cover back money paid upon a security bearing a forged signature of himself, supposing it, at the time of payment, to be his genuine signature. We have no doubt that he may. This is entirely clear in case he was induced to make the payment by fraud and misrepresentation. Nor is it necessary that fraud and misrepresentation should exist. An innocent mistake, whether arising from natural or temporary infirmity or otherwise, made without fault upon his part, entitles him to the same relief. How far this right would be affected by his neglect to give prompt notice of the mistake or by any change affecting the situation or rights of the person to whom the payment is made, we are not called upon to consider": Welch v. Goodwin, 123 Mass. 71, 25 Am. Rep. 24.

1. As Between Banks, one of which has paid out money to the other on a forged indorsement of a commercial negotiable instrument, the prevailing rule is the same as where a bank or other drawee has paid out money to a private individual under similar circumstances. Thus, a bank that pays to another a forged order, check or draft indorsed in blank, by the forger, received and indorsed by the first to the paying bank for collection, may recover the money back, provided the bank paid is in no worse condition or position than if payment had been refused by the correspondent bank. Delay by the latter bank in giving notice of the forgery is immaterial, unless the bank paid is thus placed in a worse position than if it had received notice earlier: First Nat. Bank v. First Nat. Bank, 4 Ind. App. 355, 51 Am. St. Rep. 221, 30 N. E. 808. A bank which negligently cashes a forged check purporting to be drawn upon another bank, and upon its indorsement of the check receives payment of the check from the drawee bank, is liable to the latter bank for the amount received, upon subsequent discovery and notice that the check was forged. The drawee bank is not precluded from recovering, on the ground that, relying upon the indorsement of the other bank, it paid the check without investigation of its genuineness: Corn Exchange Bank v. Nassau Bank, 91 N. Y. 74, 43 Am. Rep. 655; Central Nat. Bank v. North River Bank, 44 Hun, 114; Ellis v. Ohio Life Ins. etc. Co., 4 Ohio St. 628, 64 Am. Dec. 610; People's Bank v. Franklin Bank, 88 Tenn. 299, 17 Am. St. Rep. 884, 12 S. W. 716.

If a person named as payee in a check indorses it to a bank, which, in turn, indorses and forwards it to the bank on which it was drawn for collection, and the latter credits it to the former, it may, on discovering that the check has been fraudulently altered after it was issued by changing the name of the payee and raising the amount, cancel such credit, and the indorser, in an action by the discounting bank, cannot defend on the ground that such check has been paid by the drawee: Birmingham Nat. Bank v. Bradley, 103 Ala. 109, 49 Am. St. Rep. 17, 15 South. 440.

In First Nat. Bank v. Northwestern Nat. Bank, 40 Ill. App. 640, it was held that if a bank, for the purpose of obtaining payment of a check upon another bank, indorses the check, it guarantees the genuineness of all preceding indorsements and thereby becomes liable for the genuineness of a forged indorsement purporting to be that of the maker, and liable for any money received on the check. This case was affirmed on appeal: First Nat. Bank v. Northwestern Nat. Bank, 152 Ill. 296, 43 Am. St. Rep. 247, 38 N. E. 739.

If a bank negligently pays a forged check, without inquiry as to its genuineness, or of the identity of the person presenting, and then transmits it to the bank on which it was drawn, and is credited with the amount thereof by the latter, which retains the check for some time when it ascertains that the check, though purporting to be drawn by one of its depositors is a forgery, the latter bank may recover the amount thereof of the bank which has so transmitted it and received credit therefor. The bank on which the check purports to be drawn has a right to rely on the fact that the bank which cashed it had, before doing so, made the usual and proper investigation regarding its validity. The negligence of the bank on which it is drawn, in discovering the forgery, will not prevent. its recovery, if such negligence has not prejudiced the bank negligently paying the check in the first instance, and it has received prompt notice of the forgery upon its discovery: First Nat. Bank v. First Nat. Bank, 151 Mass. 280, 21 Am. St. Rep. 450, 24 N. E. 44; Third Nat. Bank v. Allen, 59 Mo. 310; Third Nat. Bank v. Merchants' Nat. Bank, 76 Hun, 475, 27 N. Y. Supp. 1070.

