The Famous Shoe & Clothing Company v. Crosswhite

• Decision Date: 09 July 1894
• Parties: The Famous Shoe & Clothing Company, Appellant, v. Crosswhite et al
• Court: Missouri Supreme Court

27 S.W. 397

124 Mo. 34

The Famous Shoe & Clothing Company, Appellant, v. Crosswhite et al

Supreme Court of Missouri, First Division

July 9, 1894

Transferred from St. Louis Court of Appeals.

Reversed.

Wm. C. & Jas. C. Jones for appellant.

(1) Checks are negotiable instruments and are transferable by indorsement and delivery. Tiedeman, on Com. Paper, secs. 430 440; Edwards on Bills, p. 84; 2 Daniel on Neg. Inst., secs 1582, 1651; Morse on Banking, 255; Robertson v. Coleman, 141 Mass. 231; Little v. Bank, 2 Hill, 425; Stephens v. McNeill, 26 Barb. 656; Fuller v. Hutchings, 10 Cal. 523; Merchants' Bank v. Sav. Inst., 33 N. J. Law, 170; Burns v. Kahn, 47 Mo.App. 215. (2) The evidence shows that appellant was a bona fide holder, and he is, therefore, entitled to recover. Burrell v. Parsons, 71 Me. 282; Story on Prom. Notes, sec. 191; Brush v. Scribner, 11 Conn. 392; Johnson v. May, 27 Ohio St. 374; Brome v. Spofford, 95 U.S. 474.

C. P. & J. D. Johnson for respondent.

(1) Under the admitted facts, the check in controversy is not a negotiable instrument, in the sense that the makers could not countermand its payment after it had passed into the hands of the appellant, although the appellant paid value therefor. R. S. 1889, sec. 733, p. 255; R. S. 1889, sec. 2091, p. 548; R. S. 1835, p. 104; 2 Daniels on Negotiable Instruments [4 Ed.], sec. 1567, p. 5978; Story on Promissory Notes [7 Ed.], sec. 489, p. 671, and cases cited; Tiedeman on Commercial Paper, sec. 430; 1 Edwards on Bills and Notes [3 Ed.], sec. 549, p. 396; Morse on Banks and Banking, sec. 380, pp. 622, 623, 624; 3 R. S. (New York), p. 2242; 2 Code (California), 1885, p. 532; Bank v. Bank, 10 Wallace (U.S.), 604; Bull v. Bank, 123 U.S. 110; Austin v. Blue, 6 Mo. 265; St. John v. Homans, 8 Mo. 383. (2) The appellant having accepted the check from Wilke, the holder, without knowing him or requiring him to identify himself as the payee, can not, under the custom in evidence, and the other facts admitted by the agreed statement, hold the makers for the amount it paid the man, Wilke, therefor. Martin v. Hall, 26 Mo. 387; Walsh v. Miss. Transportation Co., 52 Mo. 434; Martindale v. Railroad, 60 Mo. 509; Scudder v. Ames, 89 Mo. 508; Renner v. Bank, 9 Wheaton (U.S.), 582; Mills v. Bank, 11 Wheaton (U.S.), 438; Ellis v. Ins. and Trust Co., 4 Ohio State, 628; Park v. Vernow, 16 Mo.App. 385; Broom's Legal Maxims, 712-720; 1 Greenleaf on Evidence, secs. 292, 294; 2 Greenleaf on Evidence, secs. 248, 251; Moody, Michel & Co. v. Mack, 43 Mo. 212. (3) Under the admitted facts, actual notice of the fraudulent acquiring of the check by appellant's assignor will be attributed to appellant. Bigelow on Fraud, p. 297; Kerr on Fraud and Mistake, p. 236; Kitchen v. Railroad, 69 Mo. 265; Leavitt v. Laforce, 71 Mo. 356; Roan v. Winn, 93 Mo. 503.

OPINION

Black, P. J.

The plaintiff is a corporation engaged in a mercantile business in the city of St. Louis; and the defendants are partners engaged in buying and selling horses and mules, under the firm name of Crosswhite, Patton & Rubey.

This suit is based upon the following check:

"St. Louis, Oct. 27, 1890.

"Pay to Herman Hickle, or order, one hundred and forty-nine x-100 dollars.

"To Mullanphy Savings Bank, St. Louis, Mo.

