Clearfield Doctrine

"Governments descend to the level of a mere private corporation, and take on the characteristics of a mere private citizen...where private corporate commercial paper [Federal Reserve Notes] and securities [checks] is concerned. ... For purposes of suit, such corporations and individuals are regarded as entities entirely separate from government." - Clearfield Trust Co. v. United States, 318 U.S. 363-371 (1942)
What the Clearfield Doctrine is saying is that when private co ercial paper is used by corporate !overn ent, then "overn ent loses its #overei!nt$ #tat%# and becomes no different than a mere private corporation. As such, government or in your case a court! then becomes bound by the rules and laws that govern private corporation# which means that if they intend to co pel an individual to some #pecific perfor ance based upon its corporate #tat%te# or corporation r%le#, then the !overn ent, like any private corporation, must be the holder in due course of a contract or ot&er co ercial a!ree ent between it and the one upon whom demands for #pecific perfor ance are made and further, the government must be willing to enter the contract or co ercial a!ree ent into evidence before trying to get to the court to enforce its demands, called statutes. " mhk#

THE CLEARFIELD DOCTRINE WAS RECORDED IN THE AMERICAN LAW REPORT OF 1938. THE DOCTRINE EXPLAINS: ERIE RAILROAD COMPANY V. HARRY J. TOMPKINS. United States Supreme Court- Apri !"# $%&' (-U. S.- #'! L. ed. (Ad). *'*+# "' S. Ct.-.+ Courts. , &** - dut. o/ 0edera Courts to /o o1 State de2isions on matters o/ 3enera a1. 1. T4e P4rase 5 a1s o/ t4e se)era states5 in t4e pro)ision o/ 34 of the Feder ! "#d$%$ r& A%t o/ Se'te()er *4+ 1,89# %h '. *-+ *8 ..S.C.A. ,*/# t4at t4e a1s o/ t4e se)era states# except 14ere t4e Co01t$t#t$o0# tre t$e1# or 1t t#te1 of the .0$ted St te1 ot4er1ise re6uire or pro)ide# s4a 7e re3arded as ru es o/ de2ision in tria s at COMMON LAW# IN THE COURTS O0 THE .0$ted St te1# in 2ases 14ere t4e. app .# 2annot 2onstitutiona . 7e 2onstrued as e82 udin3 in matters o/ 3enera 9urispruden2e t4e un1ritten a1 o/ t4e state as de2 ared 7. its 4i34est 2ourt. Swift v. Tys !+ 12 Pet. 1 1- L. ed. 82/+ O3ERR.LED. Co((o0 L 4+ *5 of 0 t$o0. *. T4ere is no Feder ! %o((o0 ! 4# and Co06re11 4as no po1er to de2 are su7stanti)e ru es o/ %o((o0 ! 4 app i2a7 e in a state# 14et4er t4e. 7e o2a or 3enera in t4eir nature# 7e t4e. %o((er%$ ! ! 4 or a part o/ t4e ! 4 of tort1. :See A. "#r. T$t!e 7%o((o0 L 4+7 /8 R.C.L. t$t!e 7Co((o0 L 4.7 4. ; A''e !+ 9,25 remand /or /urt4er 2onsiderationpropriet.<<<Et2. (t4is 2an 7e /ound in an. uni)ersit. i7rar.+ ' 6e 148, 9 1/--. CLEAR0IELD TRUST DOCTRINE. =o)ernments des2end to t4e e)e o/ a mere pri)ate 2orporation# and ta>e on t4e 24ara2teristi2s o/ a mere pri)ate 2iti?en... @4ere pri)ate 2orporate 2ommer2ia paper :0edera Reser)e Notes; and se2urities :24e2>s; is 2on2erned... 0or purposes o/ suit# su24 2orporations and indi)idua s are re3arded as entities entire . separate /rom 3o)ernment. C"e#$fie"% T$&st C . v. '!ite% St#tes+ 318 ..S. 32353,1 :194*;. See Note.
Note: T4e C!e rf$e!d Do%tr$0e is st#$e %ecisis( upon a 2ourts# and imposes t4at Aan entit. 2annot 2ompe per/orman2e upon its 2orporate statutes or 2orporation ru es un ess it# i>e an. ot4er 2orporation# is t4e Ho der in Due Course o/ some 2ontra2t or 2ommer2ia a3reement 7et1een it# and t4e one on 14om

its demands /or per/orman2e are made# and is 1i in3 to produ2e said do2ument# and to p a2e t4e same into e)iden2e )efore tr.in3 to en/or2e its demands . (STARE DECISIS. n. :Latin Ato stand 7. t4in3s de2idedB; T4e do%tr$0e of 're%ede0t# under 14i24 it is ne2essar. /or a 2ourt to /o o1 ear ier 9udi2ia de2isions 14en t4e same points arise a3ain in iti3ation. C a2>Ds *t4.

