Miller v. Farmers & Mechanics Bank of Carroll County

• Decision Date: 13 March 1869
• Citation: 30 Md. 392
• Parties: DANIEL MILLER and others, Trading as DANIEL MILLER & COMPANY, v. THE FARMERS AND MECHANICS' BANK OF CARROLL COUNTY.
• Court: Maryland Court of Appeals

30 Md. 392

DANIEL MILLER and others, Trading as DANIEL MILLER & COMPANY, v. THE FARMERS AND MECHANICS' BANK OF CARROLL COUNTY.

Court of Appeals of Maryland

March 13, 1869

APPEAL from the Circuit Court for Carroll County.

This was an action of assumpsit instituted by the appellants against the appellee. The narr. contained only the common counts. The plaintiffs offered in evidence two promissory notes, payable to their order, and by them endorsed absolutely to Josiah Lee & Co., and by Josiah Lee & Co., endorsed to "Jacob Reese, Cashier, or order, for collection," and proved that the plaintiffs were the owners of the notes, and passed them to Josiah Lee & Co., and received no value therefor from Lee & Co., but merely passed the notes to them for collection; and that on the 8th of October, 1860, Lee & Co. transmitted the notes to the defendant for collection.

The plaintiffs also offered in evidence two letters from Lee & Co. to the defendant, stating that the notes were the property of the plaintiffs, and requesting the defendant to deliver the notes or the proceeds thereof to the plaintiffs and that the letters were received by the defendant in due course of the mail. It was also admitted that the notes were duly paid at maturity.

The defendant then proved by Jacob Reese, that he had been cashier of the defendant for more than ten years; that from a time prior to 1857, the defendant had had extensive dealings with Josiah Lee & Co.; that Lee & Co. were bankers and brokers in the city of Baltimore, in the practice of dealing in money and negotiable paper on their own account, as well as agents for their employers; that the notes offered in evidence were sent to the defendant on the 8th of October 1860, endorsed in the manner shown; and one of them was paid on the 24th, and the other on the 29th day of the same month and were on those days respectively, credited to Josiah Lee & Co. in their account current with the defendant; that at the time of the receipt and payment of the notes, neither the witness nor the defendant had any knowledge that they were not the property of Lee & Co.; and the first notice of the claim of the plaintiffs was derived from the letters referred to, that on the day the first of the notes was paid, Lee & Co. were indebted to defendant in the sum of $917.39; and on the 29th of October, 1860, after crediting both notes, Lee & Co. remained indebted in the sum of $741.62, and are now in debt to the defendant in the sum of $1,136; that a running account had been kept in the defendant's books with Lee & Co., since 1857, and the course of dealing had been that the defendant sent to Lee & Co. checks and negotiable paper for collection, and sometimes money, and Lee & Co. sent to the defendant all the paper which they had for collection in Carroll county; that the balances were not drawn on either side, but were from time to time allowed to remain, and adjusted by means of the collections and remittances; and that Lee & Co. from time to time also redeemed some of the defendant's circulation, and sent it up to the defendant when they would be credited in the account, there being but one single promiscuous running account kept between them.

The defendant was in the habit of treating Lee & Co. as the owners of all paper endorsed to them (Lee & Co.) in the manner in which the notes in question were endorsed, and the balances were allowed to remain with Lee & Co., to be reduced or settled out of paper by them transmitted, and to be transmitted in the course of business, to the defendant; that the balances were generally in favor of the defendant sometimes $5,000 or more, but sometimes they were in favor of Lee & Co.; that witness desired generally to have a balance in Lee & Co's hands, for the exigencies of the defendant's business, especially for the redemption of the defendant's currency in the city, but he had no fixed amount of balance, but it fluctuated, and was allowed to fluctuate, in accordance with the transactions between the parties.

The plaintiffs then asked the witness, on cross-examination, what was the main object of his desiring a balance with Lee & Co.? The witness said, "for the redemption of the defendant's currency."

The plaintiffs then asked the witness whether, if defendant had not received the two notes offered in evidence, he would, in view of the large transactions between the defendant and Lee & Co., have made any change in the account, or whether he would any the less have allowed the balance to stand? The witness answered that he did not believe he would have made any change, or ceased to allow the balance to stand, had the particular notes not been received.

The defendant then proved by the same witness that the balance was suffered to remain with Lee & Co., as well to pay for collections made by the defendant for them, as for the redemption of currency, and no distinction was made as to how much was intended for one purpose, and how much for another.

It was admitted that Lee & Co. failed about 2 o'clock, on October 30th, 1860.

The plaintiff offered four prayers, of which the first and fourth were refused--the Court being divided--and the second and third were granted.

The verdict was for the defendant, and the plaintiffs appealed.

The cause was argued before STEWART, BRENT, GRASON, ALVEY and ROBINSON, J.

Wm. M. Merrick, for the appellants:

The refusal of the two prayers was erroneous within the principles so clearly enunciated by the Supreme Court of the United States in the case of The Bank of the Metropolis vs. The New England Bank, 1 Howard, 234, and 6 Howard, 212; and Wilson & Co. vs. Smith, 3 Howard, 763, 770, 771; and which have been sanctioned by this Court in Cecil Bank vs. Farmers' Bank of Maryland, 22 Md., 154, 156, and also in New York, in McBride vs. Bank of Salem, 25 Bar., 658; and Hoffman, and others, vs. Miller, et al., Am. Law Reg., N. S., 676.

The proof showed that between the receipt of the moneys due on those notes and the insolvency of Lee & Co., there was no new credit of any sort given to them by the defendant, and as no new responsibility was incurred on the faith of those bills, and the transactions between the parties remained the same in all respects, as if those notes had not been transmitted, the Court erred in refusing to submit that precise question of fact, embraced by the fourth prayer, to the jury. Wilson vs. Smith, 3 Howard, 763.

The rule of law follows the fact in this whole class of cases. If the defendant be a general creditor of the insolvent, he cannot retain the property of a third party to satisfy his demand. He can only do so when he has given a special credit, by reason of the paper of the third party held by the insolvent. The law, if the fact of special credit be proved, attaches the legal consequence; not by reason of anything distinctively appertaining to commercial paper, but upon the general equity that where one of two innocent parties must suffer, the loss must fall upon him who, by his own negligence, has caused the other to put his own property in peril. In every case it must appear from the finding by a jury that credit, faith and trust were reposed, and consequent loss was occasioned by the act of the plaintiff. 25 Barbour, 658.

William A. Fisher, for the appellee:

The vice of both prayers is that they require a particular intent on the part of the defendant to give some special credit, or to conduct some special dealing on the faith of these very notes, segregated from others, while the law looks only to a general intent, which will cover all paper transmitted in the course of the business, and is gratified by a credit given, based merely upon the expectation of paper to be afterwards transmitted in the usual course of business. Bank of Metropolis vs. New England Bank, 1 Howard, 234, and 6 Howard, 212; Cecil Bank vs. Farmers' Bank of Maryland, 22 Md., 148; Bosanquet vs. Dudman, 1 Starkie, 1; Cecil Bank vs. Heald, et al., 25 Md., 562.

It being intended between Lee & Co. and the defendant that the proceeds of the notes should be applied towards the...