145 Mich. 656 | Mich. | 1906
The City Savings Bank of Detroit closed its doors and went into the hands of a receiver, owing to the failure of its vice president, Frank C. Andrews. The Detroit National Bank filed a claim against it, based upon two checks, drawn by Andrews, certified by the assistant cashier of the city bank, and discounted by Andrews at the Detroit National Bank. The case was tried by a jury, a verdict was found for the defendant, and the claimant has appealed.
The case must ultimately turn upon the bona fides of claimant’s purchase of the checks, and as the more important assignments of error relate to that question, we will discuss it first.
Defendant’s counsel say that there is such testimony, and we will allude to it in a general way. The assistant cashier of the city bank, on cross-examination (which we may parenthetically remark was, in our opinion, opportune and proper), testified to the fraudulent character of the certification. De Graff, claimant’s cashier, who discounted these checks, testified at length, upon cross-examination, that during November and December, 1901, and January and February, 1902, the claimant received from Frank C. Andrews many of his checks certified by the city bank, some of which were paid, through the clearing house, others being withheld from clearings for a day or so, at Andrews’ request, and some taken care of otherwise by him, and that in such cases interest or a bonus was charged him by claimant. Of the latter class, the aggregate in January was $1,311,000, those that went through the clearing house amount to $1,236,000. There were 21 of these checks, in both classes. The total amount of certified checks was $6,220,000. Drafts on New York being given for some or all of these checks, interest was charged as upon a loan up to the time of payment of the check. It is claimed that these charges were usurious and furnished a motive for these transactions. During the same time Andrews was drawing
On behalf of the defendant, Andrews testified that he asked that the checks be withheld for the reason that the bank had not the money to pay them. He further stated that he was requested to get the checks certified. Claimant’s assistant cashier testified to cautioning the cashier against the business being done with Andrews, and on one occasion the cashier said he wondered whether a given certificate was bona fide.
It is a general rule applicable to transactions not involving commercial paper, that where one has notice of facts which would put an ordinarily prudent man upon inquiry, he cannot be considered a bona fide purchaser, if he neglect to take such care of his own interests as an ordinarily prudent man would do, but that rule has not been applied to commercial paper. In National Bank of Republic v. Young, 41 N. J. Eq. 531, the court said:
“ The transaction upon which this conclusion was based was as follows: By the testimony of Buckley, who was the vice president of the bank and personally acted for the bank in negotiating the loan of December 31st, it appears that on the 28th or 29th of December, in an interview with the president of the crucible company, the latter told him that Eowler, Crampton & Co. held some $600,000 of borrowed paper of the crucible company. Upon this tesmony the vice chancellor remarked that ‘ the notice was*666 amply sufficient to put him upon inquiry; it was such as would have led a prudent man, taking reasonable care of his own interests, to make further inquiry.’ And in the statement of the principle by which his judgment should be governed, the vice chancellor laid down the doctrine of the law to be that ‘ notice or knowledge, in this connection, does not mean that the maker of the paper must bring home to its holder actual knowledge of the infirmity which renders the paper valueless, but it will be sufficient if it is shown that he had the means of knowledge; that is, that he had notice of such facts as would have led a prudent man to further inquiry, which inquiry, if pursued, would have disclosed the infirmity of the paper.’
“This statement of the doctrine of notice in its effect with respect to the bona fide character of a transaction, as a general rule, is undoubtedly correct; but it is inapplicable to negotiable commercial paper, which, in virtue of its commercial character, and the need of sustaining its negotiable quality, cannot be impeached in the hands of a subsequent holder taking it for value before maturity, unless his title was acquired Under such circumstances as show actual fraud in the party so taking it.
“ In Gill v. Gubitt, 3 Barn. & Cress. 466, the court of king’s bench held that the title of the holder of commercial paper was impeached so as to let in defenses to which such paper would have been subject in the hands of the original party, where it appeared that he had taken it under circumstances ‘ which ought to have excited the suspicion of a prudent and careful man.’ But the doctrine of that case has been overruled in England and in the Supreme Court of the United States, and generally in the courts of sister States. Goodman v. Harvey, 4 Adol. & El. 870; Goodman v. Simonds, 20 How. (U. S.) 343; Murray v. Gardner, 2 Wall. (U. S.) 110; 1 Daniel on Negotiable Instruments, § 775.”
We have held several times that notice of facts which would be sufficient to arouse the suspicion of an ordinarily prudent man is not enough to preclude good faith in a purchase. It is a matter of mala fides. Stevens v. McLachlan, 120 Mich. 290; Fredonia Nat. Bank v. Tommei, 131 Mich. 674; Glines v. State Sav. Bank, 132 Mich. 638; Thompson v. Village of Mecosta, 141 Mich. 175.
