It is a general rule that one who confers a benefit by mistake will not be denied relief because of the fact that the mistake was the result of his own negligence (ante, Sec. 15). Accordingly, one who pays negotiable paper which has been altered, or upon which an indorsement has been forged, should be allowed to recover even though, in the exercise of reasonable care, he ought to have discovered the alteration or forgery.2

Although, as has been seen {ante, Sec. 79), the drawee of a bill who pays in misreliance upon a forged signature of the supposed drawer is not ordinarily allowed to recover, if it appears that the exercise of reasonable care by the payee would have resulted in the discovery of the forgery, restitution will, according to the weight of authority, be enforced:

Ellis v. Ohio Life Ins. Co., 1855, 4 Ohio St. 628; 64 Am. Dec. 610: Action by drawee to recover money paid on a forged check. The payee purchased the check from a stranger without inquiry as to his identity or his right to the check. Ranney, J. (p. 668): "We have nowhere doubted the wisdom or policy of the rule, which allows an innocent holder to require the drawee to pass upon the signature of the drawer, and makes him responsible for the decision he makes; nor the justice of permitting the former to retain the money received upon a forgery, when some one must suffer by the mistake. But we must be better informed than at present before we shall be able to perceive the justice or propriety of permitting a holder to profit by a mistake which his own negligent disregard of duty has contributed to induce the drawee to commit." 1

1 In First Nat. Bank v. Burkham, 1875, 32 Mich. 328, Cooley, J., said (p. 331): "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."

2 Nat. Bank of Commerce v. Nat. M. B. Assn., 1873, 55 N. Y. 211; 14 Am. Rep. 232, (but see Bank of Commerce v. Union Bank, 1850, 3 N. Y. 230, and Clews v. N. Y. Nat. Banking Assn., 1882, 89 N. Y. 418; 42 Am. Rep. 303); City Bank v. First Nat. Bank, 1876, 45 Tex. 203. And see Imperial Bank v. Bank of Hamilton, [1903], A. C. 49.

But there are cases to the contrary.2

Negligence in the payment of altered or forged negotiable paper should not be confused with negligence in failing promptly to give notice to the payee upon the discovery of the alteration or forgery. Tardiness in giving such notice, if it prejudices the defendant, will defeat the plaintiff's right to restitution,3 and, in some cases, prejudice to the defendant has been presumed.4

1 Accord: Nat. Bank v. Bangs, 1871, 106 Mass. 441; 8 Am. Rep. 349; First Nat. Bank of Danvers v. First Nat. Bank of Salem, 1890, 151 Mass. 280; 24 N. E. 44; 21 Am. St. Rep. 450; State Bank v. First Nat. Bank, 1910, 87 Neb. 351; 127 N. W. 244; 29 L. R. A. (N. S.) 100; Williamsburgh Trust Co. v. Turn Suden, 1907, 120 App. Div. 518; 105 N. Y. Supp. 335; Greenwald v. Ford, 1906, 21 S. D. 28; 109 N. W. 516; People's Bank v. Franklin Bank, 1889, 88 Tenn. 299 ; 12 S. W. 716; 6 L. R. A. 724; 17 Am. St. Rep. 884; Rouvant v. San Antonio Nat. Bank, 1885, 63 Tex. 610; Canadian Bank of Commerce v. Bingham, 1902, 30 Wash. 484; 71 Pac. 43; 60 L. R. A. 955 (see also s. c. 1907, 46 Wash. 657; 91 Pac. 185). And see Gloucester Bank v. Salem Bank, 1820, 17 Mass. 33; First Nat. Bank v. Ricker, 1874, 71 111. 439; 22 Am. Rep. 104; Germania Bank v. Boutell, 1895, 60 Minn. 189; 62 N. W. 327; 27 L. R. A. 635; 51 Am. St. Rep. 519; Ford v. People's Bank, 1906, 74 S. C. 180; 54 S. E. 204; 10 L. R. A. (N. S.) 63; 114 Am. St. Rep. 986. But see Bank of Williamson v. McDowell County Bank, 1910, 66 W. Va. 545; 66 S. E. 761. In Bank of Williamson v. McDowell County Bank, supra, it was held that money paid on a forged check could not be recovered if both the drawee and holder were negligent.

2 Howard v. Mississippi Bank, 1876, 28 La. Ann. 727; 26 Am. Rep. 105; Commercial Bank v. First Nat. Bank, 1868, 30 Md. 11; 96 Am. Dec. 554; Bank of St. Albans p. Farmers' Bank, 1838, 10 Vt. 141; 33 Am. Dec. 188.

3 Yatesville Banking Co. v. Fourth Nat. Bank, 1911, Ga. App. ; 72 S. E. 528 ; Schroeder v. Harvey, 1874, 75 111. 638 ; Continental Nat. Bank v. Metropolitan Nat. Bank, 1903, 107 111. App. 455; Third Nat. Bank. v. Allen, 1875, 59 Mo. 310; Canal Bank v. Bank of Albany, 1841, 1 Hill (N. Y.) 287; Ryan v. Bank of Montreal, 1886, 12 Ont. 39; Iron City Nat. Bank v. Fort Pitt Nat. Bank, 1893, 159 Pa. St. 46; 28 Atl. 195 (cf. McNeely Co. v. Bank of N. America, 1908, 221 Pa. St. 588; 70 Atl. 891) ; City Bank v. First Nat. Bank, 1876, 45 Tex. 203. See United States v. Nat. Exch. Bank, 1909, 214 U. S. 302; 29 S. Ct. 665, (pension check).

4 Continental Nat. Bank v. Metropolitan Nat. Bank, 1903, 107 111. App. 455.