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tenth, twelfth, and eighteenth, and the modi. bank holding it for collection, "for fication thereof was proper.

clearing house purposes only," does not con. Finally, it is claimed that the verdict is

stitute a representation that it is its owner.

Mere presentation of a check for against law, in that it is contrary to an in

payment by a bank, wbich has indorsed struction wherein the jury were told that, if upon it a restrictive indorsement, does not they believed from the evidence that deceased constitute a warranty that it is what it pur. approached the crossing where the acci.

ports to be, and has not been altered from the

form in which it was originally drawn, when dent occurred at a reckless rate of speed,

by statute a contract of sale does not imply a without exercising any care or caution to warranty except as provided by the statute, ascertain whether any person was on or ap- which provides that the seller of a note proaching the same, and that in consequence

merely warrants that he has no knowledge of

defects. thereof the collision occurred, he was guilty

8. A bank cannot recover money paid of wilful and wanton negligence, and their

on a raised check from the collecting verdict must be for the defendant, notwith- bank, merely because the evidence might jusstanding any failure on the part of the mo- tify a presumption that it relied upon the reptorinan to exercise ordinary care.

resentations of the latter as to the genuine

ness of the paper, unless the evidence is conIn reply to this contention it is sufficient

clusive of the fact, where it does not plead to say that, in our judgment, the evidence

such reliance. was not such that the jury was bound to find that deceased approached said crossing

(Shaw, J., dissents.) without exercising any care or caution to ascertain whether any person was on or ap

(July 14, 1903.) proaching the same, or that in consequence of such approach the collision occurred. The judgment and order are affirmed.

the Superior Court for the City and

County of San Franciso in favor of placatiff We concur: Shaw, J.; Van Dyke, J. in an action brought to recover money alleged

to have been paid by mistake upon a raised Petition for rehearing in banc denied.

check. Reversed.

The facts are stated in the opinions.
Mr. D. M. Delmas, for appellant:

There is no reason for throwing off the loss CROCKER-WOOLWORTH NATIONAL resulting from the mistake of paying forged BANK of San Francisco, Respt.,

commercial paper from the innocent payor

to the equally innocent payee; and the NEVADA BANK of San Francisco, Appt.

loss must remain where it has happened to

fall. (139 Cal. 564.)

Price v. Neale, 3 Burr. 1355; Bank of

United States v. Bank of Georgia, 10 Wheat. A drawee bank which pays a raised | 343, 6 L. ed. 337; London & R. P. Bank v. check under the mistaken belief that Bank of Liverpool (1896), 1 Q. B. 7; Cocks it has not been altered cannot compelv. Masterman, 9 Barn. & C. 902; Boas v. the collecting bank to refund the excessive amount after it has, in good faith and with Updegrove, 5 Pa. 518, 47 Am. Dec. 425 ; Stelout notice of the fraud, turned the proceeds wagon v. Wilmington Coal Gas Co. 2 Marv. over to the payee. where the indorsement of (Del.) 188, 42 Atl. 449; First Nat. Bank v. the collecting bank is restrictive, and the Burkham, 32 Mich. 331; National Bank v. drawee knows that it holds the check merely National Mechanics' Bkg. Asso. 55 N. Y. 213, for collection.

14 Am. Rep. 232; White v. Continental Nat. 2. Clearing house rules that paper not

owned by a bank, but deposited for Bank, 64 N. Y. 316, 21 Am. Rep. 612; Naclearance, shall bear a stamped indorse- tional Park Bank v. Seaboard Bank, 114 N.Y. ment which shall guarantee the validity of all 28, 11 Am. St. Rep. 612, 20 N. E. 632; Ger. prior indorsements, abrogates, as between mania Bank v. Boutell, 60 Minn. 189, 27 L. members of the clearing house, a statutory R. A. 635, 51 Am. St. Rep. 519, 62 N. E. provision that a general indorsement warrants that the paper is “in all respects what 327; State v. Wells, F. & Co. 15 Cal. 337 ; it purports to be."

Gloucester Bank v. Salem Bank, 17 Mass. 3. An indorsement of a check by a 33.

NOTE.—As, to effect of clearing house rules take on forged bill or check, see Land Title & and customs, see cases in note to Yardley v. Trust Co. v. Northwestern Nat. Bank, 50 L. R. Pbiller, 25 L. R. A. 824.

A. 75, with note on who must bear loss on check As to effect of paper indorsed in blank by col- or bill issued or indorsed to imposter ; also lecting bank, including restrictive indorsements, Woods & Malone v. Colony Bank, 56 L. R. A. see note to National Butchers & D. Bank v. 929, and Canadian Bank v. Bingham, 60 L. R. Hubbel, 7 L. R. A. 852.

