252 U.S. 485
CHASE NAT. BANK.
Argued Jan. 14 and 15, 1920.
Decided April 19, 1920.
Mr. Assistant Attorney General Spellacy, for the United states.[ U S v. Chase Nat Bank 252 U.S. 485 (1920) ]
[252 U.S. 485, 488] Messrs. Henry Root Stern and Charles E. Rushmore, both of New York City, for defendant in error.
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:
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, Vt., had anthority to draw on the United States Treasurer. Sergeant Howard was his finance clerk and so [252 U.S. 485, 493] known at the Howard National Bank of Burlington. Utilizing the official blank form, Howard manufactured in toto the draft 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 draft.
Both sides asked for an instructed verdict without more. The trial court directed one for the defendant (241 Fed. 535) and judgment thereon was affirmed by the Circuit Court of Appeals (250 Fed. 105, 162 C. C. A. 277). If important, the record discloses substantial evidec e 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.S. 295, 298 , 39 S. Sup. Ct. 438, 3 A. L. R. 1038
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. Hortsman v. Henshaw, 11 How. 177, 183. But here the whole instrument was forged, never valid, and nobody had better right to it than the collecting bank. [252 U.S. 485, 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 recovery. '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 of Georgia, 10 Wheat. 333, 348; Hoffman v. Bank of Milwaukee, 12 Wall. 181, 192; Leather Mfgs. Bank v. Morgan, 117 U.S. 96, 109 , 6 S. Sup. Ct. 657; United States v. Natl. Exch. Bank, 214 U.S. 302, 311 , 29 S. Sup. Ct. 665, 16 Ann. Cas. 1184.
In Bank of United States v. Bank of Georgia, through Mr. Justice Story, this court said concerning Price v. Neal:
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 [252 U.S. 485, 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., [252 U.S. 485, 1891] L. R. App. Cases, 107; Dedham Bank v. Everett Bank, 177 Mass. 392, 395, 59 N. E. 62, 83 Am. St. Rep. 286; Deposit Bank v. Fayette Bank, 90 Ky. 10, 13 S. W. 339, 7 L. R. A. 849; National Park Bank v. Fourth National Bank, 46 N. Y. 77, 80, 7 Am. Rep. 310; Howard v. Bank, 28 La. Ann. 727, 26 Am. Rep. 105; First National Bank v. State Bank, 107 Iowa, 327, 77 N. W. 1045, 44 L. R. A. 131; Bank v. Trust Co., 168 N. C. 606, 85 S. E. 5, L. R. A. 1915D, 1138; 4 Harvard Law Review, 297, article by Prof. Ames. And see Cooke v. United States, 91 U.S. 389 , 396.
The judgment of the court below is
Mr. Justice CLARKE dissents.
[ Footnote 1 ] Exhibit A:
Office of the Quartermaster.
Fort Ethan Allen, Vermont.
Thesaur Amer (Shield)
December 15, 1914.
Treasurer of the United States 15-51444
Pay to the order of E. V. Sumner, 2d Lt., 2d Cav., A. Q. M., $3571.47, 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 Treasury
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 full.
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.