
    THE MARINE NATIONAL BANK, Plaintiff and Respondent, v. THE NATIONAL CITY BANK, Defendant and Appellant.
    I. Check.—Bill of Exchange. —Altered in Amount and Payer’s Name.—Certification of.—Bight, etc., of certifying Drawee and of Holder.
    1. Aeeeptam.ce, contract of, what it does not guarantee.
    
    
      a. It does not guarantee either the correctness of the amount, or that there has been no alteration in the name of the payee.
    
    1. It only guarantees the genuineness of the drawer's signature,
    • a. This is so whether the acceptance is before or after an alteration.
    2. Recovery back by the certifying drarnee of money paid hy him on a check, the amount of which had been raised and the payee’s name altered before certification.
    Mistake of Fact.
    1. Money so paid in ignorance of the alteration ma/y be recovered back from the person to whom it was paid, as having been paid under mistake of fact,
    
    UNLESS
    the person to whom the payment was made, or those under whom he derived title to the check or bill, received the check or bill in ignorance of the alteration and on the faith of the certification, knowing the check to have been in the state when certified, as when it was received in payment parted with value, or is equally innocent with the certifying drawee, and has parted with value.
    Therefore,
    3. Estoppel.
    1. Where the drawee, after the check or bill has been raised in amount and the name of the payee changed by a party who had no authority to make the alteration, in ignorance of the unauthorized alteration, certifies the check, and the party whose name had been thus without authority inserted in the check as payee thereof, receives the check in ignorance of the alteration, knowing that the drarnee certified it in the condition in which it was presented, and on the faith of the certification parts with value to the full amount of the altered sum, and the drarnee thereafter pays the check or Ull,
    
    he is estopped
    from claiming that the payment was made under a mistake of fact, and from showing that the sum and name of the payee contained in the check were not inserted therein by the drawer, or by his authority, and cannot recover back the money from the payee, who so receives the check or one lawfully claiming under him:
    
    
      Before Barbour, Ch. J., Monell and Freedman, JJ.
    
      Decided December 31, 1873.
    4. Maxim.
    1. Where one of two innocent persons must suffer, the loss should fall on the one who has been chiefly instrumental in producing it. a. This maxim applies to such a case, and under it the drawee cannot recover.
    
    II. Certification of a check by a bank is equivalent to an acceptance of a ■bill of exchange by the drawee.
    1. The obligation is the same in the two cases.
    Appeal from judgment entered on referee’s report.
    The action was to recover money paid under an alleged mistake of facts.
    Lunt Brothers gave to a stranger their check upon the Marine National Bank, for twenty-five, dollars, payable to the order of Henry Smith. The next morning a person purchased gold of Berippe & Co., and offered in payment the same check, which had then been altered or “raised” to §4,679.96. Before delivering the gold, Berippe & Co. required the check to be certified. It was taken to the Marine National Bank, and by it certified as good A Thereupon, Berippe & Co. received the check and delivered the gold. The check was endorsed by Berippe & Co. (the name of Henry Smith, the payee, having been erased, and that of Berippe & Co. inserted before they received it), and deposited by them in the defendant’s bank, and was cleared by them through the clearing-house the following morning. Buring the day the plaintiff discovered that the check had been altered, and demanded of the defendant a return of the money. The action was tried by a referee, who found the facts, and gave the plaintiff judgment.
    The defendants appealed.
    
      Arnoux, Ritch & Woodford, attorneys, and Wm.. Henry Arnoux, of counsel for appellant.
    
      I. The plaintiff having certified the check in question after the alteration was made, thereby undertook, as an original obligation, to pay to the order of Derippe & Co. the amount therein expressed, and the said Derippe & Co., having parted with value on the faith of such certification, the plaintiff was not entitled to recover, and the decision of the referee was erroneous.
    
      First. The certification was an original undertaking by the plaintiff to pay the check. “ The certificate of a bank that a check drawn payable by the bank is good, operates not as a promise to pay the debt of another, but as an engagement of the bank to pay the debt as its own” (Mead v. Merchants’ Bank, 25 N. Y. 13).
    The certification of a check imposes upon the bank an obligation to retain the amount which by the certificate it admits it has on hand to the credit of the drawer, to meet the check when presented, and to pay the same-to the holder on demand. And whether this admission is true or false, the bank is bound thereby to an innocent holder of the check (Farmers’ & Mech. Bk. v. Butchers’ & Drovers’ Bk., 16 N. Y. 125).
    
