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Larned v. Andrews.

These and other considerations lead us to the conclusion that it was not the intention of congress to prohibit and make unlawful each. sale made by a wholesale dealer who neglects to pay his tax. The object of the tax was to provide internal revenue to support the government, and not to regulate domestic trade in the States. It imposes a tax upon wholesale dealers, and provides a penalty if they neglect to pay such tax. We think this was designed to operate upon the person, and not upon the business. If congress had intended to subject the dealer neglecting to pay his tax to the additional liability of having all his sales rendered illegal, we think they would have so declared in unequivocal terms. We find that in section 180 it is provided that, if any person liable to pay any tax upon goods or manufactures shall sell the same before the tax is paid, with intent to evade the tax, every debt contracted in such sale shall be void, and the collection thereof shall not be enforced in any court. The absence of any such provision in regard to sales by wholesale dealers raises a strong implication that it was not the intention of congress to prohibit such sales. The power to regulate domestic trade belongs exclusively to the States. It cannot be exercised by congress, except where it is strictly incidental to the exercise of powers clearly granted to it. License Tax Cases, 5 Wall. 462; Pervear v. Commonwealth. id. 475; Commonwealth v. Holbrook, 10 Allen, 200. It is not to be presumed that congress intends to regulate domestic trade in the States, as incidental to its power to levy taxes, unless such intention is clearly expressed.

Upon a careful consideration of the statute in question, we are of opinion that the sales by the plaintiff were not prohibited or illegal, and that he is entitled to recover. The numerous cases cited by the defendant do not apply to the case at bar. They are cases where the specific contract or transaction upon which the plaintiff's action was founded was prohibited by law.

A very similar question arose in Smith v. Mawhood, 14 Mees. & Welsb. 452. The act of 6 Geo. IV, ch. 81, § 26, provided that if any person should carry on any trade or business thereinafter mentioned, without taking out a license, he should forfeit and lose the penalties thereinafter named. In an action of debt for tobacco sold, the defense was that the plaintiff had not taken out a license required by this section. It was held that the act of sale was not unlawful. Baron PARKE said: "I think the object of the legislature was not to prohibit a contract of sale by dealers who have not taken

National Bank of North America v. Bangs.

out a license pursuant to the act of parliament. If it was, they certainly could not recover, although the prohibition was merely for the purpose of revenue. But its object was not to vitiate the contract itself, but only to impose a penalty on the party offending, for the purposes of the revenue."

The question involved in the case at bar has been carefully considered in a recent case in Vermont, and the court arrived at the same conclusion which we have reached. Aiken v. Blaisdell, 41 Vt. 655, 666.

Exceptions overruled.

NATIONAL BANK OF NORTH AMERICA, plaintiff, v. BANGS.

(106 Mass. 441.)

Money paid on forged check-recovery of, by drawee.

The payee of a forged check, drawn payable to his order, took it from a third person, without inquiry, although in good faith and for value, and indorsed it for collection; and the drawee paid it. Held, that the drawee could recover the amount so paid from the payee. The responsibility of the drawee, who pays a forged check for the genuineness of the drawer's signature, is absolute only in favor of one who has not, by his own fault or negligence, contributed to the success of the fraud or to mislead the drawee. (See note, p. 353.)

ACTION to recover back money paid by plaintiffs in a forged check. The case was submitted on the following agreed statement of facts: "The defendants, on September 21, 1869, took of some person (whom they do not remember, and did not remember when they were first notified of the alleged forgery, and could not then tell whether he was a stranger to them or a person known to them) in good faith and for full value, in payment for gold sold by them in the usual course of their business, a check payable to their order, of which the following is a copy:

"$1,308.63.

Boston,

National Bank of North America. Sept. 21st, 1869. Pay to the order of E. D. & G. W. Bangs & Co, Thirteen hundred and eight dollars and sixty-three cents. WILLIAM D. BICKFORD."

"No. 932.

National Bank of North America v. Bangs.

"On said September 21 the defendants deposited this check, with others, and with their other moneys, in the Maverick National Bank of Boston, where they kept their deposits; and before depositing it, for the purpose of enabling the Maverick National Bank to collect the check from the National Bank of North America, and, in accordance with the usage of depositors of checks payable to order, they indorsed it in blank by writing on the back of it 'E. D. & G. W. Bangs & Co.' The Maverick National Bank the next day presented the check at the clearing-house, when it was allowed and paid to the Maverick National Bank by the National Bank of North America in the usual manner of settling the daily balances of banks at the clearing-house.