II. Recovery from Bona Fide Holders.

There is a line of cases opposed to the principles heretofore announced and in conflict to a considerable extent, with the foregoing cases cited in this note. These cases hold, in effect, that a banker or other payee upon whom a forged check has been drawn cannot, upon the discovery of a forged indorsement thereon, recover the amount of an innocent and bona fide holder for value to whom he has paid it. Most, and in fact nearly all of the late cases, maintaining this doctrine, have been decided by divided courts, and it seems that it will be only a short time before the principles announced in the first part of this note will prevail everywhere. Under the doctrine of the cases now under consideration, it is held that in a suit between the bank or drawee and a party who takes the check in the usual course of business, finding it in circulation, or even by first indorsement from the payee, and who is a good faith holder for value, even though an indorsement thereon proves to be a forgery, the loss should fall upon the drawee, because, having greater means and opportunity to become familiar with the handwriting of their correspondents or depositors, the law presumes that drawees

will know their signatures and be able to detect forgeries. That from this presumption, what is often called an obligation or responsibility arises on the part of the drawee of a draft or check, which prevents him from recovering back money paid upon it upon the ground of fraud or mistake. This is the rule laid down in Price v. Neal, 3 Burr. 1354, which furnishes the foundation for the doctrine under consideration. But even the cases which adopt it dɔ so with many limitations and exceptions, which almost annul the effect of the rule. Among such exceptions may be noted the fact that this responsibility, based upon presumption alone, is decisive only when the party receiving the money has in no way contributed to the success of the fraud, or to the mistake of fact under which the payment was made. If the loss can be traced to the fault or negligence of either party, it shall be fixed upon him. In the absence of actual fault or negligence on the part of the drawee, his constructive fault, in not knowing the signature of the drawer or indorser and in detecting the forgery will not preclude his recovery from one who has received the money with knowledge of the forgery, or who took the check under circumstances of suspicion, without proper precautions, or whose conduct has been such as to mislea i the drawee, or to induce him to pay the check without the usual scrutiny or other precaution against mistake or fraud. These exceptions are implied by the very terms in which the general rule is ordinarily stated. Yet the fact remains that this line of cases holds that a drawee who pays a check with a forged indorsement to a holder for value without notice and who is without negligence in making due inquiry cannot recover back from him. Thus, a drawee bank which pays a forged check to the holder who is a subsequent indorser cannot recover back from him as having, by his indorsement, guaranteed a prior forged indorsement because the forgery of the indorsement was not the cause of the loss: First Nat. Bank v. Marshalltown State Bank, 107 Iowa, 327, 77 N. W. 1045; Deposit Bank v. Fayette Nat. Bank, 90 Ky. 10, 13 S. W. 339; Commercial Bank v. First Nat. Bank, 30 Md. 11, 96 Am. Dec. 554; Neal v. Coburn, 92 Me. 139, 69 Am. St. Rep. 495, 42 Atl. 348; Germania Bank v. Boutell, 60 Minn. 192, 51 Am. St. Rep. 519, 62 N. W. 327; National Bank v. Grocers' Nat. Bank, 2 Daly, 289; Salt Springs Bank v. Syracuse Savings Bank, 62 Barb. 101; Iron City Bank v. Peyton (Tex. Civ. App.), 39 S. W. 223; Moody v. First Nat. Bank, 19 Tex. Civ. App. 278, 46 S. W. 660; Bank of St. Albans v. Farmers' Bank, 10 Vt. 141, 33 Am. Dec. 188. The doctrine of these cases is nowhere better stated than in First Nat. Bank v. Marshalltown State Bank, 107 Iowa, 329, 77 N. W. 1045, where the court, after recognizing the fact that many cases and able text-writers seek to maintain a different rule, said: "But whatever the text-writers may think, a long line of authorities sustain the proposition that, as between the