      Second. Certification that a check is good is equivalent to. payment (Smith v. Miller, 43 N. Y. 171).
    II. The plaintiff is estopped by its own acts from denying the validity of the check in question for the-amount and to the payee therein mentioned (Mc.Williams v. Mason, 31 N. Y. 294).
    The Marine Bank, by certifying this check in the hands of the holder, held him out, or allowed him to appear, as having full power of disposing the property to Derippe & Co., and they, innocent third parties, were thus led into dealing with such apparent owner, and they will be protected.
    Such acts will constitute an estoppel (See McNeil v. Tenth National Bank, 46 N. Y. 329).
    The referee has declared that Derippe & Co. were innocent third parties.
    
      But the learned referee concludes that the fact of the forgery presents an insuperable obstacle to defendants’ successful defence.
    Here, again, the doctrine of estoppel steps in and says, that though the filling up of the check is a forgery, the acceptor is estopped from setting up the fact (Van Duzer v. Howe, 21 N. Y. 531).
    And any alterations made before delivery would not affect the validity of such instrument in the hands of a T)ona-1ide holder for value (5 Ala. 297; 1 Branch, 10 : 11 N. H. 395).
    But even if, as between the plaintiff and Derippe & Co., this position is untenable, which it is not, it is the law, as between the plaintiff and defendant.
    III. The title to said check passed to Derippe & Go. by delivery, and from them to the defendant, and the plaintiff had no right of action against defendant while it retained possession of said check.
    Choses In action, such as bonds and mortgages and promissory notes not endorsed, may be well transferred by delivery only (Westerlo v. De Witt, 36 N. Y. 340, 345; Duffield v. Elles, 1 Bligh, N. S. 497, 542; Brown v. Brown, 18 Conn. 410).
    
      John H. Platt, attorney, and Waldo Hutchings, of counsel for respondent, urged :
    I. The rule of law is, that when, in consequence of a mutual mistake, one party has received the property of another, he must refund, and this without reference to vigilance or negligence (Kingston Bank v. Elinge, 40 N. Y. 391).
    II. The Marine Bank paid the check in question, both banks believing that it was genuine, that is to say,, under a mutual mistake of fact, and it is entitled, therefore, to recover back the money paid under that mistake.
    For (1) a check is a bill of exchange, of which the bank on which it is drawn is the drawee (Chapman v. White, 6 N. Y. 412 ; Meads v. Merchants’ Bank, 25 N. Y. 143).
    
