Professor Ames advanced and very ably supported the view that the drawee is denied a recovery, in case the signature of the drawer is forged, upon the principle that as between parties having equal equities, one of whom must suffer, the legal title should prevail.1

"The true principle," he said, "upon which cases like Price v. Neal are to be supported, is that far-reaching principle of natural justice, that as between two persons having equal equities, one of whom must suffer, the legal title shall prevail. The holder of the bill of exchange paid away his money when he bought it; the drawee parted with his money when he took up the bill. Each paid in the belief that the bill was genuine. In point of natural justice they are equally meritorious. But the holder has the legal title to the money. A court of equity (and the action of assumpsit for money had and received is, in substance, a bill in equity) cannot properly interfere to compel the holder to surrender his legal advantage. The same reasoning applies if the drawee has merely accepted the bill. The legal title to the acceptance is in the holder. A court of equity ought not to restrain the holder by injunction from enforcing his legal right, nor should a court of law permit the acceptor to defeat his acceptance by an equitable defense."

Professor Ames' theory finds little support in the reasoning of judicial opinions and has been challenged by Professor Keener and Professor Wigmore. The most effective arguments that have been urged against it are substantially as follows: and adoption. But if the presentation is made at a time when, or at a place where, such an examination cannot be had, time must be allowed for that purpose; and, if the money is then paid, the parties, the one in paying and the other in receiving payment, are to be understood as agreeing that a receipt and payment under such circumstances shall not amount to an adoption, but that further inquiry may be made, and, if the paper is found to be counterfeit, it may be returned within a reasonable time."

1"The Doctrine of Price v. Neal," 4 Harv. Law Rev. 297, 299.

1. That the doctrine that "where equities are equal the legal title shall prevail" does not apply because the competing equities are not in the same res.

2. That if the doctrine is applied to cases of forgery of the drawer's signature, it should also be applied to cases of forged indorsements, in which, however, a recovery is generally permitted.

In support of the first objection, it is pointed out that in all cases to which the application of the doctrine is unquestioned, the equities are in the same res. For example, where B and C receive assignments from A of a claim against X, it is clear that each has an equity in the same subject matter - the debt of X. If one, by collecting the debt, acquires a legal title, he will not be disturbed. Again, in the case of a contest between the purchaser of land and an equitable incumbrancer, the equity of each is in the same subject matter - the land. He who has the legal title, in addition to his equity, will not be deprived of his advantage. But in the cases under consideration the holder's equity, which arises when he buys the forged instrument, is in the purchase price paid for such instrument, while the drawee's equity, arising in an entirely separate transaction, is in the sum paid to the holder.1

Replying to this criticism, the writer of a note in the Harvard Law Review says:2

"This criticism of the theory of 'equal equities,' as explaining the doctrine of Price v. Neal, seems to proceed on a misinterpretation. There are no legal equities involved, in the sense of equitable claims against the same person in respect to the same res. The doctrine simply means that, as between parties equally meritorious, a legal title will not be disturbed. Both parties have paid out their money under an innocent mistake as to the same fact; but the holder now has legal title to the money he has received, or, in case the bill has only been accepted, to the obligation to pay. Consequently there is no reason in equity for depriving him of that legal title."

1 Professor Wigmore," A Summary of Quasi-Contracts," 25 Am. Law Rev. 695, 706; Keener, "Quasi-Contracts," pp. 154-8.

216 Harv. Law Rev. 514.

This explanation, it is submitted, does not meet the objection. It is true that the holder and drawee successively pay out their money under a mistake as to the same fact. But there are nevertheless two entirely separate transactions and two quite distinct cases of money paid under mistake. If the holder's mistake followed the drawee's and would not occur but for the drawee's, it might be successfully contended that, since the holder changes his position as a result of the drawee's act, justice would not be served by permitting the drawee to recover at the holder's expense (see ante, Sec. 25). But the holder's mistake precedes the drawee's and cannot possibly be said to result from any act or omission of the drawee. It is the holder's own calamity, for which the drawee is in no way responsible, and affords no reason for denying to the drawee the right to recover money innocently paid by him, in a subsequent transaction, to the holder. To deny relief to the drawee "is in effect to allow the defendant to recoup his loss at the expense of the plaintiff,"1 under circumstances which, in the absence of considerations of policy, do not warrant such a recoupment.

The second objection was anticipated by Professor Ames with the contention that the cases permitting a recovery of money paid under mistake as to the genuineness of an indorsement rest upon the doctrine of subrogation. He said:2

"Here, too, it may be urged, the equities are equal, and the holder, having obtained the money, should keep it. But this case differs in an important particular from all the cases hitherto considered, and another principle comes into play, which overrides the rule as to equal equities. In all the other cases the bill or note, however valueless it may have been, belonged to the holder. In the case of the forged indorsement, on the other hand, the bill or note belongs, not to the holder, but to him whose name was forged as indorser. The holder, who bought the bill, was therefore guilty of a conversion, however honestly he may have acted. When he collected the bill, inasmuch as he obtained the money by means of the true owner's property, he became a constructive trustee of the money for the benefit of the latter. The true owner may therefore recover the money as money had and received to his use. If he recovers in his action, the property in the bill would pass to the holder; but the bill would be of no value to him, for, if he should seek to collect it, he would be met with the defense that it had been paid to him once already. If, on the other hand, the true owner prefers to proceed on the bill against the maker or acceptor, he may do so, and the prior payment to the holder, being made to one without title, will be no bar to the action. The maker or acceptor, however, who pays to the true owner, is entitled to the bill, and should be subrogated to the owner's right to enforce the constructive trust against the holder, and could thereby make himself whole. Consequently, whatever course the true owner elects to pursue, the loss must ultimately fall on the holder."

1 Keener, "Quasi-Contracts," p. 156.

2 4 Harv. Law Rev. 307. See Title Guarantee and Trust Co. v. Haven, 1909, 196 N. Y. 487; 89 N. E. 1082; 25 L. R. A. (N. S.) 1308, a case where drawee (drawer's name being forged) was subrogated to assessment lien which had been terminated by payment of check.

This theory, like that which is called to the support of Price v. Neal, has little recognition in the adjudged cases. And it involves a straining of the doctrine of subrogation, since the drawee is permitted to sue in his own name, and without showing payment to the true owner of the bill. An analogy, however, may be conceded.