A. 955. As to recovery back of money paid by mis


Banking cannot be carried on in violation Mr. Garrett W. McEnerney for re of the rule that a banker pays paper present. spondent on petition for rehearing. ed to him at his peril.

Messrs. Smith & Pringle, amici curie, Germania Bank v. Boutell, 60 Minn. 189, also for respondent on petition for rehear27 L. R. A. 635, 51 Am. St. Rep. 519, 62 N. E. ing. 327; Northwestern Nat. Bank v. Bank of Commerce, 107 Mo. 402, 15 L. R. A. 102, 17 Henshaw, J., delivered the opinion of the S. W. 982.

court: The holder of commercial paper by the This is an action by plaintiff to recover very act of receiving payment upon it war- money paid by mistake upon a raised check. rants that he has a valid title, and is liable The facts are that upon the 9th day of Deupon his warranty if it turns out that any cember, 1895, the Bank of Woodland, in Yolo indorsement through which he derives is county, California, drew its check upon the forged.

Crocker-Woolworth National Bank of San Redington v. Woods, 45 Cal. 428, 13 Am. Francisco for $12, to the order of one A. H. Rep. 190.

Dean. At that time, and for some little But neither by the act of presenting, nor time prior thereto, Dean was a “client" of by his indorsement at the time of payment, the Nevada Bank of San Francisco, and had is the holder held to warrant the genuine. therein a commercial account, with $1,000 or ness of the body of a negotiable instrument. $2,000 to his credit. Dean fraudulently al.

Ibid.; Sutro v. Rhodes, 92 Cal. 117, 28 Pac. tered the check by changing its date from De98.

cember 9th to December 13th, and raising its As between the holder and the collecting amount from $12 to $22,000. On the 17th bank with which the holder has an account, of December, 1895, he placed his name, by where the rights of no third parties are con- way of general indorsement, upon the back cerned, an indorsement of a bill, note, or of the check, and deposited it with the Necheck in blank to the latter for collection, vada Bank, making out and delivering with does not carry with it title to the paper be the check the usual deposit tag. The bank fore actually collected, unless the paper is thereupon entered upon the pass book of deposited to make good the account of the Dean a “provisional credit” for the amount depositor, or is immediately drawn against. of the fraudulent check. On the 17th day of

1 Dan. Neg. Inst. 4th ed. $8 3406, 340c; December, 1895, the Nevada Bank placed its Balbach v. Frelinghuysen, 15 Fed. 675; St. clearing house stamp upon the back of the Louis & 8. F. R. Co. v. Johnston, 133 U, S. check and sent it to be cleared in the usual 566, 33 L. ed. 683, 10 Sup. Ct. Rep. 390; Beal way. The clearing house is an association of v. Somerville, 17 L. R. A. 291, 10 C. C. A. banks, acting under a regular constitution 598, 5 U. S. App. 14, 50 Fed. 647; Middlesex and agreement signed by all of its members. County v. State Bank, 32 V. J. Eq. 467. Both parties to this action are members of it.

The indorsement by stamp is an indorse-Its purpose is the adjustment of balances bement created by private agreement, and tween the members, which is done twice on therefore carries with it such obligation only every business day. The check found its way as the contracting parties have chosen to in regular course from the clearing house to freight it with. Conventio vincit legem. Cre

the Crocker-Woolworth National Bank, ated by contract, it has such qualities as its which was the correspondent of the Bank of

Woodland and had funds of the Woodland creators chose to impart, and none other. 4 Am. & Eng. Enc. Law, pp. 275, 276;

Bank on deposit, and was honored, under the Turley v. Hodge, 3 Humph. 73; Spencer v.

clearing house rules, by the payment over to Halpern, 62 Ark. 595, 36 L. R. A. 120, 37 s. the clearing house of the balance found due

against it, the Nevada Bank receiving the W. 711.

credit due to it. On the day after the payment If the drawee pays a forged check, it must,

was so made—that is, on December 18thas between itself and the collecting bank, Dean checked out of the Nevada Bank the bear the loss, since that bank professedly

sum of $20,000, leaving about $2,000 of the acted merely as a collecting agent, and war- amount of the raised check still to his ac. ranted nothing.

count, and fled the country. He was a forger, National Park Bank v. Seaboard Bank,

common criminal, and insolvent. The 114 N. Y. 28, 11 Am. St. Rep. 612, 20 N. E. Crocker-Woolworth Bank did not inform its 632.

correspondent, the Bank of Woodland, of the Mr. Robert Y. Hayne also for appel. payment of the check until the 3d of the Janlant.

