Clearfield Trust Co. v. United States case brief

Clearfield Trust Co. v. United States case brief summary
318 U.S. 363 (1943)

CASE SYNOPSIS

On a petition for a writ of certiorari to the United States Circuit Court of Appeals for the Third Circuit, petitioners, a retail store and a depository bank, challenged an order that reversed a judgment in their favor in an action brought by respondent United States to recover for a check that was cashed with a forged endorsement.

CASE FACTS
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.

DISCUSSION

• 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.

CONCLUSION
The Court affirmed the order because while respondent was not excepted from the general rules governing the rights and duties of drawees, petitioners had failed to establish any damage occasioned by respondent's delay in notifying them of the forgery.

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