§ 1662. In the transfer of bills, notes, and checks by the holder to another party, the very act of transfer makes the transferrer an implied warrantor of the genuineness of the instrument; and the transferee may recover on the instrument against the transferrer, as an indorser, if he indorses it; or may recover back the consideration, if he transferred it without indorsement.1 But when the bank takes a forged check, its right of recovery does not seem to depend on any indorsement by the holder. It is its duty to know the drawer's signature. And if he takes a forged check from the holder (and he is not himself involved in the fraud), its right to recover back the amount is regarded as turning solely on the question whether or not the holder would be placed in a worse position than if payment had been refused. Such at least is the result of the authorities which recognize the right of the bank to recover.2

§ 1663. Bank not bound to know indorser's signature. A bank is not bound to know the signature of an indorser. And besides, the holder of the check, whether he indorses it or not, warrants the genuineness of all prior indorsements. Therefore, if the bank pay a check upon which the name of a prior indorser is forged, it may recover back the amount from the party to whom it was paid, or from any party who indorsed it subsequent to the forgery. When the bank is in doubt as to the genuineness of an indorser's signature, it is entitled to demand a reasonable time for inquiry before making payment.*

There is no doubt that if the bank pays a check upon the forged indorsement of the payee's or special indorsee's name, the payee or such indorsee may recover back the amount, if the check had

1. See §§ 672, 673, 731, 732, vol. I. Birmingham Nat. Bank v. Ala. 109, 15 So. 440, 49 Am. St. Rep. 17.

2. Ante, § 1655.

Bradley, 103

3. Morse on Banking, 308, 310. See also Canal Bank v. Bank of Albany, 1 Hill, 287 (a bill); Commercial Exchange Bank v. Nassau Bank, 91 N. Y. 79. See ante, § 538, vol. I; Land Title & Tr. Co. v. Bank, 196 Pa. St. 230, 46 Atl. 420.

4. Robarts v. Tucker, 4 Eng. L. & Eq. 236, Maule, J.: “I conceive that if a bill were presented to a banker by a stranger, with an indorsement on it of a person necessary to make out the title, but unknown to the banker, the banker would be justified in refusing to pay at once." Parke, B.: "Probably, in such a case, the obligation would be to pay in a reasonable time."

been delivered to him; and the drawer may recover it back if he had not issued it."

Cases have arisen in which checks have been paid on forged indorsement made by the person to whom the drawer delivered the check, mistaking his identity for one whose money is designated as payee; and when the person to whom the check has been delivered indorses it, and although it be a forgery of the name of the person to whom the bank took him to be, it has been considered that the bank should be protected in paying the check because the drawer was in fault in the first instance and the person who forged the instrument was the person to whom the drawer actually delivered the instrument.

6

5. Morgan v. Bank, 1 Duer, 434, 11 N. Y. 404; Dodge v. National Exchange Bank, 20 Ohio (N. S.) 246; Seventh Nat. Bank v. Cook, 73 Pa. St. 483; Pickle v. People's Nat. Bank (Tenn.), 12 S. W. 919, citing the text.

6. Land Title & Trust Co. v. Bank, 196 Pa. St. 230, 46 Atl. 420; Emporia Nat. Bank v. Shotwell, 35 Kan. 360, 11 Pac. 141. See also Maloney v. Clark, 6 Kan. 82; Robertson v. Colman, 141 Mass. 231, 4 N. E. 619, 55 Am. St. Rep. 471, note; United States v. National Exchange Bank, 45 Fed. 163; Bank of England v. Vagliano Bros., L. R., App. Cas. 107 (1891).

CHAPTER L.

BANK NOTES.

SECTION I.

DEFINITION, NATURE, AND FORMAL ELEMENTS OF BANK NOTES.

§ 1664. Bank notes or bank bills (as they are equally as often called) are the promissory notes of incorporated banks, designed to circulate like money, and payable to bearer on demand.1

The terms "bank notes" and "bank bills" are of the like signification and for the purposes of interpretation, both in criminal and civil jurisprudence, are equivalent and interchangeable." In form and substance they are promissory notes, and they are governed by very many of the principles which apply to the negotiable notes of individuals given in the course of trade. But they are designed to constitute a circulating medium, and this circumstance imparts to them peculiar characteristics, and essentially varies the rules which govern promissory notes in general. They have been held not securities for money, but money itself." A bank bill may be described, in an indictment for uttering forged and counterfeited paper, as a promissory note.*

§ 1665. Bank bills are usually made payable to bearer, though sometimes expressed to be payable to a certain person or bearer. But in effect the two forms are identical, and though the person named be incompetent to sue in one of the Federal courts of the United States, yet, if the bearer be competent he may sue; for a note payable to bearer is payable to anybody, and unaffected by the disabilities of the nominal payee."

