American Express Co. v. Citizens State Bank, 181 Wis. 172 (WI 6/18/1923)

• Citation: 181 Wis. 172
• Parties: AMERICAN EXPRESS COMPANY, Appellant, v. CITIZENS STATE BANK, Respondent.
• Decision Date: 18 June 1923
• Court: United States State Supreme Court of Wisconsin

Page 172

181 Wis. 172

AMERICAN EXPRESS COMPANY, Appellant, v. CITIZENS STATE BANK, Respondent.

Supreme Court of Wisconsin.

March 10, 1923.

Opinion Filed: June 18, 1923.

Banks: Acceptance of time draft for customer's benefit: Public policy: Power to lend credit: Certified checks: Ultra vires acts: Estoppel: Statutes: Legislative construction: Weight: Costs: Disbursement for bond in garnishment.

1. Acceptance by a bank of a draft payable in ninety days for the benefit of a customer without security or consideration is not within the description "buying, discounting and negotiating promissory notes, bonds, drafts, bills of exchange, foreign and domestic, and other evidences of debt," which by sec. 2024—9, Stats. 1919, the bank has power to do.

2. Under the power to negotiate their own bills and drafts, banks have the power to indorse them, since that is the usual mode of transferring title to such paper.

3. A bank has no power to become the guarantor of another's obligation without benefit to itself, unless expressly permitted by its charter or the governing statute.

4. There is no such similarity between certified checks and drafts payable at a future date that the authority given by sec. 2024—37, Stats. 1919, to issue certified checks implies the power to issue time drafts.

5. Though the courts finally determine the construction of statutes, the legislative construction thereof is entitled to consideration and often has great weight.

6. A corporation cannot commit the rank injustice of enriching itself by retaining the fruits of a contract and then repudiating it.

7. In view of the limitation imposed on the powers of state banks and the express refusal of the legislature to confer on them the right to accept time drafts, acceptance by a state bank

with a capital of $30,000 of a ninety-day draft for $8,180 drawn on one of its customers, which owed the bank $90,000 and had $100 on deposit, and from which the bank received no security or benefit, was not only beyond its powers but contrary to public policy.

8. Under the facts in this case the bank was not estopped to plead the defense of ultra vires and had the right to defend on that ground.

9. Neither sub. (1), sec. 2921, Stats. 1919 (providing that costs include all necessary disbursements and fees of officers allowed by law), nor sec. 2771 (that, on the discharge of the garnishee and surrender of the money or property, the costs shall be taxable as disbursements of plaintiff in the action if he recovers), is a warrant for taxing as costs the amount paid for a surety bond releasing an account of the defendant bank garnished in another bank.

APPEAL from a judgment of the circuit court for Waukesha county: C. M. DAVISON, Circuit Judge. 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.

                          "(Signed)               HERBST BROTHERS
                  "To Citizens State Bank
                  "No. 19276      Menomonee Falls, Wis."
                

The seed in question had been imported by Herbst Brothers and shipped to the American Express Company at Menomonee 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 Brothers 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 Brothers 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 Brothers. 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 Menomonee 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, collectible 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, Menomonee 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 Brothers 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.

For the appellant there were briefs by Hoyt, Bender, McIntyre & Hoyt and Schoetz & Williams, all of Milwaukee, attorneys, and Sydney Wetmore Davidson of Carter, Ledyard & Milburn of New York, of counsel, and oral argument by Clifton Williams and Werner J. Trimborn of Milwaukee.

For the respondent there were briefs by Lockney, Lowry & Baird of Waukesha and Bloodgood, Kemper & Bloodgood of Milwaukee, and oral argument by J. K. Lowry.

A brief was also filed by the Attorney General and William R. Curkeet, deputy attorney general, as amici curiæ.

JONES, J.

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.

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." Sec. 2024—9, Stats. 1919.

It can hardly be claimed that the acceptance...