He who accepts a forged signature of a payee does not deserve preferred treatment. It is his neglect or error in accepting the forger's signature which occasions the loss. He should be allowed to shift that loss to the drawee only on a clear showing that the drawee's delay in notifying him of the forgery caused him damage.
Petitioners, a retail store and a depository bank, sought review of an order that reversed a district court judgment holding that respondent United States was barred from recovery because respondent delayed in giving notice of the forgery of a check. The check was obtained by an unknown person who transferred it to petitioner retail store in exchange for cash and merchandise, and the check was endorsed to petitioner bank for collection. Neither petitioner had any knowledge or suspicion of the forgery. Each acted in good faith.
Did the unreasonable delay by the respondent in giving notice of the forgery bar its recovery?
The Court affirmed the order, holding that one who accepted a forged signature of a payee was allowed to shift the loss to the drawee only on a clear showing that the drawee's delay in notifying him of the forgery caused damage. The Court held that petitioners failed to show that the delay by respondent had caused them a manifest loss.