The general rule is well settled that —
"A bank which pays money by mistake on a raised or altered check or draft may recover it back from the person, provided the bank has not been guilty of culpable negligence in making the payment." 7 Corp. Jur. 691, § 419.
A more precise statement of the law is made by Judge Freeman as follows:
"The bank or drawee is not bound to know the handwriting in the body of the instrument. Where, therefore, money is by mistake paid by a bank upon a raised or altered check, or by a drawee upon a raised or altered draft, neither party being in fault, it may generally be recovered back, as paid without consideration; but if either party has been guilty of negligence or carelessness, by which the other has been injured, the negligent party must bear the loss." People's Bank v. Franklin Bank, 88 Tenn. 299, 12 S.W. 716, 6 L.R.A. 724, 17 Am. St. Rep. 884, note, p. 896, citing many authorities.
In the leading case of Marine Nat. Bank v. Nat. City Bank,59 N.Y. 77, 17 Am. Rep. 312, it was said:
"Moneys paid upon checks and drafts which have been forgeries, either in the body of the instrument or in the indorsements, or in any respect except the name of the drawer, have uniformly been held recoverable as for money paid by mistake, and expressly upon the ground that payment, as an admission of the genuineness of the instrument, was the same as an acceptance, and only operated as an admission of the signature of the drawer."
The doctrine is clearly stated in Metropolitan Nat. Bank v. Merchants' Nat. Bank, 182 Ill. 367, 55 N.E. 360, 74 Am. St. Rep. 180, citing 2 Dan. Neg. Insts. § 1661, which says:
"This doctrine is clear and is sustained by authority. The bank is not bound to know anything more than the drawer's signature, and in the absence of any circumstances which inflict injury upon another party, there is no reason why the bank should not be reimbursed."
With respect to the negligence of the drawee bank, it is clear, as the authorities hold, that it is wholly immaterial, and does not prevent a recovery back of the money paid to a holder of the altered check or draft unless the holder has been thereby subjected to a loss which he would not otherwise have suffered, or unless the negligence is so gross as to amount to bad faith, so that the payment was not in fact made by mistake.
In the instant case the defendant bank paid the amount of the altered check to the payee, and its status was then fixed and its loss complete, so far as the drawee bank was concerned. Payment of the draft by the drawee, involving nothing more than a recognition of the genuineness of the drawer's signature, certainly did not alter the position of the defendant bank for the worse, and, whether negligent or not, there is no suggestion in the evidence, or otherwise, that the drawee's refusal to pay it would have in any way benefited the defendant. *Page 283 Nat. Bk. of Commerce v. Nat. Mech. Banking Ass'n, 55 N.Y. 211, 14 Am. Rep. 232; Crocker Woolworth Bk. v. Nevada Bank, 139 Cal. 564,73 P. 456, 63 L.R.A. 245, 96 Am. St. Rep. 169, 177. See, also, First Nat. Bank v. People's Bk., 18 Ala. App. 190,91 So. 324.
In Alabama Nat. Bank v. Rivers, 116 Ala. 1, 17, 22 So. 580, 67 Am. St. Rep. 95, an Atlanta bank drew its draft for $2 on the National Park Bank of New York, in favor of one Hall. Subsequently the name of the payee was fraudulently changed to Gellhorn, and the amount fraudulently changed to $2,000, which amount was paid by the Alabama National Bank to Gellhorn on the indorsement of the draft by Rivers, and the draft was forwarded for collection through the National City Bank of New York. Payment was refused by the drawee, and the suit was against Rivers on his indorsement. But the court observed:
"As between the drawee, the National Park Bank, and the National City Bank, holding the draft for collection as the plaintiff's agent, if the former in fact paid the draft to the latter, the payment, assuming the draft to have been raised as alleged, would be treated in law as made under a mistake of fact, and if the latter had not in fact paid the money over to the plaintiff, but had merely credited its account with the amount, it could have been compelled to refund the money to the drawee, and, having refunded it, could have charged back to plaintiff the amount credited."
The same doctrine was stated by way of dictum, arguendo, in B'ham Nat. Bank v. Bradley, 103 Ala. 119, 15 So. 440, 49 Am. St. Rep. 17.
It will be noted that, in the case of payment by the drawee bank to a collecting bank, as an agent and not as owner, the collecting bank is not liable to the drawee bank if the former has paid the amount to its principal, and has not the power to recall or cancel the payment. We are not concerned with that principle here, since the defendant bank was the holder and owner of the altered check, and received payment of its proceeds in its own right.
In the case before us the plaintiff bank was entitled to recover, as a matter of law, if it paid the draft to the defendant bank's collecting agent without knowledge of its fraudulent alteration — that is, in good faith, under a mistake of fact.
A single count in general assumpsit would have been an all-sufficient complaint.
As for the defense, besides the general issue, nothing was needed other than a plea setting up plaintiff's negligence, if there was any, with an allegation of facts showing that defendant was thereby prejudiced.
These issues were correctly pointed out by the trial judge, and correctly submitted to the jury as decisive of the case. But the issue of the plaintiff bank's negligence was stated far too favorably for the defendant, in that it was not required that, in order to negative its alleged mistake of fact, plaintiff's negligence should have been so gross as to amount to bad faith, or, if not amounting to bad faith, it should have proximately injured defendant and involved it in otherwise preventable loss.
Without going into further details, it will suffice to say that the trial judge did not err to the prejudice of defendant in the giving or in the refusal of requested instructions.
In view of what we have said, it is not necessary to discuss the rulings of the trial court on the special counts of the complaint, and the various special pleas. This is not a suit on the draft, nor on defendant's indorsement thereof, as much of defendant's pleading and argument assumes, but is a suit merely to recover money paid under a mistake of fact. The draft is evidence merely of the relation of the parties, which is the real foundation of the resulting rights and obligations here involved. We are not concerned with questions of liability as between indorsers, and sections 5153-5155 of the Code, as to the time for bringing suit by an assignee of a nonnegotiable chose in action, are without application. Nor does the question of the proper identification of the payee need to be considered; and in our view of the case we have assumed that the defendant bank was without fault in that respect.
On the issue of negligence in dealing with this altered draft, it is difficult to see how the defendant bank can claim immunity from a fault which it would fasten on the plaintiff, their facilities for discovering the fraud from the face of the paper being exactly the same.
As the case is presented by the record, we think the judgment should be affirmed.
Affirmed.
ANDERSON, C. J., and McCLELLAN and THOMAS, JJ., concur. *Page 284