Burnam v. Merchants' Exch. Bank

• Decision Date: 18 February 1896
• Parties: BURNAM v. MERCHANTS' EXCH. BANK.
• Court: Wisconsin Supreme Court

92 Wis. 277

66 N.W. 510

BURNAM

v.MERCHANTS' EXCH. BANK.

Supreme Court of Wisconsin.

Feb. 18, 1896.

Appeal from superior court, Milwaukee county; J. C. Ludwig, Judge.

Action by Charles T. Burnam, as trustee of the estate of Clark Shepardson, against the Merchants' Exchange Bank, to recover possession of a note. From a judgment for plaintiff, defendant appeals. Affirmed.

This is an action of replevin to recover the possession of a promissory note for $5,000. The note is dated June 12, 1893, and due three months after date. The plaintiff claims the note on the ground that it is a part of a trust estate of which he is the trustee. The defendant claims to own the note by purchase as a bona fide purchaser from a former trustee. It appears that one John B. Koetting was the trustee of the estate of one Clark Shepardson. As such trustee, he held the promissory note which is the subject of the suit. It came to him, indorsed in blank, from a former trustee. Koetting was, at the same time, the cashier of the South Side Savings Bank of Milwaukee. On the 12th day of June, 1893, the South Side Savings Bank borrowed $90,000 of certain associated banks, and, as collateral security for the loan, delivered to one Bigelow, as trustee for the banks, promissory notes of the face value of $153,000. Among these collateral notes was a note signed by one John Barth for $10,000, which was a perfectly good note. On July 14, 1893, the South Side Savings Bank gave to the defendant an order in writing, upon Bigelow, in the words and figures following: “Milwaukee, Wis., July 14th, 1893. F. G. Bigelow, Esq., Trustee, City--Sir: You are hereby authorized and directed to deliver to Merchants' Exchange Bank of Milwaukee, Wis., its successor or assign, all money, notes, and property now or which hereafter may come into your possession or under your control from this bank in excess of what may be necessary to satisfy the present obligation of this bank as security for which such property was placed in your possession and under your control, to the extent of fifty thousand dollars of such excess; said Merchants' Exchange Bank, its successor or assign, to be allowed to select from such excess such property as it will take, and, at the time of making such selection, shall deliver to you the certificates of deposit of this bank, corresponding to the amount and value of property or money so taken from you. And, for a valuable consideration to this bank paid this day by said Merchants' Exchange Bank, all such money, notes, and property are hereby assigned, transferred, and set over to said Merchants' Exchange Bank, its successor or assign, with due and sufficient authority to collect, receive, and receipt for the same. South Side Savings Bank. John B. Koetting, Cashier.” Afterwards, two days, the president of the South Side Savings Bank took the note in suit, and another of like amount, both indorsed in blank “John B. Koetting, Cas.,” to Bigelow, and substituted them in the place of the aforesaid note made by John Barth, and withdrew the Barth note. Koetting indorsed the note in suit, and delivered it to the president of the bank, for the purpose of having it so substituted. Neither Bigelow nor the defendant knew that the South Side Savings Bank had not the full legal title to the note, and the right to pledge it in that manner. The South Side Savings Bank failed, and went into the hands of a receiver, July 24, 1893. July 14, 1894, the defendant put its claim against the South Side Savings Bank in judgment. It never offered to take any of the notes deposited with Bigelow in payment of any part of such indebtedness. By September, in 1894, Bigelow had made the amount of the $90,000 loan out of the collateral notes, and had notes left, including the note in suit, to the nominal amount of $41,500. About October 1, 1894, Bigelow delivered the note in suit, pursuant to a judgment to which many of the creditors of the South Side Savings Bank, its receiver, and Bigelow, were parties. The trustee of the Shepardson estate was not a party. At this time the note was long since due. The defendant is still a creditor of the South Side Savings Bank. There were a finding and judgment for the plaintiff, from which the defendant appeals.Quarles, Spence & Quarles, for appellant.

George E. Sutherland, for respondent.

NEWMAN, J. (after stating the facts).

The plaintiff, as trustee of the estate of Shepardson, the original owner, is now the owner and entitled to the possession of the note in controversy, unless his title has been divested, and a better title acquired by the defendant, through the transaction by which it was pledged for the debts of the South Side Savings Bank. The defendant has derived no better title unless it is established by the evidence that it is a bona fide purchaser of the note, for none but a bona fide purchaser of commercial paper derives a better title than his vendor had. While the title of the true owner may become divested and transferred to such a purchaser without the consent or fault of the true owner, because such a result may happen, the transaction should show clearly that the purchase is bona fide, within the meaning of the law. It will not be aided by liberality of construction or intendment, but will be scrutinized with considerable strictness, for it is the duty of the court to protect the right of the owner to his property, so far as it can be done consistently with the rules of law. A bona fide purchaser of commercial paper is defined to be one who has obtained it for value given at the time, before maturity, in the usual course of business, and in good faith. 2 Am. & Eng. Enc. Law, 390; Rand. Com. Paper, § 986. It is a good consideration, within the rule, if security for an antecedent debt is taken with some new consideration. But the antecedent debt alone, without some new consideration, is not sufficient. Bowman v. Van Kuren, 29 Wis. 209;Body v. Jewsen, 33 Wis. 402;Black v. Tarbell, 89 Wis. 390, 61 N. W. 1106. It is not claimed that the defendant gave any new consideration whatever for the order of July 14, 1893, through which, if at all, it must deduce its title to the note in suit. Nor is it claimed to have been at any time a bona fide purchaser of any of the paper which was then in pledge with Bigelow for the debt of the savings bank to the associated banks. But the claim is that, by some subtle process, not easily traced or understood, on the...