Fawsett v. the Nat'l Life Ins. Co. of The United States.

• Decision Date: 20 November 1880
• Citation: 1880 WL 10155,37 Am.Rep. 95,97 Ill. 11
• Parties: ASBURY F. FAWSETTv.THE NATIONAL LIFE INS. CO. OF THE UNITED STATES.
• Court: Illinois Supreme Court

97 Ill. 11

1880 WL 10155 (Ill.)

37 Am.Rep. 95

ASBURY F. FAWSETT

v.THE NATIONAL LIFE INS. CO. OF THE UNITED STATES.

Supreme Court of Illinois.

Filed at Ottawa Nov. 20, 1880.

OPINION TEXT STARTS HERE

APPEAL from the Appellate Court for the First District;--heard in that court on appeal from the Superior Court of Cook county; the Hon. SAMUEL M. MOORE, Judge, presiding.

Messrs. GARDNER & SCHUYLER, for the appellant:

Appellant never transferred the notes, except in pledge for certain indebtedness of the Globe Insurance Company, which was fully paid, and the notes released from the pledge before Harding ever saw them.

The assignment of negotiable paper is a matter of purely statutory regulation, and can only be accomplished, to vest the legal title of the paper in the assignee, in the mode prescribed by the statute. Ryan v. May, 14 Ill. 49; Fortier v. Darst, 31 Id. 212; Badgley et al. v. Votrain, 68 Id. 25.

The payee has made what is called a restrictive indorsement. By it he appoints the Bank of Monmouth his agent for the collection of the note, and to apply the proceeds in a prescribed way. The bank took no title to the note, except for that purpose, had no interest in the proceeds, and could make no disposition of them, except as directed. The note was not, in fact or law, transferred. Best v. Nokomis National Bank, 76 Ill. 608; Barker v. Prentiss, 6 Mass. 430; Potter v. Merchants' Bank, 28 N. Y. 641; Reamer v. Bell, 79 Pa. St. 292; Lawrence v. Farrell, 77 Id. 460; Rock Co. Bank v. Hollister, 21 Minn. 385; Merritt v. Duncan, 7 Heisk. 156; Atkins v. Cobb, 56 Ga. 86; Caldwell v. Evans, 5 Bush, 380; Payne v. Flournoy, 29 Ark. 500.

An indorsement of a note for collection, or for account of another, is restrictive, and suspends the negotiability of the note while it remains upon it. Ancher et al. v. Bank of England, Doug. 637; Sigourney v. Lloyd et al. 8 B. & C. 622; Same v. Same, 5 Bing. 525; Snee et al. v. Prescott et al. 1 Atkins, 245; Truttal et al. v. Bavandore, 8 Taunt. 100; Blaine et al. v. Bourne et al. 11 R. I. 119; Sweeney v. Easter, 1 Wall. 166; Lee v. Chillicothe Br. Bank, 1 Bond, 387; Leary v. Blanchard, 48 Me. 269; Cecil Bank v. Farmers' Bank, 22 Md. 148; Power v. Finnie, 4 Call, 411; Brown v. Jackson, 1 Wash. C. C. 512; Best v. Nokomis Nat. Bank, 76 Ill. 608; Lock v. Leonard Silk Co. 37 Mich. 479.

The rule is well settled in this State that an assignee of a promissory note, taking it by an equitable title, to enforce which he has to resort to a court of equity, takes it with all the equities and infirmities existing against it, and can claim nothing under it which his assignor could not have claimed. Olds v. Cummings, 31 Ill. 188; Fortier v. Darst, 31 Id. 212; Peck v. Bligh et al. 37 Id. 317; Walker v. Dement, 42 Id. 272; Sumner et al. v. Waugh et al. 56 Id. 531.

Messrs. HIGGINS, FURBER & COTHRAN, for the appellee:

Harding, being in the lawful possession of these notes, and the same being indorsed in blank, could write such indorsement upon the note as he thought proper, and upon the return of the note to him he could have erased what he had written before delivery of the note to the National Bank of Monmouth, or after they were indorsed back to him by the cashier of that bank. Brinckley v. Going, Breese, (2d ed.) 366; Parks v. Brown, 16 Ill. 454.

If an indorser comes into possession of a bill again, after having indorsed it, whether for value or for collection, he may without any re-indorsement recover. Byles on Bills, 221, note 1; Dugan v. United States, 3 Wheat. 172; Earbee v. Wolf, 9 Porter, 366; Bond v. Storrs, 13 Conn. 412; Wright v. Allen, 16 Ind. 284; Chautauque County Bank v. Davis, 21 Wend. 584.

The payee, or indorser, may even maintain an action upon it in his own name after he has written an assignment upon the back of a note, because he still owns the note and controls the assignment. Best v. Nokomis National Bank, 76 Ill. 608.

