Citation. 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943)
Brief Fact Summary.
Plaintiff sued Defendant to recover a forged check accepted by Defendant.
Synopsis of Rule of Law.
The rule under Erie Railroad v. Tompkins does not apply in cases involving the rights and obligations of the United States, such as the disbursement of federal funds.
The United States (Plaintiff) issued a check to Clair Barner. Barner never received the check, but it was cashed at a J.C. Penney with a forged signature. J.C. Penney gave the check to Clearfield Trust Co. (Defendant), which collected the funds owed on the check from Plaintiff through the Federal Reserve. Barner informed Plaintiff he had not received the check in May 1936. Defendant learned of the forgery in January 1937, and Plaintiff asked Defendant for reimbursement in November 1937. In 1939, the United States sued Defendant based on its guaranty of all prior endorsements, to recover the amount of the check.
Does Pennsylvania law apply when determining the United States’ right to recover a forged check?
No, federal law must apply in this case. The Court of Appeals is affirmed.
The Court determined that state law could not apply in this case because the disbursement of federal funds is a constitutional function that requires uniformity. Under federal law, the Defendant has the burden to prove an unreasonable delay in notice caused injury. Here, the Defendant did not provide sufficient evidence.