President of the Fulton Bank v. President of the Phœnix Bank

Majority

p. 562

The President, Directors & Co. of the Fulton Bank of The City of New-York, versu s The President and Directors of the Phœnix Bank.

April Term, 1829.

Headnote

Where a negotiable promissory note, endorsed in blank by the payee, has been fraudulently or feloniously taken from the true owner, and that fact is shown at the trial; the person into whose hands it passes, cannot recover upon it against the maker, unless he show himself to be an innocent and bona fide holder for a valuable consideration.

The Phcenix bank of the City of New-York issued a post-note, payable 60 days after dato, to J. G. or order, on demand. This note, being endorsed by J. G., was put into the mail at Charleston in the state of South Carolina, to be transmitted to N. Y.; but the mail being robbed, it never reached the hands of the true owners, but passed into the possession of Prime, Ward, King & Co., who deposited it in the Fulton Bank and received credit for a like amount, in account with that bank. The plaintiffs presented the note to the Phcenix Bank for payment, and it was refused, upon the ground that the note had been stolen from the true owners, who had requested the defendants not to pay it. The amount of the note although passed to the credit of P., W., K. & Co., by the Fulton Bank, had never been drawn out by them, and upon action brought by the Fulton Bank, against the makers, to recover the amount of the note—it was held, that the mere act of giving credit to P., W., It. & Co., for that amount, by the Fulton Bank upon their books, did not constitute them bonafide holders of the note for a valuable consideration.

Bank post notes, overdue, are not to be regarded as subject to all the rules applicable to ordinary promissory notes, but they become assimilated in their character to ordinary Bank notes.

Assumpsit, brought by the plaintiffs to recover the amount of a post-note for fifty dollars, made by the defendants, and hearing date on the 23d of December, 1826, payable sixty days after date, to Jasper Grosvenor, or order, on demand.

The defendants upon the record, had themselves no objections to make against the payment of the note to the plaintiffs, and the defence was, in fact, interposed by S. & M. Allen, lottery dealers, who claimed to be the real owners of the note, and that it had been stolen from them under the following circumstances :

S. & M. Allen, for the purposes of their business, had offices established both in New-York and at Charleston, South Carolina.

p. 563

The note, after it had been issued, was endorsed by Grosvenor the payee, to one Samuel St. John, and by him to S. & M. Allen at Charleston, whither it had been sent as a remittance. S. & M. Allen, on the 22d of February, 1827, deposited the note in question in a package with other notes, which they had purchased, in the mail at Charleston, directed to S. & M. Allen of New-York. The mail, which left Charleston on that day, was robbed, and never arrived at New-York; by which means the package of notes addressed to S. & M. Allen did not reach its destination.

The declaration contained a count upon the note, in which the plaintiffs claimed as endorsees direct from Grosvenor, and the common money counts were also added.

The defendants pleaded the general issue, and with the plea gave a special notice, setting forth, with great particularity, the endorsement of the note by Grosvenor to St. John, and by him to S. & M. Allen; that the note was put into the mail at Charleston on the 22d of February, 1827, directed to them at New-York; that the mail was immediately afterwards robbed, by which means the note in question never came to the persons to whom it was addressed. The notice further stated, that S. & M. Allen were the real owners of the note, and called upon the plaintiffs to show the time and circumstances, under which the note came into their possession, together with the consideration which they had paid for it.

The cause was tried on the 5th day of January, 1829, before Mr Justice Oakley. At the trial, the plaintiffs presented the note, which was in the following words, viz: “ Sixty days afte r date, the President and Directors of the Phoenix Bank of New-York promise to pay Jasper Grosvenor, or order, fifty dollars on “ demand. New-York 23d December, 1826.

“ J. Boggs, President.

“ J. Delafield, Cashier.”

The note was endorsed by Grosvenor in blank, and upon it there had been written this additional endorsement, “ pay S. & M. Allen, or order.

“ Saml. St. John, Jun.”

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These last words, however, had been erased by the attorney for the plaintiffs, after the commencement of the action. The defendants proved satisfactorily that the note in question was put into the mail at Charleston, on the 22d of February, 1827, addressed to S. & M. Allén, at New-York ; that it was at that time their property, and that it had been taken feloniously from the mail immediately thereafter.

