National Bank v. Hall

• Decision Date: 01 October 1879
• Parties: NATIONAL BANK v. HALL
• Court: U.S. Supreme Court

101 U.S. 43

101 U.S. 43

25 L.Ed. 822

NATIONAL BANK v. HALL.

October Term, 1879

ERROR to the Circuit Court of the United States for the Southern District of Illinois.

The facts are stated in the opinion of the court.

Submitted by Mr. William McFadon for the plaintiff in error, and by Mr. J. A. Sleeper and Mr. J. K. Whiton for the defendants in error.

MR. JUSTICE SWAYNE delivered the opinion of the court.

This is an action of tort growing out of a contract. The bill of exceptions is well drawn, and reflects clearly the points in issue between the parties. A brief statement of the case, as it appears in the record, will be sufficient for the purposes of this opinion.

During the years 1874, 1875, and up to April 1, 1876, a firm under the name of Hall, Patterson, & Co. had existed at Chicago. It consisted of S. Frank Hall, Frank D. Patterson, and Augustus L. Patterson, three of the five defendants in error. Their business was selling live-stock on commission at the Chicago stock-yards. William G. Melson was their agent at Quincy. To secure consignments at that point to his principals it was frequently necessary to make advances there. Hall, Patterson, & Co. arranged with The First National Bank of Quincy to cash Melson's drafts on them for this purpose. The drafts were numerous, and were all payable at sight. Penfield was the cashier of the bank. A draft for $125 was returned to the bank unpaid. This gave rise to some controversy between the bank and the drawees, but the matter was satisfactorily adjusted. Thereafter Hall, Patterson, & Co. addressed a letter to the cashier, which was as follows:——

'CHICAGO, Jan. 15, 1876.

'U. S. PENFIELD, Cashier, Quincy, Ill.:

'DEAR SIR,—Hereafter we will pay drafts only on actual consignments. We cannot advance money a week in advance of shipment. The stock must be in transit so as to meet dr'ft same day or the day after presented to us. This letter will cancel all previous arrangement of letters of credit in reference to G. W. Melson. Please acknowledge receipt of this, and oblige,

'Yours respectfully,

'HALL, PATTERSON, & Co.

Penfield replied as follows:——

'QUINCY, ILL., Jan. 17, 1876.

'MESSRS. HALL, PATTERSON, & Co., Chicago:

'DEAR SIR,—Your favor of the 15th received. I note what you say. We have never knowingly advanced any money to Melson on stock to come in. Have always supposed it was in transit. Have always taken his word. After this we shall require ship'g bill.

Very truly yours,

'U. S. PENFIELD, Cashr.'

This letter closed the correspondence.

On the 1st of April, 1876, two of the defendants in error, Frazee and Greer, were added as partners to the firm of Hall, Patterson, & Co., as it had before existed. They had previously been employed as clerks, and knew of the writing of the letter to Penfield of the 17th of January, 1876. The new firm continued to do business under the name of Hall, Patterson, & Co., until after this suit was commenced. Melson acted as the agent of the new firm as he had acted for the old one. Between the 1st of April, 1876, and the happening of the loss out of which this controversy has arisen, he, as such agent, drew thirty-one drafts on his principals, amounting in the aggregate to $50,000. They were all at sight, were cashed by the bank, and were duly accepted and paid by Hall, Patterson & Co. There was no communication personally or by letter between any officer of the bank and any member of the firm, from the date of the cashier's letter of the 17th of January, 1876, until after the loss before mentioned. In the mean time, the bank was wholly ignorant of the change which had been made in the firm, and the drafts were cashed without such knowledge.

On the 7th of December, 1876, Melson drew drafts as follows:

'$2,505.

QUINCY, ILL., Dec. 7, 1876.

'Pay to the order of U. S. Penfield, Cas., twenty-five hundred and five dollars on account Jos. Hunnele 5 l'ds stock.

'W. G. MELSON.

'TO HALL, PATTERSON, & Co., Stock-yards, Chicago, Ills.'

'$2,004.00.

QUINCY, ILLS., Dec. 7, 1876.