“I should be extremely sorry to say anything which should cast doubt upon the principle that a bill of exchange, or a negotiable instrument of that sort, is negotiable to the fullest extent of its kind. The negotiation of these bills of exchange, in a mercantile country like this, is of very great value. * * *
“Farther, my Lords, I think it is right to say that I consider it to be fully and thoroughly established that if value be given for a bill of exchange, it is not enough to show that there was carelessness, negligence, or foolishness in not suspecting that the bill was wrong, when there were circumstances which might have led a man to suspect that. All these are matters which tend to show that there was dishonesty in not doing it, but they do not in themselves make a defense to an action upon a bill of exchange. I take it that in order to make such a defense, whether, in the case of a party who is solvent and sui juris, or when it is sought to be proved against the estate of a bankrupt, it is necessary to show that the person who gave value for the bill, whether the value given be great or small, was affected with notice that there was something wrong about it when he took it. I do not think it is necessary that he should have notice of what the particular wrong was. If a man, knowing that the bill was in the hands of a person who had no right to it, should happen to think that perhaps the man had stolen it, when if he had known the real truth he would have found, not that the man had stolen it, but that he had obtained it by false pretenses, I think that would not make any difference, if he knew that there was something wrong about it and took it. If he takes it in that way he takes it at his peril.
“ But then I think that such evidence of carelessness or blindness as I have referred to may, with other evidence, be good evidence upon the question which,. I take it, is the real one, whether he did know that there was something wrong in it. If he was (if I may use the phrase) honestly blundering and careless, and so took a bill of exchange 'or a bank note when he ought not to have taken it, still he would be entitled to recover. But if the facts and cir*668 cumstances are such that the jury, or whoever has to try the question, came to the conclusion that he was not honestly blundering and careless, but that he must have had a suspicion that there was something wrong, and that he refrained from asking questions, not because he was an honest blunderer, or a stupid man, but because he thought in his own secret mind — I suspect there is something wrong, and if I ask questions and make further inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover — I think that is dishonesty. I think, my Lords, that that is established not only by good sense and reason, but by the authority of the cases themselves.”
See Canajoharie Nat. Bank v. Diefendorf, 123 N. Y. 191 (10 L. R. A. 676), and our own case of Goodrich v. McDonald, 77 Mich. 486, where it is held that bad faith may be inferred from testimony not direct nor positive, proof of those kinds being frequently unobtainable. See, also, Peirson v. McNeal, 137 Mich. 173-177, and cases cited. There are many similar cases, some of which will be found in the briefs.
Were this question before us in an equity case, upon the merits, we should necessarily consider the weight of the testimony pro and con. Upon this record we can only determine whether the circumstances, taken together, tend to show mala fides, whether a jury might legitimately find from them that the plaintiff’s cashier did have a suspicion that this was a fraudulent certification, and “refrained from making inquiry lest he should know that it was so,” and therefore properly a question for the jury. The burden being upon the plaintiff to establish bona fides (see Thompson v. Village of Mecosta, 127 Mich. 522, 141 Mich. 175), the question was one for the jury, if plaintiff’s testimony was contradicted. We think that it was disputed by circumstances having a tendency to show grounds of suspicion at least, and of a character which made the subject a question for the jury, justifying a verdict for the defendant, if the circumstances shown convinced them that plaintiff’s cashier did not entertain
The plaintiff had a right to a fair, temperate, and impartial consideration of the question, whether its cashier discounted these checks in the honest belief that Andrews had a deposit in the city bank at the time, equal in amount to the checks. That is all there was of the case. It was not a question depending upon the condition of the plaintiff bank, or whether, when its business was closed up, its stockholders received #125 for each share of stock. Based on a question merely (for the witness did not answer it in the affirmative, and for that matter it would have been no better had he done so), counsel for the defendant argued that the bank had paid its stockholders 120 cents on the dollar, or more. He said:
“ This controversy is not between the Detroit National Bank and the Union Trust Company; the question for you to determine is whether these stockholders of the bank which was wound up and paid its stockholders 120 cents on the dollar, or more than that, so far, or the depositors of the City Savings Bank are going to get this money that is now here in litigation. * * *
“And the testimony shows that the stockholders of that bank had received for every #100 worth of stock #120 at least before this suit was brought; in other'words—
“ Mr. Geer: I desire to take an exception to that. .
“Mr. Whiting: I thought that would come. That is, for the million dollars of stock that they originally had in that bank, before commencement of this suit, they had*670 received $1,200,000, and there is more to come, because it has not been wound up. Of course he will object to it. And that came from that reliable witness, Mr. De Graff—
“Mr. Geer: I think I have aright to take an exception.
