Tradesmen's National Bank v. Third National Bank , 66 Pa. 435 ( 1870 )

The opinion of the court was delivered, January 3d 1871, by

Read, J.

— The drawee of a bill is held bound to know the handwriting of his correspondent, the drawer; and if he accepts or pays a bill in the hands of a bond, fide holder, for value, he is concluded by the act, although the bill turns out to be a forgery. If he ■ has accepted, he must pay ; and if he has paid, he cannot recover the money back. This was the law of Pennsylvania as settled by the ease of Levy v. The Bank of the United States, 1 Binn. 27. This rule was altered by the 10th section of the Act of the 5th April 1849, Pamph. L. 426, which enacts: “ That wherever any value or amount shall be received as a consideration, in the sale, assignment, transfer or negotiation, or in payment of any bill of exchange, draft, check, order, promissory note or other instrument negotiable within this Commonwealth by the holder thereof from the endorsee or endorsees, or payer or payers of the same, and the signature or signatures of any person or persons represented to be parties thereto, whether as drawer, acceptor or endorser, shall have been forged thereon, and such value or amount by reason thereof erroneously given or paid, such endorsee or endorsees, as well as such payer or payers respectively, shall be legally entitled to recover back from the person or persons previously holding or negotiating the same the value or amount, so as aforesaid given or paid by such endorsee or endorsees, or payer or payers respectively, to such person or persons, together with lawful interest thereon from the time that demand shall have been made for repayment of the same.”

This act, it will be seen, directly reverses in effect the case of Levy v. The Bank, and the drawee may recover back money paid on a forged name of the drawer.

A draft, purporting to be drawn in Pittsburg, Pa., August 12th 1870, in these words:—

“ $2000.

“ At sight pay to the order of ourselves two thousand dollars, value received, and charge the same to account of

“ The Third National Bank, “ Wm. B. Hays & Son.

“Pittsburg, Pa.

[Endorsed.] “ Pay to the order of J. & E. Greenwald.

“ Wm. B. Hays & Son.”

[All this was a forgery.]

[What follows are genuine endorsements.]

“ J. & E. Gbeenwald.”

“Pay C. Clark, Jr., Cash., or order for account of First National Bank, Cincinnati, Ohio.

“Theo. Stanwood, Cashier.

“P. S. Jack, Teller.”

The defendants being the holders of this draft, presented it at the clearing-house, on the 18th August, and it was paid by the plaintiffs. The plaintiffs having discovered the draft was forged, immediately on the 20th August notified the defendants of the forgeries, and demanded repayment of them'; and this was renewed on the 22d and 23d August.

These facts would seem to bring the case within the purview of the Act of Assembly, and to entitle the plaintiffs to a repayment of the amount erroneously paid to the defendants.

If the truth had been known, the defendants never could have presented the draft for payment; and now that it is known, it is equally clear they had no legal claim of any kind upon the plain-biffs.

In what capacity did they present the draft ? Clearly as the holder to demand payment of the payers, and in that capacity the money was received. If it had been refused, they could have instituted proceedings to recover the amount in their own name. The act is a practical one, and looks for repayment from the persons previously holding or negotiating the same of the amount paid by such payer to such person.

If the defendants were the agents of another bank this makes no difference, as in the present instance the money received is in the hands of the defendants, and we are not called upon to decide what would have been their situation if it had been actually paid over by them. The rule of the Clearing-House simply applies to ascertaining that the account was not overdrawn, and it is clear this was not the case with Hays & Son.

Judgment affirmed.