318 ..S. 323+ 318 ..S. ,44+ 23 S.Ct. /,3+ 8, L.Ed. 838+ 4351 .STC P 1-+-/1 S#'re(e Co#rt of the .0$ted St te1 CLEARFIELD TR.ST CO. et !. <. .NITED STATES. No. E%F. Ar3ued and Su7mitted 0e7. "# $%E&. De2ided Gar24 $# $%E&. As Amended Gar. $"# $%E&. On )$it f Ce$ti $#$i to t4e .0$ted St te1 C$r%#$t Co#rt of A''e !1 /or t4e Th$rd C$r%#$t. A2tion 7. t4e .0$ted St te1 of A(er$% a3ainst t4e C!e rf$e!d Tr#1t Co(' 0& to re2o)er t4e amount o/ a 24e2> on 14i24 ' &eeHs name 4ad 7een /or3ed# 14erein t4e ". C. Pe00e& Co(' 0& inter)ened. A =#d6(e0t d$1($11$06 t4e 2omp aint 1as re<er1ed 7. t4e C$r%#$t Co#rt of A''e !1# 13- F.*d 93+ and t4e de/endant and inter)ener 7rin3 ce$ti $#$i. Aff$r(ed. @est Headnotes :$; Ie.Cite Notes $*FC 0edera Courts $*FCJI State La1s as Ru es o/ De2ision $*FCJI(C+ App i2ation to Parti2u ar Gatters $*FC>E$E >. Corporations and Asso2iationsK Can>s and Trust CompaniesK Se2urities. Gost Cited Cases (0ormer . $FL>&L$+ @4ere %he%> dra1n on Tre 1#rer of the .0$ted St te1 1as issued /or ser)i2es per/ormed under Feder ! E(er6e0%& Re!$ef A%t and 24e2> 1as paid on /or3ed indorsement o/ ' &eeHs name# in a2tion 7. t4e .0$ted St te1 to re2o)er amount o/ 24e2> /rom $0dor1er1# t4e r#!e o/ E$ie R. C . v. T *p+i!s 1as inapp i2a7 e. "#d.Code 1 *4:1;# *8 ..S.C.A. 1 41:1;K Feder ! E(er6e0%& Re!$ef A''ro'r$ t$o0 A%t of 193/# 49 St t. 11/# 1/ ..S.C.A. 11 ,*155,*8.

:!; Ie.Cite Notes $*FC 0edera Courts $*FCJI State La1s as Ru es o/ De2ision $*FCJI(C+ App i2ation to Parti2u ar Gatters $*FC>E&& >. Ot4er Parti2u ar Gatters. Gost Cited Cases (0ormer . $FL>&L$+ T4e ri34ts and duties o/ t4e .0$ted St te1 on %o((er%$ ! ' 'er 14i24 it issues are 3o)erned 7. feder ! ! 4 rat4er t4an !o% ! ! 4. Cr.Code+ 1 148# 18 ..S.C.A. 1 *2*.

:&; Ie.Cite Notes &%& United States &%&JI 0is2a Gatters &%&>'% >. Ci s and Notes in =enera . Gost Cited Cases In a7sen2e o/ an app i2a7 e %t of Co06re11 /i8in3 ri34ts and duties o/ t4e .0$ted St te1 on %o((er%$ ! ' 'er 14i24 it issues# it is /or t4e feder ! %o#rt1 to /as4ion t4e 3o)ernin3 r#!e of ! 4 a22ordin3 to t4eir o1n standards.

:E; Ie.Cite Notes $*FC 0edera Courts $*FCJI State La1s as Ru es o/ De2ision $*FCJI(A+ In =enera $*FC>&*E >. Gatters o/ =enera Murispruden2eK 0edera Common La1. Gost Cited Cases (0ormer . $FL>&*!($++ T4e feder ! ! 4 (er%h 0t de)e oped under t4e re3ime o/ Swift v. Tys ! represented 6e0er ! %o((er%$ ! ! 4 rat4er t4an a 24oi2e o/ a feder ! r#!e desi3ned to prote2t a feder ! r$6ht# 7ut it stands as a 2on)enient sour2e o/ re/eren2e /or /as4ionin3 feder ! r#!e1 app i2a7 e to feder ! ?#e1t$o01 re3ardin3 ri34ts and duties o/ t4e .0$ted St te1 on %o((er%$ ! ' 'er 14i24 it issues.

