Goetz v. Bank of Kansas City

delivered- the opinion of the court.

In October, 1861, the plaintiffs in error, Goetg and Luening, were partners in the business of buying and selling hides on commission, at Milwaukee, Wisconsin. At that time ■ one Du Bois was a dealer in hides at .Kansas City, Missouri. On the tenth of that month Du Bois telegraphed to them from' Kansas City, inquiring what they could sell four hundred green ■ salt hides for; and what they would advance on a--bill of lading of the shipment. The firm answered by telegram, stating the market price of light hides on that day, and that they would pay a draft “for two thirds value, bill-of lading 'attached.” On the same day, the firm sent a letter to Du: Bois, repeating the message, and adding that if the -hides were in good condition and number one, they could sell them readily; that their commission was two- and a half per cent.; and that they would sell all hides that he might ship to the market at Milwaukee. Upon this understanding, and during the same month, Du Bois drew upon the firm five drafts, amounting in. the aggregate to $9395, which were accepted, and, with the exception of the fifth one, were paid. The fifth one, which was for two thousand dollars, was protested for non-payment. To each of the drafts were attached a bill of lading and an invoice of the shipment. The bill of lading purported to have been issued by the Chicago and Alton Kail-road Company, stating that it had received hides, giving the number and estimated weight, to be transported on the road from Kansas City to Milwaukee, and marked and consigned as follows: “ To shipper’s order. Notify Goetz and Luening, Milwaukee, Wis.” The invoice purported to give the net .weight in pounds of the hides shipped, and the market price

The drafts were made payable to Thornton, the cashier of the Bank of Kansas City, and were cashed as drawn, the bank paying their full face, less the usual rate of exchange on Milwaukee. The amount, as each was cashed, was passed to the credit, of Du Bois, and was checked out by him in the usual course of business, within a few days.

The drafts were sent by the bank to its correspondent at Chicago indorsed “for collection” on its account, ánd by him. were forwarded to Milwaukee. The invoices of some of the shipments were indorsed in the same way. The bills of lading were indorsed by Du Bois, per J. MacLellon, his clerk. ■

The signatures to the bills of lading proved'to-be forgeries, on which account Goetz and Luening refused to. pay the fifth draft. The bank thereupon brought an action against them, for the amount in the Circuit Court of the United States. They defended, and set up as a counter claim the sums they had -paid on the four drafts. At the same time, they commenced an action in the State court against the bank to recover the money paid on those four drafts. The latter action'was removed, on application of the bank, to the Circuit Court of 'the United States^ where the two actions were consolidated- and tried as one, the same questions being involved in both. The trial resulted, by direction of the court, in a verdict for the bank, by which it recovered against the firm the amount claimed on the unpaid draft, and defeated the claim of the firm for the return of the money paid on the other four drafts. *

■ The contention of Goetz and Luening was substantially'this, that they accepted the drafts in the belief that the bills of lading were genuine that their genuineness was asserted by the indorsement of the bank on the invoices accompanying them; that the bills of lading were forgeries ; that no shipments as stated, therein had been made.; and that Du Bois bore in. the community such a reputation for dishonesty, hav-, ing been charged at other times with forging bills of lading attached to drafts.drawn by him, that the bank was guilty

•. The testimony offered by the firm respecting the charactér of Du Bois was of great length, but it would serve no useful purpose to discuss it. It is sufficient to say that it consisted of a mass of loose statements, general charges of criminality, i with vague references in some instances to reported particulars, sensational articles in newspapers, surmises, insinuations, rumors, beliefs, and suspicions; which might make, men cau-. tious in their dealings with him; but they were altogether of too indefinite and uncertain a character to interdict all transactions with him in the ordinary course of business. ,

•Besides, testimony was produced by the bank highly favor-' able to the standing and character of Du Bois. He is-shoWn . to have been a man of great enterprise and capacity; and just before opening business with the bank, to have been a member of the governméht. of Kansas City,- representing his ward in' the .common Council, and spoken of as a prominent candidate for its ■ mayoralty. He was a member and director of. the board of trade of the'city, and one of its committee on arbitration, to which business disputes of its members were referred for settlement. He had been a captain in the Union army, and bore the-reputation of a brave and, gallant officer. He was received in the best, society-of the city, and was generally-popular. He commenced ‘business with the bank in March, 1881, and drafts by him, cashed by the bank, amounted - from twenty to one hundréd thousand' dollars a month. ' Those drafts were always accompanied by bills of lading, and not until after the discovery of the forgery of the bills of lading in this case Was1 it known that in any of these transactions he had been guilty of dishonest conduct.

