Railway Exp. Agency v. Bk. of Philadelphia , 168 Miss. 279 ( 1933 )

The general rule is that when the bank which is the drawee of a forged check pays the same to a bona fide holder for value, the bank cannot afterwards recover the payment. The rule does not, as shown by the statement thereof, include the payment of a check to the forger himself, nor the payment to one who knows when he presents it that it is a forgery, nor the payment to one who has such knowledge as to put him on notice or upon inquiry that the check is a forgery. To the rule as first above stated there is an exception, founded upon the general principle which is everywhere growing in favor among the courts, and its application is being extended day by day in order the better to conform our law to the dictates of simple and natural justice, which principle is that money paid by mistake may be recovered back; and the exception founded on that principle is that the bank may recover the money paid if demand is made with reasonable promptness and the payee of the check has not substantially changed his position, and would be in no worse condition if the mistake were corrected than if the bank had refused payment at the time of presentment. And the courts which refuse to recognize the exception just mentioned, concede that in so doing they must and do make an exception to the rule which permits the recovery of money paid under a mistake of fact, but justify it, as does the majority in the case here before us, on the ground of commercial necessity.

The cases which support the exception that the bank may recover the money back if demand is made with reasonable promptness and the payee of the check has not substantially changed his position, and would be in no worse condition if the mistake were corrected than if the bank had refused payment at the time of presentment, are, to give a partial list: Ellis v. Ohio Life Ins. Trust Co., 4 Ohio St. 628, 64 Am. Dec. 610; Iron City Nat. Bank v. Peyton, 15 Tex. Civ. App. 184, 39 S.W. 223; Canadian Bank v. Bingham, 30 Wash. 484, 71 P. 43, 60 L.R.A. 955; First Nat. Bank of Danvers v. First Nat. Bank of Salem, 151 Mass. 280, 24 N.E. 44, 21 Am. St. Rep. 450; First Nat. Bank v. Ricker, 71 Ill. 439, 22 Am. Rep. 104; First Nat. Bank v. State Bank, 22 Neb. 769, 36 N.W. 289, 3 Am. St. Rep. 294; Jones v. Miners Merchants Bank, 144 Mo. App. 428, 128 S.W. 829; First Nat. Bank v. Bank of Wyndmere, 15 N.D. 299, 108 N.W. 546, 10 L.R.A. (N.S.) 49, 125 Am. St. Rep. 588; American Exp. Co. v. State Nat. Bank, 27 Okla. 824,113 P. 711, 33 L.R.A. (N.S.) 188, the latter cases containing an elaborate discussion and the citation of many authorities. In 5 R.C.L. 559, it is said: "It is the opinion of many courts that a drawee of a check who is deceived by a forgery of a drawer's signature, may recover the payment back, unless his mistake has placed an innocent holder of the paper in a worse position than he would have been in if the discovery of the forgery had been made on presentation. Forgeries often deceive the eye of the most cautious experts; and when a bank has been so deceived, it is a harsh rule which compels it to suffer although no one has suffered by its being deceived." And all the modern texts on banking agree with the decisions which hold to that view.

Thus the stated exception is supported, not only by the most obvious considerations of morality and natural justice, but by an array of decisions and texts. Not to recognize and apply it would be to permit a holder who has just cashed a forged check, and who still remains in the bank lobby with the money in his pocket, to say to the bank, which in five minutes thereafter has discovered the forgery and has requested the return of the money, that he has the bank's money in his pocket but will keep it because the bank made a mistake and ought not to have paid it to him.

To a ruling by this court which would sanction such a result as that just stated, and the holding of the majority here does, I must dissent. I recognize, of course, the necessity of practicable general rules and that sometimes such rules must result in hardship and injustice in particular cases. This was expressly recognized in the opinion written by me in Divelbiss v. Burns, 161 Miss. 724, 730, 138 So. 346, a negotiable instruments case. But inasmuch as an ideal society is that wherein its laws conform to pure justice and enlightened morality, our laws in their progression and advancement should be made to approach, wherever possible, and to conform, as nearly as practicably possible, to that ideal. There is no compelling commercial necessity in the proposition that a man shall take and keep his neighbor's money paid on mistake, and for which he has given nothing, and a forged check is nothing, even in a banking transaction and that neighbor a bank, when to correct the mistake will leave the person who received the money in no worse position substantially than if the payment had been originally refused; and there being no such necessity the morality and justice of the situation ought not be displaced and subverted to conserve and preserve an ancient and arbitrary rule.

Cook, J., joins in this dissent.