:"; Ie.Cite Notes "L Ci s and Notes "LX Pa.ment and Dis24ar3e "L>E&E >. Re2o)er. o/ Pa.ments. Gost Cited Cases &%& United States &%&JI 0is2a Gatters &%&>'% >. Ci s and Notes in =enera . Gost Cited Cases @4ere 24e2> is paid on /or3ed indorsement o/ ' &eeHs name# dr 4eeHs ri34t to re2o)er /rom $0dor1er1 a22rues 14en t4e pa.ment is made and t4e dr 4ee# 14et4er it 7e t4e .0$ted St te1 or anot4er# is not 24ar3ea7 e 1it4 >no1 ed3e o/ t4e si3nature o/ t4e ' &ee.

:L; Ie.Cite Notes "L Ci s and Notes "LX Pa.ment and Dis24ar3e "L>E&E >. Re2o)er. o/ Pa.ments. Gost Cited Cases &%& United States &%&JI 0is2a Gatters &%&>'% >. Ci s and Notes in =enera . Gost Cited Cases @4ere 24e2> is paid on /or3ed indorsement o/ ' &eeHs name# prompt noti2e to $0dor1er1 o/ dr 4eeHs dis2o)er. o/ /or3er. is ! t a 52ondition pre2edent5 to dr 4eeHs suit to re2o)er# 7ut# i/ dr 4ee on earnin3 o/ /or3er. does not 3i)e prompt noti2e o/ it and dama3e resu ts# re2o)er. 7.

dr 4ee is 7arred and su24 r#!e app ies 14ere t4e dr 4ee is t4e .0$ted St te1. Ie.Cite Notes :*; &%& United States &%&JI 0is2a Gatters &%&>'% >. Ci s and Notes in =enera . Gost Cited Cases T4e .0$ted St te1 as dr 4ee o/ %o((er%$ ! ' 'er stands in ! ot4er dr 4ee. d$ffere0t i34t t4an an.

:'; Ie.Cite Notes "L Ci s and Notes "LX Pa.ment and Dis24ar3e "L>E&E >. Re2o)er. o/ Pa.ments. Gost Cited Cases He 14o a22epts a 24e2> 1it4 /or3ed indorsement o/ ' &eeHs name s4ou d 7e a o1ed to s4i/t t4e oss to t4e dr 4ee on . on a 2 ear s4o1in3 t4at t4e dr 4eeHs de a. in noti/.in3 4im o/ t4e /or3er. 2aused 4im dama3e.

:%; Ie.Cite Notes "L Ci s and Notes "LX Pa.ment and Dis24ar3e "L>E&E >. Re2o)er. o/ Pa.ments. Gost Cited Cases Gere de a. on part o/ dr 4ee in 3i)in3 noti2e o/ /or3ed indorsement o/ ' &eeHs name does not 7ar re2o)er. 7. dr 4ee /rom $0dor1er 14o a22epted t4e 24e2> on t4e /or3ed indorsement# 7ut to 7ar re2o)er. dama3e o22asioned must 7e esta7 is4ed and not e/t to 2on9e2ture.

:$F; Ie.Cite Notes &%& United States &%&JI 0is2a Gatters &%&>'% >. Ci s and Notes in =enera . Gost Cited Cases @4ere 24e2> dra1n on Tre 1#rer of the .0$ted St te1 1as issued /or ser)i2es per/ormed under Feder ! E(er6e0%& Re!$ef A%t# de a. o/ .0$ted St te1 in 3i)in3 noti2e o/ /or3ed indorsement o/ ' &eeHs name to $0dor1er 14o a22epted /or3ed indorsement did not 7ar re2o)er. 7. t4e .0$ted St te1 14ere e)iden2e did not esta7 is4 t4at de a. 2aused dama3e to $0dor1er1. Feder ! E(er6e0%& Re!$ef A''ro'r$ t$o0 A%t of 193/ # 49 St t. 11/# 1/ ..S.C.A. ,*15,*8. ((,-. (/0. Mr. P #! A. Fre#0d# o/ W 1h$06to0+ D.C.# /or re1'o0de0t. Mr. Ro14e!! De 0 P$0e+ "r.# o/ Ne4 @or> C$t&# /or 'et$t$o0er1. Mr. "#1t$%e DO.ALAS de i)ered t4e opinion o/ t4e Co#rt. On A'r$! *8+ 1932# a 24e2> 1as dra1n on t4e Tre 1#rer of the .0$ted St te1 t4rou34 t4e Feder ! Re1er<e B 0> of Ph$! de!'h$ to t4e order o/ C! $r A. B r0er in t4e amount o/ C*4.*-. It 1as dated at H rr$1)#r6+ Pe001&!< 0$ and 1as dra1n /or ser)i2es rendered 7.

