Michigan Bank v. Eldred

• Decision Date: 01 December 1869
• Parties: MICHIGAN BANK v. ELDRED
• Court: U.S. Supreme Court

76 U.S. 544

19 L.Ed. 763

9 Wall. 544

MICHIGAN BANK v. ELDRED.

December Term, 1869

ERROR to the Circuit Court for Wisconsin, the case being this:

The Michigan Insurance Bank brought suit against Anson Eldred, Wm. Balcom, and Elisha Eldred, composing the firm of Eldreds & Balcom, as indorsers of a promissory note dated June 12th, 1861, given by one F. E. Eldred, and the body and signature of which were in his handwriting.

The summons was served upon Anson Eldred, the only defendant residing within the District of Wisconsin, and the only one who appeared in the cause. The execution of the note, its indorsement by Elisha Eldred, one of the firm of Eldreds & Balcom, with the firm name, demand of payment from the maker, non-payment by him, and notice to the indorsers of non-payment, were all proved. The date of the note, as originally written by the maker, F. E. Eldred, had been August 12th, 1861; and the word 'June' had been written by him over the word 'August.'

The defendant, Anson Eldred, then offered to read in evidence a clause of the articles of copartnership of the firm of Eldreds & Balcom, to the effect that Elisha Eldred, one of the firm, and who, as above stated, had indorsed this note in the firm name, had bound himself not to use the firm name except for the benefit of the said joint business. The evidence was objected to by the defendant, but the objection was overruled, and testimony received.

There was no pretence that the bank had any knowledge of the articles of copartnership or of the purpose for which the copartnership's name in this instance had been used.

The defendant then introduced the deposition of F. E. Eldred, the maker of the note, and the brother of Anson Eldred, the defendant. He testified that the note was in his handwriting; that the indorsement of Eldreds & Balcom was made by Elisha Eldred, one of the firm; that he transferred the note as security for a loan about the time the note bore date. He said further:

'I had an arrangement with the firm of Eldreds & Balcom, by which they indorsed my notes and I indorsed theirs; and the indorsements were made in blank, and were filled by the holders as they wanted to use them. This note was indorsed in that way, and this arrangement was known to Anson Eldred as well as to the other partners. The word 'June' was written by me, and was written by me before I used the note.'

The defendant then read depositions, which showed that this note was transferred to the bank as collateral security for moneys lent to F. E. Eldred, the maker. Here the defendant rested, and upon this evidence the judge, in charging, made use of the following language:

'If the note in suit was never actually negotiated to the bank, but got up by Eldred and accepted by the bank in pursuance of a corrupt agreement between said Eldred and the bank to defraud the defendant, then the plaintiff cannot recover.'

The testimony was without the least proof tending to show that this note had not been negotiated to the bank, or any tending to prove that it was 'got up by Eldred and accepted by the bank in pursuance of a corrupt agreement between said Eldred and the bank to defraud the defendant.'- Verdict and judgment having gone for the defendant, the bank brought the case here.

Mr. Lynde, for the plaintiff in error, submitted as too plain for argument,

1. That the paper having been negotiable paper, and received by the bank before due for a valuable consideration, the court had erred in allowing the clause from the articles of copartnership of Eldreds & Balcom to be read, without proof that the bank had notice of the clause.¹

2. That the court had charged the jury upon a supposed or conjectural state of facts, of which no evidence has been offered; inducing them perhaps to indulge in conjectures, instead of to weigh the testimony; a sort of charge which was decided by this court, in United States v. Breitling,² to be 'clearly error.'

Mr. Cary submitted that the transactions, from beginning to end, were irregular; that when Elisha Eldred, who in indorsing under any circumstances acted in violation of his duty to his partners, indorsed here, he indorsed in blank, in blank as to both dates and amounts; and that the instrument in its altered date bore on its face such marks of irregularity as to justify the charge.