A note indorsed for collection, and afterwards returned to the owner, may be negotiated by him. McLemore v. Hawkins, 46 Miss. 715; Atkins v. Cobb, 56 Ga. 86.

The effect of an indorsement to one for the use of another, is to give notice of the rights of the beneficiary named in the indorsement, and protect him against a misappropriation. Hook v. Prout, N. Y. Court of Appeals, October 14, 1879. Evans v. Cramlington, 5 Carthew, affirmed in the Exchequer Chamber, 2 Ventris, 309; McConnell v. Hodsen, 2 Gilm. 640; Garvin v. Wiswell, 83 Ill. 215.

Messrs. HUTCHINSON & LUFF, also for the appellee:

The purchaser of commercial paper before maturity, for a valuable consideration, without knowledge of any defect of title, and in good faith, holds it by a title valid against the world. Suspicion of a defect of title, or gross negligence, will not defeat the title of the holder. Johnson v. Way, 27 Ohio St. 374; Shreeve v. Allen, 79 Ill. 553; Comstock v. Hannah, 76 Id. 530; Hamilton v. Marks, 63 Mo. 167; Hotchkiss v. National Banks, 21 Wall. 354.

These indorsements in this case are not restrictive, and do not restrain the negotiability of the notes. Buckley v. Jackson, L. R. 3 Exch. 135; Murrow v. Stewart, 8 Moo. P. C. 267; Byles on Bills, p. 157, 6th ed.

The want of the words “or order,” in Fawsett's indorsement, does not prevent the passing of the title. Edie v. East India Co. 2 Burr. 1216; Rev. Stat. ch. 98, secs. 3, 4, and 5. A note indorsed for collection and afterwards returned to the owner, may be negotiated by him. McLemore v. Hawkins, 46 Miss. 715; Atkins v. Cobb, 56 Ga. 86.

Appellee is not chargeable with notice, if any, to Nickerson, it not having been received by him in his capacity as director of appellee. First National Bank v. Christopher, 40 N. J. 435.

Mr. JUSTICE CRAIG delivered the opinion of the Court:

On the 27th day of August, 1872, The South Chicago Land and Building Association executed and delivered to A. F. Fawsett, payable to his order, six promissory notes, one for $7375, due in two years, and five for $8125 each, due in three, four, five, six and seven years, all bearing interest at eight per cent, payable annually. These notes were secured by a trust deed, given to N. S. Smith, on certain real estate in Cook county.

In January, 1873, Fawsett, who was at the time a stockholder in the Globe Insurance Company of Chicago, pledged all of the notes to the First National Bank of Chicago, as security for a debt which the bank held against the insurance company. Fawsett, at the time, indorsed the notes in blank and left them with the bank.

In February, 1873, Fawsett gave an order, in writing, to the cashier of the bank, to deliver the notes to the insurance company, on demand, and under this order the company subsequently obtained possession of the notes.

In 1874, Geo. F. Harding became a stockholder in the Globe Insurance Company, and, by some means, obtained the possession of the notes. On the back of the note due in six years, and on the back of the one due in seven years, he filled up the blank indorsement of Fawsett, so that it read as follows:

“Pay to the Second National Bank of Monmouth, for collection, for account of George F. Harding, executor of Abner C. Harding, deceased.

A. F. FAWSETT.”

Subsequently, the Monmouth bank returned the notes to Harding, with the following indorsement:

“Without recourse on us.

F. W. HARDING, Cashier Second National Bank.”

Harding then transferred the notes to the First National Bank of Chicago, by an indorsement as follows:

“George F. Harding, executor of the estate of Abner C. Harding, deceased.”

The bank, in due course of business, sold and transferred the notes to appellee, for a valuable consideration, before they were due. The notes, or the proceeds thereof, are now claimed by the original payee, Fawsett, and the question presented by the record is, had appellee, at the time it purchased the notes, such notice of Fawsett's claim or title as would defeat the title it acquired to the notes?

It is not pretended that appellee, when it purchased the notes, had actual notice that appellant, Fawsett, had any title to or interest in them, but the argument is, that the indorsement written over the signature of Fawsett is restrictive; that the notes were not, in fact or in law, transferred to the Second National Bank of Monmouth; that “an indorsement of a promissory note, for collection or for account of another, or for the use of another, is restrictive, and suspends the negotiability of the note while it remains upon it.”

It is conceded that Geo. F. Harding, having the possession of the notes, with the blank indorsement of Fawsett, the payee, upon them, whether he obtained the possession rightfully or not, might have sold them to a purchaser for value, and such purchaser would have been protected in his purchase, unless, before the purchase, he had notice of the title of Fawsett.

The question then arises, how or in what manner the purchaser was affected by the indorsement written over the signature of Fawsett by Harding, which was in these words: “Pay to the Second National Bank of Monmouth, for collection, for account of George F. Harding, executor of the estate of Abner C. Harding.”

As there is no pretense that appellee had any other or different...