Citizens' Nat. Bank v. Brown

• Decision Date: 22 March 1887
• Citation: 45 Ohio St. 39,11 N.E. 799
• Parties: CITIZENS' NAT. BANK v. BROWN.
• Court: Ohio Supreme Court

11 N.E. 799

45 Ohio St. 39

CITIZENS' NAT. BANK v. BROWN.

Supreme Court of Ohio.

March 22, 1887

Error to district court, Hamilton county.

Action at law to recover on a lost certificate of deposit. Plaintiff received from defendant bank the following certificate of deposit:

‘ No. 762. Citizens' National Bank . CINCINNATI August 9, 1882. Eugene E. Brown has deposited in this bank eleven hundred and forty-five dollars, payable to the order of himself on return of this certificate, in current funds ’ -which certificate was signed by the proper officer of the bank. This certificate he subsequently lost, but before any indorsement had been made thereon. The bank refused to deliver to him the amount of his deposit unless he would execute to it a bond to indemnify it against possible loss from any subsequent claim of any finder or holder of the lost certificate, whereupon plaintiff brought this suit.

SPEAR and MINSHALL, JJ., dissenting.

Paxton & Warrington , for plaintiff in error.

T. Q Hildebrant , for defendant in error.

DICKMAN J.

The record discloses as facts established to the satisfaction of the courts below, and which we are not disposed to call in question, that the defendant in error, on the ninth day of August, 1882, deposited with the Citizens' National Bank of Cincinnati the sum of $1,145, and received from the bank a certificate of deposit for that amount, signed by the proper officer of the bank, bearing date as of that day, and made payable to the order of the depositor in current funds, on the return of the certificate. On the sixteenth day of September, 1882, the defendant in error lost the certificate of deposit, and has not since found or recovered it. When lost, the certificate was not indorsed by the defendant in error; and on the eighteenth day of September, 1882, he demanded payment thereof from the bank, but the bank refused to pay the same, unless he would first indemnify it by bond, with good and sufficient sureties, against any loss which it might suffer by reason of the certificate being held or owned by some person other than himself, who would seek to enforce against the bank the collection thereof.

The certificate was in effect a promissory note. It possessed all the requisites of a negotiable promissory note, and, as such, was governed by the rules and principles applicable to that class of paper. In Howe v. Hartness , 11 Ohio St. 449, it was held that a certificate of deposit substantially the same as that under consideration was a negotiable promissory note; and in Miller v. Austen , 13 How. 218, where the amount deposited with the bank was payable only to the order of the depositor, at a future day certain, upon the return of the certificate of deposit, it was recognized as the established doctrine that a promise to deliver or to be accountable for so much money is a good bill or note; that the sum named in the certificate issued being certain and the promise direct, every reason existed why the indorser of the paper should be held responsible to his indorsee that could prevail in cases where the paper indorsed is in the ordinary form of a promissory note; and that as such note the state courts generally had treated certificates of deposit payable to order. The fact that the money deposited with the plaintiff in error was made payable on return of the certificate was not such a contingency as affected the negotiable character of the instrument. Hunt v. Divine , 37 Ill. 137; Smilie v. Stevens , 39 Vt. 315; Bellows Falls Bank v. Rutland County Bank , 40 Vt. 377.

In the view which we take of the case before us, it becomes unnecessary to inquire whether the certificate was overdue and payable at the time of its loss, or whether a demand before the loss of the certificate was an essential prerequisite to the maturity of the instrument, in order to determine whether one who should come into possession of it would be subject to the equities that might exist between the bank and the depositor, and whether the bank would be secure in paying the amount of the certificate to the depositor, without exacting from him an indemnity. The certificate, though negotiable, was unnegotiable when lost by the payee. It was never indorsed by him, and it becomes a subject of inquiry whether in such case a bond of indemnity to the bank was a condition precedent to his right of recovery at law on the lost instrument.

