Clearfield Trust Co. v. United States, 318 U.S. 363 (1943)
Clearfield Trust Co. v. United States
No. 490
Argued February 5, 1943
Decided March 1, 1943
318 U.S. 363
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE THIRD CIRCUIT
1. When the United States disburses its funds or pays its debts, it is exercising a constitutional function or power; and its rights and duties on commercial paper so issued are governed by federal, rather than local, law. United State v. Guaranty Trust Co., 293 U.S. 340, distinguished. P. 366.
2. In the absence of an applicable Act of Congress, it is for the federal courts to fashion the governing rule of federal law according to their own standards. P. 367.
3. Reasons which at times may make state law an appropriate federal rule are singularly inappropriate in determining the rights and duties of the United States on commercial paper which it issues, since the desirability of a uniform rule in such cases is plain. P. 367.
4. Although the federal law merchant, developed under Swift v. Tyson, represented general commercial law, rather than a choice of a federal rule designed to protect a federal right, it nevertheless stands as a convenient source of reference for fashioning federal rules applicable to such federal questions as are here involved. P. 367.
5. The right of a drawee to recover from one who presents for payment a check upon which the endorsement of the payee was forged accrues when the payment is made. P. 368.
6. The drawee, whether it be the United States or another, is not chargeable with the knowledge of the signature of the payee. P. 369.
7. If it is shown that the drawee on learning of the forgery did not give prompt notice of it and that damage resulted, recovery by the drawee is barred. P. 369.
That the drawee is the United States and the laches that of its employees is immaterial.
8. The United States is not excepted from the general rules governing the rights and duties of drawees by the vastness of its dealings or by the fact that it must act through agents. P. 369.
9. To bar recovery by a drawee, the damage alleged to have been occasioned by delay in giving notice of a forgery must be established and not left to conjecture. P. 369.
10. In this case, the showing as to damage resulting from delay of the United States in giving notice of a forgery, held not sufficient to bar recovery. P. 370.
It appeared that the presenting bank could still recover from its endorser, and the only showing on the part of the latter was that, if a check cashed for a customer is returned unpaid or for reclamation a short time after the date on which it is cashed, the employees can often locate the person who cashed it.
130 F.2d 93, affirmed.
Certiorari, 317 U.S. 619, to review the reversal of a judgment against the United States in an action brought by it to recover an amount paid on a forged Government check.