drawee and a good faith holder of a check, the drawee bank is to be deemed the place of final settlement, where all prior mistakes and forgeries shall be corrected and settled once for all, and if overlooked and payment is made, it must be final. There can be no recovery over. This doctrine is founded by some courts upon the thought that the drawee bank is conclusively presumed to know the signature of its depositors. This, however, may be too narrow a basis. It may well be that such a rule is demanded by the necessities of business in these times when the currency of the commercial world is comprised so largely of checks and drafts. Whether it is the better rule or the one more consonant with reason and justice is no longer an open question. The rule has one qualification, however, introduced by some cases and which we feel inclined to adopt. When the holder of the check has been negligent in not making due inquiry, if the circumstances were such as to demand an inquiry when he took the check or draft, the drawee may recover." The case of Star Ins. Co. v. New Hampshire Nat. Bank, 60 N. H. 442, generally cited by the above cases as sustaining the rule announced by them, maintains exactly the contrary proposition-namely, that the drawee who, without notice of any forgery, has paid a draft to a bona fide holder for value, to whom it was negotiated by the forged indorsement of the payee's name, may recover of such holder the money paid upon the draft. The court said: "An acceptance of the draft warrants the genuineness of the drawer's signature but not of an indorser's made subsequent to the issuing of the draft and before acceptance or payment, and the payment by the drawee to one who holds by a forged indorsement of the payee's name entitles him to recover the sum paid, if reasonable notice of the forgery is given": Star Fire Ins. Co. v. National Bank, 60 N. H. 446. "This is not the case of a drawee paying a draft on which the name of a drawer is forged, or which was put in circulation by the drawer with a forged indorsement upon it. In such case, the drawee, having ordinarily the best means of knowledge of the drawer's signature, cannot recover from an innocent holder to whom he has paid the draft: Hortsman v. Henshaw, 11 How. 177; Coggill v. American Exchange Bank, 1 N. Y. 113, 49 Am. Dec. 310"; Star Fire Ins. Co. v. Nat. Bank, 60 N. H. 446. The doctrine of Hortsman v. Henshaw, 11 How. 177, as above announced, is sustained by Meacher v. Fort, 3 Hill (S. C.), 227, 30 Am. Dec. 364, and York Bank v. Asbury, 1 Biss. 233, Fed. Cas. No. 18,142. But in such case, the loss does not fall upon the drawee; it falls where it belongs, upon the fraudulent drawer who puts the instrument in circulation, because "if the maker of a note makes it payable to a fictitious person. and puts it in circulation with the name of the fictitious person written on it, or if he makes it payable to

a real person and forges the indorsement or procures it to be done, and then puts it in circulation, he is estopped from saying that it was not genuine": York Bank v. Asbury, 1 Biss. 233, Fed. Cas. No. 18,142; Meacher v. Fort., 3 Hill (S. C.), 227, 30 Am. Dec. 364.

KINGSLEY v. WHITMAN SAVINGS BANK.
[182 Mass. 252, 65 N. E. 161.]

SAVINGS BANKS.-Payment on Forged Orders to a Person Having Possession of and Presenting the Depositor's Bank-Book cannot be justified under a by-law declaring that, "As the officers of this institution may be unable to identify every depositor transacting business at the bank, the institution will not be responsible for the loss sustained where the depositors have not given notice that their books have been stolen or lost, if the sums of money entered in such book shall have been paid in whole or in part on presentation of said book." The effect of this by-law is only to avoid loss to come by the inability of the officers of the bank to identify the depositor. (p. 652.)

Action of contract to recover for moneys deposited by plaintiff with the defendant savings bank, but paid by it to another person. In January, 1900, the plaintiff made a deposit of six hundred dollars, and received a deposit-book having in it the printed by-laws, one of the provisions of which is shown in the above syllabus. He kept his book in his trunk in his house, looking frequently to see if it was there, but never looking at the book itself, and he did not know that any person other than himself and his wife knew of the book or where it was kept. In August, 1901, she left him. Soon after that he took his book from the trunk for the purpose of having the interest on his deposit entered on it, but found, upon presenting it to the bank, that it was not the original, and that the original had been paid in full and taken up by the bank. These payments had been made on orders purporting to be signed by the plaintiff. In each case the person presenting the order also presented the book, and the withdrawals were entered therein at the times of their payment. The plaintiff testified that he did not sign any of the orders and had no knowledge of them until he went to the bank and was informed that his deposit had been withdrawn. The trial judge found in favor of the plaintiff for the amount of his deposit with interest, and the defendant alleged exceptions.