The rule that payment by a bank of a check drawn on itself, where the drawer's name is forged, does not obtain as between banks. The rule is said to be by courts of not the highest authority that the first bank indorsing the check guarantees the signatures on the check, including the maker's.1 It is impliedly decided in other cases, but this particular language is not used.2 But if the second bank is guilty of negligence,3 or of a delay which caused injury,4 the indorsing bank will not be liable to it.5 If the paper is a forgery owing to a forged indorsement, or to the amount being altered, the first bank indorsing the paper is liable to the other banks taking the paper or paying it.6 The reason of this rule is so plain that it needs no comment. It is said, however, that if the second bank is guilty of negligence or delay in reporting the forgery or negligence in discovering such a forgery, the indorsing bank will be exonerated.7 But this statement is strenuously denied by very high authority.8 But where the statute requires diligence to be shown, the failure to exhibit such diligence by the second bank will be a defense as to the bank first indorsing the paper.9 The real ground of recovery is upon the indorsement or receipt of the money, but some courts lay stress upon the indorsing bank's negligence.10 The rules of the clearing-house are binding upon banks settling accounts by that medium,11 so far as the rule extends, even upon forged paper.

47 See note 27 to this section, and Crawford v. West Side Bank, supra.

48 Leather Mfg. Bank v. Morgan, 117 U. S. 96. The statement in the text is what the case meant to decide, but in the case before it the court was concerned with the negligence of a depositor subsequent to the payment. As to that negligence the antecedent negligence of the bank would be immaterial, but as this case stands it is an authority to the contrary.

49See notes 14,18, 19, 20, ante, to this section.

1 First Nat. Bank v. Northwestern Nat Bank, 40 I11 App. 640; First Nat. Bank v. First Nat. Bank, 4 Ind. App. 355; Indiana Nat. Bank v. First Nat Bank, 9 Ind. App. 185. The first case on appeal (152 I11. 296) was not affirmed as to this point, the court saying, the indorsement having been forged, the forgery of the drawer's name was immaterial. Custom may be admitted to prove this rule. Ellis v. Ohio Life Ins. Co., 4 Ohio St. 628. But if the paying bank was negligent it cannot recover. First Nat. Bank v. First Nat. Bank, 58 Ohio St 207. Cases seemingly contra to the text are Deposit Bank v. Fayette Nat. Bank, 90 Ky. 10; Comm. Nat Bank v. First Nat Bank, 30 Md. 11, and Northwestern Nat. Bank v. Bank of Commerce, 107 Ma 402.

2 First Nat Bank v. First Nat. Bank, 151 Mass. 280; Third Nat Bank v. Allen, 59 Mo. 310; First Nat Bank v. State Bank, 22 Neb. 769; State Nat Bank v. Freedman's Sav. Bank, 2 Dill. 11.

3 Salt Springs Bank v. Syracuse Sav. Inst, 02 Barb. 101.