Jules S. Bache Co. v. Bank of Detroit

Defendant Sibley borrowed from defendant bank $17,500, giving his note and as collateral what purported to be 25 bonds, face value $1,000 each, of Empire Oil Refining Company. The next day Sibley arranged with plaintiff, a broker, for sale of the bonds. The broker telephoned the bank, explained its arrangement with Sibley, and asked if it was agreeable to the bank to sell the bonds. The bank replied that the bonds were there, consented to the selling, and agreed to make delivery if the full sale price were paid to it. All parties then believed the bonds to be genuine.

Plaintiff made sale of the bonds through its New York office, and thereupon gave notice to Sibley:

"Please note that in compliance with your instructions we have this day sold for your account and risk: (the bonds)."

Sibley two days later made delivery order as follows:

"Bank of Detroit, "Apr. 14, 1928.

"Detroit, Michigan.

"Please deliver to J. S. Bache Co. 25000/00 shares Bonds Empire Oil Refining 1942 5 1/2 stock on payment of $23,827.08.

"Apply $17,500/00 on my note, crediting balance to my account. Cancl. a/c MO.

"Yours very truly, "J.W. SIBLEY."

Plaintiff, on the same day, made its check to the order of the bank for the price, $23,827.08, which check plaintiff sent to the bank, and took up the bonds pursuant to the delivery order. Upon receiving the price, the bank returned Sibley's paid note to him and gave him credit on his account at the bank for the remainder of the money, according to agreement. Plaintiff broker forwarded the bonds to New York, where they were found to be forgeries. They were returned, and were tendered back, first to Sibley and afterward to the bank, with demand for repayment, which was refused.

This bill was filed to recover back the money paid, and to enjoin payment by the bank to Sibley. From decree for plaintiff against the bank for the $17,500 by which Sibley's note was paid, and for $6,215.41 remaining in Sibley's account when the restraining order was served, and against Sibley for the remainder of the price paid by plaintiff, the bank has appealed.

The bank had no title to these bonds. It had lien as pledgee. 49 C. J. p. 925.

The bank, having consented to payment of Sibley's note before due, was bound, upon payment, to deliver on Sibley's order, as it did, and to the party whom he had designated to take delivery, the plaintiff. Delivery on Sibley's order is as though delivery had been made to him. Delivery on Sibley's order is no more an affirmation by the bank of title in itself or of the genuineness of the bonds than it would be if the bank had made delivery to Sibley himself. The bank's telephonic reply, above stated, cannot be construed as an affirmation, warranty, or representation that the bonds were genuine. That the bank received the whole price, according to agreement, and, satisfying Sibley's note, credited the remainder to his account, is not significant. Plaintiff knew with whom it was dealing, knew who was selling the bonds, as its quoted notice to Sibley indicates. The bank was not the seller, and cannot be held as having warranted the genuineness of the bonds. Nor must it, a third party, respond for money paid, in legal effect, to Sibley by plaintiff under a mistake of fact. A case closely in point is Baker v. Arnot, 67 N.Y. 448. See, also, Ketchum v. Stevens, 19 N.Y. 499; Walker v.Conant, 69 Mich. 321 (13 Am. St. Rep. 391); note L.R.A. 1918C, 177.

As Sibley has not appealed, the decree against him and that part of the decree requiring the bank to pay to plaintiff the sum remaining in Sibley's account at the bank will not be disturbed. In all other respects the decree relative to the appellant bank is reversed, and, in that regard, the bill dismissed, with costs.

McDONALD, C.J., and POTTER, SHARPE, NORTH, FEAD, WIEST, and BUTZEL, JJ., concurred.