"The Maverick National Bank, on the day of deposit, credited the defendants with the amount of the check in its account with them; and the National Bank of North America, on September 22, debited William D. Bickford, in whose name the check purported to have been drawn, and who was a customer of and a depositor in the National Bank of North America, and had funds on deposit there, with the amount of the check. The check was retained by the National Bank of North America until the 1st or 2d of October, 1869, when it was sent with other checks, by the National Bank of North America, to William D. Bickford, with the monthly statement of his account, according to the usage of banks. Bickford, after examining the checks, pronounced this a forgery, and on the 4th of October informed the bank of it; and on the same day the defendants were notified by the National Bank of North America that the check was forged, which was the first intimation or suspicion they had that the check was forged. For the purposes of the hearing on this statement of facts, it is admitted that the check was a forgery."

Both banks belonged to the Boston Clearing-House Association. "It was the usage for each bank belonging to the Clearing-House Association, each morning, at ten o'clock, to have at the clearinghouse, for the purpose of effecting settlements with the other banks, all the checks and other demands, such as bills, etc., it had received against all the other banks during the preceding day; making them up into separate bundles for each bank, with a ticket containing the items and aggregate of the contents of each bundle. The settlement was made at the clearing-house upon the footings of these tickets, without regard to the fact whether the contents of the bun

National Bank of North America v. Bangs.

dle were correctly ticketed, or formed good claims against the bank charged with the contents of the bundle as per ticket; and in from ten to fifteen minutes past ten o'clock the messenger from each bank was able to receive and take to his bank all the claims of the other banks against it. On the return of the messenger to his bank, the messenger delivers to the paying teller the various bundles of demands against the bank; and it was the usage for the paying. teller, or some other officer of the bank charged with that duty, to immediately proceed to open and examine the contents of these bundles, ascertaining whether the contents of each bundle corresponded with the ticket, and whether each check was properly signed, drawn and indorsed, and whether the drawers of the check had funds deposited, sufficient to meet the amount drawn; and all this is completed before one o'clock of the same day; and all checks not then returned to the banks from which they were received are then charged to the drawers, in the same manner as if they had been presented and paid at the counter of the bank.

"It is agreed that the bank of North America acted in good faith in the premises."

H. C. Hutchins and H. H. Currier, for plaintiffs.

W. A. Field, for defendants.

WELLS, J. This suit is brought to recover money paid upon a check purporting to be drawn by one Bickford, upon the plaintiff bank, to the order of the defendants, indorsed by them, deposited with their banker, and collected through the clearing-house. The signature of the drawer proved to be a forgery. As the discovery of the forgery was not made in time to enable the plaintiff to return the check, as of absolute right, under the rules of the clearing-house, we think the case must stand as if the payment had been made directly at the plaintiff's counter, in the ordinary mode.

The right of return, secured by the rules of the clearing-house, is a special provision, in compensation for payment without inspection. Instead thereof, the rules give opportunity for subsequent inspection. When that has been had, the special rules cease to govern; and the rights of the paying bank rest upon the general principles of law. Boylston National Bank v. Richardson, 101 Mass. 287. But, in applying those general principles, it was held, in Merchants' National

National Bank of North America v. Bangs.

Bank v. National Eagle Bank, 101 id. 281, that the drawee of a check, who paid it without inspection, under the provisions of the clearing-house rules, might recover back the money if there had been no actual laches on the part of the drawee, and no change of position on the part of the holder; notwithstanding "the failure of the bank to return a check by one o'clock," as allowed by the rules. The failure in that case was by accident, and involved no neglect.

In this case the money was paid to the use of the defendants. In making up and returning the monthly account of its depositor, the forgery was discovered and made known to the plaintiff, and notice thereof was immediately given to the defendants. In this respect the case shows no laches on the part of the plaintiff, and no change of situation on the part of the defendants which can defeat a recovery, if any right of recovery ever existed, or could arise from the payment in the manner stated. Merriam v. Wolcott, 3 Allen, 258; Canal Bank v. Bank of Albany, 1 Hill, 287.

If the suit were between the bank, or drawee, and a party who took the check in the usual course of business, finding it in circulation, or even by first indorsement from the payee, the loss would fall upon the bank; 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. From this presumption arises what is often called an obligation or responsibility on the part of the drawee of a bill or check, which prevents him from recovering back money paid upon it on the ground of a mistake of fact. Price v. Neal, 3 Burr. 1354; Levy v. Bank of the United States, 1 Binn. 27; Bank of St. Albans v. Farmers & Mechanics' Bank, 10 Vt. 141. But 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." Gloucester Bank v. Salem Bank, 17 Mass. 33, 42. 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 and 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 mislead the drawee, or to induce.

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