In a former section referring to depositsl was stated the rule as to the payment of forged paper that obtains between banks. The payment of exchanges is practically governed by these rules. If the acceptance be forged and the bank pays it, the party whose name is forged can of course hold the bank, if he gives notice when he discovers the forgery:2 and if the drawer returns the draft to the payee, who presents it and is refused payment, the drawer can thereupon sue the bank.3 But the indorsement of a fictitious payee's name, the fictitious payee being thought to be an existing person, is none the less a forgery.4 But it has been held that if the payee who indorses the draft is the person intended, his indorsement is not a forgery and no recovery can be had against the bank by the drawer.5 The negligence of the drawer of the draft has usually been held to be a defense against him where the draft was raised,6 and the same rule applies to the acceptor in accepting on a forged signature;7 but one court became entangled in a metaphysical subtlety and held that where a clerk in a bank drew a draft which could be easily altered, and had it signed by the cashier, whereupon the clerk took the draft from the confiding cashier and altered it and discounted it, the forgery of the check and not the negligence of the cashier was the proximate cause of the loss.8 This decision is simply another proof of how prone even able courts are to fall into palpable error, The test is, Could the forgery have been committed if the cashier had not been negligent? If not, then the cashier's negligence was a concurring cause of loss, and the bank was liable. This case would overturn a principle that is absolutely settled as to the drawer of a check, and a bank draft is no more than a check by one bank upon another. The bank could hold the cashier liable to it for his folly, but the innocent holder had no remedy except against the bank. If the bank takes money from a person upon a forged signature, it will be compelled to pay it.9 If it pays to a person upon a forged signature or a forged draft it may recover,10 except where the signature of the drawer was forged and it paid to a bona fide holder.11 But the person who obtains the draft from the bank and sends it to the payee, who receives upon it more than the amount for which the draft was drawn, is not liable to the bank, unless he received the money.12

1 See Sec. 155, ante, and also Sec. 154, ante.

2 First Nat. Bank v. Tappan, 6 Kan. 456. For duty as to examination to detect forgery, see Sec. 154, ante.

3 Citizens' Nat Bank v. Imp. & Trad. Nat. Bank, 119 N. Y. 195. The reason of the rule is that payment upon a forged signature is no payment at all. Star Fire Ins. Co. v. State Nat. Bank, 60 N. H. 442. As to raised drafts and forged signatures, see Sec. 154, ante. If the bank agrees to repay an amount charged on a forged draft it will be held none the less, because it would be held without the agreement. Nat. Bank of Commerce v. Manufacturers' Bank, 122 N. Y. 367. If a bank pays a raised draft it may recover.

4 Chesin v. First Nat. Bank, 96 Tenn. 641; and see S 151, ante.

5 Emporia Nat. Bank v. Shotwell, 35 Kan. 360; Crippen v. American Nat. Bank, 51 Mo. App. 508. Both these cases are wrong. They were intended to decide what is stated in the text. But both bank and drawer were deceived, and both made a mistake of fact in thinking that the person who indorsed was another individual intended by them. It was a clear case of mutual mistake. If they had intended the first person by the name of the payee, as the text above indicates, the decisions would have been correct. See note 23, Sec. 154.

6 See Sec. 154, ante.

7 Howard v. Mississippi Valley Bank, 28 La. Ann. 727.

8 Exchange Nat Bank v. Bank of Little Rock 58 Fed. R. 140, 19 U. S. App. 152. This case was not one of proximate cause at all. The injury arose from the forgery and the opportunity therefor given by the cashier. The cashier's negligence concurred in affording the opportunity and was taken advantage of by the clerk. The cases cited by the court do not justify the decision.

9 Even to one who pays supra protest. Goddard v. Merchants' Bank, 2 Sandf. 247.

10 See Sec. 154, ante.

11 National Park Bank v. Ninth Nat Bank, 46 N. Y.77. Another bank has been held to be within this rule. Northwestern Nat. Bank v. Bank of Commerce, 107 Mo. 402; but see Sec. 155, ante. For the rule under a statute, see Tradesmen's Nat Bank v. Third Nat. Bank, 66 Pa. 435.

12 City Nat Bank v. Stout, 61 Tex. 567. In this case the cashier of the bank assisted in deceiving the bank that paid.