The robbery of the mail was also shown, and notices of it had been given in Philadelphia and New-York. Several of the stolen notes belonging to S. & M. Allen had been presented at their counter in New-York, for endorsement, and they had stated to the holders that the notes had been stolen from the mail. The defendants themselves had received information of the robbery, by a printed notice, and had paid S. & M. Allen the amount of the note after it had been stolen from the mail, receiving from them at the same time a bond of indemnity.

On the part of the plaintiffs, it appeared that the note in question had been received by them on the 25th of February, 1828, from Prime, Ward, King & Co. in deposite. That it was sent to the Phœnix Bank on the 26th of that month, and returned on the same day, with a message, that it was a stolen note and could not be received. It was then sent to P., W., K. & Co.’s office, and they returned it to the plaintiffs. When the note was presented to Prime, Ward, King & Co., by the messenger of the plaintiffs, they offered to take it back if he would swear that it was received of them, by the Fulton Bank. The messenger did not make the oath, as P., W., K. & Co. did not press it upon him. If they had done so, the witness would have made the affidavit, and P., W., K. & Co. declared, that they did not know where they got the note. It appeared, however, that this declaration was received from the messenggr, who returned the note This testimony was objected to by the plaintiffs but admitted by the court.

It further appeared, that the note, when received by the Fulton Bank, had been carried to the credit of P., W., K. & Co.; that there was a large balance to their credit in that bank on the ,25th and 26th of February, 1828, and for several days thereafter. The note went into their general account, and they drew

p. 565

checks on those days, leaving, however, a large balance to their credit. The Fulton Bank had never taken any steps to collect the money of Prime, Ward, King & Co. Mr. Ward, one of the partners in that firm, being examined as a witness, testified, that he knew not from whence their house obtained the note, nor were there any means of ascertaining that fact. He stated, however, • that on the 12th of July, 1827, P., W., K. & Co. received two post-notes of the Phœnix Bank, for $500 each, from Horatio Gates & Co,, of Montreal, which the defendants had refused to pay, upon the ground that they were stolen notes, and that they had received notice not to pay them. The witness first heard of the robbery in July, 1828. Notice of the robbery, it appeared, had not been made public through the papers, upon the suggestion of the Post Master General, who thought that it might interfere with the detection of the robbers.

Upon this testimony, the counsel for the defendants insisted,

I. That the note, having been received by the plaintiffs after it had become due, the defendants had a right to make the same defence as if the suit had been commenced by the finder, or a robber, and claimed to have the court charge the jury, that if they were satisfied that the note in question belonged to S. & M, Allen & Co., and had been lost or stolen, they should find a verdiet for the defendants.

II. That the note, by reason of the last endorsement, ought to be regarded as a note payable to order, and that the plaintiffs had acquired no right to it, as S. & M. Allen had not indorsed it, and on that ground, the jury ought to find a verdict for the defendants.

III. That the plaintiffs, under the circumstances of the case, were not, in judgment of law, holders of the note for a valuable consideration; as they had parted with nothing on the credit of it, before they received notice of its loss, and could either have erased the, credit they had given P., W., K. & Co. for the note, or charg

p. 566

ed it to them, if they had chosen so to do, and that on this ground the jury ought to find a verdict for the defendants.

Upon the two first grounds, the presiding Judge was of opinion, that the defence could not be sustained, but upon the third he thought there was some doubt. He, however, instructed the jury, that the plaintiffs were to be considered by them as bona fide holders of the note for a valuable consideration, and that <he only question of fact for them to find, was, whether the plaintiffs had notice of the loss, or sufficient information to put them on inquiry when they received the note, and whether they had acted negligently in receiving it, under the circumstances.

To the opinions above expressed, and to the charge of the Judge, the defendants excepted. The cause was summed up upon the questions of notice and negligence by the counsel on both sides, and the jury returned a verdict in favour of the plaintiffs.

The defendants now moved for a new trial, on the ground of a misdirection, and Mr. S. A. Foot, in their behalf, contended,

I. That the testimony as to the offer made on each side, when the plaintiffs informed P., W., K. & Co. that the note in question had been spffeu, was admissible in evidence.

