
    * The President, Directors and Company of the Gloucester Bank versus The President, Directors and Company of the Salem Bank.
    Where a banking company paid notes, on which the name of the president had been forged, and neglected for fifteen days to return them, it was held that they had lost their remedy against the person from whom the notes had been received.
    Assumpsit for money had and received. Trial was had on the general issue, November term, 1818, before the Chief Justice ; when it appeared that on the 30th of January, 1818, the cashier of the Salem bank informed the cashier of the Gloucester bank, by letter of that date, that he had on hand, in notes of the Gloucester bank, above 8500 dollars, and wished an exchange for Essex or Boston notes. On Saturday, the 7th of February following, the cashier of the Gloucester bank drew a check on the Boston bank for 8500 dollars, which Mr. Mansfield, one of the directors of the Gloucester bank, took to Salem on the 9th of February, and delivered it to the cashier of the Salem bank, as he was going to Boston. He did not receive the Gloucester bank notes at that time, but took a check drawn by the cashier of the Salem bank for the same amount, to remain until Mr. M.’s return from Boston. On the 10th of February he saw the cashier of the Salem bank, who delivered him a package containing, as he said, 8500 dollars in notes of the Gloucester bank; upon which Mr. M. delivered to him the check he received the day before. The check drawn by the cashier of the Gloucester bank was duly paid to the Salem bank. The pack age received by Mr. M. was delivered the next day to the cashier of the Gloucester bank, without being opened.
    It was admitted that the notes purported to be of the Gloucester bank. The cashier, after he received them, took out 210 dollars, which he applied to the use of the bank, and the residue were replaced in the same package, in which also they had remained until the trial, except when they were examined, as hereafter mentioned.
    * On the 31st of March, 1818, the cashier of the Glou- [ * 34 ] cester bank informed the cashier of the Salem bank, by letter, that there were a great proportion of the notes, he received by Mr. Mansfield, of the doubtful dates, not to say counterfeits, and he wished an exchange for good notes of the Gloucester bank, or of any bank in Boston or Essex. On the 6th of April following, the cashier of the Salem bank answered this letter, and declined to take back the notes. On the 23d of June, 1818, the cashier of the Gloucester bank again wrote, proposing to the Salem bank to join with the Gloucester bank in selecting suitable persons to decide on the notes in question, with others of a like kind. The defendants refused to accede to this proposal. The cashier of the Salem bank was at the Gloucester bank on the 26th of February, 1818, when the cashier of the Gloucester bank proposed an examination of the notes in the package to ascertain whether they were genuine, which proposal was declined.
    The plaintiffs offered evidence to prove that the name of John Somes, president of the Gloucester bank, was forged to a part of the notes. The chief justice refused to admit the evidence, and directed a nonsuit. The cause was continued on the plaintiffs’ motion to set aside the nonsuit, which was argued at the last November term in this county.
    
      Prescott, Saltonstall, and Cummings, for the plaintiffs.
    Two questions arise in this case. 1. Whether it was competent for the plaintiffs, after accepting the bills in the package, to recover back the money paid for them, in case they had discovered and given notice of the forgery immediately, or as soon as they had opportunity to examine the notes.
    2. Whether they have lost their remedy by loches or delay in giving notice and making demand on the defendants.
    The plaintiffs claim the money paid for these forged notes, on the ground that the consideration, upon which * it was paid, has failed. There is no question but this [ * 35 " action may be maintained, where payment of a promissory note is made in counterfeit notes, as in Young vs. Adams 
      
