Bank of the United States vs. The Bank of Georgia.

reversed, with directions to award a venire facias de novo. On the second instruction asked by the plaintiffs, it is unnecessary to express any opinion.

Judgment reversed accordingly.

Besides the cases cited by Mr. Justice Story, in his opinion, the question arising in this case has been discussed, and the same rule established in Vermont and South Carolina. In Vermont, it arose in the case of the Bank of St. Albans vs. Farmers and Mechanics Bank, 10 Verm. 141. A check upon the Bank of St. Albans was presented to the defendants, and paid by them. The latter then sent the check to the Bank of St. Albans, with direction to place the amount to their credit, which was done. The check having been subsequently discovered to be a forgery, the question arose as to the liability of the Farmers and Mechanics Bank to refund the amount. Judge Phelps delivered the opinion of the Court. "I am for myself fully satisfied from the cases of Bree vs. Holbach, Doug. 654, and Price rs. Neale, Burr. 1354, that Lord Mansfield entertained the opinion, that there was no remedy against a person who should innocently put off a forged security; but that to enable the receiver to maintain an action in such case, something like fraud or mala fides must appear, or at least some culpable negligence on the part of the person putting off the security. He seems to have held that if both parties are equally innocent, there is no ground in equity for transferring the loss from one to the other.

"It must, however, be admitted that at this day such is not the law; but, on the contrary, it seems now to be well settled that a person, on giving a security in payment, or procuring it to be discounted, vouches for its genuineness. This rule, however, has never to our knowledge been extended to the case where the party when receiving or discounting the paper is presumed, from his relation to it, to have the means of correct knowledge as to its genuineness, or where it has been kept for an unreasonable time, without notice to the other party of its spurious character. The acceptor of a bill is holden to pay it, although the name of the drawer may be forged; and it is for this reason that in an action against him the hand-writing of the drawer need not be proved. The case of Price vs. Neale is now understood to have proceeded upon the ground, that the drawee is bound to know the hand-writing of his correspondent; and thus understood, its authority has never been questioned. It has often been commented upon, both in the English courts and those of this country, and although its applicability to the transfer of a forged security between persons, not parties to it, has been questioned, yet its authority as applied to the case of such a bill, accepted or paid by the drawee, has been uniformly and fully sustained. That the rule there adopted extends as well to the case of a bill paid upon presentment, as to one accepted and afterwards circulated, appears not only from the case itself, but from subsequent decisions, in which it has been approved.

"There is good reason for the distinction upon which the authority of that case rests to be found in the intrinsic character of the transaction itself. The presentment of a bill to the drawee is a direct appeal to him to sanction or repudiate it. It is an inquiry as to its genuineness, addressed to the person who of

Bank of the United States vs. The Bank of Georgia.

all men is supposed best able to answer it, and whose decision is most satisfactory. He is moreover the person to whom the bill itself points, as the legitimate source of information to others, and if he were permitted to dishonor a bill after having once honored it, the very foundation of confidence in commercial paper would be shaken. There is a wide difference between such a transaction and the passing of paper as a representative of money between persons equally strangers to it, in the ordinary course of business. In the latter case the receiver relies in a measure upon the paper, while in the former the case is reversed, and the holder relies, and has a right to rely, upon the decision of him to whom the bill is addressed, and who alone is to determine whether it shall be honored or not.

"The same rule holds as to bank checks and bank notes, and for precisely the same reasons. On this point I deem it unnecessary to cite authority. The cases are collected and reviewed by Mr. J. Story, in the case of the Bank of Georgia ats. The Bank of the United States, to which I may refer as abundantly satisfactory." The judge then proceeds to examine the facts of the case before him, and upon the reasoning which has been quoted holds, that the plaintiffs have no right to recover.

The principle was carried still further in the case of Hull ats. The Bank of South Carolina, Dudley Law Rep. 259. The bank had paid to Hull a check of one Hopton, for $78,00, under an impression that he had funds in the bank to that amount. On the next evening, this was discovered to be a mistake, and notice thereof given to the defendant. The question was as to the right of the bank to recover back the amount. Judge Butler, delivering the opinion of the Court, says: "This question is to be decided rather by authority than any general reasoning. No part of a commercial community is more interested in commercial usages than banks, and they cannot complain when they are required strictly to conform to them. They cannot always guard against fraud and imposition, but they may against mistakes depending on an inspection of their own books and accounts. Mistakes may be prevented which cannot be remedied. They accepted and paid the check presented by the defendant, for and on account of Hopton, the drawer, whose money they had kept for his convenience and accommodation. The privity of contract was between them and their customer, Hopton, and not between them and one who may have happened in the course of dealing to present a check drawn by Hopton. In the case of Levy us. The U. S. Bank, 4 Dallas, 234, the plaintiff presented a bill of exchange the bank gave the plaintiff credit on the books, believing the bill to be genuine; the bill turned out to be a forgery, and the bank cancelled the credit; the plaintiff, however, contended that he was entitled to recover the money, because the bank had duly accepted the papers, and done that which was equivalent to payment. The principal difficulty in the case was, whether the credit in the books amounted to payment, and it was held by the Court that it did, and the plaintiff recovered. It seemed to have been conceded that if the bank had paid the money, there was no doubt of Levy's right to retain it. In the case of Price vs. Neale, 3 Burr. 1354, the defendant accepted a forged bill; Lord Mansfield said it was an established principle that when once the drawee of a bill had accepted it, he could not refuse to pay; or once having paid it, could not recover it back; unless there was fraud on the part of the endorser

