Justh v. National Bank of Commonwealth

This action was brought by the plaintiffs to recover the sum of $40,000 loaned by them to William E. Gray & Co., and deposited by the latter with defendant, on the ground that the loan was made on the security of certain collaterals which proved to be forged. On the trial, the following facts were established.

William E. Gray & Co. kept an account with defendant, and* on the morning of December 10th, 1869, they commenced the business of the day by borrowing $30,000 from said bank. The loan was made in the ordinary manner of doing business with brokers, on call, upon collaterals, and on condition that it should be repaid during the day. The collaterals consisted of three New

At about 2.10 p. m. on the same day, plaintiffs’ firm loaned Gray & Co. $30,000, and about ten minutes thereafter, $10,000 upon the pledge of securities purporting to consist of New York State bounty bonds, U. S. 5-20 bonds registered, and U. S. 5-20 coupons. Each of these loans was made in the form of a check, drawn by plaintiffs upon the National Bank of the State of New York, and certified by the latter to be good. The checks thus certified were separately deposited by Gray & Co. with the defendant in the usual way, and collected by said bank.

At or shortly after three o’ clock on the same day, Gray & Co., by their check of $20,000 upon defendant’s bank, repaid the balance of the loan obtained from said bank, and demanded the remaining two of their bonds. These were at this time in the hands of the cashier, who had gone out to make inquiries concerning them. The inquiry resulted in the discovery that the two bonds had originally been issued for $1,000 each, and had been altered to represent a value of $10,000 each. Upon such discovery Gray & Co. assented that the said bonds should be turned over for their account to the Manhattan Company, which acted as the transfer agents of the State, and the bonds were turned over by defendant accordingly.

William E. Gray, who had made the transaction with the plaintiffs, absconded on the 11th day of December, 1869. About a month thereafter plaintiffs ascertained that most of the securities upon which they had made the two loans above referred to were forgeries, and upon such discovery they immediately tendered to the defendant the said securities, and demanded pay

There was no evidence that the defendant had taken plaintiffs’ money in bad faith, or with any notice of the fraud perpetrated by Gray & Co. upon the plaintiffs, and the proof was wholly insufficient to sustain the theory that the defendant delivered to Gray & Co. the same forged bonds that were received by plaintiff as collaterals, with a view or for the purpose of enabling Gray & Co. to raise money from the plaintiffs on them to make good a deficiency in their account with the- defendant. On the contrary, it appeared that plaintiffs’ checks were received on deposit by defendant in the ordinary course of business, and that their respective amounts were credited to Gray & Co. in the usual way. There was no evidence that the first bond that was taken up and surrendered between 12 and 2 o’clock was not a perfectly valid instrument, nor was it shown that it ever went to the plaintiffs. It was shown that the other two bonds never went to plaintiffs at all.

Upon this state of facts it is difficult to see how the action can be maintained. Although the fundamental principle of our law of personal property is that no man can be divested of his property without his own consent, and that consequently even a bona-fide purchaser from a person in the possession of property, who has no title to it and no authority whatever from the owner to sell or dispose of it, cannot acquire any title against the true owner (Williams v. Merle, 11 Wend. 80 ; Ely v. Ehle, 3 Comst. 509; Everett v. Saltus 15 Wend. 474 ; S. C. on error 20 Wend. 69 ; Wilson v. Nason, 4 Bosw. 155 ; Grand Trunk Railway Co. v. Edwards, 56 Barb. 408 ; Decker v. Matthews, 12 N. Y. 313 ; Boyce v. Brockway, 31 N. Y. 490 ), there are numerous exceptions to the general rule, which are founded on the obvious policy of human affairs. Thus the law will in many cases imply an authority from the owner to sell,,

As has been pointed out in Philbrick v. Dallett ( 43 How. 419 , S. C. 12 Abb. N. S. 419), the doctrine as to what constitutes a person.a bona-fide holder of negotiable paper for value varies with the facts peculiar to different classes of cases. In the case of commercial paper obtained by fraud or fraudulently put in circulation, the rule undoubtedly is, as claimed by plaintiffs, that the mere receipt of such paper as payment or security for a precedent debt, no new credit or other things of legal value being given on the faith thereof, .and no security being relinquished or discharged, nor any new responsibility incurred on the credit thereof, is not parting with value such as to enable the holder to enforce such paper against an accommodation party, or to hold it against the true owner, or to hold it free of

But even if the question were with the defendant as actual holder of the checks, neither the National Bank of the State of New York, on which they were drawn, and which had certified them, nor the plaintiffs, could resist their payment or collection, for the defendant not only discharged upon its books the indebtedness of Gray & Co., but it also surrendered the bonds pledged as collateral security. The validity of one of these bonds has not been disproved, and the other two, 'as the evidence shows, were still good for $1,000 each. This ’ would constitute the defendant a bona-fide holder for a, valuable consideration within the rule above cited

The rights of the parties having become fixed on the 10th of December, 1869, the testimony offered by plaintiffs as to the verbal statements made by certain officers of the defendant in January, 1870, was rightfully excluded on account of its immateriality (Baptist Church v. Brooklyn Fire Ins. Co., 28 N. Y. 153 ).

The complaint was properly dismissed, and the judgment appealed from must be affirmed, "with costs.

Cubtis and Van Vobst, JJ., concurred.