      ; or where counterfeit notes are paid for goods purchased, as in Maride vs. Hatfield 
      . It is on the ground that the notes are not what they are represented to be, and are no consideration for the discharge of the promise, or sale of the goods. So if money be paid for a bond that is forged, or a lease made without authority, t may be recovered back; for the consideration on which it was paid has failed .
    In the case at bar, upon the representation of the defendants, that they had 8500 dollars of the notes of the Gloucester bank, the plaintiffs gave them their check for that amount. The check was cash. It was paid when presented. But a portion of the notes delivered to the plaintiffs, as notes of the Gloucester bank, were forged. The defendants delivered the notes to the agent of the plaintiffs in a sealed package, in the evening, knowing that the package could not be opened, and the notes examined until the next day. If the plaintiffs, under these circumstances, had the next day offered to return the spurious notes, and had demanded the money paid for them, it is believed there would be no question of their right to recover it back. It would be a case, where the plaintiffs would have paid their money for notes which were represented to be genuine, but which proved to be forgeries; and where they had examined them, and given notice to the defendants, as soon as they were expected, or had opportunity to do it. The case in principle would be the same as if the package had contained blank paper. The defendants would get the money for nothing, when both parties intended an adequate consideration should be given for it. It would be against equity and all conscience that they should retain it.
    It may be said that a person, even a body corporate, is bound to know its own signature; and if he voluntarily [ * 36 ] *pay a note or bill, which he afterwards discovers to be a forgery, the law will not assist him to recover back the money.
    If that were a general rule, which is not admitted, it would not be applicable to the present case ; for here it was known that the package would not be opened until the next day. This was the course of the business. The notes were taken without an opportunity of examining them, upon the faith of the defendants’ representation that they were genuine.
    But the plaintiffs deny that there is any peremptory rule of law, that a person, who has by mistake paid a note or bill, to which his
    
      signature as promisor or acceptor had been forged, may not, under any circumstances, recover back the money. The utmost extent to which the rule has been carried is, that it shall not be allowed, where the holder, or other parties must be presumed to be preju diced by the promisor or acceptor’s not detecting the forgery, and refusing payment, when the note or bill was presented to him. The leading case on the subject is that of Price vs. Neale 
      . There one bill was paid, without being first accepted. By the credit given by the plaintiff’s honoring this bill, the defendant was induced to take a second. The plaintiff lay by nearly two years before he brought his action ; and there were two endorsers. It cannot be inferred from any thing in this case, that the admission of the genuineness of the bill, so far as to pay it, would estop the party afterwards from showing the fraud, and recovering back the money, provided the holder, or other parties to the bill, would not thereby be placed in a worse situation than when it was presented for payment.
    In the next case which appears to have arisen , the Court consider it as a bill paid by the drawee, whose acceptance was forged. This bill had been paid six days before notice of the forgery was given to the holder. There was an endorser, who would have been discharged by the delay. Two of the judges rest their opinion upon * this ground, and one was [ * 37 ] in favor of the plaintiff, considering the case of Price vs. Neale overruled by the cases of Jones vs. Ryde & Al. 
      , and Bruce vs. Bruce 
      . The case of Jones vs. Ryde Al. may be considered as decided on the ground, that the defendant had lost his remedy against the endorser. In Bruce vs. Bruce, the bill was drawn by a servant of the victualling office, and paid by them. The principal point of difference between this case and that of Price vs. Neale is, that in one the bill was drawn by a servant of the drawee, and in the other by a general correspondent; and what is very material, that the victualling office was a public body or corporation, and not so likely to know the signatures of their officers, as a merchant is to know his own. In the cases of Jenny vs. Fowler & Al. 
      , Cooper vs. Le Blanc 
      , and Leach vs. Buchanan 
      , the signatures of the defendant had been admitted by him; and the plaintiffs took the bills on the credit of that admission.
    2. The plaintiffs have not forfeited their right to recover back the money, by loches or delay to demand it. This in itself creates no consideration, and gives no equitable or legal right to the defendants to keep the money. The rule requiring prompt notice to be given, as far as any has been established, was made to protect the holders of a bill or note from loss by the delay, and has been applied only, where they might and probably would be prejudiced by it. No precise time, however, for returning spurious notes or bills has ever been fixed by law. In Price vs. Neale, there was a delay of nearly two years, and an endorser to be affected.
    
