Drew v. Wheelihan
| Decision Date | 21 December 1898 |
| Docket Number | 11,330 - (152) |
| Citation | 77 N.W. 558,75 Minn. 68 |
| Parties | NICK DREW v. W. P. WHEELIHAN |
| Court | Minnesota Supreme Court |
Action in the municipal court of Duluth to recover $400 upon a bank check for that amount, drawn by defendant upon the First National Bank of Grand Rapids, Wisconsin, and dated July 16 1897. The other facts are stated in the opinion. The cause was tried before Edson, J., and a jury, which rendered a verdict for defendant. From a judgment in favor of defendant plaintiff appealed. Affirmed.
Purchase of Bank Check -- Evidence of Bad Faith.
Bad faith in the purchase, for value, of an invalid and void bank check, may be partly evidenced by the gross negligence of the purchaser. It may also be shown by a variety of circumstances, some of them slight in character and others of greater significance.
Purchase of Bank Check -- Question for Jury.
Held, in the case at bar, that the question of plaintiff's good or bad faith when purchasing the check in question was for the jury on the evidence.
Windom & McMahon, for appellant.
The check in question was offered and received in evidence on the trial, together with the indorsements thereon, thereby making a case for plaintiff in the absence of a valid defense. Merchants & Mechanics Sav. Bk. v. Cross, 65 Minn. 154; G.S. 1894, § 5751. If defendant fails to show plaintiff's knowledge of the defense to the check at the time that he cashed the same, or to controvert the plaintiff's proof of bona fides, then the plaintiff is entitled to have a verdict directed in his favor. Collins v. McDowell, 65 Minn. 110; Drovers v. Potvin, 116 Mich. 474; Borden v. Clark, 26 Mich. 410; Rosemond v. Graham, 54 Minn. 323; 2 Thompson, Trials, § 2262.
The fact of the bank's indorsement upon the back of the check, with the same scratched off, would not tend to put plaintiff on inquiry. Collins v. McDowell, supra. The fact that one purchased a note under such circumstances as to induce suspicion that the title of the prior holder was defective, is not sufficient to show bad faith on his part in making the purchase. Brown v. Tourtelotte, 24 Colo. 204.
A bona fide holder is one who has taken the bill, note or check, without notice of any defense of which the defendant could avail himself in an action by a prior holder of the paper. Bigelow, B. & N. 437. Plaintiff cannot be affected with notice of other dealings of the defendant than those immediately connected with the contract sued upon. Bottomley v. Goldsmith, 36 Mich. 28; Moorehead v. Gilmore, 77 Pa. St. 118; Freeman v. Savery, 127 Mass. 75.
Gross negligence, when not disclosing bad faith, is not sufficient to admit equities against an indorsee for value. Bigelow, B. & N. 439; Collins v. Gilbert, 94 U.S. 753; Brown v. Spofford, 95 U.S. 474; Farrell v. Lovett, 68 Me. 326; Seybel v. National, 54 N.Y. 288; Belmont v. Hoge, 35 N.Y. 65; Smith v. Livingston, 111 Mass. 342; Freeman v. Savery, supra; Crosby v. Grant, 36 N.H. 273; Hamilton v. Vought, 34 N.J.L. 187; Lake v. Reed, 29 Iowa 258; Gage v. Sharp, 24 Iowa 15; Hamilton v. Marks, 63 Mo. 167; Moorehead v. Gilmore, supra; Johnson v. Way, 27 Ohio 374; Shreeves v. Allen, 79 Ill. 553; Howry v. Eppinger, 34 Mich. 29; Commercial v. First, 30 Md. 11; Woolfolk v. Bank, 10 Bush, 504.
The true question for the jury is not whether there were suspicious circumstances, but whether the holder took the paper without notice of any infirmity or taint. Smith v. Livingston, supra; Phelan v. Moss, 67 Pa. St. 59; Moorehead v. Gilmore, supra; Hamilton v. Vought, supra; Lake v. Reed, supra; Johnson v. Way, supra; Hamilton v. Marks, supra; Collins v. Gilbert, supra; Brown v. Spofford, supra; Shreeves v. Allen, supra; Howry v. Eppinger, supra; Commercial v. First, supra.
Mere knowledge of facts that would lead a prudent man to inquiry is not sufficient to defeat an indorsee for value. Jones v. Gordon, L.R. 2 App. Cas. 616; Woolfolk v. Bank, supra; Freeman v. Savery, supra. There must be something amounting to bad faith in the holder, such as a fraudulent turning away from a knowledge of facts, or a wilful blindness, before he will be affected with notice. Knight v. Pugh, 4 W. & S. 445; Fletcher v. Gushee, 32 Me. 587; Ellicott v. Martin, 6 Md. 509; Ross v. Bedell, 5 Duer, 462; Sloan v. Union, 67 Pa. St. 470; Heath v. Silverthorn, 39 Wis. 146.
James A. Hanks, for respondent.
