Money paid by the drawee of a negotiable instrument in the mistaken belief that the drawer's account shows a balance sufficient to meet the instrument is not recoverable.1 Most of the theories that have been advanced in explanation of the denial of relief to the drawee who pays under a mistake as to the genuineness of the signature of the drawer (ante, Sec. 81 et seq.) have also been called to the support of the present rule. It seems probable that, in the latter case, as in the former, the rule is chiefly attributable to the policy of maintaining confidence in the security of negotiable paper (ante, Sec. 87).
The entry of the amount of a check in the depositor's pass book, followed by the entry of it in the books of the bank to the credit of the depositor and the debit of the drawer, is regarded as the equivalent of payment;2 but the mere receipt of the check by the bank is not.3 Whether the entry of the check in the depositor's pass book alone is enough is not settled.1 In some of the larger cities clearing house rules prescribe a time limit within which negotiable paper found to be not good because of lack of funds may be returned. As between banks dealing under such a rule, the return of paper within the time limit gives to the drawee the right to recover. In some cases delay beyond the time limit is held to be fatal;2 in others the rule is more liberally construed, and unless the plaintiff is guilty of laches or the defendant's position is altered, a recovery is allowed.3
1 Chambers v. Miller, 1862, 13 C. B. N. S. 125; Pollard v. Bank of England, 1871, L. R. 6 Q. B. 623; Riverside Bank v. First Nat. Bank, 1896, 74 Fed. 276; 20 C. C. A. 181; 38 U. S. App. 674; First Nat. Bank of Denver v. Devenish, 1890, 15 Colo. 229; 25 Pac. 177; 22 Am. St. Rep. 394; Manufacturers' Nat. Bank v. Swift, 1889, 70 Md. 515; 17 Atl. 336; 14 Am. St. Rep. 381; National Bank v. Berrall, 1904, 70 N. J. L. 757 ; 58 Atl. 189; 66 L. R. A. 599; 103 Am. St. Rep. 821, (payment stopped); Oddie v. Nat. City Bank, 1871, 45 N. Y. 735; 6 Am. Rep. 160 ; (but see Nat. Park Bank v. Steele, etc., Co., 1890, 58 Hun 81; 11 N. Y. Supp. 538); Hull v. Bank of South Carolina, 1838, Dudley (S. C.) 259; Citizens' Bank v. Schwarzsehild, 1909, 109 Va. 539; 64 S. E. 954; 23 L. R. A. (N. S.) 1092.
In Massachusetts a recovery will be allowed unless the payee shows a change of position. Merchants' Nat. Bank v. Nat. Eagle Bank, 1869, 101 Mass. 281; 100 Am. Dec. 120; Merchants' Nat. Bank v. Nat. Bank of Commonwealth, 1885, 139 Mass. 513; 2 N. E. 89; (but see Boylston Bank v. Richardson, 1869, 101 Mass. 287).
2 City Nat. Bank v. Burns, 1880, 68 Ala. 267 ; 44 Am. Rep. 138.
3 Boyd v. Emmerson, 1834, 2 Ad. & Ell. 184.
1 That it is not equivalent to payment: Nat. Gold Bank v. McDonald, 1875, 51 Cal. 64; 21 Am. Rep. 697. But see Oddie v. Nat. City Bank, 1871, 45 N. Y. 735; 6 Am. Rep. 160 ; Levy v. Bank of U. S., 1802, 4 Dall. (Pa.) 234.
2 Preston v. Canadian Bank, 1883, 23 Fed. 179, (D. C. 111.)
3 Merchants' Nat. Bank p. Nat. Eagle Bank, 1869, 101 Mass. 281; 100 Am. Dec. 120; Merchants' Nat. Bank v. Nat. Bank of Commonwealth, 1885, 139 Mass. 513; 2 N. E. 89.