      Smith vs. Mercer is the only case, in which it has been decided that a drawee, whose acceptance has been forged, shall not recover back the money he has paid. In this case, notice was not given to the holder until six days after the bill was paid. There were two endorsers, who must have been discharged by the delay; and the defendant would have lost the money, if the plaintiff had [ * 38 ] been * permitted to recover in that action. It was on this ground that the decision was in his favor. In Jones vs. Hyde & Al., the bill drawn on the treasury was purchased on the 23d of August, and was held until the 5th of October, before notice was given of the forgery, and the money was recovered back. The plaintiff had paid his money for a certificate which proved to be a forgery in part, and the defendant did not appear to have incurred any damage by the delay.
    In the case at bar, the notes were received on the evening of the 10th of February, and on the 16th the plaintiffs suspended their business, and the defendants had notice that their notes had been counterfeited; and on the 26th of the month, the cashier of the Salem bank was in the Gloucester bank, and was informed that part of the notes they had received of the defendants were forgeries, and was requested to take them back, but he refused . Here was a delay of five days only in fact; for the defendants had virtual notice on the 16th, and at the utmost it was but sixteen days. It is evident that this could, by no possibility, prejudice the defendants. There was no other party on the notes, to be discharged by it; and, according to the course of business in this and other banks, the defendants could not know of whom they received the notes, so as to resort to them. This is not pretended.
    The plaintiffs are then entitled to recover the money paid by them for these spurious bills, unless a delay to demand it for a fortnight, which occasioned no damage to the defendants, is to preclude them. The plaintiffs contend that there is no authority and no principle of law to warrant this.
    But the defendants are not free from loches on their part. They took the notes without sufficient examination; for, in point of fact, the signature of the president was as well known to their officers, as to the officers of the Gloucester * bank. In passing the [ * 39 notes to the plaintiffs they represented them to be genuine, which they probably believed, but did not know to be true, and which was false. If there was any fault, the first and greatest was in the defendants.
    If promisors or acceptors are, in any case, where the holder is not prejudiced, precluded from recovering back the money they have paid for a forged note or acceptance, such rigorous rule ought not to be applied with the same strictness to a bank. A corporation can act only by its officers and servants; and those who receive the notes are not the same that sign them. The president is not expected to be, and usually is not present, when notes are received It is no part of his duty, and in this case he was dead.
    Upon these grounds the plaintiffs contend that, by accepting the notes in the manner stated in this case, they are not precluded from showing that they were forged, and were no consideration f.r the money given for them; and that they have not lost their right or remedy to recover it back, by any loches or delay on their part.
    
      Pickering, Webster, and Nichols, for the defendants.
    The notes being admitted by the plaintiffs to be good, in all respects but the signature of the president, it is not competent for the plaintiffs to deny that signature, unless they show that the notes got into circulation without their default. The argument in the preceding case applies to this point.
    Admitting that it would be a good defence for the plaintiffs, if they were sued upon the notes, to prove that they were not signed by the president, yet when they have once paid them to a bona fide holder, they ought not to recover back the money.
    It is said by the plaintiffs, that they took the notes upon our representation that they were good notes; and this not being true, that they ought to recover back the money. We made no other representátion, than what * every person is sup- [ * 40 ] posed to make, when he presents a note to a bank for payment. The holder believes it to be good, but he does not warrant it. It was so in our case.
    The cases of Young vs. Adams, and Markle vs. Hatfield., were cases of notes of third persons. The present is where the plaintiffs claim a right to recover, back the amount of notes purporting to be their own, and so received by them. The peculiar principle of this case is, that we stated nothing to the plaintiffs, but what was within their own knowledge. They knew, or were bound to know, when they received the notes, whether they were good or not.
    The case of Price vs. Neale is precisely in point. Lord Mansjeld said it was incumbent on the plaintiff to be satisfied that the bill drawn on him was the drawer’s hand, before he accepted or paid it; but it was not incumbent on the defendant to inquire into it This case has been always considered as law, and the reason there are so few similar cases is, that the principle settled by it has. never been disputed.
    
      Smith vs. Mercer was decided upon the same principle, and it has been recognized” as law in New York, and by this Court . The point decided in the two cases last referred to was, that where a person gives counterfeit notes to another, not a party to those notes, in payment of an existing debt, it is no payment, and the creditor may still sue upon his contract as unsatisfied.
    But in the case of Ellis vs. Wild 
      , it was decided that if a person offers bad notes in exchange for goods, without warranting the notes, the person who receives them must abide by the loss. See also Fydell vs. Clark 
      , to the same point.
    Upon this ground we contend, that we should not be bound to take back the notes, even if they were those of a third person. When we held these notes, we were not indebted to the plaintiffs, but passed them to them in exchange for their check, without warranting them. [ * 41 ] * We further contend, that the delay of the plaintiffs ought to bar them of a right to recover, were there no other reason. At least as early as the 11th of February, the plaintiffs received these notes, and considered them as their own. On the 26th of the same month, they wished the cashier of the Salem bank to examine them, and on the 31st of March, they gave an intimation that part of them were counterfeit. There was then a delay of fifteen days, at least, before any notice was given to the defendants. This is an unreasonable delay, and not to be permitted even in common mercantile transactions, much less in banking institutions.
    The reason, for which immediate notice is required to be given to endorsers of promissory notes, is applicable to the present case, viz., the mischief which might result from delay. What safety would there be in commercial negotiations, were the principle admitted that a banking company, who had once received what they considered their own notes, should, at any subsequent period, have a right to call upon those of whom they had received them, to take them back, on the ground that they were counterfeit ?
    The case of Price vs. Neale was not so strong as the present. There Price, the acceptor of a bill, was prevented from recovering back the amount, because he ought to have known the handwriting of the drawer. Here the plaintiffs did not know their own signature.
    It would seem that, as it respects bank notes, the law should be more favorable to persons receiving them, than to the receivers of bills of exchange. Bank notes are considered as the common currency. Persons receiving them rely more on the appearance of the paper and impression, than on the signatures. In bills of exchange, reliance is wholly upon the signatures. If then a bank suffers its own paper and plates to get into circulation, when they want nothing but a signature to make them good notes; if the signature is afterwards forged, and the bank receives * them of a bona fide holder, it would be extremely unjust, [ * 42 ] if they could compel him to take them again.
    The cause was argued at the last November term in this county, and was continued under advisement to this term, and now
    
