
    New York Produce Exchange Bank, Appellant, v. Twelfth Ward Bank of the City of New York, Respondent.
    First Department,
    December 10, 1909.
    Bills and notes — payment.of raised check by drawee — effect of guaranty of indorsements — liability of guarantor—erroneous charge.
    Where the amount of a check had been raised, the date altered and another payee substituted, the drawee, having paid the same through the Clearing House, relying upon an indorsement by the defendant bank with which it had. been deposited stating that the indorsements were guaranteed, can recover the amount paid. , .
    .The guaranty of the indorsements, was equivalent to a. guaranty of the genuineness of the whole instrument, including the indorsements, excepting only the signature of the drawer. • . . ■
    The drawee was entitled to rely upon such guaranty and, in the absence of notice of the forgery, owed the guarantor no duty to make an investigation.
    In an action to recover the money so paid,.it is error to charge that if the drawer had knowledge of facts sufficient to cause a person of ordinary prudence to suspect that there was something wrong with the check, it was his duty to have stopped payment.
    Under the circumstances no duty of extraordinary vigilance rested either upon ' the drawee or the drawer, and mere lapse of time in discovering the fraud by reason of the delayed return of the check to the drawer is no defense.
    
      Appeal by the plaintiff, the New York Produce Exchange Bank, • from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 4th day of February, 1909, upon, the verdict of a jury, and also from an order entered in said clerk’s office on the 3d day of February, 1909, denying the plaintiff’s motion for a new trial made upon the minutes.
    
      James E. Kelly, for the appellant.
    
      Otto C. Sommerich, for the respondent.
   Scott, J.:

This is an appeal by plaintiff from a judgment in favor of defendant upon the verdict of a jury. Although there is no certificate that the case contains all.the evidence the exceptions are ample to raise all the questions it is necessary to consider.

The action is to recover the amount paid upon an altered check under a mistake of fact. The evidence tended to show the following state of facts: ■

The firm of S. & W. Bauman, on November 24, 1906, drew its check on plaintiff, in favor of E. Jacob & Go., for $5.69. On December 3, 1906, that check was deposited in defendant bank' to the credit of Alexander Seidman, a customer. When so deposited the check had been raised to $2,105.90 ; the date had been altered; the name of the payee had been erased and the name of William Seidman written in as payee, and the check indorsed by William Seidman and Alexander Seidman.

The plaintiff bank paid the amount of the check as raised through the Clearing House and received back the check with the following indorsement upon it signed by defendant:' Received pay-, ment through New York Clearing House, December 3,1906. * * * Endorsements guaranteed.” Under the authorities this was equivalent to a guaranty of the genuineness of the whole of the instrument, including the indorsements, excepting only the signature of the drawer, and in case of forgery rendered the defendant liable primafaeie to refund to plaintiff the amount received on the check on the ground that the payment had been made under a mistake of fact. (White v. Continental Nat. Bank, 64 N. Y. 319; Metropolitan Nat. Bank v. Loyd, 90; 535; Corn Exchange Bank v. Nassau Bank, 91 id. 74.) It was the custom of S. & W. Bauman to have their bank book balanced monthly and when they received back,1 about January 1, 1907, the checks- paid out by plaintiff during' December they discovered the altered check, and on January 2, 1907, notified -plaintiff, who at once notified defendant and demanded repayment of the amount received on the check. Seidmán meanwhile. had drawn down his balance in defendant bank. There is nothing in the evidence, so far as contained in the case on appeal, to suggest that the plaintiff ■ bank failed in any respect in the diligence it owed to defendant. It was entitled'to rely upon the guaranty of the defendant as to the genuineness of the check, and in the absence of notice .of its alteration it - owed defendant no duty to make an investigation. It appears that it did notify defendant as soon as it- received notice of the- forgery, and it is not suggested, except in the charge of the court, that plaintiff failed to communicate to defendant any information received from Bauman. It was also erroneous to charge that if Bauman had knowledge1 of facts sufficient to have warranted a person of' ordinary care and prudence of suspecting that there was something wrong about the check fit was his duty to have stopped payment on the check. Bauman owed no such duty to defendant, and if hé had there is enough in the case to show that the only charge of lack of care in this regard was based upon the fact that the check, although drawn on November twenty-fourth, was not returned to Bauman with the' checks paid in November. No duty of extraordinary vigilance rested either upon plaintiff or Bauman, and mere lapse of time in discovering the fraud constitutes no defense. (Corn Exchange Bank v. Nassau Bank, supra; Frank v. Lanier, 91 N. Y. 112.) The case was submitted to the jury under instructions which left as the crucial point in the case the supposed negligence of S. & W. Bauman, the drawers of the check. This was wholly foreign to the real issues in the case and may easily have influenced the verdict.

The judgment should be reversed and a new trial granted, with costs to the appellant to abide the event.

Ingbaham, McLaughlin, Olabke and Houghton, JJ., concurred.

Judgment and order reversed, new trial ordered, costs to appellant' to abide event.  