tenth, twelfth, and eighteenth, and the modi fication thereof was proper. Finally, it is claimed that the verdict is against law, in that it is contrary to an instruction wherein the jury were told that, if they believed from the evidence that deceased approached the crossing where the accident occurred at a reckless rate of speed, without exercising any care or caution to ascertain whether any person was on or approaching the same, and that in consequence thereof the collision occurred, he was guilty of wilful and wanton negligence, and their verdict must be for the defendant, notwithstanding any failure on the part of the motorman to exercise ordinary care. In reply to this contention it is sufficient to say that, in our judgment, the evidence was not such that the jury was bound to find that deceased approached said crossing without exercising any care or caution to ascertain whether any person was on or approaching the same, or that in consequence of such approach the collision occurred. The judgment and order are affirmed. We concur: Shaw, J.; Van Dyke, J. Petition for rehearing in banc denied. 4. 5. bank holding it for collection, "for clearing house purposes only," does not constitute a representation that it is its owner. Mere presentation of a check for payment by a bank, which has indorsed upon it a restrictive indorsement, does not constitute a warranty that it is what it purports to be, and has not been altered from the form in which it was originally drawn, when by statute a contract of sale does not imply a warranty except as provided by the statute, which provides that the seller of a note merely warrants that he has no knowledge of defects. A bank cannot recover money paid on a raised check from the collecting bank, merely because the evidence might justify a presumption that it relied upon the representations of the latter as to the genuineness of the paper, unless the evidence is conclusive of the fact, where it does not plead such reliance. (Shaw, J., dissents.) (July 14, 1903.) APPEAL by defendant from a judgment of the Superior Court for the City and County of San Franciso in favor of plaintiff in an action brought to recover money alleged to have been paid by mistake upon a raised check. Reversed. The facts are stated in the opinions. Mr. D. M. Delmas, for appellant: There is no reason for throwing off the loss resulting from the mistake of paying forged commercial paper from the innocent payor to the equally innocent payee; and the loss must remain where it has happened to fall. Price v. Neale, 3 Burr. 1355; Bank of United States v. Bank of Georgia, 10 Wheat. 343, 6 L. ed. 337; London & R. P. Bank v. Bank of Liverpool [1896], 1 Q. B. 7; Cocks v. Masterman, 9 Barn. & C. 902; Boas v. Updegrove, 5 Pa. 518, 47 Am. Dec. 425; Stelwagon v. Wilmington Coal Gas Co. 2 Marv. (Del.) 188, 42 Atl. 449; First Nat. Bank v. Burkham, 32 Mich. 331; National Bank v. National Mechanics' Bkg. Asso. 55 N. Y. 213, 14 Am. Rep. 232; White v. Continental Nat. Bank, 64 N. Y. 316, 21 Am. Rep. 612; National Park Bank v. Seaboard Bank, 114 N.Y. 28, 11 Am. St. Rep. 612, 20 N. E. 632; Germania Bank v. Boutell, 60 Minn. 189, 27 L. R. A. 635, 51 Am. St. Rep. 519, 62 N. E. 327; State v. Wells, F. & Co. 15 Cal. 337; Gloucester Bank v. Salem Bank, 17 Mass. 33. take on forged bill or check, see Land Title & Trust Co. v. Northwestern Nat. Bank, 50 L. R. A. 75, with note on who must bear loss on check or bill issued or indorsed to imposter; also Woods & Malone v. Colony Bank, 56 L. R. A. 929, and Canadian Bank v. Bingham, 60 L. R. A. 955. for re Banking cannot be carried on in violation Mr. Garrett W. McEnerney of the rule that a banker pays paper present-spondent on petition for rehearing. ed to him at his peril. Messrs. Smith & Pringle, amici curiæ, 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 S. W. 982. Henshaw, J., delivered the opinion of the court: This is an action by plaintiff to recover The holder of commercial paper by the 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 upon his warranty if it turns out that any indorsement through which he derives is forged. The facts are that upon the 9th day of December, 1895, the Bank of Woodland, in Yolo county, California, drew its check upon the 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. But neither by the act of presenting, nor by his indorsement at the time of payment, is the holder held to warrant the genuineness of the body of a negotiable instrument. Ibid.; Sutro v. Rhodes, 92 Cal. 117, 28 Pac. 98. 