Am. Express Co. v. Citizens' State Bank

• Citation: 181 Wis. 172,194 N.W. 427
• Parties: AMERICAN EXPRESS CO. v. CITIZENS' STATE BANK.
• Decision Date: 18 June 1923
• Court: Wisconsin Supreme Court

181 Wis. 172

194 N.W. 427

AMERICAN EXPRESS CO.

v.CITIZENS' STATE BANK.

Supreme Court of Wisconsin.

June 18, 1923.

Appeal from Circuit Court, Waukesha County; C. M. Davidson, Judge.

Action by the American Express Company against the Citizens' State Bank and another. Judgment for plaintiff against defendant the Wisconsin Sugar Company only, and plaintiff appeals. Affirmed.

This is an action against the Citizens' State Bank as acceptor of the following bill of exchange:

“New York, January 8, 1921.

Ninety days after date pay to the order of American Express Company, Eight thousand, one hundred eighty two 00/100 dollars, against 300 bags sugar beet seed. Value received, and charge the same to account of Wisconsin Sugar Company.

To Citizens' State Bank.

[Signed] Herbst Brothers.

No. 19276. Menominee Falls, Wis.”

The seed in question had been imported by Herbst Bros. and shipped to the American Express Company at Menominee Falls to fill an order from the Wisconsin Sugar Company. A bill of lading covering the shipment, an invoice to the Wisconsin Sugar Company, and a sight draft upon the Wisconsin Sugar Company were delivered to the American Express Company, which had furnished a letter of credit to Herbst Bros. for the purchase of the seed.

These papers were forwarded to the agent of the express company at Milwaukee with instructions to deliver the bill of lading to the Wisconsin Sugar Company upon payment of the draft. The sugar company could not pay the draft and began negotiations with Herbst Bros. and the express company for time. This sight draft was not used.

As a result of these negotiations another draft, the one upon which suit is brought, was mailed to the Wisconsin Sugar Company by Herbst Bros. The name of the drawee was left blank when the draft was mailed, and the name of the defendant bank was inserted by the sugar company.

On January 11, 1921, Egan, an agent of the sugar company, took the draft to the bank, handed it to Warth, then acting as assistant cashier of the bank, and asked him “to take care of it.” Warth then wrote in red ink across the face of the draft, according to the testimony of Warth and Egan: “Accepted, Jan. 11, 1921. Payable at Citizens' State Bk. George E. Warth, A. Cashier.” He then looked it over, and, according to their testimony, saw that he had not signed it as a trade acceptance, and then interlined the words, after the date, “By Wisconsin Sugar Company.” On the same day Egan took the draft to one Forsman, agent of the plaintiff in Milwaukee, and got the shipping papers.

Forsman sent the draft to plaintiff in New York, along with a letter which, at the trial, was not allowed in evidence. Agents of the plaintiff in New York sent the bill to Menominee Falls for indorsement by the sugar company and later secured the indorsement of Herbst Brothers. In the early part of April, it was forwarded through banking channels for collection. About April 8th, it was sent by the First Wisconsin National Bank of Milwaukee to defendant, and a few days thereafter a protest for nonpayment in the usual form, signed by Warth as a notary public, was sent to the parties interested. This protest stated that the draft had been presented for payment to the Citizens' State Bank, and that payment had been refused because of lack of funds.

At the trial the depositions of three of plaintiff's employees in New York were offered in evidence. The deponents stated that they saw the draft when it was received in New York, about January 14, 1921, and that the draft appeared to have been accepted by the bank, and did not bear the words, “By Wisconsin Sugar Company, payable at.” Testimony to the same effect was given at the trial.

On April 12th, Forsman wrote to the Citizens' State Bank demanding to know by what authority the acceptance had been altered. In reply it was stated that the bank never intended to assume payment of the draft; that it was merely a trade acceptance by the Wisconsin Sugar Company, collectable at the bank, and that the bank was in no way liable. The letter contained this paragraph:

“In reference to your notation that this trade acceptance was altered to read, ‘Accepted January 11, 1921, by Wisconsin Sugar Company, payable Citizens' State Bank, Menominee Falls, Wis., Geo. E. Warth, Asst. Cashier,’ this is correct.”

The letter was signed, “Citizens' State Bank, George E. Warth, A. Cashier.”

Much conflicting testimony was given by handwriting experts as to the time the words were added. Letters were presented which showed that Herbst Bros. and the express company expected that a bank acceptance was to take the place of the original sight draft.