II. That the note was dishonoured when the plaintiffs took it, and the same defence ought to have been allowed against them as against the robber. The note was like any other note, and was dishonoured at the time of the demand. It was due after 60 days, and whoever took it after it was due, took it subject to all the equity existing in faVour of the true owner.

III. By the last indorsement, the negotiability of the note by order, had been restored. It was made payable to S. & M. Allen, and as they never endorsed it, that circumstance, if not conclusive against the holders, was enough to put every taker upon inquiry. The words, “payable on demand,” mean nothing more, than that the note should be presented at the bank for payment. But to make the note available to any person besides

p. 567

S. & M. Allen, it should have been endorsed by them. The holders cannot sue in their own names without such ment, and upon this ground the plaintiffs must fail.

IV. The plaintiffs were not holders of the note for a valuable consideration. They seek to recover in their own right, and not for Prime, Ward, King & Co.: they must, therefore, be bona fide holders, for a valuable consideration, without notice that the note was a stolen one. But it is not pretended that they purchased the note, or that they parted with any thing valuable for it, when it was received. The note was taken for safe keeping, and the plaintiffs were mere bailees for the depositers. It appeals inevidence, that the depositers offered to take the note back again, if the plaintiffs’ messenger would make oath that it was received of Prime, Ward, King & Co. This is conclusive proof, that as between the bank and the depositers, there was no dealing which made the deposit conclusive and irrevocable. If the plaintiffs, then, had satisfied P., W., K. & Co. that the note had been received from them, they would have redeemed it, and the plaintiffs were bound to make the proof required.

This is not the case of a forged note, which has been taken by the bank from which it was issued, and passed to the credit of a customer in his bank book, for in such case the credit is conclusive between the parties, we admit. But that rule is founded upon a principle of policy and convenience, which requires the bank to know their own notes, and they receive them at their peril. Here the plaintiffs passed to the credit of P., W., K. & Co. a note of the defendants, to which it was supposed the depositers had good title. If it shall appear that Prime, Ward, King & Co. could not collect the note of the defendants, then the plaintiffs are not bound or concluded by the credit given to the depositers in their books. The credit may be stricken from their accounts, and the plaintiffs could never have been compelled to pay P., W., K. & Co. the amount of a note, which they could not collect of the defendants.

The rule is, that a note like this, which has been lost or stolen, is good and valid in the hands of an innocent purchaser or taker,

p. 568

W^° ^as rece‘ve(^ ^ bona fide for a valuable consideration, and without notice. The defect of the plaintiffs’ title is here; they have never paid any thing for the note, nor have they been prejudiced by it. There has always been a large balance in their hands belonging to P., W., K. & Co. ever since the note was deposited. The means of redress and protection are in their own hands, and they are not liable to pay over the amount of the note to the depositors, as the proof now stands.

z If this defence prevail, then Prime, Ward, King & Co. will be driven to the necessity of asserting their title to the note; and if they took it under such circumstances as bring them within the rule relative to such notes,- they will recover. But if they took the note for collection merely, without ever having paid anything for it, and without having been prejudiced thereby, then their title will fail, and the person from whom they received it, must assert his claim. By this means, the note may be traced back to the rob-her, and it may appear that no consideration has ever been paid for the note since the day it was feloniously taken from the true owner. This is the true rule of law governing these cases, and it is the just policy of the law, not to allow a person to collect a lost or stolen note merely because he happens to be the holder of it. [Bay v. Coddington, 5 Johns. C. R. 58. 20 Johns. R. 644. same case. Buller v. Harrison, Cowp. 566. Cox v. Prentiss, 3 Mau. and Sel. 345. Lafarge v. Newland, 7 Cowen R. 461. Mowatt v. McLellan, 1 Wend. R. 178. Kent's Com. vol. 3, p. 51.]

■ Mr. R. R. Ward and Mr. J. Hoyt, for the plaintiffs, contra, contended,

I. That the plaintiffs were to be considered as bona fide holders of the note for a valuable consideration, and without notice that it had been feloniously taken from the true owners. Prime, Ward, King & Co., at the time when they deposited the money, presented their pwn bank book to the plaintiffs, who passed the amount of this note among others to their credit thereon. This book, then, contains an admission in writing on the part of the that they had received of P., W., K. & Co., not aspe»

p. 569

cific note for collection, but a sum of money: and this particular sum even, was not a specific entry by itself, but was included in a much larger sum, deposited at the same time, and carried to the credit of Prime, Ward, King & Co.

