Central Natl. Bank v. Bennett

The plaintiff in error here was the plaintiff and the defendant in error Benjamin F. Bennett and others were the defendants in the court below. The amended petition stated that Benjamin F. Bennett, to obtain a loan from the plaintiff bank, presented to it two notes, each bearing his signature and the purported signature of his wife, Emma L. Bennett. Bennett was a depositor at the bank, while his wife was not. The bank took the notes, and gave Bennett the amount of them, less the discount. Bennett has disappeared, and the signature of his wife is a forgery.

At the time of Bennett's negotiations with the bank in reference to the loan there was a contract between the bank and the defendant Ætna Casualty Surety Company providing for indemnity to the bank in case of loss under certain specified conditions. The portion of the policy alleged by the bank to be here applicable reads as follows:

"The Ætna Casualty and Surety Company * * * does hereby agree to indemnify the Central National Bank of Portsmouth, Ohio, * * * against direct loss, not exceeding the sum of ten thousand dollars, which may be sustained through the payment by the insured bank, after the date hereof, of any * * * promissory note * * * payable at the insured bank, and upon which there shall have been forged as the * * * maker * * * thereof the signature of a depositor or that of any person whose signature such depositor has instructed the insured bank to recognize * * *."

To the amended petition the surety company interposed a general demurrer, which the lower court sustained. The bank brings this proceeding in error to test the correctness of that ruling.

The sole question to be determined by this court is whether the transaction between the bank and Bennett came within the terms of the contract of the bank with the surety company. This depends upon the interpretation of the word "payment" in the policy. The plaintiff contends that "payment" is to be construed in a broad sense, as "a transfer of property from one to another." The defendant asserts that the proper meaning is to be determined in harmony with the provisions of the Negotiable Instruments Law; that it is used in its technical sense.

In interpreting the words of a contract one of the established rules is that all words are to be taken in their ordinary and popular sense, unless there is something to show that they are used in a different sense. Mansfield Sandusky City Rd. Co. v.John P. Veeder Co., 17 Ohio, 385; New Amsterdam Casualty Co. v.Johnson, Admx., 91 Ohio St. 155, 157, 158, 110 N.E. 475, L.R.A., 1916B, 1018. What then is the meaning of "payment" in the ordinary and popular sense. In Webster's New International Dictionary it is defined as "the act of paying, or giving compensation; the discharge of a debt or obligation."

Counsel for the plaintiff in error have cited a number of cases which say that payment is the delivery of money or other agreed medium by the debtor to the creditor, or that it is the fulfillment of a promise. Oneida County v. Tibbits, 125 Wis. 9,102 N.W. 897; Moore Dawson v. Highway Engineering Construction Co., 196 N.C. 142, 144 S.E. 692; 48 Corpus Juris, 585. Before this meaning can be applied, it is necessary to analyze the transaction between Bennett and the bank. In the case of a loan by a bank it is contemplated by the parties that there be a mutual simultaneous transfer; the lender gives the money or credit and the borrower gives the note. When the bank gave the money to Bennett it was not paying the note, but was merely loaning him the money, which he promised to repay by executing and delivering the note. It is common knowledge that the general meaning of the phrase "payment of a note" is the payment of money by the maker to the holder. Transfers of money prior to such payment are referred to as "loans," "purchases," or "payments for a note."

There is another rule of construction which must be considered and which settles the question here in dispute. Unless a contrary intention is clearly expressed, a term or phrase which has a technical meaning in the business to which the contract refers will be interpreted according to that meaning. Cincinnati Ins.Co. v. Duffield, 6 Ohio St. 200, 67 Am. Dec., 339; Thomas v.Matthews, 94 Ohio St. 32, 56, 113 N.E. 669, L.R.A., 1917A, 1068.

The contract of insurance between the bank and the surety company deals entirely with banking practice and custom. Its purpose is to save the bank harmless in specified cases arising in the course of banking business. In Ohio the Uniform Negotiable Instruments Act (Sections 8106 to 8302, General Code) has codified the law in regard to commercial paper. Banks in this state conform with its provisions in dealing with drafts, notes, and other negotiable instruments. This law has been adopted by most of the states of the Union, and is generally regarded with deference by the few states which have not enacted it into statutory law. The Ætna Casualty Surety Company is a Connecticut corporation and that state has adopted the Uniform Negotiable Instruments Law.

Taking into consideration the provisions of the Negotiable Instruments Law it is clear that the custom of merchants in referring to "payment" contemplates the transfer of money from one bound upon the instrument to the holder. Sections 8175 to 8184, General Code. "Payment" as referred to in the Negotiable Instruments Law is so used there as to indicate such a transfer of money as works a discharge of the instrument, or of liability upon it. Sections 8224 to 8226, General Code.

In this case we must conclude that there was a transfer or loan of money to Bennett by the bank, but there was no payment of thenote. This transaction created rights upon the instrument, and did not transfer or discharge them. Bennett was never a creditor upon the instrument; by its terms we know that he was a debtor upon it. He was primarily bound, and the only person bound, by it. It is clear that the payment for the note by the bank was not a payment of the note covered by the policy.

The demurrer was rightly sustained, and the judgment will be affirmed.

Judgment affirmed.

MIDDLETON, P.J., and MAUCK, J., concur.