      
      l) 6 Mass. Rep. 182.
    
    
      
       2 Johns. 455.
    
    
      
       6 D. E. 606, Crispin vs Read.
      
    
    
      
       3 Burr. 1354.
    
    
      
       6 Taunt. 81, Smith vs. Mercer.
      
    
    
      
       5 Taunt. 488.
    
    
      
       Ibid
    
    
      
      
        2 Sir. 946.
    
    
      
       Ibid. 1051.
    
    
      
       4 Esp. 226.
      
    
    
      
       See the facts stated in the preceding case, between these part/es.
    
    
      
       See Markle vs. Hatfield, and Young vs. Adams.
      
    
    
      
       6 Mass. Rep. 321.
    
    
      
       1 Esp. Rep. 447.
    
   Parker, C. J.,

delivered the opinion of the Court. The question in this case is, whether, as between these parties equally innocent and ignorant, the loss shall remain where the chance of business has placed it, or shall be shifted back upon the Salem bank, who may be considered as having, by good fortune, rid themselves of it.

In all such cases, the just and sound principle of decision has been, that if the loss can be traced to the fault or negligence of either party, it shall be fixed upon him. Generally, where no fault or negligence is imputable, the loss has been suffered to remain where the course of business has placed it.

The case of Price vs. Neale is the most prominent among the cases of this kind ; and Lord Mansfield pronounced it a very clear case. Neale, the defendant, was the innocent and bond fide holder of a bill purporting to have been drawn by one Sutton on Price. He notified Price of it, who immediately sent his servant to pay the bill, and take it up, which he did. Neale held another bill pur porting to be drawn by the same Sutton on Price, payable in six weeks; which, on being sent to Price, was accepted by him, and was afterwards paid. The name of the drawer was forged on both bills ; and the action was brought by Price, to recover the money paid on both. He failed in his suit, because it was not permitted, that an innocent sufferer should throw his loss on one equally innocent ; and because (which Sewall, J., thought, as he stated in the case of Young vs. Adams, was the principal reason), there was negligence on the part of Price in paying one bill, and accepting and paying the other, without scrutinizing the handwriting of the drawer; with which, it was presumed, he was acquainted. And Chief Justice Kent adopted the same oninion in the case of Markle vs. Hatfield.

[ * 43 ] * There seems to be nothing in the doctrine here laid down, so unreasonable as to make the case a questionable one. It would seem to be a principle of natural justice, that where a loss has happened, he, through whose means it happened, should sustain it, although innocent, rather than he, who is not only innocent, but wholly without imputation of negligence. And there are no cases since decided, which militate with this principle in England. If a man will accept a forged bill of exchange, when . presented to him by a bona fide holder ignorant of the forgery, he shall be bound by his acceptance. And this has been the law, ever since the case of Jenny vs. Fowler, cited from Strange, the principle of which has been recognized and acted upon in many nisi prim cases in very recent times, as may be seen by the following cases read at the bar.—2 Campb. 456.—6 Taunt. 76.—3 Esp. 60.—4 Esp. 226.

In the case of Young vs. Adams, Sewall, J., treats the case of Price vs. Neale as undoubted law.

