Hackett v. Reynolds, Lamberton & Co. ( 1886 )

Mr. Justice Clark

delivered the opinion of the court

Although the indorsement by Hackett was in blank, it is undisputed that he was the real owner of the note; that the Penn Bank received it for collection only, but remitted it to Reynolds, Lamberton & Co., as if it were the paper of the bank; the indorsement was: — “Pay S. H. Lamberton, cashier or order for account, Penn Bank, Pittsburgh; G. L. Reiber, cashier.” We -must also assume, for the verdict establishes the fact, that Reynolds, Lamberton & Co. had no notice what ever that the apparent relation of the Penn Bank to the paper was not its real relation to it; they had an undoubted right to treat the Penn Bank as the actual owner of the note. If, therefore, they had purchased it for a valuable consideration or ; made advances upon it, or given new credit upon the faith of it, they would have been protected as bona fide holders or owners of the note.

But it is not alleged that Reynolds, Lamberton & Co. bought the note, or advanced, or gave credit upon it. It is contended, that there had been mutual dealings between the Penn Bank and Reynolds, Lamberton & Co.; that they had an account current between them, in which they credited each other with the proceeds of all paper remitted for collection; that their accounts were- from time to time settled on these principles ; that upon the credit of these remittances in their usual course of dealing, balances were suffered to remain in the Penn Bank, to be met by the proceeds of these remittances, and that the proceeds of the Hackett note were, in good faith, credited to the Penn Bank, under this course of dealing. The court instructed the jury, if this was so, their verdict should be for the defendant.

Upon an examination of the whole case we fail to find any evidence showing, or tending to show,-that any balances were' in point of fact suffered to remain, to be met by these 'remit- ¡ tances; andjyhich, but for this course of dealing, would havej been drawn. It does not appear for what particular purpose these balances were suffered to remain; we might as readily suppose they were kept for convenience, or to facilitate exchanges, or for both, or all these purposes, as for the purpose stated. Mr. Lamberton, the only witness who testifies on this subject, says in substance, that he is the cashier of the banking firm of Reynolds, Lamberton & Co., at Oil City; that the Penn Bank was their Pittsburgh correspondent, and made their collections in Pittsburgh, and that they did the same for the Penn Bank in Oil City; that mutual accounts were kept-, in which each of the said banks gave credit to the other for collections made, respectively, and that this had been their custom for many years. He further states, that the Fisher note was paid on the 26th May, 1884; that the proceeds were placed to the credit of the Penn Bank in the usual course of business, and the credit was acknowledged to them on the same day; that after this credit was entered, there remained a balance of about $6,000 in favor of Reynolds, Lamberton & Co., against the Penn Bank. There is not the slightest evidence that this balance of $6,000 had been suffered to remain, upon the faith of, and to be met by remittances for collection from the Penn Bank.

We are of opinion, moreover, that if there had been evidence to this effect, in order to avail the defendants in this case, it must be shown that the balances were suffered to remain upon the faith of remittances received, or under some circumstances perhaps, in process of transmission, and that Reynolds, Lamberton & Co., relying upon such remittances, actually did something or forbore to do something,; by which their condition was worse than it would ofherwise have been. To this extent, we are willing to follow the rule laid down in The Bank of the Metropolis v. Bank of New England, 1 Howard, 234; and 6 Howard 227. A purchaser or holder of a legally executed negotiable instrument can hold it against all claims and defenses, where he has acquired it, not only in good faith, but upon a valuable consideration; this, in Pennsylvania, is a rule of general application, equally binding upon banking companies, in their dealings with each other, as upon individuals. We cannot consent to the doctrine, that a mere usage and course of dealing between banks, in the transmitting of bills and notes for collection, by which they mutually credit the avails in account to overbalances due, can, without more, deprive a third person, the real owner of the notes or bills, of his rights.

The case is distinctly ruled by the First National Bank of Clarion v. Gregg, 29 P. F. S., 384; the language there employ-ad by Mr. Justice Williams, when applied to the ease under consideration, mutatis mutandis, expresses with the greatest clearness and accuracy the proper determination of this case.

The Penn Bank did not become the owners of the note by the plaintiff’s indorsement and delivery of it to them for collection, and they had no right to pledge it, or direct its proceeds to be placed to their credit, in payment of their indebtedness to Reynolds, Lamberton & Co. It is true, that they were the apparent owners of the note, and, in the absence of notice of the plaintiff’s title, Reynolds, Lamberton & Co., had the right to treat them as the real owners. If Reynolds, Lamberton & Co., had made advances or given new credits to the Penn Bank on the faith of the note, they would undoubtedly be entitled to retain the amount out of the proceeds; but just at this point the defense wholly fails. The testimony of the cashier does not show that Reynolds, Lamberton & Co., made any advances, or gave any new credits on the faith of the note; nor does it show that they incurred any liability or did anything by which their condition is worse than it would have been if they had not received the note for collection and credit, or that they will suffer any loss or damage if the credit is not allowed; if so, they clearly have no equity which entitles them to withhold the proceeds from the owners of the note.

• The judgment is reversed, and a venire facias de novo awarded.