195 F. 1 | 6th Cir. | 1912
(after stating the facts as above). The record requires us to consider the proposition, in substance urged on behalf of the receiver, that the action can be ‘sustained on the promissory note in its present form, without reference alike to the receiver’s inability to produce the abstracted securities and his refusal to account for any portion of their value upon payment of either the note or judgment, and also without recognizing the defense of alleged wrongful conversion of the pledged securities and the resulting damages.
We are thus brought to the inquiry whether the evidence presents a question of fact for the jury, or merely a question of law, touching delivery of the instrument.
It is insisted as against Jahn that in his conversation with Skud which led up to the transaction in dispute Jahn used the plural pronoun “we” many times when alluding to matters such as a case which Larson had lost; to the reason why Larson did not wish to sell the stock; to their confidence in Skud; and to the time when they would take up the note, etc. We think it is rather a strained inference to deduce from
“He had authority to receive them in behalf of the bank. He attempted to exercise that authority; and, when he afterward stole them, he stole from the bank, and not from his fellow indorsers.”
See, also, W. N. Bank v. Birch, supra. In Ditty v. Dominion Nat. Bank, 75 Fed. 769, 771, 22 C. C. A. 376, 378, the principle just re
“We do not see that the circumstance, in that case, that the treasurer stole the money, aud, in this, that the president obtained it on the false representation that he was authorized to borrow it for his bank, makes any reasonable distinction between the two cases.”
“Having received the benefit through an agent, it is affected with the burden of the notice which that agent had of its reception, and therefore it became liable for money had and received to its use from the Dominion National Bank. * * * So in this case the bank, having received the money through the agency of its president, could not retain it without assuming the burden of the president’s knowledge as to how it came to be obtained.”
See Aldrich v. Chemical National Bank, 176 U. S. 618, 633, 20 Sup. Ct. 498, 44 L. Ed. 611, where the Ditty Case was cited with approval; Atlantic Mills Co. v. Indian Orchard Mills, 147 Mass. 268, 274, 17 N. E. 496, 9 Am. St. Rep. 698; Fairfield v. Southport Nat. Bank, supra, 80 Conn. 103, 67 Atl. 471; Lowndes v. City National Bank, 82 Conn. 8, 13, 14, 72 Atl. 150, 22 L. R. A. (N. S.) 408; Merchants’ Bank v. State Bank, 10 Wall. 604, 644, 645, 19 L. Ed. 1008; First Nat. Bank v. Bakken, 17 N. D. 224, 227, 116 N. W. 92.
. Manifestly it can make no difference which party to an action invokes the principle of those decisions. If Skud had received the money mentioned in the note, he would have to pay it back. Since he did not receive it, neither the bank nor its receiver can claim the benefit of his promise without yielding to him the corresponding benefit of the stock. If this were not the law, it would result that the receiver alone could in effect rescind the contract with Skud so far as it would impose an obligation upon the bank and affirm it so far as it would operate to its advantage. Peninsular Bank v. Hanmer, 14 Mich. 207, 214.
“A defense, by way of recoupment, denies tbe validity of the plaintiff’s cause of action to so large an amount as he claims. It is not an independent cross-claim, like a separate and distinct debt or item of account due from the plaintiff, but is confined to matters arising out of, or connected with, the contract or transaction which forms the basis of the plaintiff’s action. It goes only in abatement or reduction of the plaintiff’s claim, and can be used as a substitute for a cross-action only to the extent of the plaintiff’s demand.”
Again (8 Mich. 354):
“It prevents circuity of action, and accomplishes full justice to all the parties without tbe violation of any rule of law.”
Although Judge Campbell dissented because of an imperfect notice and of a belief that it was not open to amendment, yet he said (8 Mich. 355):
“And I think the doctrine of recoupment, arising directly, as here, out of matters forming the consideration, should be permitted in like manner to apply.”