B r0er to t4e Wor>1 Pro6re11 Ad($0$1tr t$o0. T4e 24e2> 1as p a2ed in t4e mai addressed to B r0er at 4is address in M %>e&<$!!e+ P . B r0er ne)er re2ei)ed t4e 24e2>. Some un>no1n person o7tained it in a m.sterious manner and presented it to t4e ". C. Pe00e& Co. store in C!e rf$e!d+ P .# representin3 t4at 4e 1as t4e ' &ee and identi/.in3 4imse / to t4e satis/a2tion o/ t4e emp o.ees o/ ". C. Pe00e& (/0, Co. He endorsed t4e 24e2> in t4e name o/ B r0er and trans/erred it to ". C. Pe00e& Co. in e824an3e /or % 1h and mer24andise. B r0er ne)er aut4ori?ed t4e endorsement nor parti2ipated in t4e pro2eeds o/ t4e 24e2>. ". C. Pe00e& Co. endorsed t4e 24e2> o)er to t4e C!e rf$e!d Tr#1t Co. 14i24 a22epted it as a3ent /or t4e purpose o/ 2o e2tion and endorsed it as /o o1s: HPa. to t4e order o/ Feder ! Re1er<e B 0> of Ph$! de!'h$ # Prior Endorsements =uaranteed.H :0N$; C!e rf$e!d Tr#1t Co. 2o e2ted t4e 24e2> /rom t4e .0$ted St te1 t4rou34 t4e Feder ! Re1er<e B 0> of Ph$! de!'h$ and paid t4e /u amount t4ereo/ to ". C. Pe00e& Co. Neit4er t4e C!e rf$e!d Tr#1t Co. nor ". C. Pe00e& Co. 4ad an. >no1 ed3e or suspi2ion o/ t4e /or3er.. Ea24 a2ted in 3ood /ait4. On or 7e/ore M & 1-+ 1932# B r0er ad)ised t4e t$(e>ee'er and t4e fore( 0 o/ t4e W.P.A. 'ro=e%t on 14i24 4e 1as emp o.ed t4at 4e 4ad not re2ei)ed t4e 24e2> in 6uestion. T4is in/ormation 1as du . 2ommuni2ated to ot4er 6e0t1 o/ t4e .0$ted St te1 and on No<e()er 3-+ 1932# B r0er e8e2uted an a//ida)it a e3in3 t4at t4e endorsement o/ 4is name on t4e 24e2> 1as a /or3er.. No noti2e 1as 3i)en t4e C!e rf$e!d Tr#1t Co. or ". C. Pe00e& Co. o/ t4e /or3er. unti " 0# r& 1*+ 193,# at 14i24 time t4e C!e rf$e!d Tr#1t Co. 1as noti/ied. T4e /irst noti2e re2ei)ed 7. C!e rf$e!d Tr#1t Co. t4at t4e .0$ted St te1 1as as>in3 reim7ursement 1as on A#6#1t 31+ 193,. 0N$ =uarantee o/ a prior indorsements on presentment /or pa.ment o/ su24 a 24e2> to Feder ! Re1er<e ) 0>1 or (e()er ) 0> de'o1$tor$e1 is re6uired 7. Tre 1#r& Re6#! t$o01. 31 Code of Feder ! Re6#! t$o01 1 *-*.3*+ 1 *-*.33. T4is suit 1as instituted in 1939 7. t4e .0$ted St te1 a3ainst t4e C!e rf$e!d Tr#1t Co.# t4e 9urisdi2tion o/ t4e feder ! D$1tr$%t Co#rt 7ein3 in)o>ed pursuant to t4e pro)isions o/ s *4:1; of the "#d$%$ ! Code# *8 ..S.C. 1 41:1;# *8 ..S.C.A. 1 41:1;. T4e 2ause o/ a2tion 1as 7ased on t4e e8press 3uarant. o/ prior endorsements made 7. t4e C!e rf$e!d Tr#1t Co. (/00 ". C. Pe00e& Co. inter)ened as a de/endant. T4e 2ase 1as 4eard on 2omp aint# ans1er and stipu ation o/ /a2ts. T4e D$1tr$%t Co#rt 4e d t4at t4e ri34ts o/ t4e parties 1ere to 7e determined 7. t4e ! 4 o/ Pe001&!< 0$ and t4at sin2e t4e .0$ted St te1 unreasona7 . de a.ed in 3i)in3 noti2e o/ t4e /or3er. to t4e C!e rf$e!d Tr#1t Co.# it 1as 7arred /rom re2o)er. under t4e ru e o/ M#$+et St$eet Tit"e 1 T$&st C . v. C2e"te! T. C . + *92 P . *3-+ 14/ A. 848. It a22ordin3 . d$1($11ed t4e 2omp aint. On appea t4e C$r%#$t Co#rt of A''e !1 re<er1ed. 3 C$r.+ 13- F.*d 93. T4e 2ase is 4ere on a petition /or a w$it f ce$ti $#$i 14i24 1e 3ranted# 31, ..S. 219+ 23 S.Ct. */8+ 8, L.Ed. /-*+ 7e2ause o/ t4e importan2e o/ t4e pro7 ems raised and t4e 2on/ i2t 7et1een t4e de2ision 7e o1 and Sec&$ity34i$st N#t. 5#!+ v. '!ite% St#tes+ 1-3 F.*d 188+ /rom t4e N$0th C$r%#$t.