1. See 2 Parsons on Notes and Bills, 88.

2. Eastman v. Commonwealth, 4 Gray, 416; Low v. People, 2 Park. Cr. 37. 3. Southcot v. Watson, 3 Atk. 226.

4. Commonwealth v. Simonds, 14 Gray, 59; Commonwealth v. Thomas, 10 Gray, 483. But "silver certificates" of the United States may not be so described. Stewart v. State, 62 Md. 412.

5. Bank of Kentucky v. Wister, 2 Pet. 318.

§ 1666. Bank notes are invariably payable on demand. It is essential to enable them to circulate as currency, that they be redeemable in money at any time, and, therefore, they are made payable whenever demanded. Banks have often issued their notes payable at a future day, but such instruments are called "post notes," and are not bank notes in the accepted use of the

term.

§ 1667. Style of execution. It would matter not upon what kind of paper the bank note was executed, or whether it were printed or written. But, being designed to circulate as money, they are generally printed on paper of fine fabric, and elaborated with vignettes and fanciful lettering, which, besides being ornamental, subserves the principal purpose of rendering counterfeits difficult. And private marks are often inserted in the texture of the paper, which enhance the facility of identification and the difficulties of forgery.

§ 1668. Issuing notes a common-law right. The privilege of issuing bank notes was, prior to the National Banking Act, regulated by statutes of the several States, and generally was confined to incorporated institutions, or persons acting under a general banking law; and none but such companies or persons could issue notes designed for the purposes of a circulating medium. But this restriction was purely statutory; for, in the absence of a statute, the right of banking pertains to every private citizen, and any one may issue his obligations in whatsoever form he pleases."

§ 1669. How signed. The execution of bank notes should conform to the provisions of the statute authorizing their issue. They are usually required to be signed by the president and cashier of the bank, and when this is requisite, no note will be valid unless so signed. Where bank notes prepared for the official signatures were stolen from the bank's possession, and the signatures forged, it was contended that the negligence of the bank should render it liable for their payment. But it was held otherwise, because the crime had been committed after the notes had left the bank. Had they been complete when they were stolen, it would have been different. If signed, but incomplete,

6. Morse on Banking, 1. As to the power of national banks to issue bills or paper credit to pass as money, see State v. Scougal, 3 S. Dak. 55, 51 N. W. 858, 44 Am. St. Rep. 756.

7. Gloucester Bank v. Salem Bank, 17 Mass. 1, 33.

at the time of the theft, it is conceived that they would not be binding on the bank.8

The date of bank notes is not evidence of the time they were issued, because they are often held by the bank for a long time after being prepared for circulation, and are constantly paid into the bank and reissued; and the date indicates rather the series to which the notes belong than the actual day of issue. And it has been held that the figures denoting the number of the note are no part of the obligation, and that their alteration will not affect the rights of the holder if the proof shows the note to be genuine. 10

§ 1670. Bankers' cash notes are the promissory notes of bankers, and they were formerly called goldsmiths' notes, because the goldsmiths acted as bankers and gave these notes for money deposited with them. They are drawn like bank notes, payable to bearer on demand; and they generally pass as cash, and are legal tender, unless objected to. The use of checks upon deposits has to a great extent superseded them in England. They are so far like ordinary promissory notes that they may be indorsed, and then operate like bills drawn upon the bank. They are not money, like Bank of England notes; and if the bank has stopped payment when they are transferred, the loss is thrown upon the transferrer, unless the transferee, by laches, fails to present them, or to notify the transferrer that they are bad.11

§ 1671. The post notes of a bank are promissory notes, payable on time, and yet designed to circulate as money. A bank authorized to issue paper for circulation may issue them;12 and being issued for the purpose of circulating like money, they are subject to the rules which govern ordinary bank notes payable on demand, rather than to those which govern negotiable promissory notes;13 and the rules of demand and notice do not apply to

8. See §§ 839, 840, 841, 842, vol. I, and notes.

9. Farmers & Mechanics' Bank v. White, 2 Sneed, 482; Greer v. Perkins, 5 Humphr. 588; Wright v. Douglas, 3 Barb. 554; Selfridge v. Northampton Bank, 8 Watts & S. 320; Long v. Bank, 81 N. C. 46, date immaterial; Note Holders v. Bank of Tennessee, 16 Lea, 46.

10. Note Holders v. Bank of Tennessee, 16 Lea, 46.

11. See on this subject Chitty on Bills [*522], 591.

12. Campbell v. Mississippi Union Bank, 6 How. (Miss.) 625.

13. Fulton Bank v. Phoenix Bank, 1 Hall, 562.