uary following. On the 4th of January it Messrs. John Garber, Lloyd & Wood, ascertained from the Bank of Woodland that W. S. Wood, Garber, Creswell & Gar- no such check had been drawn, and conseber, and Ralph C. Harrison for respond quently knew that a fraud had been perpeent.

trated. It notified the Nevada Bank, anil de


manded repayment of the $22,000, and of- / equity. And, therefore, in order to recover fered to return the raised check.

money in this form of action, the party must Mistake is the gravamen of this action. show that he has equity and conscience on It is alleged in the complaint to have con- his side, and that he could recover it in a sisted " in the belief on the part of plaintiff court of equity. .. In conscience he that said check had been actually and in fact only who received the money ought to be drawn, made, and issued by said Bank of obliged to pay it back, and a court of equity Woodland for said sum of $22,000, and dated would inquire in this case whether the party December 13, 1895, and had not been fraudu had received the money or not. Now, if a lently or otherwise altered in said or any re-court of equity would give this plaintiff no spects; and such belief in the then present relief, we ought not to permit him to recover existence of such facts was material to such in a court of law in an action founded upon payment, and without such belief plaintiff equitable principles.” would not have paid said sum or any part The same idea is expressed by Lord Mansthereof.”

field in Moses v. Macferlan, 2 Burr. 1012: The cause was tried without a jury. The “This kind of equitable action, to recover court made findings, some of which will here- 1 back money which ought not in justice to be after be more fully considered, and gave kept, is very beneficial, and therefore much judgment for plaintiff. Defendant's motion encouraged. It lies only for money which for a new trial was denied, and from the ex æquo et bono the defendant ought to rejudgment and from the order denying its fund.

It lies for money paid by motion this appeal is taken.

mistake, or upon a consideration which hapSo far as the defendant is concerned, it pens to fail, or for money got through imis not contended but that it acted with per- position (express or implied), or extortion, fect honesty and in the utmost good faith or oppression, or an undue advantage taken in presenting the check, and it is not in con- of the plaintiff's situation, contrary to laws troversy but that upon payment by the plain. made for the protection of persons under tiff the money was in turn, upon the check those circumstances. In one word, the gist of demand of the depositor, paid over to him. this kind of action is that the defendant, No benefit was reaped, no advantage gained, upon the circumstances of the case, is obliged by defendant in the transaction. As between by the ties of natural justice and equity to the defendant and its depositor, Dean, the refund the money." findings clearly establish that the bank was In London & R. P. Bank v. Bank of Liver. but the agent for collection merely, and pool [1896), 1 Q. B. 7, Mr. Justice Mathew as such did, as in law was its duty to do, says: “If the mistake is discovered at once, pay over the money to its principal upon his it may be the money can be recovered back; demand.

but if it be not, and the money is paid in good This action, then, as we have said, is one faith, and is received in good faith, and there for the recovery of money paid by mistake, is an interval of time in which the position and it is of consequence to bear in mind at of the holder may be altered, the principle the outset of this consideration the well- seems to apply that money once paid cansettled principles governing the right of re- not be recovered back. That rule is obvious. covery in such cases. The action, even when ly, as it seems to me, indispensable for the in form a legal action for money had and re- conduct of business.” ceived, always addresses itself to the equi- In National Bank v. National Mechanics' table consideration of the court. The gov- Bkg. Asso. 55 N. Y. 213-216, 14 Am. Rep. erning principle is this: That where equally | 232, the principle is thus stated: “ It is now innocent persons have dealt with one an- settled both in England and in this state other under a mistake the burden of loss re- that money paid under a mistake of fact may sulting from the common error ordinarily be recovered back, however negligent the will be left where the parties themselves party paying may have been in making the have placed it, and so a recovery can only be mistake, unless the payment has caused such had where, in equity and good conscience, the a change in the position of the other party defendant should be called upon to refund. that it would be unjust to require him to Ilolly v. Missionary Soc. 180 U. S. 284, 45 refund.” L. ed. 531, 21 Sup. Ct. Rep. 395.