:$; :!; :&; @e a3ree 1it4 t4e C$r%#$t Co#rt of A''e !1 t4at t4e ru e o/ ((,-, E$ie R. C . v. T *p+i!s+ 3-4 ..S. 24+ /8 S.Ct. 81,+ 8* L.Ed. 1188+ 114 A.L.R. 148,+ doe1 ! t ''!& to t4is a2tion. T4e ri34ts and duties o/ t4e .0$ted St te1 on %o((er%$ ! ' 'er 14i24 it issues are 3o)erned 7. feder ! rat4er t4an !o% ! ! 4. @4en t4e .0$ted St te1 dis7urses its /unds or pa.s its de7ts# it is e8er2isin3 a %o01t$t#t$o0 ! f#0%t$o0 or po1er. T4is 24e2> 1as issued /or ser)i2es per/ormed under t4e Feder ! E(er6e0%& Re!$ef A%t of 193/# 49 St t. 11/# 1/ ..S.C.A. 11 ,*155,*8. T4e aut4orit. to issue t4e 24e2> 4ad its ori3in in t4e Co01t$t#t$o0 and t4e 1t t#te1 o/ t4e .0$ted St te1 and 1as i! ! w#y dependent on t4e ! 41 o/ Pe001&!< 0$ or o/ 0& other 1t te. C/. 5 #$% f C **issi !e$s v. '!ite% St#tes+ 3-8 ..S. 343+ 2- S.Ct. *8/+ 84 L.Ed. 313D R y#" I!%e*!ity C . v. '!ite% St#tes+ 313 ..S. *89+ 21 S.Ct. 99/+ 8/ L.Ed. 1321. T4e duties imposed upon t4e .0$ted St te1 and t4e ri34ts a26uired 7. it as a resu t o/ t4e issuan2e /ind t4eir roots in t4e same /edera sour2es. :0N!; C/. Deit$ic+ v. 6$e#!ey+ 3-9 ..S. 19-+ 2- S.Ct. 48-+ 84 L.Ed. 294D (/0- D7Oe!c28