This bank book, under these circumstances, contains conclusive evidence against the plaintiffs, that they owe the depositers a sum of money; and if an action were brought against the bank, to recover the amount thus admitted to be due to P., W., K. & Co., the evidence furnished by the book could not be controverted or gainsayed by the bank. If this proposition be correct, then, it follows, that the plaintiffs are bona fide holders of the note for a valuable consideration, that is, their liability to pay P., W., K. & Co. a like amount with that deposited, is a sufficient consideration to maintain their title tothis note.

The money received by the plaintiffs of the depositers, was re» ceived in the ordinary course of business. Prima fade, at least, the bank owes the amount deposited, and it would be a most inconvenient and mischievous rule to throw upon them the burthen of proving that the note in question was a stolen note. Prime, Ward, King & Co. demand of the plaintiffs the amount of their deposit: the plaintiffs reply, that the amount passed to their credit is incorrect; that one of the notes received by the bank as cash, was, in fact, the property of S. & M. Allen, from whom it had been stolen, and that, therefore, the depositers are not entitled to recover the amount, which the bank has admitted to be due. If the bank set up this defence, must they not prove it ? And can it be either a just or prudent rule, which shall subject the depositary to this hardship and inconvenience?

But the entry upon the bank book is conclusive evidence against the bank, in favour of P., W., K. & Co., and the plaintiffs are therefore bona fide holders of this note, and entitled to recover. [4 Johns. R. 389.]

II. But if this were not so, the plaintiffs may yet recover upon the strength of P., W., K. & Co.’s title. There is no pretence that they are not bona fide holders ; for the evidence is, that they

p. 570

could not tell from whence they received the note. They, of course, gave value for it, for bank notes pass between man and man as cash. If the bank are bailees or trustees of P., W., K. & Co., then they may repose upon their title, and upon this ground, the plaintiffs are- entitled to recover. The defendants received value for their note when they issued it, and, of course, they are liable to pay somebody; and who the receiver is, cannot be male-rial, to them. [Smith v. The Merchants’ Bank of Albany, 19 Johns. R. 115.]

III. The plaintiffs, when they took the note, had nothing to put them on their guard. The notice of the robbery never reached them, and they are not to he visited by any constructive notice. Handbills were issued, but they were not shown to the plaintiffs, and the ordinary course of publishing an account of the robbery in the newspapers, was not resorted to. Hence it is clear, that the bank has received no direct or positive notice, and there was nothing to put them on inquiry. This point is not much relied on by the defendants, and evidently cannot be maintained. [Ch itty on Bills, p. 26. 151. Edi. of 1826.]

IV. The note is not a negotiable note, in the meaning of the term adopted by the defendants: that is, its negotiability does not depend upon endorsement, after the payee has put his name upon it. For the sake of remittance or security, post-notes are payable to order, and at a future day. But the instant they are endorsed and become due, they are money for all the ordinary purposes of business. They do not differ from other bank notes in this particular, but would be good as a tender in payment of a debt, if not objected to. The title of the plaintiffs, then, does not depend upon endorsement, but upon delivery; and being holders of the note, they can maintain this suit in their own names.

(After stating the facts of the case.) It is not denied, on the part of the plaintiffs, that the note upon which this action was brought, was feloniously taken from the public mail at or near Charleston, in South Carolina, on or about the

p. 571

22d of February, 1827, after it had been deposited therein, for the purpose of being remitted to New-York. It is equally clear and undisputed, that S. & M. Allen, the persons to whom the note was remitted, were its true owners, and they, in the name of the Phoenix bank, interpose this defence for the purpose of protecting their own rights. The defendants upon the record, are indifferent as to the result of this action, having been indemnified by S. & M. Allen against its consequences. Being, however, the makers of the note, and having received value for it, the defendants must, of course, pay its amount to somebody ; and it is of no importance to them whether payment is made to the plaintiffs, or to. S. & M. Allen.

The defendants, therefore, are not, as to its practical results, interested in the event of this suit, but S. & M. Allen are, .and the first question is, whether they can be permitted to interpose this defence in the name of the bank.