Mr. Daniel (2 Dan. Neg. Inst. 3d ed. 8 In Straton v. Rastall, 2 T. R. 370, Buller, 1655) says: “ Where the bank discovers the J., speaks as follows: “Of late years this forgery immediately, and demands restitucourt has very properly extended the action tion, offering to return the check before the for money had and received. It is founded holder has lost anything by regarding the on principles of justice, and I do not wish matter as all right, we cannot help thinkto restrain it in any respect. But it must be ing that it should be entitled to recover remembered that it was extended on the prin- back the amount. Mr. Chitty seems to have ciple of its being considered like a bill in 'had the same opinion. And Professor Par


sons has expressed it in favorable terms. against an innocent payee, if the recovery And the better doctrine, as we think, is that would subject such payee to loss. Such has the bank should have the right to recover, been the rule since Price v. Neale, 3 Burr. unless the circumstances of the holder had 1354, decided by Lord Mansfield in 1762. been changed so as to render it unjust." Again, where, as in the present case, the

Mr. Daniel is here speaking of the forgery forgery consists in changing the body of the of the drawer's signature. In discussing that check so as to raise the amount, as the narrower class of forgeries, such as the one drawee is not charged with knowledge of the at bar, where the signatures are all genuine, handwriting of whomsoever may have prebut the amount of the check has been in- pared the body of the check, he may, even if creased, a kind of forgery known as “raising negligent, recover upon the ground of misa check,” he says where money is paid by a take, provided that his recovery would not bank on such a check by a mistake, the gen. pass the burden of loss over to an innocent eral rule is that it may be recovered from payee who had changed his condition upon the party to whom it was paid, as having faith of tlie payment. That is to say, where been paid without consideration. This is the drawee has done any act to give cur. undoubtedly the “ general rule," as Mr. Dan- rency to the paper, as by acceptance, etc., on iel declares, but the rule is always subject to the faith of which the holder has taken, or the most important qualification, which he the condition of the holder will be altered points out in his next sentence: The bank for the worse in any way,—as, where he reis not bound to know anything more than ceived the check for collection and paid over the drawer's signature, and, in the absence the proceeds to the principal before he reof any circumstance which inflicts injury ceived notice of the alteration,—then the upon another party, there is no reason why party paying is precluded from recovering the bank should not be reimbursed." 2 Dan. by the ordinary rules of estoppel; otherwise Neg. Inst. 5th ed. 8 1661.

not. And Professor Keener (Keener, Quasi Con- Still further, an implied warranty of gentracts, p. 67) says: “ To say that plain- uineness accompanies the unrestricted intiff can recover money paid by mistake, not-dorsement and transfer of any negotiable inwithstanding the recovery will throw a loss strument. It is an assurance to the drawee upon the defendant, provided the plaintiff is of its genuineness in all respects, saving that under no obligation to the defendant, is to of the name of the drawer alone, with which lose sight of the grounds upon which a re knowledge the drawee is charged. Chitty, covery is allowed, -namely, that the defend. Bills, ed. 1845, p. 245; Jones v. Ryde, 5 ant has money which in conscience he can- Taunt, 488; Wilkinson v. Johnson, 3 Barn. not keep. It seems difficult to establish, in a & C. 428; Herrick v. Whitney, 15 Johns. 240; case where the defendant cannot be said to Story, Bills of Exchange, $$ 110, 235. This be more responsible for the mistake made by warranty of a general indorsement is dethe plaintiff than is plaintiff himself, that he clared in our state by $ 3116 of the Civil should in conscience return to the plaintiff Code. money paid under mistake, where the result An examination of the cases will show of such payment is to throw a loss upon the that, in all well-considered adjudications, defendant which he would not have suffered recognition, tacit or express, is given to these had not the payment been made. The prin- principles. Their ultimate analysis amounts ciple that forbids the defendant enriching to this: That plaintiff, even if negligent, himself at the expense of the plaintiff should may recover if his act has not changed the clearly forbid the plaintiff indemnifying him- position of an innocent defendant to his self against loss at the expense of an inno- detriment. Therefore, where defendant has cent and blameless defendant."

become the owner of the instrument uninfluWe have quoted at this great length, be enced by any act of the plaintiff, or where cause these principles are all important in by general indorsement defendant has wardetermining whether a recovery should be al- ranted the instrument, and has estopped himlowed or withheld from plaintiff. The appli- self from denying ownership and genuinecation of them, however, is frequently affect- ness, plaintiff may have recovery. Thus, in ed by other well-settled rules of mercantile Bank of Commerce v. Union Bank, 3 N. Y. law to which consideration must always be 230, a raised check was presented by defendpaid.

