Ashford v. Thos. Cook and Son (Bankers) Limited, 4874

• Decision Date: 12 June 1970
• Docket Number: No. 4874,4874
• Court: Hawaii Supreme Court
• Parties: , 42 A.L.R.3d 836, 7 UCC Rep.Serv. 1131 Curtis H. ASHFORD, Plaintiff-Appellee, v. THOS. COOK & SON (BANKERS) LTD. and Thos. Cook & son, Inc., Defendants-Appellants.

Page 530

471 P.2d 530

52 Haw. 113, 42 A.L.R.3d 836, 7 UCC

Rep.Serv. 1131

Curtis H. ASHFORD, Plaintiff-Appellee, v. THOS. COOK & SON (BANKERS) LTD. and Thos. Cook & son, Inc. Defendants-Appellants.

No. 4874.

Supreme Court of Hawai'i.

June 12, 1970.

Syllabus by the Court

1. Travelers checks upon being printed become a medium of exchange or acquire negotiable characteristics and all the risk of theft is with the issuer. The issuer is thus liable to any bona fide purchaser for value of stolen travelers checks.

2. Where the instructions given by the trial judge correctly and fully covered the issue, his refusal to give other requested instruction on the same issue was not error.

3. The determination as to whether the plaintiff was a bona fide purchaser for value of the stolen travelers checks was a factual issue, and the trial judge correctly submitted this issue to the jury.

4. A jury finding on a factual issue supported by substantial evidence may not be set aside by this court.

W. Patrick O'Connor, Honolulu (A. William Barlow, Honolulu, with him on the briefs), for defendants-appellants.

Stuart M. Cowan, Honolulu (Greenstein & Cowan, Honolulu, of counsel), for plaintiff-appellee.

Before RICHARDSON, C. J., and MARUMOTO, ABE, LEVINSON and KOBAYASKI, JJ.

ABE, Justice.

On June 24, 1964, defendant, Thos. Cook & Son (Bankers) Ltd., sold and delivered travelers checks totaling $25,000 to Mr. and Mrs. Kochton at their home in the suburb of Chicago, Illinois. Mr. Kochton was at home at the time of delivery and he signed his name to one-half of the checks on the lower left hand corner in the presence of an agent for Thomas Cook & Son (Bankers) Ltd., as required by its regulation. However, Mrs. Kochton was not at home and her unsigned travelers checks for the amount of $12,500 were left with Mr. Kochton. In spite of an instruction to have the checks signed as provided before her departure, Mrs. Kochton failed to do so and unsigned travelers checks amounting to $11,900 were stolen from her in Tahiti in July, 1964.

On May 3, 1966, Curtis H. Ashford, plaintiff, who was then living in Tahiti, inquired of the Indo-China Bank, the only bank at Papeete, Tahiti, whether he could exchange New Zealand pounds and Polynesian francs for United States dollars and was informed that he could not. He returned to his boat to have lunch. Shortly thereafter a young Tahitian male came on board his boat and stated that he had been informed that plaintiff desired to exchange Polynesian francs for United States dollars and suggested that plaintiff purchase travelers checks. Plaintiff inquired whether that was possible becuase when he was informed at the bank that he couldn't make the exchange of Polynesian francs for United States dollars he had assumed he couldn't buy travelers checks with francs. When plaintiff was assured that he could purchase travelers checks, assuming that the Tahitian was connected with the bank, he asked if he should go to the bank during the noon hour. The Tahitian told plaintiff that was not necessary and that he and a director from the bank would come to the boat to consummate the transaction.

Subsequently the Tahitian returned to plaintiff's boat with a European male, who introduced himself as a Cook's agent and flashed an identification card. Thereafter the transaction was consummated ¹ whereby plaintiff paid Polynesian francs and New Zealand pounds valued between $8,450 to $8,600 for United States travelers checks with face value of $8,300. The overcharge, according to the 'agent', was for fee, premium and difference in exchange rate.

Thereafter he remained in Tahiti for a short time before leaving for Hawaii. After coming to Hawaii, plaintiff kept the travelers checks until January 1967, when he deposited them with the Liberty Bank in Honolulu. When the checks were forwarded to New York for collection, they were not honored and Liberty Bank debited plaintiff's account.

Plaintiff brought this action against defendants Thos. Cook & Son (Bankers) Ltd., and Thos. Cook & Son, Inc. The case was tried by a jury and after the jury returned a verdict, the trial court entered judgment for plaintiff for the sum of $8,300 plus interest, costs, etc., or $9,609.06. Defendants appealed.

