Bradwell v. Pryor

Mr. Presiding Justice Smith

delivered the opinion of the court.

The fundamental question presented by this record is whether or not appellant Bradwell is a bona fide holder of the draft for $2,500 placed in his hands by S. R. Chamberlain.

The rule regarding the transfer of negotiable paper under circumstances similar to those existing in this case was clearly stated in Russell v. Haddock, 3 Gilm., 233, as follows: “The rule undoubtedly is that where a party is about to receive a bill or note, if there are any such suspicious circumstances accompanying the transaction, or within the knowledge of the party, as would induce a prudent man to inquire into the title of the holder or the consideration of the paper, he shall be bound to make such inquiry, or if he neglects to do so, he shall hold the bill or note subject to any equities which may exist between the previous parties to it. In other words, he shall act in good faith, and not wilfully remain ignorant where it was his duty to inquire into the circumstances and know the facts.” In Sturges v. Met. Nat. Bank, 49 Ill., 220, this rule was again restated in the same terms.

The law, however, imposes no such burden upon the receiver of negotiable paper for value in the ordinary course of business until he has notice or knowledge of facts which on inquiry would lead to notice of defective title or want of consideration. Morris v. Preston, 93 Ill., 215. The question then is, did appellant Bradwell have knowledge of such facts that on inquiry would have led him to notice or knowledge of the fraud by which the money represented by the draft was obtained from appellees.

The record discloses many uncontroverted facts which were sufficient to put appellant on inquiry touching the circumstances under which the draft was obtained, and its consideration. The fact that he was the attorney and adviser of the Chamberlain Transportation Company; that the company was in financial straits, so that its vessels had been libeled for supplies; that appellant had released the vessels from seizure by giving bonds; the fact that he had made advances to the company from time to time to tide it over its financial difficulties; that the company had transferred to him the steamer Worthington because of its financial difficulties and its obligations to appellant, and that a contract existed by which in consideration of towage of the Wilbur and the Bliss appellant was to receive one-third of the freights earned by those vessels and that at the time the Wilbur was stranded the vessels were working, under this contract; that he knew when the Wilbur was stranded and that both Chamberlain and Blair came to him for expense money to go to Houghton; that neither the company nor Chamberlain nor Blair had any money or ready means of securing any except from appellant, up to a few days before Chamberlain handed appellant the draft in question—these facts were known to appellant and would suggest in a most direct way that the sudden possession of a draft for $2,500 as the quick result of the disaster to one of its vessels needed some explanation.

If the inquiry had been followed up it would have led appellant to the fact that the draft represented money received by Chamberlain for lumber which he had no right to sell and to which he could give neither title nor possession. Inquiry would have led to the fact that the sale was brought about by concealing the fact that the lumber had passed out of the possession of the master of the vessel who had delivered it to Whitney Bros, and taken their receipt for it, and by-the false impression which Blair gave to appellees to the effect that he represented the insurance on the cargo and that the master of the vessel in conjunction with the insurance company had the lumber and the right to sell it in order to meet bills amounting to $3,000 there in Houghton.

The fraud perpetrated upon appellees by Chamberlain and Blair was so bold that it needs only a statement of the undisputed facts for its demonstration. Each fact by itself and all the facts taken together lead to the conclusion that appellant was put on notice of the fraud by reason of the circumstances surrounding the transaction and consequently he is not a bona fide holder of the draft for value in the eye of the law. The decree must be affirmed.

Affirmed.