Cosmopolitan State Bank v. Lake Shore Trust & Sav. Bank

• Decision Date: 10 April 1931
• Docket Number: No. 20369.,20369.
• Citation: 175 N.E. 583,343 Ill. 347
• Parties: COSMOPOLITAN STATE BANK v. LAKE SHORE TRUST & SAVINGS BANK.
• Court: Illinois Supreme Court

343 Ill. 347

175 N.E. 583

COSMOPOLITAN STATE BANK

v.LAKE SHORE TRUST & SAVINGS BANK.

No. 20369.

Supreme Court of Illinois.

Feb. 18, 1931.

As Modified on Denial of Rehearing April 10, 1931.

Error to First Branch, Appellate Court, First District, on Appeal from the Municipal Court of Chicago; Harry Olson, Judge.

Suit by the Cosmopolitan State Bank against the Lake Shore Trust & Savings Bank. Judgment for defendant was affirmed by the Appellate Court, and plaintiff brings certiorari.

Judgments of the Appellate Court and municipal court reversed, and cause remanded.

Eugene P. Kealy, of Chicago, for plaintiff in error.

Alden, Latham & Young, of Chicago (Hobart P. Young, of Chicago, of counsel), for defendant in error.

DUNN, C. J.

The Cosmopolitan State Bank sued the Lake Shore Trust & Savings Bank in the municipal court of Chicago to recover the amount of a check for $1,762.50, dated November 5, 1925, drawn by A. Anderson on the plaintiff, payable to the order of the Auburn Automobile Company, appearing to be indorsed by the payee, which was cashed by the defendant, indorsed by it, and presented to and paid by the plaintiff. The check was charged to Anderson's account, and later he made a claim to have the amount credited to him because the check was paid without authority and not upon the order of the payee. The plaintiff then credited Anderson's account with the amount of the check and sued the defendant for that amount. The cause was tried before a judge without a jury, and at the conclusion of the evidence for the plaintiff judgment was rendered in favor of the defendant. The Appellate Court affirmed the judgment, and the record was certified to this court pursuant to a writ of certiorari allowed on the petition of the plaintiff.

Anderson was a depositor who maintained a checking account in the plaintiff bank. C. R. Schuster was a friend of Anderson who conducted an automobile business in the name of Clark Motor Sales on North Clark street, in Chicago, near the garage where Anderson kept his automobile. Schuster dealt in Auburn automobiles. He purchased cars from the Auburn Automobile Company at its branch, the Auburn Chicago Company, on South Michigan avenue, at wholesale prices, which he was obliged to pay on delivery, and he sold for such prices and on such terms as he chose. He offered to sell Anderson an Auburn automobile at the wholesale price, but he had no car at his place of business which Anderson liked. They went down together to the Auburn Chicago Company, where Anderson selected a car which suited him. Its motor number was 6,470 and its serial number 2,641,061, but Anderson was not informed of these numbers. Two or three days later Schuster told Anderson that he wanted to get delivery of the car and asked Anderson to give him a check. Anderson told him he would make the check to the Auburn Automobile Company, that he was buying the car from that company, that Schuster was giving him the wholesale price and he wanted to make out the check to the company the car was coming from. He made the check for $1,762.50 to the Auburn Automobile Company as payee. Schuster took the check and said he was going down to get the car. The fact was that Schuster had got the car two days before Anderson gave him the check, had paid for it and brought it up to his garage. He had also executed a chattel mortgage on it, dated October 29, 1925, for $1,605.90, which he acknowledged on November 5, 1925, before James A. Kearns, clerk of the municipal court, and which was filed with the recorder on November 9, 1925. The check was deposited with the defendant and was paid to it on November 6, 1925. When received in evidence it bore the following indorsements:

‘Motor number 6470 Serial 2641061.

‘Auburn Automobile Company, F. P.

‘Clark Motor Sales

‘C. R. Schuster

‘Paid through early clearings to Lake Shore Trust & Savings Bank Nov. 6, 1925.’

The indorsement of the numbers was in Anderson's handwriting. He testified that he got the numbers from Schuster when Schuster called up for the check. Anderson asked for the numbers because he wanted to put them on the back of the check. The name of the automobile company was typewritten or stamped with a rubber stamp. The initials ‘F. P.’ and the two names below were handwritten and the last indorsement was stamped.

Frank H. Popp testified that he was connected with the Auburn Automobile Company from 1924 to 1928 as vice-president and general manager of the Auburn Chicago Company, a subsidiary of the Auburn Automobile Company; that the indorsement ‘Auburn Automobile Company, F. P.,’ was not his signature; that he never authorized the indorsement of the check; that the indorsement was not made with a stamp by the automobile company; that the check never was in the possession of the company, and that it never received the proceeds of the check and never had or claimed any interest in it. Schuster bought the identical car referred to by the serial number on the back of the check three days before the date of the check. He paid for it and it was delivered to him on the same day. The evidence was all produced by the plaintiff, and when the plaintiff rested the defendant offered no evidence. The court thereupon found the issues for the defendant and rendered judgment against the plaintiff for costs.

The subject-matter of this suit is a bank check-a negotiable instrument to which there are three parties: The drawer, Anderson; the drawee, the plaintiff; and the payee, the Auburn Automobile Company. The rights and liabilities of these parties under the law are not doubtful. The plaintiff was bound to pay the amount of the check of the drawer to the payee or to its order, and to no other person. So far as the facts of this case are concerned, the rights and duties of the parties are not complicated by any question of identity or intention or any equities among the parties, but are to be determined solely by the application of the rules of commercial law in relation to negotiable instruments. Anderson, though he owed the automobile company nothing, drew his check for the price of the car, making it to the company as payee. He had visited the company's showrooms and selected a car which suited him. He apparently believed he was buying the car of the company, but the company understood that it sold the car to Schuster. Schuster paid for it and took it away the next day. He did not, however, tell Anderson he had the car. On the contrary, he asked Anderson, after he had the car in his possession, for a check for the price and told him he wanted to get delivery of the car. He asked to have the check made to him, but Anderson, thinking the car was the automobile company's not yet delivered, and that it was entitled to the purchase money, made the check payable to the automobile company and delivered it to Schuster. In fact, not only did Anderson not owe the automobile company anything, but he did not owe Schuster anything, because, at the time, Schuster had given a chattel mortgage on the car for more than nine-tenths of what Anderson was to pay for it. However, Anderson wrote the check to the automobile company as payee and gave it to Schuster to pay the automobile company for the car and get possession of it.

All these things, however, have nothing to do with the merits of this case. Anderson, for whatever reason seemed sufficient to him, made the check and directed the plaintiff to pay $1,762.50 to the order of the automobile company. Schuster took the check knowing that it was payable to the order of the automobile company and knowing that he could not collect it without the indorsement of the...