D&2*e 1 C . v. 4e%e$#" Dep sit I!s. C $p.+ 31/ ..S. 44,+ 2* S.Ct. 2,2+ 82 L.Ed. 9/2. In a7sen2e o/ an app i2a7 e A%t of Co06re11 it is /or t4e feder ! %o#rt1 to /as4ion t4e 3o)ernin3 r#!e of ! 4 a22ordin3 to t4eir o1n standards. '!ite% St#tes v. 6&#$#!ty T$&st C .+ *93 ..S. 34-+ // S.Ct. **1+ ,9 L.Ed. 41/+ 9/ A.L.R. 2/1+ is not opposed to t4is resu t. T4at 2ase 1as 2on2erned 1it4 a 2on/ i2t o/ a1s ru e as to t4e tit e a26uired 7. a tr 01feree in @#6o1! <$ under a /or3ed endorsement. Sin2e t4e pa.eeHs address 1as @#6o1! <$ # t4e 24e2> 4ad Hsomet4in3 o/ t4e 6ua it. o/ a /orei3n 7i H and t4e ! 4 o/ @#6o1! <$ 1as app ied to determine 14at tit e t4e tr 01feree a26uired. 0N! Jarious Tre 1#r& Re6#! t$o01 3o)ern t4e pa.ment and endorsement o/ 6o<er0(e0t %he%>1 and 1arrants and t4e reim7ursement o/ t4e Tre 1#rer of the .0$ted St te1 7. Feder ! Re1er<e ) 0>1 and (e()er ) 0> de'o1$tor$e1 on pa.ment o/ %he%>1 or 1arrants 7earin3 a /or3ed endorsement. See 31 Code of Feder ! Re6#! t$o01 11 *-*.-+ *-*.3*55 *-*.34. 0or3er. o/ t4e 24e2> 1as an o//ense a3ainst t4e .0$ted St te1. Cr$($0 ! Code 1 148# 18 ..S.C. 1 *2*# 18 ..S.C.A. 1 *2*.

:E; In our 24oi2e o/ t4e app i2a7 e feder ! r#!e 1e 4a)e o22asiona . se e2ted state a1. See R y#" I!%e*!ity C . v. '!ite% St#tes+ 1#'r . Cut reasons 14i24 ma. ma>e 1t te ! 4 at times t4e appropriate feder ! r#!e are sin3u ar . inappropriate 4ere. T4e issuan2e o/ %o((er%$ ! ' 'er 7. t4e .0$ted St te1 is on a )ast s2a e and transa2tions in t4at paper /rom issuan2e to pa.ment 1i 2ommon . o22ur in se)era states. T4e app i2ation o/ 1t te ! 4# e)en 1it4out t4e 2on/ i2t o/ a1s ru es o/ t4e /orum# 1ou d su79e2t t4e ri34ts and duties o/ t4e .0$ted St te1 to e82eptiona un2ertaint.. It 1ou d ead to 3reat di)ersit. in resu ts 7. ma>in3 identi2a transa2tions su79e2t to t4e )a3aries o/ t4e a1s o/ t4e se)era states. T4e desira7i it. o/ a uni/orm ru e is p ain. And 14i e t4e feder ! ! 4 (er%h 0t de)e oped /or a7out a 2entur. under t4e re3ime o/ Swift v. Tys !+ 12 Pet. 1+ 1- L.Ed. 82/+ represented 6e0er ! %o((er%$ ! ! 4 rat4er t4an a 24oi2e o/ a feder ! r#!e desi3ned to prote2t a feder ! r$6ht# it ne)ert4e ess stands as a 2on)enient sour2e o/ re/eren2e /or /as4ionin3 feder ! r#!e1 app i2a7 e to t4ese feder ! ?#e1t$o01.