“Mr. Whiting: Certainly he has a right to make objection, and I have a right to comment on it.
“The Court: Note an exception to it.
“Mr. Whiting: Let him make all the objections he wants. I tell you the testimony is just as I say. Mr. De-Graff told me, and if counsel had listened, he would have heard it, that the stockholders received at least $120 for every $100 they had of stock of the bank. So that, if the suit is brought in the name of the Detroit National Bank, it is brought by those who are to benefit by it, and those are the stockholders in that bank. It is brought against the receiver of the City Savings Bank, not against the bank but against the receiver, because under the State law the commissioner of banking caused to be appointed a receiver for the City Savings Bank, when he found that through Andrews it was necessary to put it out of business. The receiver represents not alone the stockholders but he represents the depositors, the savings depositors and the commercial depositors of the City Savings Bank, and on the 10th of February, 1902, when this bank’s doors were closed, the depositors of the City Savings Bank held claims against that bank for money which the bank had had of about $3,000,000. Of those about 1,600,000 or 1,700,000 were savings depositors, the rest, about 1,400,000 or 1,500,000 were commercial depositors. Those are the people whom this receiver represents and who are really in fact the defendants in this case.
“Mr. Geer: To that I object.
“Mr. Whiting: The depositors of the City Savings Bank—
“ Mr. Geer: I desire to object to that argumont, because it is wholly immaterial to this issue.
“ The Court: Note an exception.
“ Mr. .Whiting: The stockholders of the City Savings Bank; and when the depositors are paid in full, when the depositors get that three million dollars and they get the expenses of the receivership paid, then the stockholders of the City Savings Bank are going to get something, but not until then. That is the condition as it exists, and that*671 is the actual circumstance under which this suit is brought. What is it brought for ? To recover on two checks drawn by Frank C. Andrews on the City Savings Bank and claimed to have been certified by the City Savings Bank. Mind that word certified means what this man Schrage did by writing on the face of the check. Let me take the checks.
“Mr. Geer: I have not got them. [Mr. Harmon hands papers.]
“Mr. Whiting: That is what that means when we say certified, it applies to ‘Good, Schrage, Teller.’ Look at that and at the other one. There is nothing magical about that. That was all that there was meant by certification, that little expression, ‘ Good, Schrage, Teller.’ They seek to recover from this City Savings Bank, or from the receiver of the City Savings Bank, the amount of these two checks, and they say it is #160,000. Of course, you would not know it, or I would not know it if we looked at the papers, because the papers are for $100,000 and for $110,000, and they pretend to claim that there has been $50,000 paid on one of them, and that there is only $60,000 due on it. That is the one there. They want to receive from your hands, from this bank — a verdict against that bank for $160,000, and 5 per cent, interest for three years.
“Mr. Geer: To that I take an exception.
“ Mr. Whiting: There is about $8,000 a year of interest besides the face of these checks. The legal rate of interest in this State happens to be 5 per cent., and the interest on this $160,000 at the legal rate is what they seek to recover at your hands; if they don’t, I want to know it; counsel has objected to it, but when he gets up to tell you about it he will tell you that they want the $160,000 and interest, and that is about $8,000 a year, and if you give it for three years, that is for $24,000 more than the face of these checks, making it $184,000, that they are after, before these $3,000,000 of depositors get anything.”
We have seen that the rule is not different where the claim is against the estate of a bankrupt, than in other cases. See Jones v. Gordon, L. R. 2 App. Cas. 627, and it would shock the sense of justice of any impartial person, should this court announce the doctrine that the jury were at liberty to determine that the plaintiff should not re
There are many assignments of error which we must of. necessity omit to discuss at length. We cover many of them when we say that it was competent for the defense to show the prior transactions of the parties, and plaintiff’s knowledge of Andrews’ pecuniary circumstances, business, and methods of doing business.
It was proper to impeach De Graff by the testimony of Stewart. It was also competent to show by Stewart, as part of the res gestee, that at the time of taking a certified check De Graff expressed doubt of its validity, if such was the proof. It would of course be incompetent to show admissions of De Graff as such.
We think that it was competent to offer evidence tending to show printed official statements of the city bank, brought to the knowledge of the plaintiff’s officers, containing an item of only $10,000 of certified checks, when plaintiff’s officers must have known that it held a much greater amount of such checks at the time.
We think it unnecessary to refer to the assignments of error upon the charge, as the discussion of the other assignments will suffice.
The judgment is reversed, and a new trial ordered.