It is a rule of law well settled, that possession of a promissory note, endorsed in blank, or payable to bearer, is prima fade evidence of ownership, and if the person or party having the possession, came by it bona fide, for a valuable consideration, in the course of his business, and without any accompanying circumstances of suspicion to put him upon his guard, or excite inquiry, he shall hold the note against the original owner, even if it had been lost or stolen. But it is equally well settled, that if the holder of the note received it under circumstances which ought to put a man of ordinary prudence upon his guard, or, at least, upon inquiry; or if he came into a possession of it without having parted with any thing of value, or without having given some new credit in exchange for the note, then the maker may, under proper equitable circumstances, setup a defence against his right of recovery. [Bay v. Coddington, 5 Johns. Ch. Rep. 56 . Gill v. Cubitt, 3 Barn. and Cresw. 466. and the cases there cited.]

In the case of Gibson v. Taiman, decided in this court, it was held, “ that if the holder of a note obtains it by fraud, he cannot main- “ tain an action upon it against any of the parties to it. He “ must aver and prove that the note was transferred to him, and “ though his possession of the note is prima facie evidence of the

p. 572

“ transfer, yet if the defendant can show that the plaintiff obtain- “ ed the note by his own fraudulent act, he has a right to defeat “ t^ie acti°n on that ground, although he may be liable to pay the “ note to the true owner.”

The principle of that decision is applicable to this case. The plaintiffs here must recover, if they recover at all, by the strength of their own title, and if they have no right to the note, as against the claims of the original owners, they cannot recover upon the ground that the defendants are liable to somebody. The main question, then, to be decided, is, whether the plaintiffs a/re bona fide holders of this note; whether they have paid any value for it, or given credit upon the faith of it, or incurred any new responsibility by reason of their possessing it. That they came into the possession of this note in the ordinary course of their business, and without any circumstance to cast the slightest suspicion, in their minds, upon the title of those who made the deposit, cannot be denied; and the point upon which this case must turn, will depend upon the question of consideration entirely.

It appears from the evidence, that Prime, Ward, King & Co., at the time when the note was deposited, were creditors of the hank to a considerable amount, and have continued to be so since. They have at all times since the deposit, had funds in the Fulton Bank, subject to their order, to an amount far exceeding the amount of this note, and the plaintiffs cannot, therefore, by any possibility, be prejudiced by the claims of S. & M. Allen, unless Prime, Ward, King & Co. could recover the amount of this deposit of them.

It cannot be successfully contended on the part of the plaintiffs, that they, at the time when the note was received in deposit, parted with any thing of value in exchange for it, or that they gave any new credit to Prime, Ward, King & Co., upon the mere faith of the note, or that they have, at any time, withdrawn the amount. For, if those who made the deposit, had afterwards drawn out the money from the bank, there can be no doubt, that in such a case, the plaintiffs would be treated as bona fide holders for a valuable consideration, and entitled to recover. But the fact

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is not so. P., W., K. & Co. have not withdrawn their money from the hands of the plaintiffs ; but a sum remains there now, more than sufficient to indemnify them, and which they have a right to retain, unless they are concluded by some act of their own.

When the note in question was deposited with the Fulton Bank, they received it voluntarily of P., W., K. & Co., and gave them credit for a like amount in their books. It will be observed, that the plaintiffs were not bound to receive this note in deposit, or as payment of any antecedent debt, and they might have refused to receive any thing but cash. The note was, then, merely deposited with the plaintiffs in the usual course of business, for collection ; and the question is, whether their own acts, or the credit given to P., W., K. & Co., in their own book, and in the books of the bank, shall be held as conclusive evidence, that the plaintiffs were indebted to them to the amount of thej credit. If this be so, then beyond all doubt, the plaintiffs have givertea^neio credit upon the faith of the specific note, and may be prejudiced to the full extent of its amount, by their liability over to Prime, Ward, King & Co.