It was said by Lord ELLENBOROUGH, in Pierson v. Hutchinson , 2 Camp. 211, ‘ whether an indemnity be sufficient or insufficient, is a question of which a court of law cannot judge; ’ and by Lord ELDON, in Ex parte Greenway , 6 Ves. 812, ‘ I never could understand by what authority courts of law compelled parties to take the indemnity.’ But the difficulty which courts of law have found in adjusting indemnities, is obviated in this state under our Code of Civil Procedure, which settles in the same action the legal and equitable rights of the parties; altering rather the form of administering justice, than impairing in any manner the rights of the parties, whether before denominated legal or equitable. Lamson v. Pfaff , 1 Hand. 449.

If a negotiable note payable to bearer, or to order, and indorsed in blank, is lost before maturity, it is right that the maker, upon paying its contents, should be made secure against being compelled to pay the same a second time. But when the lost instrument is not payable to bearer, or is payable to order, and is unindorsed by the payee, as no legal title in such a case could pass, so as to invest any one with the privileges of a bona fide holder in the usual course of trade, no indemnity would be necessary. If one should find a note negotiable by indorsement, and forge the indorsement, the holder by this title could make no valid claim against any one, because the written transfer would confer no title upon him; and if the finder should not forge the indorsement, his action or demand of payment must needs be in the payee's name, and the maker might then plead any judgment already rendered against him on the note in favor of the payee, or any payment thereon made by him to the payee.

Among the exceptions as to indemnity, it is said by an approved text-writer that there are some cases in which the defendant can run no risk, and in which the plaintiff may, therefore, proceed in a court of equity or law without giving a bond of indemnity; that is, where the note is not negotiable, and where, though negotiable, it is payable to order and unindorsed, or has been specially indorsed. Daniel, Neg. Inst. § 1481.

The reason which permits notes never negotiable to be sued under the expeditious forms of the common law, in preference to the more tedious and expensive ones of chancery, applies, says Parsons, in his treatise on Notes and Bills, equally well to all notes which, being negotiable, have not been negotiated. The rule as laid down by Greenleaf (Evidence, vol. 2, § 156) is, that if the bill or other negotiable security be lost, there can be no remedy upon it by law, unless it was in such a state when lost that no person but the plaintiff could have acquired a right to sue thereon. But, if there be no danger that the defendant will ever again be liable on the bill or note, as, if the indorsement were specially restricted to the plaintiff only, or if the instrument was not indorsed, the plaintiff has been permitted to recover upon the usual secondary evidence; and Judge Story, in considering the remedy afforded in equity, and approving the rule allowing a recovery on a lost note at law where it is not negotiable, states that the same rule will apply, if the note were originally negotiable, where it has not been indorsed by the payee. Prom. Notes, § 451.

In accord with the rule holding the maker liable without indemnity, where the payee has lost a negotiable note before indorsing it, is the decision in Thayer v King , 15 Ohio 242. That decision was rendered in the year 1846, and it has stood approved in this state from the day of its announcement. We find no adequate ground for now disturbing it. The court held in that case that an action might be maintained at law on a note payable to order, and indorsed in blank, and lost after it became due. The reason for so holding will apply with equal force to the case under consideration. In the one case it was deemed unnecessary to invoke the chancery powers of the court for an indemnity, as the maker would be protected against a double payment of the overdue lost notes by reason of their being charge with all equities existing between himself and the owner of the paper; and in the case at bar no bond of indemnity was necessary, the bank being protected against a second payment of the certificate of deposit by reason of its not having been indorsed before in was lost, whereby no bona fide holder could invalidate the equities between Brown and the bank. In referring to the contingency of a double recovery against a maker who has been compelled to pay lost negotiable paper, which had fallen into the hands of an innocent holder, who had received it before due, READ, J., in Thayer v. King, supra , says: ‘ If former payment or recovery would be a complete bar to any subsequent payment or recovery, the reason of the rule ceases, and the objection to a recovery by the owner no longer exists. Hence, if the circumstances of the case are such that the negotiable paper can never be produced for payment a second time, or if produced would permit no right of recovery in the hands of the holder, no indemnity in such case being required to guard against a second payment, recovery may be had in a court of law. Thus, if the instrument be totally destroyed, or if it pass into the hands of the holder, charged with all the equities...