In a special verdict the jury found that Warth inserted the words, “By Wisconsin Sugar Company, payable at” before he delivered the draft to Egan; and that Warth had authority to bind the bank by writing an acceptance on the face of the draft.

Judgment was rendered in favor of the bank and against the sugar company.

Hoyt, Bender, McIntyre & Hoyt and Schoetz & Williams, all of Milwaukee, and Sidney Wetmore Davidson, of New York City (Carter, Ledyard & Milburn, of New York City, of counsel), for appellant.

Bloodgood, Kemper & Bloodgood, of Milwaukee, and Lockney, Lowry & Baird, of Waukesha, for respondent.

JONES, J. (after stating the facts as above).

A question of fact warmly contested at the trial was whether the draft in suit was altered in the manner and at the time stated by Warth and Egan, or whether it was altered at a later time when it came into possession of the bank. The statement of facts contains only a small portion of such testimony, because we have come to the conclusion that the case must be decided on grounds which render a recital of that evidence unnecessary. We will add, however, that we are convinced that when the draft was delivered to Forsman in Milwaukee it was in the form recited above; that the alteration was made later and was wholly unauthorized; and that the verdict of the jury to the contrary was not supported by credible evidence. It follows, therefore, that the plaintiff was entitled to judgment unless one or more of the legal objections raised by defendant prevails.

[1] The first question presented is whether the bank had the power to accept the draft. The following are the sections of the statutes which were in force when the draft was accepted and which are relied on by plaintiff's counsel as conferring the power.

“Upon making and filing of the articles of incorporation the bank shall become a body corporate and as such shall have the following powers:

“First. To make all contracts necessary and proper to effect its purpose and conduct its business. * * *

“Sixth. To exercise, by its directors, duly authorized officers, or agents all such powers as shall be usual in carrying on the business of banking; by buying, discounting and negotiating promissory notes, bonds, drafts, bills of exchange, foreign and domestic and other evidences of debt; by receiving commercial and savings deposits under such regulations as it may establish; by buying and selling coin and bullion, and by buying and selling exchange, foreign and domestic; issuing letters of credit, and by loaning money on personal or real security, as provided hereinafter.” Section 2024--9, Stats. 1919.

It can hardly be claimed that the acceptance by a bank of a draft payable in 90 days for the benefit of a customer without security or consideration comes specifically within the description of “buying, discounting and negotiating promissory notes, bonds, drafts, bills of exchange, foreign and domestic and other evidences of debt.”

This is conceded by counsel for plaintiff, but it is argued that express power is given to negotiate foreign bills of exchange; that this includes the necessity of indorsing such bills or drafts. It is further argued that the obligations of an indorser include greater power and responsibility than those of an acceptor.

There is little doubt as to the proposition that banks, under the power to negotiate their own bills and drafts have the power to indorse them since that is the usual mode of transferring title to such paper. We do not think it necessary to enter into a discussion of the relative responsibilities which a bank incurs by indorsing its own paper or that in which it has a pecuniary interest in the regular course of business, and that assumed by the bank in this instance.

[2] If this acceptance was valid, the bank became liable to pay the amount of the draft according to the tenor. Section 1677--2, Stats. 1919. According to the terms of the contract the bank was not transferring or indorsing paper of which it was the owner or in which it had an interest, but in effect was agreeing to pay the debt of a third party. The rule is well settled that a bank has not the power to become the guarantor of the obligation of another without benefit to itself, unless its charter or governing statute expressly permits it.

“Neither, as included in its powers nor incidental to them, is it a part of a bank's business to lend its credit. If a bank could lend its credit as well as its money, it might, if it received compensation and was careful to put its name only to solid paper, make a great deal more than any lawful interest on its money would amount to. If not careful, the power would be the mother of panics, and if no compensation was received, there is the additional reason, if any is needed, that such a power is in derogation of the rights and interests of stockholders, and at all events could only be exercised with the consent of all.

“Indeed, lending credit is the exact opposite of lending money, which is the real business of a bank, for while the latter creates a liability in favor of the bank, the former gives rise to a liability of the bank to another.” 1 Morse, Banks and Banking (5th Ed.) § 65; Magee, Banks and Banking (3 Ed.), § 248; 1 Michie, Banks and Banking, § 99.

This rule is so well established that it is...