:"; '!ite% St#tes v. N#ti !#" Exc2#!9e 5#!+ + *14 ..S. 3-*+ *9 S.Ct. 22/+ /3 L.Ed. 1--2+ 12 A00.C 1. 1184+ /a s in t4at 2ate3or.. T4e Co#rt 4e d t4at t4e .0$ted (/0: St te1 2ou d re2o)er as dra1ee /rom one 14o presented /or pa.ment a pension %he%> on 14i24 t4e name o/ t4e ' &ee 4ad 7een /or3ed# in spite o/ a protra2ted de a. on t4e part o/ t4e .0$ted St te1 in 3i)in3 noti2e o/ t4e /or3er.. T4e Co#rt /o o1ed Le#t2e$ Mf$s.7 5#!+ v. Me$c2#!ts 5#!++ 1*8 ..S. *2+ 9 S.Ct. 3+ 3* L.Ed. 34*+ 14i24 4e d t4at t4e ri34t o/ t4e dr 4ee a3ainst one 14o presented a 24e2> 1it4 a /or3ed endorsement o/ t4e ' &eeHs name a22rued at t4e date o/ pa.ment and 1as not dependent on noti2e or demand. T4e t4eor. o/ t4e N#ti !#" Exc2#!9e 5#!+ 2ase is t4at 4e 14o presents a %he%> /or pa.ment 1arrants t4at 4e 4as t$t!e to it and t4e r$6ht to re2ei)e pa.ment. :0N&; I/ 4e 4as a26uired ((,-0 t4e %he%> t4rou34 a /or3ed endorsement# t4e 4 rr 0t& is 7rea24ed at t4e time t4e %he%> is 2as4ed. See M#!&f#ct&$e$s7 T$&st C . v. H#$$i*#! N#t. 5#!+ T$&st C . + 142 M$1%. //1+ *2* N.@.S. 48*D 5e$9*#! v. Ave!&e St#te 5#!++ *84 I!!.A''. /12+ 1 N.E.*d 43*. T4e t4eor. o/ t4e 4 rr 0t& 4as 7een 24a en3ed. A(e1+ T2e D ct$i!e f P$ice v. Ne#"+ 4 H r<.L.Re<.+ *9,+ 3-1553-*. It 4as 7een ur3ed t4at Ht4e ri34t to re2o)er is a ?# 1$ %o0tr %t# ! r$6ht# restin3 upon t4e do2trine t4at one 14o 2on/ers a 7ene/it in misre ian2e upon a ri34t or dut. is entit ed to restitution.H Wood4 rd+ ;&#si C !t$#cts :1913; 1 8-K 4i$st N#t. 5#!+ v. City N#t. 5#!++ 18* M 11. 13-+ 134+ 2/ N.E. *4+ 94 A(.St.Re'. 23,. Cut 14ate)er t4eor. is ta>en# 1e ad4ere to t4e 2on2 usion o/ t4e N#ti !#" Exc2#!9e 5#!+ 2ase t4at t4e dr 4eeHs ri34t to re2o)er a22rues 14en t4e pa.ment is (/0< made. T4ere is no ot4er 7arrier to t4e maintenan2e o/ t4e 2ause o/ a2tion. T4e t4eor. o/ t4e dr 4eeHs responsi7i it. 14ere t4e dr 4erHs si3nature is /or3ed (P$ice v. Ne#"e+ 3 B#rr. 13/4K '!ite% St#tes v. C2#se N#t. 5#!++ */* ..S. 48/+ 4- S.Ct. 321+ 24 L.Ed. 2,/+ 1- A.L.R. 14-1; is inapp i2a7 e 4ere. T4e dr 4ee# 14et4er it 7e

t4e .0$ted St te1 or anot4er# is not 24ar3ea7 e 1it4 t4e >no1 ed3e o/ t4e si3nature o/ t4e pa.ee. '!ite% St#tes v. N#ti !#" Exc2#!9e 5#!++ 1#'r + *14 ..S. t ' 6e 31,+ *9 S.Ct. t ' 6e 229+ /3 L.Ed. 1--2+ 12 A00.C 1. 1184D St#te v. 5$ #%w#y N#t. 5#!++ 1/3 Te00. 113+ *8* S.W. 194. 0N& @e need not determine 14et4er t4e 3uarantee o/ prior endorsements adds to t4e dr 4eeHs ri34ts. See Br 00 0E1 Ne9 ti#="e I!st$&*e!ts L#w :2th ed.; ''. 33-55331+ 8125581,K 4i$st N#t. 5#!+ v. City N#t. 5#!+ + 18* M 11. 13-+ 134+ 2/ N.E. *4+ 94 A(.St.Re'. 23,. C/. H *e I!s. C . v. Me$c#!ti"e T$&st C .+ *19 Mo.A''. 24/+ *84 S.W. 834. Under t4e t4eor. o/ t4e N#ti !#" Exc2#!9e 5#!+ 2ase# t4e 4 rr 0t& o/ t4e t$t!e o/ 4im 14o presents t4e %he%> /or pa.ment 1ou d 7e imp ied in an. e)ent. See P2i"#%e"p2i# N#t. 5#!+ v. 4&"t ! N#t. 5#!+8 D.C.+ */ F.*d 99/+ 99,.