    (2) Certifying a check amounts, in law, to accepting a bill of exchange (Farmers’ Bank v. Butchers & Drovers’ Bank, 16 N. Y. 125; Barnes v. Ontario Bank, 19 N. Y. 152; at p. 159 ; Meads v. Merchants’ Bank, 25 N. Y. R. 143, at p. 146, etc., per Wright, J. [dissenting] ; Irving Bank v. Wetherald, 36 N. Y. 335; Merchant’s Bank v. State Bank, 10 Wall, 604, at pp. 647, 648).
    (3) The acceptance of a bill of exchange is not an admission nor a certificate that the body of the bill is genuine (Bank of Commerce Union Bank, 3 N. Y. 230).
    (4) A drawee who has paid a bill of exchange under the belief that it was genuine, whereas the body of the bill had been altered fraudently, can recover the amount that he has paid under such mistake of fact,, provided the drawer’s signature remained genuine (The National Bank of Commerce v. The National Mechanics’ Banking Association, decided at the General Term of the Superior Court of the city of New York, in January, 1873, not yet reported; Bank of Commerce v. Union Bank, 3 N. Y. 230).
    (It will be noted that this case is cited with approval in the case of the Park Bank v. The Ninth National Bank, reported in the 46th N. Y. p. 77).
    III. The only person who could transfer the title to the check drawn by Lunt Bros, was the payee Smith, named therein. The City Bank therefore obtained money from the Marine Bank on the presentation of a forged title, and the Marine Bank can recover in this action (Bank of Commerce v. Union Bank, 3 N. Y. 330 ; Canal Bank v. Bank of Albany, 1 Hill, 287, 290).
    IV. It is the party endorsing the bill who gives it currency and vouches for its genuineness, so far as the body of the bill is concerned, and the acceptor speaks only to the genuineness of the drawer’s signature (Bank of Commerce y. Union Bank, 3 N. Y. 230; Canal Bank v. Bank of Albany, 1 Hill, 287),
    Y. It is proper, therefore, that the party who endorses a forged check and thus gives it currency, should bear the loss. It is directly the result of his own negligence (National Bank of North America y. Bangs, 106 Mass. 441); and as each party to the bill has his remedy, against his immediate endorser, the first endorser is the one on whom the loss must fall eventually (Bank of Commerce v. Union Bank, 3 N. Y. 230 ; Canal Bank v. Bank of Albany, 1 Hill, 287).
    Were the whole instrument a forgery, the case of the National Park Bank v. The Ninth National Bank (46 N. Y. 77) holds that the Marine Bank could not recover, and the distinction between the case and the one before the court is this : In that case the bank misleads the holders of the check by its false certificate of a fact which is peculiarly within the knowledge of the bank, and which it is bound to know, viz., the handwriting of its customer and correspondent. But even this rule is not inflexible. When the holders of a check take it under circumstances which should have put them on their guard, and their failure to make inquiry as to its genuineness amounts to negligence, the drawee of the check who has paid it under a mistake of fact is not estopped to show even the forgery of the drawer’s signature, and on doing so he may recover the money that he has paid under such mistake of fact. To illustrate this principle: A stranger comes into a broker’s office and asks the price of a given amount of gold in currency. The stranger goes out and returns and presents a forged check for the amount drawn to the broker’s order. The broker takes the check. This is held to be such negligence on the part of the broker, that the bank that pays the check to another bank in which the broker deposits the check, may recover from the broker the amount of the check (National Bank of North America v. Bangs, 106 Mass. 441).
    Thus, even the rule that the drawee is bound to know his correspondent’s signature and pays to his own loss,, in case it turns out to be forged, does not apply when the holder of the check takes it under the circumstances of the case just cited; and in the present case ¡Derippe & Co. not only took the check from a stranger, but the drawers of the check were also strangers to them, so far as never having had business transactions with a man makes him a stranger.
    VII. To make Derippe & Co. bona-fide holders for value of the check, it must appear not only that they gave value for it, but that it was transferred to them by one who had the title to it. Unless a draft has been accepted and endorsed in blank so as to become payable to bearer, the only persons who can transfer a title to it are those whose names appear on the instrument. ¡¡Now the only parties whose names appeared on the paper when Derippe & Co. claim they acquired a title to it were Lunt Brothers (the drawers), Derippe & Co. (the payees), and the Marine bank (the drawees). They were all the original parties to the instrument (even were it genuine), and of whom can Derippe & Co. claim to be transferees for value ? Of the acceptors ? They had possession of the draft for a special purpose and not as owners. Of the drawers? The draft they drew was payable to the order of Henry Smith. Of the stranger who offered it to them ? He had no title. His name did not appear on the instrument.
    The bank accepted the draft, by certifying it, before it came into the possession of Derippe & Co., but the payees of a bill of exchange accepted before it is delivered to them, are none the less original parties to the bill.
   By the Court.—Monell, J.

It is claimed by the appellant that the principle which controlled the decision of this court in the National Bank of Commerce v. the National Mechanics Banking Association (35 N. Y. Sup. Ct. R. 282) has no application to this case. In that the check was certified before alteration ; in this case it was certified after alteration. The difference, it is claimed, so distinguishes the cases, that the present case is not embarrassed by a former decision.

In the case referred to, a check for a small amount was certified by the bank. It was afterwards altered to a larger sum, and negotiated. It was paid by the certifying bank, through the clearing-house, without discovering the alteration. It having been found that the payment was made under a mistake of facts, it was held the certifying and paying bank could recover.

In this case, however, it is insisted that by the certification of the check after its alteration, the bank incurred an obligation which estops it from claiming the benefit of a mistake.

It is conceded, that had the bank, upon presentation of the check, paid the amount over its counter, it could recover. This is precisely in accordance with Bank of Commerce v. Union Bank (3 N. Y. R. 230) and the late case in this court of the same plaintiff against the National Mechanics Banking Association. In the first of these cases, a sight draft was altered after it was issued, and paid by the drawee in ignorance of the forgery, and it was held he could recover.

No greater effect can be given to a bank certification of a check, than to the acceptance by the drawee of a bill of exchange. The obligation is the same in the two cases (Farmers Bank v. B. & D. Bank, 16 N. Y. R. 125; Barnes v. Ontario Bank, 19 Id. 152, 159). And in neither case does the obligation extend beyond a guarantee of the genuiness of the drawer’s signature. It is not a guarantee that the amount is correct (Bank of Commerce v.Union Bank, supra).

The plaintiffs, by their certification of the check, are not estopped from showing the forgery of the amount, or the alteration of the name of the payee. The signature of the drawer was genuine, and there the obligation of the payee terminated.

There is nothing, therefore, in the contract of acceptance of a bill of exchange, or of the certification of a check, which can distinguish it from an actual payment except so far as it may operate as an estoppel; and if a recovery can be had in the latter case, it can also be had in the other. It is the mistake offacts which enables a party to recover ; and there can be no difference in principle between an actual payment of money under a mistake, and the incurring of' an obligation to pay money.

