First Nat. Bank of Rapid City v. Sec. Nat. Bank of Sioux City
| Decision Date | 24 February 1892 |
| Citation | 51 N.W. 305,34 Neb. 71 |
| Parties | FIRST NAT. BANK OF RAPID CITY v. SECURITY NAT. BANK OF SIOUX CITY. |
| Court | Nebraska Supreme Court |
1. A bona fide purchaser of a negotiable certificate of deposit for value, before maturity, without notice of equities, is protected to the same extent as an innocent holder of other negotiable paper. But if such certificate is transferred when overdue the purchaser takes it subject to all defenses which could have been made, had it remained in the hands of the payee.
2. The indorsement of such paper by the payee before due, “without recourse,” is not of itself sufficient to charge the purchaser with notice of defenses of the maker.
3. Across the face of a certificate of deposit in the usual form, payable to the order of the payee on the return of the certificate properly indorsed, were stamped the words: “This certificate payable three months after date, with 6 per cent. interest per annum for the time specified.” The instrument was transferred by the payee more than three months after its date. Held to be a time certificate, and dishonored when sold.
4. In an action on a negotiable certificate of deposit transferred after due, the maker may set off any cross-demand which existed in his favor against the original payee at the time of the transfer.
Error to district court, Douglas county; GEORGE W. DOANE, Judge.
Suit by the Security National Bank of Sioux City, Iowa, against the First National Bank of Rapid City, S. D., to recover on certificates of deposit issued by defendant. Judgment for plaintiff. Defendant brings error. Reversed and remanded.Chas. Offutt, for plaintiff in error.
Congdon & Hunt, for defendant in error.
This suit was brought in the court below by the defendant in error upon four certificates of deposit issued by the plaintiff in error, payable to the order of John W. Rose, and by him indorsed to the Security National Bank of Sioux City, Iowa. Three of the certificates were for $200 each, and one for $150.72. The defense is failure of consideration, and that the defendant in error acquired the certificates after maturity, and under such circumstances as to charge it with notice of the maker's defense. On a trial to the court, there was judgment for the defend ant in error for the full amount of the certificates. Two questions are presented for consideration: First. Is the defendant in error a bona fide purchaser of the certificates, for a valuable consideration, before maturity, in the ordinary course of business, without notice of dishonor or of facts which impeach their validity as between the original parties? Second. Has the consideration failed?
The certificates are alike, except as to amounts and numbers, and in the following form: The words, “This certificate payable 3 months after date, with 6 per cent. interest * * * for the time specified,” were stamped in red ink across the face of the certificates.
The proofs show that John W. Rose, on or about the 5th day of October, 1887, called at the banking-house of Lake & Halley, private bankers in Buffalo Gap, S. D., with three certificates of deposit issued to him by Morton E. Post & Co., of Cheyenne, Wyo.,--one for $739.38, one for $67.35, and one for $77,--each bearing interest and maturing at different dates, and instructed G. C. Smith, the acting cashier, to send the certificates to the First National Bank of Rapid City, and request that bank to issue four of their certificates, payable to Mr. Rose's order, as follows: Three certificates for $200 each, and one for $150.72, in exchange for Morton E. Post & Co.'s certificate for $739.38, on which interest expired October 8, 1887. Mr. Rose instructed Cashier Smith to treat the other two certificates in like manner as their interest matured. On October 5, 1887, Lake & Halley sent the three certificates, duly indorsed by Mr. Rose, to the First National Bank of Rapid City, inclosed with the following letter:
“Banking-House of Lake & Halley, Buffalo Gap, Dakota, Oct. 5, 1887. James Halley, Esq., Cashier, Rapid City, Dak.--Dear Sir: Herewith time C. D.'s, Morton E. Post & Co., Cheyenne, Wyo., drawn in favor of John W. Rose, and indorsed to you as follows:
+--------------------------------------------------------------+
¦No. 12,300, expiration of 3 mos., Oct. 8, '87 ¦$739 38¦ ¦
+----------------------------------------------+-------+-------¦
¦Int ¦11 34 ¦$750 72¦
+----------------------------------------------+-------+-------¦
¦No. 12,335, expiration of 3 mos., Oct. 20, '87¦67 35 ¦ ¦
+----------------------------------------------+-------+-------¦
¦Int ¦1 01 ¦68 36 ¦
+----------------------------------------------+-------+-------¦
¦No. 12,337, expiration of 3 mos., Oct. 21, '87¦77 00 ¦ ¦
+----------------------------------------------+-------+-------¦
¦Int ¦1 01 ¦78 15 ¦
+--------------------------------------------------------------+
When the first C. D. matures, send us your time C. D.'s, 3 mos., to order John W. Rose, as follows: Three for $200 each, and one for $150.72 for the balance. Treat the others as they mature in like manner. Yours, truly, C. C. SMITH, A. Cas. Would not take our C. D.'s, as this is not a national bank.”
This letter and the certificates were received by the plaintiff in error on the 6th day of October, 1887, and on the same day forwarded the $739.38 certificate for collection through the First National Bank of Omaha. On the 8th day of the same month the First National Bank of Rapid City issued the four certificates of deposit in suit, and sent them to Lake & Halley on the same day, who delivered them to Mr. Rose. There was no other consideration for the issue of the four certificates in controversy. They were issued for the exact amount of the principal and interest called for by the Post & Co. certificate first maturing. When the Post & Co. certificate reached Cheyenne and was presented for payment the makers had failed, having suspended and assigned on the morning of October 10, 1887. The certificate was protested on the following day, and due notice given to all parties. Rose was requested at once to take back the dishonored certificate, and return the four certificates issued in exchange therefor, which he declined to do. On June 7, 1888, Rose sold the certificates to the Security National Bank of Sioux City, Iowa, for $750.72, the face value, in cash, and indorsed them to it “without recourse.” The defendant in error at once presented the certificates to plaintiff in error, and demanded payment, which was refused. Thereupon this suit was instituted.
The defendant in error insists that it is an innocent holder of the paper. The established doctrine is that a certificate of deposit in the usual form issued by a bank, and made payable to order or bearer, is negotiable, and a bona fide purchaser thereof, for value, before maturity, without notice of equities, is protected to the same extent as an innocent holder of other negotiable paper. Bank of Peru v. Farnsworth, 18 Ill. 563;Laughlin v. Marshall, 19 Ill. 390;Bean v. Briggs, 1 Iowa, 488;Huse v. Hamblin, 29 Iowa, 501; Kilgore v. Bulkely, 14 Conn. 363; Drake v. Markle, 21 Ind. 433;Bank v. Ringel, 51 Ind. 393;Johnson v. Henderson, 76 N. C. 227;Pardee v. Fish, 60 N. Y. 265;Miller v. Austen, 13 How. 218;Curran v. Witter, 68 Wis. 16, 31 N. W. Rep. 705;Moore v. Gano, 12 Ohio, 300;Howe v. Hartness, 11 Ohio St. 449. It is also equally well settled that...
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