to extend to them.
He was under no moral or legal obligation to give an opinion on
these points. He had no reason to suppose that he was asked for
such an opinion, and because he did give an opinion that the check
was good in the only points of which he knew anything, it would be
illogical to hold the bank liable on the ground that the response
meant good absolutely and for all purposes.
The court told the jury very clearly that if the bank officer
had any reason to believe that the defendants were seeking
information in regard to the general validity of the check, or if
they had been asked any question which related to the genuineness
of the check as to amount or the names of the payees, his statement
that it was all right would bind the bank. This was as far as the
court ought to have gone in that direction, for they were not bound
to answer such a question, nor, as we have already said, does the
law or the nature of the business imply that they had any superior
information on these points to that which the defendants had.
The case was certainly very fairly put before the jury, so far
as the rights of the plaintiffs in error are concerned, if the
views here advanced are sound, and the judgment must be
Affirmed.
[
Footnote 1]
Boyce v.
Edwards, 4 Pet. 122;
Johnson v. Collings,
1 East 103.
[
Footnote 2]
Merchants' Bank v. State
Bank, 10 Wall. 647.
