MARCH 13, 1924, 3 COMP. GEN. 626

MARCH 13, 1924, 3 COMP. GEN. 626

GOVERNMENT CHECK FRAUDULENTLY RAISED BY PAYEE WHERE A GOVERNMENT CHECK WHICH HAD BEEN FRAUDULENTLY RAISED BY THE PAYEE AND DEPOSITED TO HIS CREDIT WITH A BANK, AND THE BANK WAS SUBSEQUENTLY REQUIRED TO MAKE GOOD THE ENTIRE AMOUNT OF THE CHECK, SAID BANK, BEING A HOLDER IN DUE COURSE, IS ENTITLED TO REIMBURSEMENT FOR THE ORIGINAL AMOUNT OF THE CHECK PROVIDED, THE PAYEE HAS ALREADY RECEIVED THAT AMOUNT.

DECISION BY COMPTROLLER GENERAL MCCARL, MARCH 13, 1924:

THERE IS BEFORE THIS OFFICE A CLAIM FILED BY THE CITY NATIONAL BANK OF TUSCALOOSA, ALA., FOR REIMBURSEMENT IN THE SUM OF $153.83, BEING THE ORIGINAL AMOUNT OF A GOVERNMENT DISBURSING OFFICER'S CHECK WHICH WAS PAID BY SAID BANK AFTER HAVING BEEN FRAUDULENTLY RAISED BY THE PAYEE TO $653.83.

IT APPEARS THAT THE CHECK IN QUESTION WAS ISSUED JUNE 30, 1923, BY T. H. DALEY, A DISBURSING OFFICER OF THE UNITED STATES VETERANS' BUREAU, PAYABLE TO ROY J. ASHLEY, A VOCATIONAL TRAINEE OF THE UNITED STATES VETERANS' BUREAU OF THE UNIVERSITY OF ALABAMA. AFTER THE RECEIPT OF THE CHECK BY THE PAYEE HE MADE MATERIEL ALTERATIONS AND RAISED IT FROM ITS ORIGINAL AMOUNT, $153.83, TO $653.83. WITH THE CHECK SO ALTERED HE PRESENTED IT TO THE CLAIMANT BANK AND WAS GIVEN CREDIT IN HIS ACCOUNT FOR SAME. THE CHECK WAS SENT BY THE CLAIMANT TO THE BIRMINGHAM BRANCH OF THE FEDERAL RESERVE BANK OF ATLANTA AND THE CLAIMANT WAS GIVEN CREDIT IN THE AMOUNT OF $653.83. THE FEDERAL RESERVE BANK TRANSMITTED THE CHECK TO THE TREASURER OF THE UNITED STATES, WHERE THE ALTERATION WAS DISCOVERED. A DEMAND WAS MADE UPON THE CLAIMANT FOR THE AMOUNT OF THE CHECK AS ALTERED ($653.83), AND IN COMPLIANCE WITH SUCH DEMAND THE CLAIMANT REFUNDED THE ENTIRE AMOUNT, AND THE GOVERNMENT NOW HOLDS THE CHECK WITHOUT HAVING PAID THE AMOUNT FOR WHICH IT WAS ORIGINALLY DRAWN.

WHILE NOT MATERIAL TO THE QUESTION HERE PRESENTED, IT MAY BE STATED THAT THE PAYEE OF THE CHECK WAS ARRESTED ON THE CHARGE OF ALTERING A GOVERNMENT OBLIGATION, MADE A COMPLETE CONFESSION, ENTERED A PLEA OF GUILTY TO THE INDICTMENT AGAINST HIM, AND WAS SENTENCED TO SERVE A TERM OF THREE YEARS IN THE FEDERAL PENTITENTIARY AT ATLANTA, GA.

THE CLAIMANT HAS BEEN REIMBURSED BY INSURANCE COMPANY ON FORGERY INSURANCE IN THE AMOUNT OF $300. THIS, HOWEVER, DOES NOT AFFECT THE LIABILITY OF THE UNITED STATES FOR THE ORIGINAL AMOUNT OF THE CHECK $153.83.

IT WAS THE GENERAL RULE PRIOR TO THE ENACTMENT OF THE NEGOTIABLE INSTRUMENTS LAW THAT IF A BILL, NOTE OR CHECK BE ALTERED IN A MATERIAL PARTICULAR, EITHER BY FRAUD OR BY AN INNOCENT MISTAKE NOT CORRECTED WHILE THE PAPER WAS IN THE HANDS OF THE PARTY WHO MADE THE ALTERATION, IT WOULD BE BY THE LAW MERCHANT DESTROYED TOWARD ALL NONASSENTING PARTIES, AND THAT, TOO, WHETHER THE ALTERATION WAS MADE BY THE PARTY CLAIMING UNDER IT OR BY ANY OTHER PARTY TO IT, AND NO ACTION COULD BE MAINTAINED AGAINST THE NONASSENTING PARTIES EITHER UPON THE ALTERED INSTRUMENT OR UPON THE INSTRUMENT AS IT STOOD BEFORE ALTERATION, EVEN BY A BONA FIDE HOLDER FOR VALUE. THE FACT THAT THE INSTRUMENT MAY HAVE BEEN RESTORED TO ITS ORIGINAL FORM AFTER HAVING BEEN PASSED WITH THE ALTERATION MADE NO DIFFERENCE.

THE NEGOTIABLE INSTRUMENTS LAW, HOWEVER, HAS CHANGED THE RULE OF THE LAW MERCHANT TO THIS EXTENT, THAT A HOLDER OF THE INSTRUMENT IN DUE COURSE (AND THE BANK IS THE HOLDER IN DUE COURSE IN THE PRESENT CASE) NOT A PARTY TO THE ALTERATION MAY ENFORCE PAYMENT OF IT ACCORDING TO ITS ORIGINAL TENOR. SEE GARRARD V. HADDEN, 67 PA.ST., 82; BROWN V. REED, 79 PA.ST., 370; BOOTH V. POWERS, 56 N.Y., 22. SEE ALSO ACT OF JAN. 12, 1899, 30 STAT., 797, SEC. 124.

THE CLAIMANT WAS NOT A PARTY TO THE ALTERATION IN THE PRESENT CASE AND BEING A HOLDER IN DUE COURSE IS ENTITLED TO BE REIMBURSED IN THE AMOUNT OF THE ORIGINAL CHECK, $153.83. THEREFORE, THE ALLOWANCE OF THE CLAIM IS AUTHORIZED, PAYABLE FROM THE APPROPRIATION,"VOCATIONAL REHABILITATION, U.S. VETERANS' BUREAU, 1923.'

IT DOES NOT APPEAR THAT THE USUAL ADMINISTRATIVE REPORT HAS BEEN FURNISHED BY THE U.S. VETERANS' BUREAU AS TO WHETHER OR NOT THE PAYEE, ROY J. ASHLEY, HAS BEEN PAID THE ORIGINAL AMOUNT OF THE CHECK SINCE THE BANK MADE REFUND TO THE GOVERNMENT. THIS REPORT MUST BE OBTAINED BEFORE SETTLEMENT IS MADE WITH THE CLAIMANT.