66 Dean. At that time, and for some little time prior thereto, Dean was a client" of the Nevada Bank of San Francisco, and had therein a commercial account, with $1,000 or $2,000 to his credit. Dean fraudulently al| tered the check by changing its date from December 9th to December 13th, and raising its amount from $12 to $22,000. On the 17th of December, 1895, he placed his name, by way of general indorsement, upon the back of the check, and deposited it with the Nevada Bank, making out and delivering with the check the usual deposit tag. The bank thereupon entered upon the pass book of Dean a provisional credit" for the amount of the fraudulent check. On the 17th day of December, 1895, the Nevada Bank placed its clearing house stamp upon the back of the check and sent it to be cleared in the usual way. The clearing house is an association of banks, acting under a regular constitution and agreement signed by all of its members. Both parties to this action are members of it. 66 As between the holder and the collecting bank with which the holder has an account, where the rights of no third parties are concerned, an indorsement of a bill, note, or check in blank to the latter for collection, | does not carry with it title to the paper before actually collected, unless the paper is deposited to make good the account of the depositor, or is immediately drawn against. 1 Dan. Neg. Inst. 4th ed. §§ 340b, 340c; Balbach v. Frelinghuysen, 15 Fed. 675; St. Louis & S. F. R. Co. v. Johnston, 133 U. S. 566, 33 L. ed. 683, 10 Sup. Ct. Rep. 390; Beal v. Somerville, 17 L. R. A. 291, 10 C. C. A. 598, 5 U. S. App. 14, 50 Fed. 647; Middlesex County v. State Bank, 32 N. J. Eq. 467. The indorsement by stamp is an indorse-Its purpose is the adjustment of balances bement created by private agreement, and therefore carries with it such obligation only as the contracting parties have chosen to freight it with. Conventio vincit legem. Created by contract, it has such qualities as its creators chose to impart, and none other. 4 Am. & Eng. Enc. Law, pp. 275, 276; Turley v. Hodge, 3 Humph. 73; Spencer v. Halpern, 62 Ark. 595, 36 L. R. A. 120, 37 S. W. 711. If the drawee pays a forged check, it must, as between itself and the collecting bank, bear the loss, since that bank professedly acted merely as a collecting agent, and warranted nothing. National Park Bank v. Seaboard Bank, 114 N. Y. 28, 11 Am. St. Rep. 612, 20 N. E. tween the members, which is done twice on every business day. The check found its way in regular course from the clearing house to the Crocker-Woolworth National Bank, which was the correspondent of the Bank of Woodland and had funds of the Woodland Bank on deposit, and was honored, under the clearing house rules, by the payment over to the clearing house of the balance found due against it, the Nevada Bank receiving the credit due to it. On the day after the payment was so made that is, on December 18th Dean checked out of the Nevada Bank the sum of $20,000, leaving about $2,000 of the amount of the raised check still to his account, and fled the country. He was a forger, a common criminal, and insolvent. The Crocker-Woolworth Bank did not inform its correspondent, the Bank of Woodland, of the Mr. Robert Y. Hayne also for appel- payment of the check until the 3d of the Jan 632. lant. Messrs. John Garber, Lloyd & Wood, W. S. Wood, Garber, Creswell & Garber, and Ralph C. Harrison for respondent. uary following. On the 4th of January it ascertained from the Bank of Woodland that no such check had been drawn, and consequently knew that a fraud had been perpetrated. It notified the Nevada Bank, and de manded repayment of the $22,000, and of- | equity. And, therefore, in order to recover fered to return the raised check. Mistake is the gravamen of this action. It is alleged in the complaint to have consisted "in the belief on the part of plaintiff that said check had been actually and in fact drawn, made, and issued by said Bank of Woodland for said sum of $22,000, and dated December 13, 1895, and had not been fraudulently or otherwise altered in said or any respects; and such belief in the then present existence of such facts was material to such payment, and without such belief plaintiff would not have paid said sum or any part thereof." money in this form of action, the party must show that he has equity and conscience on his side, and that he could recover it in a court of equity. . . In conscience he only who received the money