Some cases varying from that, but still having a strong resemblance to it, have occurred, which, without reason, have excited some doubts whether the doctrine is now adhered to. Such is the case of Jones vs. Ryde & Al., and the case just mentioned of Young vs. Adams. In these cases, the plaintiffs were permitted to recover the contents of false securities, against those who had innocently paid or delivered them. But the distinction taken by Sewall, J., in the latter case, is the true one, viz., that in those cases the parties did not pay money upon contracts supposed to be their own, and which they were bound to know, but received, in discharge of another contract, something which purported to be of value, but which was worth nothing. And in conformity with this principle, it has been decided in New York, and in this state, that if a man pays a debt with counterfeit money, he shall be held to make it good; although he received and parted with the notes as good.—2 Johns. 455.— 5 Mass. Rep. 182; and in England, in 5 Taunt. 488. [ * 44 ] * And now we are to consider, whether the facts in the case before us bring it within the principle of Price vs. Neale, and the cases which have been governed by that; or of the other cases of payment in spurious notes, to discharge an antecedent contract, or for the purchase of bills of exchange or other marketable commodities. And we think the former principle must be applied.

When the cashier of the Salem bank delivered the bundle of notes to the cashier of the Gloucester bank, as the delivery was not at the bank, nor in banking hours, and was accompanied with a declaration that they were good bills, a reasonable time should have been allowed to count and examine them. Had this been done the next morning at the Gloucester bank, and the notes been immediately returned, or a tender of them made, there can be no doubt an action might have been sustained. For the notes could not be considered as received in payment, until there had been an opportunity to examine and count them. The circumstances, under which they had been received by Mr. Mansfield, would not have hound the Gloucester bank to take the risk of their being good.

But on the 11th of February, they were received by the cashier of the Gloucester bank, counted by him, and placed in the vault; and no notice taken of them until the 26th of February, fifteen days after they were received; and even then nothing done, but an offer to the cashier of the Salem.' bank to examine them, who declined; and they thus remained, without any express disavowal of them by the Gloucester bank, until the 31st of March. Here, we think, was a degree of negligence, which takes away all right to call on the defendants to make good the notes. There was an actual adoption of them by the Gloucester bank as their own notes, through their cashier, who, acting in the course of business intrusted to him, of which paying and receiving notes is a principal, part, must be considered as representing the bank in this transaction.

* The consequence of making the Salem bank answera- [ * 45 J ble, under such circumstances, would be very mischievous. Men would never feel safe in suffering bank notes to pass through their hands, if they were liable to be called upon, several weeks after, to make good such as might be discovered to be spurious. Even when passing a bad note, in the ordinary course of business, to pay a debt, a delay of a month or a week, in making the demand, would throw a suspicion upon the case, and make it difficult to recover. But when a debt is paid to a bank, in notes purporting to be their own, and which they have the best means of detecting, if spurious, nothing short of immediate notice to the payer, and demand of him for payment, could authorize them to maintain an action for the money. A party thus called upon has a right to call upon him from whom he received the notes, and this latter upon the one behind him, &c., until they are traced back to him who forged them.

But there must be some limitation to the right in point of time, or the whole community would be in commotion. And the true rule is, that the party receiving such notes must examine them as soon as he has opportunity, and return them immediately. If he does not, he is negligent, and negligence will defeat his right of action.

This principle will apply in all cases where forged notes have been received; but certainly with more strength, when the party receiving them is the one purporting to be bound to pay. For he knows better than any other, whether they are his notes or not; and if he pays them, or receives them in payment, and continues silent, after he has had sufficient opportunity to examine them, he should be considered as having adopted them as his own.

It has been said in argument, that notice was given to the Salem bank, as soon as the notes were found to be counterfeit, and that an intimation was given, as early as the 26th of February, that they were questionable. But it was then too late. Fifteen days before, the Gloucester bank had received notice, that some fraud [ * 46 ] had been practised * upon their notes; and their fears were so strong, that they thought it necessary to close the doors of their bank; and in all this time no examination was made of the notes in question, nor any intimation given to the Salem bank that they were not genuine. The defendants then had no means of looking up those from whom they had received the notes; and although there is no evidence in the case from which it can be ascertained that they could have saved themselves, if they had received earlier notice, the law itself will presume that a change of circumstances had taken place, which would justify them in resisting the action.

If it be said that the question, whether there has been unreasonable delay or negligence, is a question of fact for the jury, the answer is, that a judge, on the facts in this case, would be bound to instruct the jury, that, in point of law, there had been negligence; so that a new trial would be altogether fruitless.

Motion overruled.  