name he assumed in obtaining the loan, and that his indorsement was the indorsement of the payee named. It is said in the opinion: "The vital point in this case is that Shotwell intended the draft to be sent to the party executing the notes and mortgage, and intended it to be paid to the person to whom he sent it, and whom he designated by the name of Daniel Guernesy, because that was the name he assumed in executing the notes and mortgage; and therefore the National Bank is protected in paying the draft to the very person whom Shotwell intended to designate by the name of Daniel Guernesy." In Maloney v. Clark, 6 Kan. 82, the plaintiff was induced to send a draft drawn to the order of his brother to a stranger who in the correspondence had personated his brother. The stranger indorsed the name of the plaintiff's brother on the draft, and sold it to the defendants, who were bankers. It was held that under these facts the plaintiff could not recover.

In Robertson v. Coleman, 141 Mass. 231, 55 Am. Rep. 471, 4 N. E. 619, a person who assumed the name of Barney took to Coleman, an auctioneer, a stolen horse and buggy to be sold. Before selling them Coleman made inquiry and received a favorable report of the standing of the real owner of the assumed name. After the sale he gave a check drawn to the order of Barney to the person for whom he sold the team, who indorsed it and parted with it for value. Payment of the check having been stopped, suit was brought by the holder against Coleman and a recovery had. In the opinion it was said: "It is clear from the facts that although the defendant may have been mistaken in the sort of man the person they dealt with was, this person was intended by them 237 as the payee of the check, designated by the name he was called in the transaction, and his indorsement of it was the indorsement of the payee of the check by that name." It would follow under this reasoning that if the check had been paid by the bank it would have been a good payment. In the case of United States v. National Exch. Bank, 45 Fed. 163, decided by the circuit court of the United States for the eastern district of Wisconsin, it was held that a bank was not liable for the payment of a check on a forged indorsement where the person who committed the forgery and received the money was in fact the person to whom the drawer delivered the check and whom he believed to be the payee named. man had by fraud obtained possession of a postoffice money order drawn in favor of Erben, on which he forged Erben's indorsement, and in payment of the order received a check from

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the postmaster drawn on the bank defendant to the order of Erben, on which he forged Erben's indorsement, and it was paid by the bank. This decision, as the others cited, is put upon the ground that the intention of the drawer of the check was that it should be paid to the person to whom he delivered it. There are a number of other cases which more or less directly recognize the principle on which these decisions are based, but in which there is no direct ruling on the subject, and we have found none which express a contrary view.

The facts of this case do not, we think, bring it within the rule that a bank paying a check to order on a forged indorsement may not charge the payment to the drawer's account, for the reason that the check was issued to the person whom the drawer intended to designate as the payee. If not within the rule, the plaintiff has no standing whatever. It is a perverted statement of the whole transaction to say that the check was intended for Dr. Herman S. Bissey, and that he alone was entitled to receive payment. Dr. Bissey had no more right to the check than had Ashley. He had given nothing for it. No one was entitled to it, and had the truth been known it would not have been issued. Under the supposed facts on which the trust company acted, Ashley was the owner of the property; he had executed a mortgage, and was entitled to payment. The clear intention was to pay him, although there was a mistake as to the facts on which the intention was based. Nor is the solution of 238 the question involved to be sought in determining whether the bank was negligent in dealing with its depositor Rogers. This was suggested at the argument, but mainly as a makeweight. The case was not presented or argued on that ground, and in view of the principles by which the question of liability must be determined and of the facts as shown at the trial, it could not have been. The true ground of liability, if any existed, was that the bank collected of the trust company a check drawn to the order on which the indorsement was forged. Between the bank and the trust company, as the drawer of the check, no relation, contractual or otherwise, existed. The drawer of a check cannot maintain an action against one who collects it on a forged indorsement from the bank on which it was drawn, although the bank paying the check may. The remedy of the drawer is against the bank which pays his check, and the bank's remedy is against the person to whom it paid. The liability of the party collecting the check arises from his implied warranty of the indorsement. This liability is founded

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on contract, and not on negligence, and it exists, if at all, whether there was negligence or not. But if we consider the question in this light the plaintiff has no case. The fraud was in effect consummated when the check was delivered to Ashley. He would have received money instead of a check if he had asked for it, or he could have drawn the money in the banking department in an adjoining room. Any right of the trust company to recover must rest on the assumption of its entire good faith and innocence; and if it gave a check to Ashley with any reservation or doubt as to his honesty in the transaction, it is estopped by the fact that it gave to one of whom it had reason to be suspicious the means of perpetrating a fraud on others. The officers of the trust company of course had no doubt. They acted in entire good faith, and it may be conceded with ordinary prudence; but the loss was occasioned by their error, and there is no reason, legal or equitable, why it should be shifted to another.

The judgment is reversed.

MR. CHIEF JUSTICE GREEN and Mr. Justice Dean dissented, and the latter said: "There is no dispute as to the facts; the court below directed the jury to find for plaintiff, and we have this appeal by the National Bank, defendant, assigning as error the peremptory instruction of the court below. A majority of my brethren are of opinion the court erred. I think it was right. I put the case wholly upon the principle or rule that where one of two innocent persons must suffer by the wrong of a third, he shall stand the loss whose fault or neglect made the loss possible. . . . . The fraud was only possible in view of the undisputed facts, because of the childish credulity and consequent neglect of the most ordinary business precautions of the defendant. I would affirm the judgment."