ought to be obliged to pay it back, and a court of equity would inquire in this case whether the party had received the money or not. Now, if a court of equity would give this plaintiff no relief, we ought not to permit him to recover in a court of law in an action founded upon equitable principles." The same idea is expressed by Lord Mansfield 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- | back money which ought not in justice to be after be more fully considered, and gave judgment for plaintiff. Defendant's motion for a new trial was denied, and from the judgment and from the order denying its motion this appeal is taken. So far as the defendant is concerned, it is not contended but that it acted with perfect honesty and in the utmost good faith in presenting the check, and it is not in controversy but that upon payment by the plaintiff the money was in turn, upon the check demand of the depositor, paid over to him. No benefit was reaped, no advantage gained, by defendant in the transaction. As between the defendant and its depositor, Dean, the findings clearly establish that the bank was but the agent for collection merely, and as such did, as in law was its duty to do, pay over the money to its principal upon his demand. kept, is very beneficial, and therefore much In London & R. P. Bank v. Bank of Liverpool [1896], 1 Q. B. 7, Mr. Justice Mathew says: "If the mistake is discovered at once, it may be the money can be recovered back; but if it be not, and the money is paid in good faith, and is received in good faith, and there is an interval of time in which the position of the holder may be altered, the principle seems to apply that money once paid cannot be recovered back. That rule is obviously, as it seems to me, indispensable for the conduct of business." This action, then, as we have said, is one for the recovery of money paid by mistake, and it is of consequence to bear in mind at the outset of this consideration the wellsettled principles governing the right of recovery in such cases. The action, even when in form a legal action for money had and received, 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 another under a mistake the burden of loss resulting from the common error ordinarily will be left where the parties themselves have placed it, and so a recovery can only be had where, in equity and good conscience, the defendant should be called upon to refund. Holly v. Missionary Soc. 180 U. S. 284, 45 L. ed. 531, 21 Sup. Ct. Rep. 395. settled both in England and in this state that money paid under a mistake of fact may be recovered back, however negligent the party paying may have been in making the mistake, unless the payment has caused such a change in the position of the other party that it would be unjust to require him to refund." Mr. Daniel (2 Dan. Neg. Inst. 3d ed. § 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." Mr. Daniel is here speaking of the forgery of the drawer's signature. In discussing that narrower class of forgeries, such as the one at bar, where the signatures are all genuine, but the amount of the check has been increased, a kind of forgery known as " raising a check," he says where money is paid by a bank on such a check by a mistake, the general rule is that it may be recovered from the party to whom it was paid, as having been paid without consideration. This is undoubtedly the "general rule," as Mr. Daniel declares, but the rule is always subject to the most important qualification, which he points out in his next sentence: "The bank is not bound to know anything more than the drawer's signature, and, in the absence of any circumstance which inflicts injury upon another party, there is no reason why the bank should not be reimbursed." 2 Dan. Neg. Inst. 5th ed. § 1661. And Professor Keener (Keener, Quasi Contracts, p. 67) says: "To say that a plaintiff can recover money paid by mistake, notwithstanding the recovery will throw a loss upon the defendant, provided the plaintiff is under no obligation to the defendant, is to lose sight of the grounds upon which a recovery is allowed, namely, that the defendant has money which in conscience he cannot keep. It seems difficult to establish, in a case where the defendant cannot be said to be more responsible for the mistake made by the plaintiff than is plaintiff himself, that he should in conscience return to the plaintiff money paid under mistake, where the result of such payment is to throw a loss upon the defendant which he would