This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Money possesses the quality of negotiability to the highest degree.1 Even if money is stolen it can not be recovered from one who has taken it for value in good faith,2 even if it is taken in payment of a preexisting debt.3 While it is sometimes said that this is because it is impracticable to distinguish one piece of money from another, it was seen long ago that this was not the true reason, but that this result was reached from the fact that money was eminently negotiable.4 In like manner, money which is improperly converted and is paid in satisfaction of a prior debt to one who takes without notice, is not impressed with a trust.5
3 Murphy v. Improvement Co., 97 Fed. 723.
4 Chandler v. Smith, 147 Ga. 637, 95 S. E. 223.
5 Pond Creek Coal Co. v. Rilev Lester & Bros., 171 Ky. 811, 1S8 S. W. 907.
6 First National Bank v. Greenlee. 102 Neb. 180, L. R. A. 1918D, 224, 160 N. W. 539.
7 Warren v. Scott. 32 la. 22.
1 Connecticut. Bristol v. Warner, 19 Conn. 7.
Illinois. Archer v. Claflin, 31 111. 306
Massachusetts. Dean v. Carruth, 108 Mass 242.
Montana. Clarke v. Marlow, 20 Mont. 249, 50 Pac. 713
South Carolina. Hubbell v. Fogartie, 3 Rich. L. (S. Car.) 413, 45 Am. Dec. 775.
2 Famous Shoe Co. v. Crosswhite, 124 Mo. 34, 46 Am. St. Rep. 424, 26 L. R. A. 568, 27 S. W. 397.
3Garrigus v. Missionary Society, 3 Ind. App. 91, 50 Am. St. Rep. 262, 28 N. E. 1009 (a note "to advance the cause of missions and to induce others to contribute").
4 Baxter v. Brandenburg, 137 Minn. 259, 103 N. W. 516.
1 England. Miller v. Race, 1 Burr. 452.
Arkansas. Oklahoma State Bank v. Rank, 120 Ark. 869, 179 S. W. 509.
Iowa. Smith v. Crawford County State Bank, 99 Ia. 282, 61 N. W. 378, 68 N. W. 690.
Kansas. Kimmel v. Bean, 68 Kan. 598, 104 Am. St Rep. 415, 64 L. R. A. 785, 75 Pac. 1118; Benjamin v. Welda State Bank, 98 Kan. 361, L. R. A. 1917A, 704, 158 Pac. 65.
Louisiana. First National Bank v. Gilbert, 123 La. 845, 25 L. R. A. (N.S.) 831, 40 So. 593.
New York. Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511. "The rule has been settled, by a long line of cases, that money obtained by fraud or felony cannot be followed by the true owner into the hands of one who has received it bona fide and for a valuable consideration in due course of business. * * * It is said that the case is to be governed by the doctrine, established in this state, that an antecedent debt is not such a consideration as will cut off the equities of third parties in respect of negotiable securities obtained by fraud. But no case has been referred to where this doctrine has been applied to money received in good faith in payment of a debt. It is absolutely necessary for practical business transactions that the payee of money in due course of business shall not be put upon inquiry at his peril as to the title of the payor. Money has no earmark. The purchaser of a chattel or a chose in action may, by inquiry, in most cases, ascertain the right of the person from whom he takes the title. But it is generally impracticable to trace the source from which the possessor of money has derived it. It would introduce great confusion into commercial dealings if the creditor who receives money in payment of a debt is subject to the risk of accounting therefor to a third person who may be able to show that the debtor obtained it from him by felony or fraud. The law wisely from considerations of public policy and convenience, and to give security and certainty to business transactions, adjudges that the possession of money vests the title in the holder as to third persons dealing with him and receiving it in due course of business, and in good faith, upon a valid consideration. If the consideration is good as between the parties, it is good as to all the world." Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511 [quoted in Kimmel v. Bean, 68 Kan. 598, 104 Am. St. Rep. 415, 64 L. R. A. 785, 75 Pac. 1118, and also in Benjamin v. Welda State Bank, 98 Kan. 361, L. R. A. 1917A, 704, 158 Pac. 65].
2 England. Miller v. Race, 1 Burr, 452.
Arkansas. Oklahoma State Bank v Bank, 120 Ark. 369, 179 S. W. 509.
Kansas. Kimmel v. Bean, 68 Kan. 598, 104 Am. St. Rep. 415, 64 L. R. A. 785, 75 Pac. 1118; Benjamin v. Welda State Bank, 98 Kan. 361, L. R. A. 1917A, 704, 158 Pac. 65.
Louisiana. First National Bank v. Gilbert, 123 La. 845, 25 L. R. A. (N.S.) 631, 49 So. 593.
New York. Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511.
3 Benjamin v. Welda State Bank, 98 Kan. 361, L. R. A. 1917A, 704, 158 Pac. 65.
4"Tis a pity that reporters sometimes catch at quaint expressions that may happen to be dropped at the bar or bench and mistake their meaning. It has been quaintly said 'that the reason why money cannot be followed is because it has no earmark,' but this is not true. The true reason is, upon account of the currency of it, it cannot be recovered after it has passed in currency. So in case of money stolen, the true owner cannot recover it after it has been paid away fairly and honestly upon a valuable and bona fide consideration; but before money has passed in currency, an action may be brought for the money itself." Miller v. Race, 1 Burr. 452.