:L; :*; :'; :%; :$F; T4e N#ti !#" Exc2#!9e 5#!+ 2ase 1ent no /urt4er t4an to 4o d t4at prompt noti2e o/ t4e dis2o)er. o/ t4e /or3er. 1as ! t a 2ondition pre2edent to suit. It did not rea24 t4e 6uestion 14et4er a2> o/ prompt noti2e mi34t 7e a de/ense. @e t4in> it ma.. I/ it is s4o1n t4at t4e dr 4ee on earnin3 o/ t4e /or3er. did not 3i)e prompt noti2e o/ it and t4at dama3e resu ted# re2o)er. 7. t4e dr 4ee is 7arred. See L#%% 1 Ti"t ! 5#!+ v. '!ite% St#tes+ 9 C$r.+ 3- F.*d 334D '!ite% St#tes v. N#ti !#" R c+"#!% 5#!+8 D.C. + 3/ F.S#''. 91*D '!ite% St#tes v. N#ti !#" City 5#!+8 D.C.+ *8 F.S#''. 144. T4e /a2t t4at t4e dra1ee is t4e .0$ted St te1 and t4e ! %he1 t4ose o/ its emp o.ees are not materia . C +e v. '!ite% St#tes+ 91 ..S. 389+ 398+ *3 L.Ed. *3,. T4e .0$ted St te1 as dra1ee o/ %o((er%$ ! ' 'er stands in no di//erent i34t t4an an. ot4er dr 4ee. As stated in '!ite% St#tes v. N#ti !#" Exc2#!9e 5#!++ *,- ..S. /*,+ /34+ 42 S.Ct. 388+ 389+ ,- L.Ed. ,1,+ HT4e .0$ted St te1 does 7usiness on 7usiness terms.H It is not e82epted /rom t4e 3enera ru es 3o)ernin3 t4e ri34ts and duties o/ dra1ees H7. t4e ar3eness o/ its dea in3s and its 4a)in3 to emp o. a3ents to do 14at i/ done 7. a prin2ipa in person 1ou d ea)e no room /or dou7t.H I%.+ *,- ..S. t ' 6e /3/+ 42 S.Ct. t ' 6e 389+ ,- L.Ed. ,1,. Cut t4e dama3e o22asioned 7. t4e de a. must 7e esta7 is4ed and not e/t to 2on9e2ture. Cases su24 as M#$+et St. Tit"e 1 T$&st C . v. C2e"te! T$&st C .# 1#'r # p a2e t4e 7urden on t4e dr 4ee o/ 3i)in3 prompt noti2e o/ t4e /or3er.--$0=#r& to the defe0d 0t )e$06 're1#(ed )& the (ere f %t of de! & . See L !% ! 1 Rive$ P"#te (/-> 5+. v. 5#!+ f Live$p "# :1892; 1 F.B. ,. Cut 1e do not t4in> t4at 4e 14o a22epts a /or3ed si3nature o/ a ' &ee deser)es t4at pre/erred treatment. It is 4is !e9"ect or e$$ $ in a22eptin3 t4e for6erHs si3nature 14i24 o22asions t4e oss. See 5#!+ f C **e$ce v. '!i ! 5#!++ 3 N.@. *3-+ *32. He s4ou d 7e a o1ed to s4i/t t4at oss to t4e dr 4ee on . on a 2 ear s4o1in3 t4at t4e dr 4eeHs de a. in noti/.in3 4im o/ t4e /or3er. 2aused 4im dama3e. See Wood4 rd+ ;&#si C !t$#cts :1913; 1 */. No su24 dama3e 4as 7een s4o1n 7. C!e rf$e!d Tr#1t Co. 14o so /ar as appears 2an sti re2o)er /rom ". C. Pe00e& Co. T4e on . s4o1in3 on t4e part o/ t4e atter is 2ontained in t4e stipu ation to t4e e//e2t t4at i/ a %he%> 2as4ed /or a 2ustomer is returned unpaid or /or re2 amation a s4ort time a/ter t4e date on 14i24 it is 2as4ed# t4e e('!o&ee1 2an o/ten o2ate t4e person 14o 2as4ed it. It is /urt4er stipu ated t4at 14en ". C. Pe00e& Co. 1as noti/ied o/ t4e /or3er. in t4e present 2ase none o/ ((,-- its e('!o&ee1 1as a7 e to remem7er an.t4in3 a7out t4e transa2tion or %he%> in 6uestion. T4e in/eren2e is t4at t4e more prompt t4e noti2e t4e more i>e . t4e dete2tion o/ t4e for6er. Cut t4at /a s s4ort o/ a s4o1in3 t4at t4e de a. 2aused a mani/est oss. T2i$% N#t. 5#!+ v. Me$c2#!ts7 N#t. 5#!++ ,2 H#0 4,/+ *, N.@.S. 1-,-. It is 7ut anot4er 1a. o/ sa.in3 t4at mere de a. is enou34. Aff$r(ed. Mr. "#1t$%e M.RPH@ and Mr. "#1t$%e R.TLEDAE d$d ! t ' rt$%$' te in t4e 2onsideration or de2ision o/ t4is 2ase. ..S. 1943.

CLEARFIELD TR.ST CO. <. .NITED STATES 318 ..S. 323+ 318 ..S. ,44+ 23 S.Ct. /,3+ 8, L.Ed. 838+ 4351 .STC P 1-+-/1 END OF DOC.MENT