not have suffered had not the payment been made. The principle that forbids the defendant enriching himself at the expense of the plaintiff should clearly forbid the plaintiff indemnifying himself against loss at the expense of an innocent and blameless defendant." We have quoted at this great length, because these principles are all important in determining whether a recovery should be allowed or withheld from plaintiff. The application of them, however, is frequently affected by other well-settled rules of mercantile law to which consideration must always be paid. Thus, it is the law beyond controversy that the drawee of a negotiable instrument is chargeable with knowledge of the genuineness of the signature of the drawer, of the condition of his funds, and of the state of his credit. If the drawee pays upon the forged signature of the drawer, he cannot recover Again, where, as in the present case, the forgery consists in changing the body of the check so as to raise the amount, as the drawee is not charged with knowledge of the handwriting of whomsoever may have prepared the body of the check, he may, even if negligent, recover upon the ground of mistake, provided that his recovery would not pass the burden of loss over to an innocent payee who had changed his condition upon faith of the payment. That is to say, where the drawee has done any act to give currency to the paper, as by acceptance, etc., on the faith of which the holder has taken, or the condition of the holder will be altered for the worse in any way,-as, where he received the check for collection and paid over the proceeds to the principal before he received notice of the alteration,-then the party paying is precluded from recovering by the ordinary rules of estoppel; otherwise not. Still further, an implied warranty of genuineness accompanies the unrestricted indorsement and transfer of any negotiable instrument. It is an assurance to the drawee of its genuineness in all respects, saving that of the name of the drawer alone, with which knowledge the drawee is charged. Chitty, Bills, ed. 1845, p. 245; Jones v. Ryde, 5 Taunt, 488; Wilkinson v. Johnson, 3 Barn. & C. 428; Herrick v. Whitney, 15 Johns. 240; Story, Bills of Exchange, §§ 110, 235. This warranty of a general indorsement is declared in our state by § 3116 of the Civil Code. An examination of the cases will show that, in all well-considered adjudications, recognition, tacit or express, is given to these principles. Their ultimate analysis amounts to this: That plaintiff, even if negligent, may recover if his act has not changed the position of an innocent defendant to his detriment. Therefore, where defendant has become the owner of the instrument uninfluenced by any act of the plaintiff, or where by general indorsement defendant has warranted the instrument, and has estopped himself from denying ownership and genuineness, plaintiff may have recovery. Thus, in Bank of Commerce v. Union Bank, 3 N. Y. 230, a raised check was presented by defendant bank bearing its general indorsement, and a recovery was allowed. It was there argued that, notwithstanding the defendant bank was in fact merely a collecting agent, its general indorsement was a warranty of genuineness. In Marine Nat. Bank v. National City Bank, 59 N. Y. 67, 17 Am. Rep. 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 client 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 tified. 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 prinwas 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 17th 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 good referred only to the genuineness of the drawers' signature and to the condition of his account. The case most nearly analogous to the one at bar is that of National Bank v. National Mechanics' Bkg. Asso. 55 N. Y. 211, 14 Am. Rep. 232. The genuine check of a depositor in the plaintiff's bank, drawn to one Greenleaf, was taken to the bank and there certified. After certification it was fraudulently raised by Greenleaf from $56.75 The facts in the case at bar summarized, amount to this: By the affirmative error of plaintiff, money was paid to defendant, who was the agent of Dean. The defendant, after receiving payment, did, as in law it was bound to do (Svendsen v. State Bank, 64 Minn. 40, 31 L. R. A. 552, 58 Am. St. Rep. 522, 65 N. W. 1086), pay the money to its principal upon his demand, and thus changed its position so that, if recovery is had, the loss must inevitably be borne by it. The ap |