Crosswhite, Patton & Rubey."

Indorsed: "Herman Huickel."

The above spelling of the name of payee and indorser is taken from the check as we find it in the transcript, but hereafter we follow the statement of agreed facts in that respect. According to the agreed facts one Herman Wilke appeared at the defendant's place of business on the day of the date of the check, and represented his name to be Herman Heckle, and that he was the owner of two mules which he then sold and delivered to the defendants, and in payment therefor they gave him the check in question. On the same day Wilke went to the plaintiff's place of business and purchased merchandise to the amount of $ 74.15, and in payment therefor indorsed the check under the name of Herman Huickel and delivered it to the plaintiff, and the plaintiff paid him the difference, namely, $ 74.85. The plaintiff received the check from Wilke without making inquiry of him as to how he obtained it, though he was unknown to the plaintiff's agents who sold the goods, and without his being identified. On the same day the plaintiff presented the check to the bank for payment, but payment was refused because of directions given to the bank by defendants, they having learned that the mules had been stolen by Wilke.

Plaintiff procured the arrest of Wilke, and recovered back a part of the merchandise and money. If plaintiff is entitled to recover at all, it is agreed the amount it should recover is $ 61.15.

The trial court gave judgment for the defendants, and that judgment was affirmed by the St. Louis court of appeals and the cause was then transferred to this court because Judge Thompson deemed the opinion opposed to St. John v. Homans, 8 Mo. 382, and Ivory v. Bank, 36 Mo. 475.

The first question is whether this check is a negotiable instrument. The court of appeals held that it was not, and this is the line of argument: No instrument, except a bill of exchange, is negotiable in this state, unless it appears on its face to have been issued for value received; this check does not profess on its face to have been issued for value received, nor is it a bill of exchange, and hence it is not negotiable.

The chief error in this argument lies in the major proposition which has for its authority Lowenstein v. Knopf, 2 Mo.App. 159, where the conclusion is expressed that bills of exchange and instruments containing the words "value received" are the only negotiable instruments which we have in this state, because the statute declares no other instruments negotiable.

The statute provides: "Every promissory note for the payment of money to the payee therein named, or order or bearer, and expressed to be for value received, shall be due and payable as therein expressed, and shall have the same effect and be negotiable in like manner as inland bills of exchange."

It is to be remembered that for a long time Lord Holt, held that promissory notes were not negotiable, while the merchants of Lombard street insisted they were negotiable. Parliament interfered and overruled Holt by the act of Anne. This court at a very early day declined to follow the ruling of Lord Holt, holding that promissory notes were negotiable by the common law. Irvin v. Maury, 1 Mo. 197. The legislature, however, to put the matter at rest in this state, enacted a statute which, after some changes, comes down to us in the language above quoted.

Now the object and whole object and purpose of this statute was to make promissory notes negotiable. A promissory note to be negotiable must, of course, conform in form to the statute; but the statute leaves all other commercial instruments where the law merchant places them. If negotiable by that law, they are negotiable in this state. This is too clear to admit of any doubt.

Are checks negotiable by the law merchant? Before answering this question it is well to remember that some writers treat checks as bills of exchange, with some peculiarities; while other writers treat them as distinct commercial instruments, having some features in common with bills of exchange. While the controversy is largely one of words only, the latter method of treating checks seems to be the least objectionable, because it comports with commercial usage. It is said by the supreme court of the United States: "Bank checks are not inland bills of exchange, but have many properties of such commercial paper; and many of the rules of the law merchant are alike applicable to both;" and the court then goes on to point out many matters in which they are alike and many in which they differ.

As to the element of negotiability it is said: "Checks are commercial paper, and are generally affected by the rules which affect commercial paper. Thus the holder of a check payable to bearer, or indorsed in blank, is presumed to be the owner, bona fide, and for value. It is only after proof that the original issue of the check was a fraud, or that it was lost by the drawer before issue, that such a holder will be required to show his bona fides to prove that he has given value for the check, and that he has come into possession of it in the usual course of business. If, being obliged to show these facts, he does so successfully, it then makes no difference under what circumstances of fraud or loss the check originally left the drawer's hands; the holder shall retain and shall recover upon it at least as much as he has paid for it." 1 Morse on Banks and Banking [3 Ed.], sec. 393.

Another writer says: "A check, like a bill or note, in order to be negotiable, must be payable...