First Nat. Bank of Meridian v. Strauss

• Decision Date: 22 April 1889
• Citation: 6 So. 232,66 Miss. 479
• Court: Mississippi Supreme Court
• Parties: FIRST NAT. BANK OF MERIDIAN v. A. STRAUSS

6 So. 232

66 Miss. 479

FIRST NAT. BANK OF MERIDIAN v. A. STRAUSS

Supreme Court of Mississippi

April 22, 1889

FROM the circuit court of Lauderdale county, HON. S. H. TERRAL Judge.

The facts are stated in the opinion of the court.

Judgment affirmed.

R. P Williams, for appellant.

The court below determined the case adversely to the bank on the theory that Gattman & Co. got no title to the draft, because being insolvent, it was fraud on their part as against Strauss, to discount the draft. We think this conclusion wrong. The fact of insolvency may be considered with other facts tending to establish fraud; but we cannot conceive a case where the bare fact of insolvency of the buyer would constitute a fraud on the seller. Nothing in the record supports the conclusion of the court, unless the fact of insolvency will do it. Gattman & Co. made no representations at the time they purchased the paper. They kept nothing from Strauss that the law required them to disclose. Meyer Gattman's going to Canada did not aid the fact of insolvency; it is not shown that he carried a cent with him, or that the condition of the firm was changed by his going. It is not shown that the other partners remaining in the bank knew that it was insolvent when the draft was purchased; on the contrary, Mr. McFarland, the expert who examined the books, was of opinion that they did not know it.

We think that the weight of authority is that the purchaser must have known himself to be insolvent, before the fact of insolvency can be considered in determining whether or not there has been fraud. How was Strauss defrauded when the proceeds of the draft were placed to his credit, subject to his immediate cheek? It was precisely as if he had sold the draft to Gattman & Co., got the money and deposited it in bank. If this had been done, it could not be contended that Strauss had any claim to the funds or the draft, even in the hands of Gattman & Co.

There is a wide distinction between the contract of a bank for the future payment of money, and that where the money is deposited subject to check. It is hard to conceive how a bank could be guilty of fraud in the latter case, unless the deposit by the creditor and the closing of the bank were simultaneous acts. See Lake v. Hughes, 63 Miss. 552; 49 Am. R. 235; 55 Mich. 379.

We invite attention to the testimony of W. W. George, vice-president of the First National Bank, plaintiff, showing the custom that existed between the two banks, in reference to collections sent by one bank to the other. Gattman & Co. were indebted to the First National, and the understanding was that all collections sent by them to the latter should be entered to their credit and to the liquidation of any debt they might owe the other bank, and vice versa. Appellant is the owner of the paper for value, without notice of any claim of Strauss, and its claim must prevail.

Witherspoon & Witherspoon, for appellee.

1. The deposit of the draft by Strauss and his indorsement thereof were obtained through fraud. This finding of the judge, which has the same effect as would the verdict of a jury, is not manifestly wrong. On the contrary, the facts show conclusively that fraud was used to get the draft. The insolvency of the Gattmans for twelve years; the flight of Meyer Gattman to Canada; the knowledge of the insolvency by the other partners, for they must have known the hopeless condition of the bank; the reception of the deposit without disclosing their insolvency, when they knew Strauss believed the bank rich--all this shows a clear case of fraud, and supports the finding of the judge, without even a conflict in the evidence. This entitled the depositor to reclaim his draft or its proceeds. Craigie v. Hadley, decided by the court of appeals of New York, May 5, 1885, 1 N.E. 537; 67 N.Y. 598.

The remaining partners managing the bank could not have been ignorant without imputing to them gross inattention to their duties. No authority has been, or can be shown holding that the reception of a deposit by an insolvent bank without disclosing its insolvency to the depositor is not such a fraud as entitles him to reclaim his deposit.

The case of Hughes v. Lake, 63 Miss. 558, relied upon by opposite counsel, is wholly unlike this ease. Here the court held that a banker might be guilty of a felony in violating § 2814, code 1880, and still not be liable to attachment for fraudulently contracting a debt. If Strauss had sued out an attachment against Gattman & Co. on this ground, it would have been necessary to prove that they never intended to pay him, as held in Hughes v. Lake, and in Marqueze v. Sontheimer, 59 Miss. 430. But we are not required to bring this case within the provisions of the attachment law. As well seek to apply the laws of burglary in an action of replevin.

The right of rescission is as clear for a fraudulent concealment as for an actual intent or a positive representation of a material fact. We contend, however, that the facts show an actual intent on the part of Gattman & Co. to defraud the claimant. In Hughes v. Lake the jury found that there was no intent to defraud, while here the judgment on the facts in favor of the claimant includes the finding that there was such intent.

The case of Dickerson v. Wason, 47 N.Y. 439 (s.c. 7 Am. R. 455), in its facts is very similar to this, and we ask the court to read it.

2. The paper was merely indorsed to the First National Bank for collection, and it became an agent for that purpose and had no right to sue on the draft. It had no title, and hence the suit must fail.

But, conceding that this is a case where the appellant, an agent, might sue in its own name, it is well established that any defense we might have against Gattman & Co., the principal, would be good against the agent. 1 Wait's Ac. and Def. 281, and authorities there cited.

The appellant did not advance a cent on this draft, but claims the right to appropriate the proceeds to the payment of its old debt against Gattman & Co., and this, too, when the Gattmans owe Strauss four hundred dollars. The case stands as if Gattman & Co. had brought the suit. How could they stand up in a court of justice and claim this money, in the face of the fraud by which they obtained the draft, and of the violation of the contract by which they received it? The judgment should be affirmed.

OPINION

COOPER J.

Strauss a merchant in Aberdeen, Mississippi, on the 16th day of March indorsed in blank and deposited with Gattman & Co., bankers, a draft drawn on Metzler at Meridian, receiving credit on his pass-book for the amount of the same, less the fee for collection. Gattman & Co. were at that time largely insolvent and had been for more than two years, but of this fact Strauss had no knowledge or suspicion. Gattman & Co. indorsed the draft to the First National Bank of Meridian "for collection for account." On the 17th day of March (Saturday) Gattman & Co. transacted...