I cannot allow this potential effect to the mere act of giving credit upon the hooks of the hank, or those of their customers ; and I do not admit that the plaintiffs would have been concluded by any such entries. It may be, that entries made by banks upon the books of their customers, are considered by their officers as conclusive and irreversable: but the law does not look upon these acts with the same stem eye. The entry, it is true, being made by the bank, may be conclusive as to amount, where money has been deposited ; but not so in a case where the bank receives nothing of value, except in particular cases hereafter tobe noticed. This note, when deposited, was treated by the plaintiffs as a representative of fifty dollars, and they, therefore, gave credit to P., W., K. & Co. on their hooks, for a like amount. But when the note was presented for payment, the makers refused to pay it, upon the ground, that its true owners were not its holders. The plaintiffs, at the time of this refusal, had an open account with P., W., K. & Co., and might have erased the credit previously given, or have entered a like sum to their debit, by which means these accounts would have conformed to the truth of the case.

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In the case of Garland v. The Salem Bank, [ 9 Mass. R. 408 .] the endorser of a promissory note, being ignorant that by the rules °f law, he was not bound to pay the note for the want of a proper demand of the maker and notice to himself, -paid the amount of it to the defendants, with whom it had been left for a collection by the holder, and the bank passed the money to the credit of the holder on their books, as so much money deposited by him. Three days thereafter, the endorser discovered bis mistake, and that the amount of the note had not been paid over to the holder in any other way, than by its having been passed to his credit on the books of the bank. He thereupon demanded the amount back again; but the bank refused to comply with his demand, and subsequently paid the money over to the holder who deposited the note, upon his check.

Upon action brought by the endorser for money had and received, it was held tjj^tThe note had been paid by mistake by the endorser, under a misapprehension of his rights; that the entry to the credit of the holder, was not conclusive upon any of the parties, and that the bank might have corrected their accounts after the mistake was discovered. The endorser, therefore, had a verdict for the amount of the note. In this case óf Garland v. The Salem Bank, it was contended, that, the payment by the endorser to the bank, and the transfer to the credit of the holder, who made the deposit, amounted to an effectual and irrevocable transfer, according to the course of bank business.. The court,' however, considered that the mere act of giving credit on the books of the bank, under the circumstances -of the case, did not amount to such a transfer, and the bank could have successfully resisted an action brought by the person in whose favour the credit was made.

The principle of that case is applicable to this, and shows, that the credit given by the Fulton Bank to Prime, Ward, King & Co. was not conclusive ner" irreversible. -It was, as it stood, evidence prima facie against them, but not conclusive.

This view of the subject raises the question, whether Prime, Ward, King & Co., could recover the amount of this deposit of the plaintiffs, and whether they may not recover for the benefit of

p. 575

Prime, Ward, King & Co. It will be observed, however, that the Fulton Bank reposes upon the strength of its own title, and the plaintiffs do not claim to be the mere agents of Prime, Ward, King & Co., or to sue for their benefit. The plaintiffs, in fact, put their right to recover upon the exclusive ground, that the credit given to their customers in their book, is conclusive upon them, and that, therefore, they are holders for a valuable consideration. As I view the subject, the plaintiffs are under no such responsibility. They received the noteas the bankers of P., W., K. & Co., and for their accommodation. In that character they presented the note to the defendants, and payment being refused, they could return the note to P., W., K. & Co.

If the plaintiffs had taken a forged check in the name of a dealer, drawn upon themselves by mistake, and had passed the amount to the credit of another customer, it might have made a different case ; for there the law might 'cast upon them the responsibility of knowing the handwriting of the person who made the check. Bankers are supposed by the law, to be acquainted with the signatures of their correspondents and customers, and all the consequences of mistake in such cases are cast upon them. So in cases where their own notes, or notes purporting to be their own, are presented at the counter of a bank for payment: there the law presumes that the officers of the banks know their own paper, and can discriminate between spurious and genuine notes. If they cannot, who can 1 If they receive a forged note as a genuine note of their own issuing, they must sustain the loss. [Bank of the United States v. The Planters’ Bank of Georgia, 10 Wheaton p. 333., and the cases there cited.] The rules applicable to that class of cases, however, do not apply here, as I apprehend. The law does not throw upon these plaintiffs any peculiar responsibility, and theirentry upon the customer’s book, although prima facie, is not conclusive evidence against them.—If P., W., K. & Co. were to" bring an action against the Fulton Bank for the amount of this deposit, and were to exhibit the bank-book in evidence, then the bank would be at liberty to show-all the circumstances of the transaction and that payment of the note, when it was presented to the Phoenix Bank, was refused. It

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is said, that it already appears, that those who deposited the note are innocent and bona fide holders, and that a controversy with them on the part of the plaintiffs would be unavailing. In reply, it may be observed, that there is no proof now before the court which establishes that fact. We have nothing upon that point, except the evidence of Mr. Ward, and it might be that on a proper occasion, S. & M. Allen could show the circumstances under which the note was taken by P., W., K. & Co.

