First National Bank of Detroit v. Burkham

Cooley, J:

This case is certainly novel and peculiar. The drawees seek to recover from the payees the amount of a bill which they have accepted and paid, and the genuineness of which is not disputed. The ground upon which they plant their right of recovery is, that they have paid under a mistake of fact. The mistake consisted in their security from the drawer of the bill being fictitious, when they supposed it to be genuine and reliable.

Admitting this to be so, how does the fact concern the payees? Do they assume to guarantee the fairness of the dealings of the drawers with the drawees, or the adequacy of any securities upon which the dealings are based? Not, certainly, in ordinary cases. The law merchant gives the payees the right to assume that any draft they receive and forward, if it is accepted and paid, is a draft which, from *330 tbe statp of tbe dealings between drawers and drawees, it is right and proper that tbe latter should pay as the principal party'; and tbe presumption of law that such is the case is their complete protection if they received the bill in the ordinary course of business and for value.

What is peculiar in the present case is, that the security which was sent forward with the bill proved to be fictitious. It is said that the drawees relied upon this security, and would not have paid the bill but for a belief that it was valid. It is in this that the mistake consists on which they rely for a recovery.

If a mistake regarding their security will authorize the drawees to recall the payment made to the payee, no reason is perceived why a mistake regarding the responsibility of the drawer, or regarding his honesty and integrity, or any thing else upon which they relied for protection in their dealings, should not justify the like action. If they suppose the drawer to be responsible when he is not, is not this as genuine a mistake of fact on their part as if they suppose a security to be good when it is fictitious?

But it is said the payees themselves relied upon the security when they discounted the bill and sent it forward for payment. This is doubtless true; but we do not perceive that this changes the case. A payee in every case in which-a bill is discounted relies, and is compelled to rely upon such security as he has from the drawer, until the bill is sent forward and paid or accepted. When that takes place he is furnished Avitli what to him is conclusive evidence that the drawer was- authorized to draw the bill. He may have relied upon the drawer’s responsibility, or he may have confided in his integrity, or in something else. It is immaterial what his reliance was; the law left the risk with him until payment or acceptance took it off his shoulders. Then the risk, if any, passes to the drawee.

It is not claimed in this case that if the. drawees had relied upon the responsibility of the drawer, and that had failed them, they would have had any ground of recovery *331 against tbe payees. But we think it would be an exceedingly unsafe doctrine in commercial law, that one who has discounted a bill in good faith, and received in its payment the strongest possible assurance that it was drawn with proper-authority, should afterwards hold the moneys subject to such a showing as the drawee might be able to make as to the-influences operating upon his mind to induce him to make-payment. The beauty and value of the rules governing-commercial paper consist in their perfect certainty and reliability ; they would' be worse than useless if the ultimate-responsibility for such paper, as between payee and drawee, both acting in good faith, could be made to depend on the-motives which influenced the latter to honor the paper.

The best view that 'can be taken of this case for the-plaintiffs below is, that there was a mutual mistake of fact under which the bank discounted and the drawees paid the bill. Conceding this, why should the drawees be allowed to transfer the loss to the bank? Usually when one of two-parties equally innocent must suffer, the law leaves the loss where it has chanced to fall; but in a case like this, if the law should assist either party on the ground of mutual mistake, it certainly should not be the drawees. This suit seeks to reverse the rule of commercial law, and transfer from the acceptor to the payee the responsibility rvliich the former assumes by acceptance, and which the law leaves there.

So far we have assumed that the bank discounted the bill in good faith and for value. We think this not open to question on the facts. The amount was put to the credit of the drawer and drawn against. The previous transactions cannot affect this unquestionable fact.

On the main point, Robinson v. Reynolds, 2 Q. B., 196, and Thiedemann v. Goldschmidt, 1 De Gex Fisher & Jones, 4, are in point, and appear to us unanswerable.

The judgment must bo reversed, with' costs, and a new trial ordered.

The other Justices concurred.