Bank of the United States vs. The Bank of Georgia.

who had procured the acceptance. And in Jeneys vs. Fowler, 2 Strange, 946, it was held that after a bill has been accepted, it is not necessary to prove the hand-writing of the drawer, for the acceptor was liable to the payee. The question in the above cases arose on bills of exchange, and it is attempted to distinguish them from bank checks. But a bank check has all the characteristics of a bill of exchange, and cannot be distinguished from it. Indeed they not only perform all the offices of bills, but are more generally used for the transfer and payment of money. They are mercantile agents which should not be crippled in their daily and hourly operations. Before one reaches the bank after it has been drawn, it may have paid and discharged many debts, and after it has been accepted and paid, all the intervening holders are in general discharged from all liability to the bank; it becomes then a transaction between the bank and the drawer; the bank not unfrequently paying money on the checks of the drawer when he has no deposit. In a note in 1 Camp. 425, checks and bills are put upon the same footing; and it seems to be clearly settled that a check once credited in the books of a bank is an acceptance, and subjects the acceptor to payment; and that when the check has been actually dishonored, the bank must look to the drawee for redress, and not the payee; 6 East. 199; Locke vs. Masterman, 17, E. C. L. R. 517. If, however, the defendant by fraudulent contrivance procured the check to be drawn, and obtained payment of it under false pretences, or wilfully suppressed the truth where he should have told it, he might be liable.”

FRAUDULENT CONVEYANCES.

HAMILTON US. RUSSELL.*

An Absolute Sale of personal property, not accompanied or followed by a transfer of the possession, is per se fraudulent as to creditors of the vendor.

ERROR to the Circuit Court of the county of Washington in the District of Columbia.

MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court.

On the 4th of January, 1800, Robert Hamilton made to Thomas Hamilton an absolute bill of sale for a slave in the bill mentioned, which, on the 14th of April, 1801, was acknowledged and recorded in the Court of the county where he resided. The slave continued in possession of the vendor; and some short time after the bill of sale was recorded, an execution on a judgment obtained against the vendor was levied on the slave, and on some other personal property also in possession of the vendor. In July, 1801, Thomas Hamilton, the vendee, brought trespass against the defendant Russell, by whose execution, and by whose direction the property had been seized; and at the trial, the counsel for the defendant moved the Court to instruct the jury, that if the slave, George, remained in the possession of the vendor, by the consent and permission of the vendee; and if by such consent and permission the vendor continued to exercise acts of ownership over him, the vendee under such circumstances could not protect such slave from the execution of the defendant.

The Court gave the instruction required, to which a bill of exceptions was taken.

The counsel for the plaintiff then moved the Court to instruct the jury that a plaintiff in trespass, whose property is loaned to a friend, and is in that friend's possession at the time it is seized

1 Cranch, 309. 1 Cond. Rep. 318.

Hamilton es. Russell.

by a sheriff in virtue of an execution against the person so in possession, can sustain an action of trespass for a seizure upon such possession.

The Court, being divided, refused to give the instruction required, and the jury found a verdict for the defendant. Judgment was accordingly rendered for the defendant, to which a writ of error has been sued out, and the question is, whether the Court below has erred in the instructions given or refused.

In the opinion to which the first bill of exceptions was taken, it is contended on two grounds that the Circuit Court has erred. 1. Because this sale is, under the act of the Virginia assembly against fraudulent sales, protected by being recorded.

2. That if it be not protected by that act, still it is only evidence of fraud, and not in itself a fraud.

On examining the act of assembly alluded to the Court is of opinion, that it does not comprehend absolute bills of sale among those where the title may be separated from the possession, and yet the conveyance be a valid one, if recorded within eight months. On this point one judge doubted, but he is of opinion that this bill of sale was not recorded within the time required by the act, and that the decision in the case of Eppes vs. Randolph, which was made by the Court of Appeals of Virginia, on a different act of assembly, would not apply to this act.

On the second point there was more difficulty. The act of assembly which governs the case appears, as far as respects fraudulent conveyances, to be intended to be co-extensive with the acts of the 13th and 27th Elizabeth, and those acts are considered as only declaratory of the principles of the common law. The decisions of the English judges therefore apply to this case.

In some cases a sale of a chattel, unaccompanied by the delivery of possession, appears to have been considered as an evidence, or a badge, of fraud, to be submitted to the jury, under the direction of the Court, and not as constituting in itself, in point of law, an actual fraud which rendered the transaction as to creditors entirely void. Modern decisions have taken this question up upon principle, and have determined, that an unconditional sale, where the possession does not "accompany and follow the deed," is, with respect to creditors, on the sound construction of the statute of Elizabeth, a fraud, and should be so determined by the Court. The distinction they have taken is