American Trust & Sav. Bank v. Gueder & Paeschke Manuf'g Co.

• Decision Date: 08 May 1894
• Citation: 37 N.E. 227,150 Ill. 336
• Court: Illinois Supreme Court
• Parties: AMERICAN TRUST & SAV. BANK v GUEDER & PAESCHKE MANUF'G CO.

150 Ill. 336

37 N.E. 227

AMERICAN TRUST & SAV. BANKvGUEDER & PAESCHKE MANUF'G CO.¹

Supreme Court of Illinois.

May 8, 1894.

Appeal from appellate court, first district.

Petition by the Gueder & Paeschke Manufacturing Company against the American Trust & Savings Bank, assignee of Herman Schaffner & Co., to obtain a certain check. The petition was dismissed for want of equity, but the decree of dismissal was reversed by the appellate court. Defendant appeals. Affirmed.

Moran, Kraus & Mayer, for appellant.

Weigley, Bulkley & Gray, for appellee.

BAILEY, J.

This was a petition in the matter of Herman Schaffner and A. G. Becker, insolvents, presented to the county court by the Gueder & Paeschke Manufacturing Company, praying for an order requiring the assignee of the insolvents to surrender and deliver up to the petitioner a certain check deposited by it with the insolvents prior to the execution of their voluntary assignment. The facts-about which there seems to be little, if any, dispute-are these: On the 2d day of June, 1893, and for some time prior thereto, Herman Schaffner and A. G. Becker were copartners doing business as private bankers in the city of Chicago, under the firm name of Herman Schaffner & Co. The petitioner, the Gueder & Paeschke Manufacturing Company, is a corporation organized under the laws of the state of Wisconsin, having its principal office and place of business in the city of Milwaukee. That company, for some time prior to the date above mentioned, kept a deposit account with Schaffner & Co., and on June 1, 1893, it forwarded to them, by mail, a check, of which the following is a copy: ‘No. 17,047. Atchison, Kansas, May 29th, 1893. Blish, Mieze & Silliman Hardware Company: Pay to the order of the Gueder & Paeschke Manufacturing Company three hundred and sixty-four 15/100 dollars. To First National Bank, Atchison, Kansas. The Bliss, Mieze & Silliman Hardware Company. E. A. Mieze, Treasurer.’ Before mailing the check the petitioner placed thereon the following indorsement: ‘For deposit with Herman Schaffner & Co. to the credit of Gueder & Paeschke Manf'g Co.’ This check was received by Schaffner & Co. on June 2, 1893, in the morning, and they immediately gave the petitioner a credit on account for its amount, and after placing upon it the following indorsement: ‘For collection and return. June 2, 1893. Account of Herman Schaffner & Co., Chicago, Ill.,’-forwarded it to the place of residence of the drawee for collection. On June 3d, the day following, A. G. Becker, who was then the surviving partner of the firm, made a voluntary assignment for the benefit of creditors to the American Trust & Savings Bank, as assignee. On June 5, 1893, payment of the check was stopped; and on that day it was presented for payment, and protested for nonpayment. The petition, which was filed August 24, 1893, set up, in substance, the foregoing facts, and also alleged that Schaffner & Co., at the time of receiving the check, knew that they were insolvent, and received it well knowing that they were about to fail, and in fraud of the rights of the petitioner, and also that the petitioner never received any benefit or consideration whatever from Schaffner & Co. for the check, and that there was then due the petitioner, on its deposit account, over and above the amount of the check, the sum of $116.37. The assignee answered, denying all the equities of the petition; and, a hearing being had on pleadings and proofs, the county court found against the petitioner, and dismissed the petition for want of equity. On appeal to the appellate court, that order was reversed, and the cause was remanded, with directions to enter an order requiring the assignee to surrender the check to the petitioner. From that judgment the assignee now appeals to this court; the judges of the appellate court having duly certified that the cause, although involving less than $1,000, involves questions of law, of such importance, both on account of principal and collateral interests, that it should be passed upon by this court.

It was admitted by counsel at the hearing that, upon receipt of the check, Schaffner & Co. gave the petitioner credit for its amount on petitioner's deposit account, the same as though it had deposited that amount in cash, and that the petitioner thereby became entitled at once to draw its checks against such deposit; and it was also admitted that, by the custom and business usage prevalent among bankers, Schaffner & Co., if they had remained solvent, would have had the right, in case of the dishonor of the check for any reason, to charge back the amount of it in their account with the petitioner. We think it clear that the deposit was, in legal effect, a negotiation of the check, so as to vest the legal title thereto in Schaffner & Co., with the right on their part to charge it back to the petitioner's deposit account in case it should not be paid on presentment; and we also think that the credit given to the petitioner in its account was a sufficient consideration for the assignment of the check. The transaction, then, was one which, in the absence of fraud, would have passed the title of the check irrevocably to Schaffner & Co., and the claim of the petitioner to relief must therefore rest solely upon its charge of fraud, thus enabling it to rescind the transaction, and reclaim the check, on that ground. The fraud alleged consists of the act of Schaffner & Co. as bankers, in receiving the check on deposit after they had become insolvent, and with knowledge of their insolvency and of their impending failure, thereby occasioning the loss to the petitioner of the amount of the deposit. That such act, if proved, constituted a fraud...