BANKS-PAYMENT OF FORGED CHECKS.-Money paid upon a forged indorsement of a check or draft may be recovered back. The bank is not bound to know the signature of an indorser. And the holder, whether he indorses the instrument or not, warrants the genuineness of all prior indorsements. If, therefore, a check or draft upon which the name of a prior indorser has been forged is paid, the amount may be recovered back from the party to whom it has been paid, or from any party who indorsed the instrument subsequently to the forgery: See the monographic notes to People's Bank v. Franklin Bank, 17 Am. St. Rep. 898; Laborde v. Consolidated Assn., 39 Am. Dec. 522.

HERTZLER v. GEIGLEY.

[196 Pa. St. 419, 46 Atl. 366.]

AGENCY-DEFENSE OF ILLEGALITY OF CONTRACT.An agent who has sold goods for his principal, collected the proceeds, and refused to turn them over cannot defend against the claim of his principal thereto on the ground that the sales were made without a license, and therefore illegal.

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CONTRACTS-ILLEGALITY-DEFENSE.-An Illegal tract cannot be executed, but when it has in fact been executed by the parties themselves, and the illegal object of it has been accomplished, the money or thing which was the price of it may be a legal consideration between the parties for a promise, express or implied, and the court will not unravel the transaction to discover its origin.

AGENCY-ILLEGALITY OF TRANSACTION AS DEFENSE. If money has been actually paid to an agent for the use of his principal, the legality of the action of which it is the fruit does not affect the right of the principal to recover it.

AGENCY-ILLEGALITY OF CONTRACT AS DEFENSE.— The law cannot enforce an illegal contract, but if the servant or agent of another has, in the prosecution of an unlawful enterprise for his master, received money or other property belonging to the master, he is bound to turn it over to him, and cannot shield himself from liability therefor upon the ground of the illegality of the original transaction.

B. F. Davis and S. P. Eby, for the appellant.

A. B. Hassler, for the appellee.

421 GREEN, C. J. The plaintiff's statement of cause of action contains throughout a claim that the defendant was indebted to her for the proceeds of whisky belonging to her, but which he sold for her as her agent. The first clause alleged that the defendant was indebted to her for large quantities of whisky, which the defendant received from her agent and "sold for plaintiff and received the money or proceeds of said sales from time to time." The second clause alleges "that from about July 20, 1894, to about March 24, 1895, the defendant sold and collected for sales of plaintiff's whisky and liquor, the sum of $1,608.75, and from that time on until about August 1, 1897, the sum of $734.06." The third clause charges that defendant "marked down the values of whisky or liquor he took away from time to time," representing the values of the whisky he received from her (plaintiff), "and which defendant had agreed to, or was to sell at said prices for the plaintiff as her agent or salesman." The fifth clause states that "the plaintiff allows the defendant the

sum of $250, commission for said sales of said whisky or liquors, that being the amount or balance he is entitled to receive.” Then follows a statement in items of the values of liquor taken away and sold by defendant for the plaintiff, amounting in the aggregate to $2,342.81, "from which is deducted $250 amount of defendant's commissions," leaving a balance due the plaintiff of $2,092.81.

It will be perceived from this analysis of the plaintiff's statement of cause of action, that it is in no sense a bill for goods sold and delivered by plaintiff to defendant, but is exclusively a claim for moneys due by defendant to plaintiff, which were collected from third parties to whom defendant had sold the whisky as the agent of the plaintiff. On its face, therefore, it is a claim for money due from the defendant as agent, to the plaintiff as principal, collected by him for her and not paid over.

This being the correct legal aspect of the claim, the case is brought within a clear line of decisions, in which it has been held that the agent could not make defense against the claim on the ground that the sales were illegal because made without 422 a license, or for any other cause of illegality. The authorities on this subject are very numerous, and in reality not controverted. A very few references will suffice. The controlling principle is well stated in the opinion of Chief Justice Gibson in the case of Lestapies v. Ingraham, 5 Pa. St. 71, thus: "True it is that an illegal contract will not be executed; but when it has been executed by the parties themselves, and the illegal object of it has been accomplished, the money or thing which was the price of it may be a legal consideration between the parties, for a promise, express or implied, and the court will not unravel the transaction to discover its origin." A very full and exhaustive discussion of the whole subject is found in the opinion of Mr. Justice Wickham in the case of Commonwealth v. Shober, 3 Pa. Sup. Ct. 554. It was there said: "It is an elementary rule in the law of agency, applicable alike in civil and criminal proceedings, that the agent shall not be heard to deny the title of his principal. This rule is founded on reason, public policy, and common honesty. Nor does it matter whether the goods or money retained or embezzled by the agent came to his hands through transactions tainted with illegality. "The contract of the agent to pay the money to his principal is not immediately connected with the illegal transaction, but it grows out of the receipt of the money for his principal': Story on Agency, sec. 347. 'If money has been actually paid to an agent