It is substantially found, and is undoubtedly true, that Derippe & Co. received the check in ignorance of the alteration, and upon the faith of the plaintiff s' certificate; and the defendants insist that the plaintiffs should be estopped from claiming, as against the defendants, the benefit of the mistake, upon the principle as well of estoppel, as also that when one of two innocent persons must suffer, the loss should fall upon the one who has been chiefly instrumental in producing it.

The reliance of Derippe & Co. was upon the certificate written upon the check. It conveyed to them the information (if it did not contain the obligation) that it was “good” for the amount specified in it. In ignoranee of the alteration, that amount they took to be $4,679.96 ; and they parted with that sum to the holder, and received the check innocently and ignorantly.

Had no other rights intervened, doubtless the certifying bank could legally have claimed the benefit of the mistake. It could have insisted that it had merely guaranteed the genuiness of the drawers’ signature, and had assumed no obligation as to the amount inserted, and having paid it under a mistake, could probably | have recovered.

1' But I am of opinion that other rights had intervened, and that Derippe & Co. were authorized to rely upon, as they did rely upon, the certificate upon the check, i When it was presented, it purported to be payable to their order; it was payable to their order, and filled for the full sum of $4,679.96, and there was nothing to excite suspicion. Yet Derippe & Co., before they would part with value, required the check to be certified. It was accordingly taken to the bank, the certificate put upon it, and then delivered to Derippe & Co. for its full amount.

A general definition of an estoppel in pais is thus given in Continental Bank v. Bank of Commonwealth (SOW. Y. JR. 575, 581): “It is argued that theré must have been some act or declaration of the plaintiff or of its agent to the defendant, assignors, which so affected the conduct of the latter to their injury, as that it would be unjust now to permit the plaintiff to set up the truth of the case to the contrary of its mistaken act or declaration.” In that case the certificate of the bank teller was a forgery. But the defendant before receiving the check, caused inquiry to be made of the teller, who pronounced it “all right.” It was held that the bank was estopped by the declaration of its teller from questioning the genuineness of the certification. In that case the receiver of the check relied upon the declaration of the teller, and parted with value only upon such declaration. In the case before us, Derippe & Co. relied on the act of the bank, and parted with value only upon such act. The declaration in the one case, and the act in the other, were both and equally made under a mistake, yet they must both and equally have the same effect. They equally affected the conduct of the receivers of the checks, and as Derippe & Co. were led by the act of the plaintiffs into the belief that the check was “good” for the whole' amount, it must estop the latter from “setting up the truth to the contrary of its mistaken act.”

I think also that regarding the parties as equally innocent, the loss should fall on the plaintiffs as being the chief instrument in producing it. It innocently and under a mistake certified the check. It thereby induced the receiver to part with value. Without the certificate, Derippe & Co. doubtless would not have received the check, and would not have been injured, but receiving it, on 'the strength of the certificate, the injury may be fairly attributable to the act of the plaintiff.

There was nothing in the evidence to impair the entire good faith of Derippe & Co. There was nothing to excite suspicion or to put them on inquiry. In respect to the alterations of the check, both in the amount and in the name of the payee, the bank which certified it in its altered condition, and Derippe & Co., who afterwards received it, must equally be regarded as ignorant and innocent.

The plaintiffs, being estopped by their act of certification of the check from alleging the truth as against Derippe & Co., are equally estopped as against the defendants who received the check from Derippe & Co.

The learned referee arrived at a different conclusion, but not without much doubt and misgiving. He however thought another objection was conclusive, namely, that Derippe & Co. did not get title to the check, for the reason that the erasure of Smith’s name and the insertion of Derippe’s & Co’s. was a forgery. It was no more a forgery than the alteration of the amount. Either rendered the check void as to the drawer. But it does not follow that as between Derippe <fc Co. and the plaintiff, the alterations in the check will impair their relative rights. Had the bank not paid the check, Derippe & Go. would have been remediless against the drawers. But I apprehend the question between Derippe & Co. and the plaintiff is quite a different one, and it does not lie with the latter to inquire into the former’ s title. It was certified after the payee’s name had "been altered, and in the condition it was as to the amount, and so came to Derippe & Co.

The same state of facts existed in Bank of Commerce v. Union Bank (supra). The payee’s name had been altered. But the court put its decision on the ground of a payment made under a mistake of facts, not because the holder had no title.

I am of opinion that the conclusions of tire referee were erroneous, and that his judgment should he reversed, the order of reference vacated, and a new trial granted, with costs to the appellant to abide the event-

Barbour, Ch. J., and Freedman, J., concurred.  