Under these circumstances, it is not suprising that, when the drafts on the merchants' in Milwaukee'were presented for discount, the bank made no inquiry as to the genuineness of the bills of lading attached to them. A bank in discounting commercial paper does not- guarantee the genuineness of a .document attached to it as collateral security. Bills of lading

The bank after discounting the drafts, stood towards the acceptors in the position of an original lender, and could not be affected in its claim by the want of a consideration from the drawer for the acceptance, or by the failure of such consideration. This has been held in numerous cases, .and was directly adjudged by this court in Hoffman v. Bank of Milwaukee, 12 Wall. 181 , which in essential particulars is -similar to the one at' bar. There the bank had discounted drafts drawn by parties at Milwaukee on Hoffman & Company, commission merchants of Philadelphia, ‘ to which were attached bills of lading purporting to represent shipments of flour. Hoffman & Company accepted and paid the drafts. The bills of lading proved to be forgeries, and- Hoffman & Company sued the bank to recover the money paid. It was contended that they had accepted and paid the drafts in the belief that the acconapanying bills of lading were genuine, and that, had they known the real facts, they would not have accepted and paid the drafts, and could not have been compelled to do so, ih which case the loss would have fallen oh the bank; that is, that they paid the drafts under a mistake of facts. But the court answered “ that money paid as in this case by the ac- • cept'or of a bill of exchange to the payee of the same, or to a subsequent indorser in discharge of his legal obligation as 'such, is not a payment by-mistake, nor without consideration, unless it be shown that the instrument was fraudulent in its ■

The case of Robinson v. Reynolds, decided by the- Queen’s Bench, and, on error, in the Exchequer Chamber, 2 Q. B. 196, is also similar, ■ in essential particulars, to the one at bar. An. action of assumpsit having been brought by the indorsee of a bill of exchange against the acceptors, they pleaded- that the drawer was in the habit of delivering goods in Ireland to the City of Dublin- Steam Company to be carried to Liverpool, consigned and deliverable there to his order, and of taking' from .the company a receipt for the goods, bill of lading, .or document, which, by the custom of merchants, when indorsed for value, passed the property in the goods, and entitled the indorsee to have them delivered to him; that the drawer used to obtain advances from the National Bank of Ireland on indorsing to it such document, and drawing and delivering to it a bill of exchange on the defendants or other person t'o whom

The case having been taken to the Exchequer Chamber, the judgment of the Court of Queen’s Bench, was. affirmed. Tinr dal, C. J., in delivering the opinion of the court, said: “ The sole ground on which the'defendant relies is, that the acceptance was not binding on account of the total failure or insuffi-. ciency of the consideration for which it was given, the document, on the delivery of which the acceptance was given, having been forged, and there- never having been any other consideration whatsoever for the acceptance of the defendants. And this would, have been a good answer to the action, if the bank had been the drawers of the bill. But the bank • are indorsees, and indorsees for value; and the failure ór want of consideration between them and. the acceptors constitutes no defence; nor would the want of consideration between the drawer and acceptors (which must be considered as included in the general averment, that there was no consideration), unless they took the bill with notice of the wan't of • consideration, which is not averred in this plea. -Admitting that the bill was accepted by the drawee at the request of the.. bank, and on a consideration ’which turns out to be utterly worthless, the case is the same as if the bill had been accepted without any value at all being given by the bank to the, defendants; and, on that supposition, the defendants would still be liable as acceptors to the bank, who are indorsees for value, unless not only such want of consideration existed between the drawer and acceptors, but unless the indorsees had notice or knowledge thereof. For the acceptance binds the defendants conclusively, as'between them and every bona fide indorsee for value. And it matters not whether the bill was. accepted before or after such aU indorsement.”

Many other cases to the same purport might be cited. Craig v. Sibbett, 15 Penn. St. 238 , 240; Munroe v. Bordier, 8 C. B. 862 ; Thiedeman v. Goldschmidt, 1 De Gex. F. & J. 4; Hunter v. Wilson, 19 L. J. N. S. Exch. 8; Leather v. Simpson, 11 L. R. Eq. 398.

The main position of the plaintiffs in error is, therefore, untenable. It only remains to say a few words respecting the exceptions to the rejection and admission .of testimony.

1. Articles from newspapers touching the conduct of Du Bois in drawing drafts, with alleged fictitious bills of lading attached, on a house in Buffalo- two years before, were excluded as having no connection with the transactions in controversy, and it not appearing that the officers of the bank ever saw them; and we think the exclusion was correct. The story of his conduct two years before in a different transaction, however bad or even criminal it may have been, did not show, or tend to show, bad faith in the officers of the bank in discounting the drafts in this case.

2. The testimony of one of the plaintiffs and of one of his attorneys was offered as to declarations of the president of the bank, made several days after the last draft had been discounted, to the effect that the bank had become .largely involved in certain wool transactions with Du Bois as early as July or August, 1881, and would have broken off its relations with him if it had not been that this wool matter remained unsettled. The testimony was excluded, and rightly so. The declarations had no bearing upon the good faith of the officers of the bank in the transactions in this case; and, if they had, being made some days after those transactions, they were not admissible as part of the res gestee any more than if made by a stranger. Evidence of declarations of an agent as to past transactions of his principal are inadmissible, as mere hearsay. Luby v. Hudson River Railroad, 17 N. Y. 131 , 133 ; Adams v. Hannibal and St. Joseph Railroad, 74 Missouri, 553.

3. The testimony of the president of the bank, explanatory of the conduct of its officers when certain drafts came back protested, was admissible. The witness had testified, upon examination by the plaintiffs,. that the bank never had any

We see nothing in the other exceptions which requires notice.

Judgment affirmed.