Where there is fraud or illegality, the presumption is that he who is guilty of it will part with the note thereby acquired, for the purpose of enabling some party to recover on it. Such presumption operates against the holder, and suspicion follows the note into his hands and fastens upon his title. Cummings v. Thompson, 18 Minn. 228 (246); Bank of Montreal v. Richter, 55 Minn. 362. See also Vosburgh v. Diefendorf, 119 N.Y. 357; Canajoharie v. Diefendorf, 123 N.Y. 191. Gross negligence, though not of itself sufficient as a matter of law to defeat title, constitutes evidence of bad faith. Seybel v. National, 54 N.Y. 288; 1 Parsons, N. & B. 258; Canajoharie v. Diefendorf, supra. See also Murray v. Lardner, 2 Wall. 110, 121; Dutchess v. Hachfield, 73 N.Y. 226. If the purchaser knows generally that there is something wrong about the paper, it is sufficient to put him on inquiry and affect his title. 4 Am. & Eng. Enc. (2d Ed.) 303. Whether the party had such knowledge or not is a question for the jury. Goodman v. Simonds, 20 How. 343. What is sufficient to arouse suspicion is also a question of fact for the determination of the jury. 4 Am. & Eng. Enc. (2d Ed.) 304; Fowler v. Brantly, 14 Pet. 318; Brown v. Taber, 5 Wend. 566. See also Schmueckle v. Waters, 125 Ind. 265.
Action by an alleged good-faith purchaser, for value, against the maker of a dishonored bank check. For the purposes of this appeal it stands admitted that the check was illegal and void in the hands of McArthur, the payee, and Smith, one of the indorsers, under the provisions of G.S. 1894, § 6594.
The facts were that almost immediately after the check was signed by defendant at Duluth, it was indorsed by McArthur to Smith. The latter was a business man, residing in Duluth, while defendant was a resident of Grand Rapids, Wisconsin, temporarily in Duluth. Smith at once went to a saloon keeper in the place last mentioned, by the name of Hencke, and got him to go with him to the Commercial Bank in the same city for the purpose of obtaining the money, $400. The officers of the bank refused to cash the paper without Hencke's indorsement. The check was then indorsed by Hencke as demanded, and also by Smith, and the money paid over to Hencke, who refused to turn it over to Smith until the check was sent to Grand Rapids and collected. Thereupon Smith and Hencke returned to the bank, Hencke paid back the $400, and the check was delivered to Smith after Hencke had erased his absolute indorsement, and the bank had erased an indorsement it had made to another bank in Duluth for collection (upon which it had become liable). Smith forthwith went to West Superior, in the state of Wisconsin, and called upon Drew, the plaintiff, who was in the saloon business, and then proposed to the latter that if he would cash the check he (Smith) would "buy a drink." Another person who had been present when defendant signed the check, and who knew of its invalidity, seems to have been in the saloon at the time, about 3 o'clock of the afternoon of the day on which the check was drawn.
From plaintiff's testimony it seems that he looked at the face of the check, remarked that it was a large one, then looked at the back, saw the erased indorsements before mentioned, and asked what they were, and if the check had not been returned by the bank. To this inquiry Smith answered that he had previously turned the check over to Hencke; that the latter had received the money, but wanted to retain it until the bank collected the check; that he (Smith) needed the money, so he had obtained the check from Hencke, and had brought it to plaintiff to be cashed. The latter testified that he did not then know anything about the maker of the paper, nor about McArthur, the payee, nor did he know where Grand Rapids was, except that it was in the southern part of Wisconsin; and that he had previously cashed checks for Smith, with whom he had been acquainted about seven years.
Plaintiff admitted that he had at his saloon telephone communication with Hencke and the Commercial Bank at Duluth, seven miles distant; that he knew there were several banks in that city, as well as in West Superior. Immediately after cashing the check, and, of course, during banking hours, plaintiff went in person to the bank in the last-named city where he kept his account and transacted his business, and there indorsed and left the check for collection, not for deposit on account. Meantime payment had been stopped, and hence this action.
The illegality of the check being admitted on this appeal, the cause must be disposed of precisely as if the admission had been made at the trial. Therefore the burden of proof was on plaintiff to establish his good faith when taking the instrument. The presumption was against him, and it was incumbent upon him to overcome it. Bank of Montreal v. Richter, 55 Minn. 362, 57 N.W. 61.
But the plaintiff was entitled to protection as an innocent purchaser, unless he had knowledge or notice of such facts that his failure to make inquiry, when taking the check, amounted to bad faith. Collins v. McDowell, 65 Minn. 110, 67 N.W. 845. Gross negligence, although not of itself sufficient, as a question of law, to defeat title, constitutes evidence of bad faith. Canajoharie v. Diefendorf, 123 N.Y. 191, 25 N.E. 402.
As was stated in Murray v. Lardner, 2 Wall. 121, the rule may be said to resolve...
To continue reading
Request your trial