To this it was replied, that F. E. Eldred was authorized by the arrangement between him and the firm to fill up the blanks; dates as well as amounts. He wrote the whole note originally, and the word 'June' afterwards; but the word was written before the instrument was negotiated.

Mr. Justice CLIFFORD stated the case, and delivered the opinion of the court.

Promissory notes, given for the payment of money, without any condition or contingency, and payable to order or bearer, are as much commercial instruments as bills of exchange, and the title to the same, and their transfer from one person to another, are governed and regulated by the same rules of commercial law.

Authorities may be found where it is held that it is not essential to the character of a promissory note or bill of exchange that it should be negotiable, and that other words besides the words 'or order,' or the words 'or bearer,' may be employed to express the quality of negotiability; but it is not necessary to discuss those topics, as the inquiry before the court has respect to the execution, transfer, and title of a negotiable promissory note in the ordinary form.³

Examined carefully, the pleadings and evidence exhibit the following facts, which are material to the present investigation: Claiming title to the note in question, the plaintiffs instituted the present suit against the defendant and one Uri Balcom and Elisha Eldred, alleging that they were copartners in trade under the firm name of Eldreds & Balcom. They, the defendants, were engaged in business both in Chicago and Milwaukee, and the record shows that they were sued as indorsers of the note described in the declaration. Only one of their number, to wit, the defendant, resided in that State, and he only was served with process. Besides a special count against the defendants as the indorsers of the note, the declaration also contained the common counts, to which was annexed a copy of the note, as notice that the note would be offered in evidence under those counts. Process having been served, the present defendant appeared, and pleaded the general issue, and the parties went to trial, and the verdict and judgment were for the defendant. Exceptions were duly taken by the plaintiffs to the rulings and instructions of the court, and they sued out this writ of error, and removed the cause here for re-examination.

Some further reference to the facts proved at the trial is necessary, in order that the precise nature of the questions presented in the bill of exceptions may be understood.

Founded as the declaration was upon a promissory note, it was only necessary for the plaintiffs, under the general issue, to prove the execution of the note, the signature of the indorsers, the demand of payment of the maker, the dishonor of the note, and notice of the dishonor, and non-payment to the indorsers. Having proved those facts, they introduced the note in evidence, of which the following is a copy:

DETROIT, June 12, 1861.

$4000. Sixty days after date I promise to pay to the order of Eldreds & Balcom four thousand dollars at the Michigan Insurance Bank, value received.

(Signed) F. E. ELDRED.

Indorsed on the back of the note is the name of the firm to which the defendant belongs, to wit, Eldreds & Balcom, and the allegations of demand, protest, and notice of dishonor and non-payment were fully proved.

Witnesses were examined upon both sides, from whose testimony, as reported in the bill of exceptions, it appears that the maker of the note was engaged in business at Detroit, in the State of Michigan; that he and the firm of which the defendant is a member entered into an arrangement to interchange accommodation indorsements for business purposes; that the understanding was that the firm should indorse whatever paper he, the maker of that note, should find it necessary to use in his business, and that he, in consideration thereof, should indorse their paper intended for discount, to such an extent as they might desire.

Pursuant to that arrangement the respective parties indorsed numerous blank notes for each other, and it appears that the senior partner of the firm indorsed at one time some fifty or fifty-five blank notes of the kind, and that the defendant knew what was done, and advised that the indorsements should be made. Packages of such blank notes, signed by the maker of the note in controversy, were sent by express to that firm for their indorsement, and when they were indorsed in blank they were returned through the same channel to the party by whom they were forwarded, and it appears that the note described in the declaration is one of the notes indorsed by the senior partner of the firm.

Approved as the arrangement was by the defendant, he has no cause for complaint; and it also appears that the maker of the note borrowed money of the plaintiffs and that he indorsed the note to them as collateral security in the regular course of business.

Depositions were also introduced by the defendant, and he offered in evidence the third article in the copartnership agreement of the indorsers of the note, which reads as follows: 'That neither of the parties shall employ any of the moneys, goods, or effects belonging to the said copartnership, or...