In Platt v. Brand, 26 Mich. 173, 175, in speaking of recoupment, Judge Campbell said:
“The whole doctrine is one of the equitable outgrowths of the improvement of legal practice; and no obstacle should be thrown in the way of its encouragement. Our legislation has indicated this design by enlarging the defense and permitting defendants to recover damages beyond the plaintiff’s claim. We do not feel disposed to accept any technical doctrines which would prevent its full efficacy, unless compelled by a weight of authority which we do not find here.”
See, also,, language of Judge Cooley in Chandler v. Childs, 42 Mich. 128, 130, 131, 3 N. W. 297, and of Judge Marston in Iron Cliffs Co. v. Gingrass, 42 Mich. 30, 31, 3 N. W. 238.
In Donnel v. Wyckoff, 49 N. J. Law, 48, 50, 7 Atl. 672, 673, it was held that in an action brought by a pledgee for the debt the defendant might set up the wrongful conversion of the pledge by way of defense, and be allowed its value as payment of the debt pro tanto; the court saying: -
“The loan of the money and pledge of the stock as collateral security áre parts of the same transaction, and the value of the property wrongfully con*9 verted and the amount of the debt can both be as readily ascertained in the action by the pledgee for the debt, as in tho action by' the pledgor for the conversion of the pledge.”
Again (49 N. J. Law, 51,7 Atl. 673):
“To deprive the creditor of all remedy for his debt, because by inadvertence. he has made an unlawful disposition of the pledge—it may be of less value than the debt—would he unjust. Equally unjust would it be to compel the debtor to pay the debt in full In the face of the wrongful disposition of the property pledged, and then put him to an action of trover against the same party, who may he insolvent and incapable of satisfying the judgment against him. The injustice that might he done to the pledgee in an action of trover for the wrongful conversion of tho pledge—the debt for which it was pledged being unpaid—is obviated by allowing the amount of the debt in abatement of damages, on the theory that to that extent the property pledged has been applied to the pledgor’s use. On the same principle the value of the pledge wrongfully converted may he treated as payment pro tanto, or in full in an action for the debt.”
To the same effect: Rush v. First Nat. Bank, 71 Fed. 102, 104, 105, 17 C. C. A. 627 (C. C. A. 8th Cir.); Brown v. First Nat. Bank, 112 Fed. 901, 905, 50 C. C. A. 602, 56 L. R. A. 876 (C. C. A. 7th Cir.); Stuart v. Bigler’s Estate, 98 Pa. 80, 84; Ocean Nat. Bank v. Fant, 50 N. Y. 474, 476; Frank & J. G. Jenkins, Jr., v. Conklin, 146 App. Div. 301, 130 N. Y. Supp. 779, 780. Other cases showing varying though kindred applications of the doctrine: Michigan Yacht & Power Co. v. Busch, 143 Fed. 929, 936, 75 C. C. A. 109 (C. C. A. 6th Cir.); Wm. Carraway & Sons v. Kentucky Refining Co., 163 Fed. 189, 192, 90 C. C. A. 59 (C. C. A. 6th Cir.); York Mfg. Co. v. Rothwell, 119 Fed. 144, 147. 56 C. C. A. 52 (C. C. A. 6th Cir.); Dushane v. Benedict, 120 U. S. 630, 648, 7 Sup. Ct. 696, 30 L. Fd. 810; Bank v. Smith, 144 Iowa, 203, 206, 122 N. W. 825. That Skud’s remedy is not confined to equity finds further support in the analogous class of cases, which hold that a mortgagee may bring trover for conversion of the mortgaged property. Grove v. Wise, 39 Mich. 161; Hull v. Bernatz, 106 Mich. 551, 64 N. W. 473; Huellmantel v. Vinton, 112 Mich. 47, 70 N. W. 412; note to Worthington v. Hanna, 23 Mich. 530.
We are therefore constrained to hold that it was error to grant the motion to direct a verdict. We refrain from passing upon other questions presented.
The judgment below must be reversed, and a new trial awarded, with costs.