I.

Defendants contend that the trial court erred in holding the travelers checks to be negotiable instruments when they were stolen.

As acknowledged by all the parties, the Uniform Commercial Code, HRS C. 490, became effective on January 1, 1967, about eight months after the plaintiff acquired the checks and is not applicable here. The defendants argue that the checks had not been delivered and under the Negotiable Instruments Law the defense of non-delivery of an incompleted instrument was applicable in this case. We cannot agree. The agent intended and did transfer possession to Mr. Kochton and delivery of the checks was completed. However, we are not concerned with this issue.

Each of the travelers checks involved here contains the following on its face:

TRAVELERS CHEQUE FOR ONE HUNDRED DOLLARS

_ _

Counter-sign here in the presence of paying Cashier

Thos. Cook & Son (Bankers) Ltd New York Agency.

Upon presentation of this cheque countersigned by the person whose signature is shown below will

Pay to the Order of _ _

Signature of holder

_ _

This cheque is redeemable by Thos. Cook & Son (Bankers) Ltd New York Agency.

Revised Laws of Hawaii 1955, § 197-1, the Uniform Negotiable Instruments Act (hereinafter referred to as Negotiable Instruments Law or NIL) reads:

'Form of negotiable instrument. An instrument to be negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain and unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.'

It has been conceded by scholars that travelers checks in the various forms do not fall squarely within the purview of the Negotiable Instruments Law. ² This may be because the travelers check industry was in its infancy when the Negotiable Instruments Law was enacted. ³

Courts of other jurisdictions have applied the NIL to travelers checks and have arrived at conflicting results where a thief stole blank travelers checks, signed and countersigned them and negotiated to third parties for value and without notice. In American Express Co. v. Anadarko Bank & Trust Co., 179 Okl. 606, 67 P.2d 55 (1937), the Oklahoma court held that American Express Co. was liable for the checks because the purchaser's signature was not necessary to make the checks complete and as the stolen checks were completed negotiable instruments, the issuer was liable to the bona fide holder. On the other hand, in City National Bank of Galveston v. American Express Co., 16 S.W.2d 278 (Tex.Com.App.1929) the court held that American Express Co. was not liable for travelers checks as they were not completed when stolen because the signature of the purchaser had not been affixed and as they had not been delivered they were not valid contracts even in the hands of a holder in due course. See also, First Nat. City Bank of New York v. Frederics-Helton Trav. Serv., Inc., 29 Misc.2d 1041, 209 N.Y.S.2d 704 (SCt.N.Y.1961).

We believe we should take a more realistic and less technical approach and recognize that travelers checks have been accepted by the public as a medium of exchange and that they have acquired negotiable characteristics by established custom and general acceptance by the public rather than by conformity with provisions of the Negotiable Instruments Law ⁴ or of the Uniform Commercial Code. ⁵

It is common knowledge that any establishment issuing travelers checks intends its checks to be readily and freely passable from one person to another as money. This is not only intended, but it is widely advertised that travelers checks are readily accepted in commerce as money and that they are safer. The public is made to believe that travelers checks are a substitute for meney, a medium of exchange, which are self-identifying and accepted everywhere, but, unlike currency, they can be carried without danger of loss or theft because of the protective device of signature and countersignature.

We believe that if travelers checks are intended by the issuer and accepted by the public as a medium of exchange to take the place of money, they should be subjected to the same rules of law applicable to money under like circumstances.

The general rule is that when on in good faith acquires possession of stolen money for valuable consideration his title is superior to that of the true owner. Ohio Casualty Ins. Co. v. Smith, 297 F.2d 265 (7th Cir. 1962); First Nat'l Bank of Birmingham, Ala. v. Gilbert & Clay, s23 La. 845, 49 So. 593 (1909).

The United States Supreme Court in Cooke v. United States, 91 U.S. 389, 23 L.Ed. 237 (1875) held that inasmuch as treasury notes were intended to circulate and take the place of money, even though they were stolen and placed unlawfully in circulation, the United States was required to pay bona fide holders of such notes. At pages 403-404, the court said;

'The notes were perfect and complete as soon as printed. They did not require the signature of any officer. As soon as they had received the impression of all the plates and dies necessary to perfect their form, they were ready for circulation and use. In this respect they did not differ from the coins of the mint when fully stamped and prepared for issue. Coin is the money of commerce, and circulates from hand to hand as such. These notes represent the promises of the government to pay money, and were intended to circulate and take the place of money, of some extent, for commercial purposes.'

We therefore hold that...