ant bank bearing its general indorsement, Thus, it is the law beyond controversy that and a recovery was allowed. It was there the drawee of a negotiable instrument is argued that, notwithstanding the defendant chargeable with knowledge of the genuine bank was in fact merely a collecting agent, ness of the signature of the drawer, of the its general indorsement was warranty of condition of his funds, and of the state of his genuineness. In Marine Nat. Bank v. Nacredit. If the drawee pays upon the forged tional City Bank, 59 N. Y. 67, 17 Am. Rep. signature of the drawer, he cannot recover 305, a check genuine as to the drawer's sig. nature, but forged as to the payee's name and to $15,000, and was deposited by Greenleaf raised as to the amount, was presented to with the defendant. Greenleaf was a ciient D. & Co., gold brokers, in payment for some of defendant, and made other deposits upon purchased gold. They sent the check to that date, amounting, with the raised check, plaintiff bank, the drawee, where it was cer- to $20,000. Upon the same day he drew out cified. D. & Co. then paid it into the defend-in money substantially all of his deposits, ant bank, which accepted it. The defendant including the amount of the raised check. bank in turn presented it to plaintiff bank, Upon the next day the plaintiff bank paid the where it was paid. Upon the same day the defendant bank the amount of the raised plaintiff discovered the alterations, and gave check through the clearing house. Upon disnotice to the defendant, with the demand covery of the fraud the action was brought. that it refund. Throughout the action the It is pointed out that the defendant bank defendant was treated as the owner of the had paid the money upon the raised check check. Its defense in support of its refusal to its fraudulent depositor, and thus had beof payment was based upon the certification come the owner of it, and that it had done by the plaintiff bank of the check after it this uninfluenced by any act of the plaintiff had been raised, and the decision of the court bank. The court says: “On general prin. was largely addressed to this matter; it ciples, mere negligence in making the mistake being held that the certification went no is not, and has been already shown, sufficient further than to the genuineness of the draw- to preclude the party making it from deer's signature and to the amount of his manding its correction. Such negligence funds or credit. In Third Nat. Bank v. does not give to the party receiving the pay. Allen, 59 Mo. 310, defendants were private ment the right to retain what was not his bankers, and bought a raised check from a due, unless he has been misled and prejudiced stranger. They presented it to plaintiff, the by the mistake. If his loss had been incurred drawee, and it was paid. Upon prompt dis- and become complete before the payment, he covery of the forgery and notification to the should not, in justice, be permitted to avail defendants a recovery was allowed. Here himself of the mistake of the other party to the defendants were the owners of the check, shift the loss upon the latter.

If the and had purchased it upon their private ac- defendant had shown that it had suffered count, and plaintiff, not having in any way loss in consequence of the mistake committed induced the defendants to change their posi- by the plaintiff, as, for instance, if, in contion, was entitled to the recovery. Parke v. sequence of the recognition by the plaintiff of Roser, 67 Ind. 500, 33 Am. Rep. 102, was al. the check in question, the defendant had paid most precisely the case of Marine Nat. Bank out money to its fraudulent depositor,—then, v. National City Bank, 59 N. Y. 67, 17 Am. clearly, to the extent of the loss thus susRep. 305, the defense turning merely on the tained the plaintiff should be responsible. declaration of the bank that the check was But it appears that all the money which good. The defendant was the owner of the Greenleaf, the fraudulent depositor obtained raised instrument. In Espy v. Bank of Cin- from the Mechanics' Banking Association on cinnati, 18 Wall. 604, 21 L. ed. 947, a raised the credit of the altered check, was paid out check offered in payment for bonds and gold on the 16th of February, the day before the purchased had been sent to the bank for in- check was presented to the plaintiff. formation, and the teller of the bank re- The recognition of this check by the plaintiff plied that it was good. The principle is there on the 17tli of February could not have had announced that where money is paid on a any influence upon the action of the Mechanraised check by mistake, neither party being ics' Banking Association in paying Greenin fault, the general rule is that it may be leaf's drafts on the 16th. The loss occarecovered back as paid without considera- sioned by those payments had been fully intion; but, if either party has been guilty of curred by the Mechanics' Banking Associanegligence or carelessness by which the other tion before the plaintiff had made the mishas been injured, the negligent party must take which it seeks in this action to have corbear the loss. And it was held that the rected." declaration of the bank's teller that it was The facts in the case at bar summarized, good referred only to the genuineness of the amount to this: By the affirmative error of drawers' signature and to the condition of plaintiff, money was paid to defendant, who his account. The case most nearly analogous was the agent of Dean. The defendant, after to the one at bar is that of National Bank v. receiving payment, did, as in law it was National Mechanics' Bkg. Asso. 55 N. Y. 211, bound to do (Svendsen v. State Bank, 64 14 Am. Rep. 232. The genuine check of a Minn. 40, 31 L. R. A. 552, 58 Am. St. Rep. depositor in the plaintiff's bank, drawn to 522, 65 N. W. 1086), pay the money to its one Greenleaf, was taken to the bank and principal upon his demand, and thus changed there certified. After certification it was its position so that, if recovery is had, the fraudulently raised by Greenleaf from $56.75 'loss must inevitably be borne by it. The ap

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