'Pay to the order of U. S. Penfield, Cas., two thousand and four dollars on account S. C. Fooley 4 l'ds hogs and cattle.

'W. G. MELSON.

'TO HALL, PATTERSON, & Co., Stock-yards, Chicago, Ills.'

Both these drafts were cashed by the bank on the day of their date, and the proceeds were paid to Melson. They were taken in the usual course of business and in entire good faith. The cashier testified that by 'ship'g bill,' in his letter of the 17th of January, 1876, he meant bill of lading, but that no bill of landing was taken by the bank after the date of that letter, and that all Melson's drafts—being thirty-one after the 1st of April, and ten or twelve between January 17 and April 1 of that year—were paid by Hall, Patterson, & Co. without bills of lading being attached, and without inquiry by the bank or its cashier concerning such securities. When the two drafts last mentioned were cashed the cashier had no knowledge whether they were drawn against stock or not. It was a rule of the bank, understood by all the stock agents doing business there, that no draft should be drawn unless the stock was in transit. Agents, when drawing, were, therefore, not usually questioned upon the subject. Their compliance with the rule was assumed by the bank. The two drafts last mentioned were indorsed and transmitted by the cashier to his correspondent in Chicago for collection. They were accepted and paid by Hall, Patterson, & Co., and the plaintiff in error received the money. No stock was forwarded by Melson. The transaction was a fraud on his part. Upon receiving the proceeds of the frafts he fled the country. He was diligently sought for, but could not be found. Hall, Patterson, & Co. brought this suit against the bank to recover the amount they had paid. A verdict and judgment were rendered in their favor in the court below, and the bank has brought the case here for review.

The bill of exceptions contains all the evidence given upon the trial. It discloses nothing which affords the slightest ground for any imputation against the bank or its officers with respect to their good faith and fair dealing in the transaction out of which this controversy has arisen. The defendants in error claimed nothing in that respect in the court below, and they have made no such claim here.

The counsel for the bank has assigned twenty-seven errors. Some of them are repetitions of the same objections in different forms. None of them are frivolous, and many of them, if the exigencies of the case required it, would be entitled to grave consideration by this court.

The two letters between the parties, of the 15th and 17th of January, 1876, are the heart of the controversy. The stress of the case is upon their construction and effect. Passing by the other points raised in the record, we shall first give our attention to this subject, and our remarks will be confined to that and one other of the errors assigned.

By this letter Hall, Patterson, & Co. advised the bank: 1. That thereafter they would pay drafts only on actual consignments of stock; 2. That they would not pay money a week in advance of shipments; 3. That the stock must be in transit, so as to meet the draft the same day or the day after it was presented to them; 4. That this letter was to cancel all previous letters of credit as to W. G. Melson; 5. They asked an acknowledgment of the receipt of the letter.

These terms were clear and explicit. What was the reply of the bank?

The cashier answered: 1. That the letter of the other party was received; 2. That its contents were noted; 3. That the bank had never knowingly advanced money to Melson on stock to come in; 4. That the cashier had always taken Melson's word; 5. That thereafter the bank would require a 'ship'g bill,' meaning a bill of lading. This letter Hall, Patterson, & Co. never answered.

What was its effect as to them? It certainly did not accept their proposition, nor accede to their terms, that 'the stock must be in transit to meet the draft on the same day or the day after presented.' They made this expressly the condition of their accepting. The letter made no allusion to the requirement, and was wholly silent on the subject. Upon this point the parties were as wide asunder as if the letters had not been written.

For whose benefit was the shipping bill mentioned by the cashier to be taken?Prima facie the point is left in uncertainty. Here again the cashier is silent. But the interpretation is reasonable that Hall, Patterson, & Co., having in advance refused to accept, except upon the condition mentioned, the bank notified them in reply that it would thereafter take a bill of lading, not for their protection, but for its own. This view is strengthened by the conduct of the defendants in error, and the practical construction which they seem to have thus given to the clause. They did not say in reply that they understood the shipping bill was to be for their benefit, and that they should expect it to accompany the draft. No such bill was ever required by them or sent by the bank. They went on accepting and paying in silence exactly as before. The large number of drafts so accepted and paid by them has been already stated. If they relied on the shipping bill...