If the credit given to those who deposited the note, is conclusive against the bank, it is conclusive upon the ground, that an entry in the bank-book is iinal, as between the bank and its customer ; that it is an act done which can never he remedied, a step taken which cannot be retraced. Suppose the robber himself was the person who made the deposit: could he by this indirect means, possess himself of money which he could not obtain directly 11f the robber were to sue the defendants, they might refuse to pay him and show his w'ant of title;—and can it be, that by the mere act of placing the note in a bank, as a deposit, he can thereby securely enjoy the fruits of his felony 1 This statement, to my mind, carries with it the proper answer. At all events, in a suit against them, after the fact is established, that the note in question was the property of 6. & M. Allen, and that it was stolen, P., W., K. & Co. would be compelled to show the manner in which they became possessed of it. It may be they took it of a stranger without enquiry, and without due caution ; for it is said, they know not from whom the note came to them. It may be that they received it of Gates & Co. for collection merely, and have never been prejudiced. By this means, the note will be traced back to the robber, and if no person can show himself to be a bona fide holder of it, in the legal acceptation of the term, then there can be no recovery against the rights of the true owner.

It being established, that the plaintiffs are not such holders of the note, as can recover by the strength of their own title, it follows that this defence may be set up by the Phœnix Bank. It certainly may, under the circumstances of this case; for here S. & M. Allen appear and interpose their just rights. This is a suffi

p. 577

cient justification of the bank, and authorizes them to refuse pay- , *• •' merit. We may, however, go further. It is true, the Phoenix Bank can have no preference, as to whom they will pay the amount of the note, since they have promised to pay the holder. Nevertheless, they are under no obligation to pay any person, who is not a bona fide holder. If they could show that the note was stolen or lost, and that the holder of it came into possession of it without paying value for it, in any sense of the word, they would be justified in refusing payment. They ought to withhold the money from the person, who had no just title to it, and become trustee, or fiduciaries for the real owner, whenever he may appear By this means, no injustice would be done, and the rights of innocent persons would he best preserved.

Under this view of the subject, as there must be a new trial, it is not necessary to examine the other points made by the counsel for the defendants. But, in regard t.o the second and third points made by them, I do not consider post-notes, issued by a bank, as subject to all the technical rules attached to ordinary bills of exchange and promissory notes. Post-notes are intended to circulate like other bank notes, after they become due, and are treated as such for all convenient purposes. True it is, they are payable to order, and must be endorsed to give them negotiability. In this case, the note was endorsed by Grosvenor, the payee, in blank, and it was payable 60 days after date, on demand. When it became due, the makers were bound to pay it, at whatever period of time (within the statute) it might be presented. As between a bona fide holder and themselves, they had no equity to set up by way of defence; and it is a misapplication of the rule relating to notes over due, to apply it to a case like the present one. He, who takes a note over-due, takes it, it is said, subject to the equities existing between the original parties. And who are the original parties in this case 1 The Phoenix Bank and Grosvenor—the makers and the payee. And what equities are there existing between these parties, which the defendants can set up 1 None whatever. The note, when endorsed by Grosvenor, had perfect negotiability, and could afterwards pass by mere deli

p. 578

very. The names of all endorsers after him could be erased, without injury to a perfect right against the makers.

Without noticing the first point made by the defendants, I am of opinion, that the second and third points, on which their application for a new trial rests, cannot be sustained; but upon the fourth, I consider the application well founded. I do not view the plaintiffs as bonafi.de holders of the note for a valuable consideration, as the proof now stands; and as they cannot recover until that be shown, there must be a new trial.

New trial granted.

[Ward and Hoyt, Att’ys for the plffs. Foot and Kent, Att’ys for S. & M. Allen.]

Vide McLaughlin v. Waite, 5 Wend. R. 404.

Mote.—This action was finally abandoned by the plaintiffs, and the cause was never again brought to trial.