Third Nat. Bank of Baltimore v. Lange

• Decision Date: 25 March 1879
• Citation: 51 Md. 138
• Parties: THE THIRD NATIONAL BANK OF BALTIMORE v. JOHN H. LANGE, and others.
• Court: Maryland Court of Appeals

51 Md. 138

THE THIRD NATIONAL BANK OF BALTIMORE v. JOHN H. LANGE, and others.

Court of Appeals of Maryland

March 25, 1879

APPEAL from the Circuit Court of Baltimore City.

This was a proceeding in equity by the appellee, Lange, against the appellant and others, to enjoin the appellant from collecting or attempting to collect a promissory note purchased by it, but equitably belonging to the appellee Lange, or from protesting it, or taking any further steps in regard thereto. The injunction ordered to be issued, was served upon the appellant three days before the maturity of the note. The case is further stated in the opinion of the Court.

The cause was argued before BARTOL, C.J., BRENT, MILLER, ALVEY and ROBINSON, J.

Henry Stockbridge, for the appellant.

The form of the note in question made it a negotiable instrument. It was made payable to order, and so, when endorsed in blank might pass from hand to hand like a bank note; was entitled to all the immunities, and carried with it all the incidents of negotiable commercial paper. 3 Duer, 377; Story on Bills, sec. 60; 3 Kent's Com., 77; Burrill's Law Dic., " Negotiable Words;" Bouvier's Law Dic., " Negotiable."

The title of the appellant, therefore, to the note was clear and unquestionable. Its receipt by the bank for value before maturity, and without notice of any pre-existing equities made the title by which the appellant held it good against the world, and gave it a right to collect the note of the maker, which none could successfully resist or assail. 1 Daniel on Neg, Inst., secs. 769, 790, 791, 814; Goodman vs. Harvey, 4 Ad. & E., 870; Goodman vs. Simonds, 20 Howard, 343.

And see the note on this case in Redfield & Bigelow's Leading Cases on Bills of Exchange, 257; Dalrymple vs. Hillenbrand, 62 N.Y. Reps., 5; Hamilton vs. Marks, 16 Am. L. Reg., (New S.,) 42; Johnson vs. Way, 4 Am. L. T. Reps., ( N. S.,) 62; Commissioners, &c. vs. Clark, 4 Otto, 285; Collins vs. Gilbert, 4 Otto, (753,) 757-762; Cecil Bank vs. Heald, 25 Md., 563; Maitland vs. Citizens' Bank, 40 Md., 540.

But even if there be a right to divert the fund, with which the makers of the note may liquidate their liability, from the payment of the note to the holder of the note, and to devote it to the benefit of the cestui que trust in the prior equity proceeding, there was no right to enjoin the appellant, or in any way to interfere with its collectien of the note from the endorsers thereof. As between the bank and the endorsers, the bank being satisfied of the genuineness of the endorsement, or assuming the risk of its being so, was under no obligation to go further. 1 Daniel on Neg. Inst., secs. 669, 670 and 775; Story on Bills, sec. 110; 1 Parsons on Notes and Bills, 25.

The complainant in this cause had no right then, to deprive the bank of its rightful claim against the endorsers by enjoining it from fixing their liability by protesting the note at its maturity.

Thomas R. Clendinen, for the appellee, Lange.

The appellee, Lange, insists that the note in question is not a negotiable instrument. The favor which has been shown negotiable instruments is altogether for the benefit of commerce. Instruments of this kind were never used, and were never expected to be used in or for the benefit of commerce. The business and duties of a trustee have no connection with general commercial transactions. He is an officer appointed by Court, and his duties do not lead him into commerce. The protection which is afforded the bona fide purchaser for value of a negotiable promissory note used in commercial transactions for the benefit of commerce, has no application to a case where a bank has overstepped its legitimate sphere and business, and bought an obligation for purchase money belonging to the Court. Sullivan vs. Violett, 6 Gill, 181; Ives vs. Bosley, 35 Md., 262; Story on Agency, sec. 228.

The question, upon constructive notice, is not whether the purchasers had the means of obtaining, and might, by prudent caution, have obtained the knowledge in question, but whether the not obtaining it, was not an act of gross or culpable negligence. 2 Sugden on Vendors, 529.

What is sufficient to put a purchaser upon an enquiry is good notice, that is, where a man has sufficient information to lead him to a fact, he shall be deemed conusant of it; therefore, if a man knows that the legal estate is in a third person at the time he purchases, be is bound to notice what the trust is. 2 Sugden on Vendors, 542; Christian vs. Mitchell, 3 Ire. Ch. Rep., (N. C.,) 514; Story's Equity Juris., sec. 400, b; Maples vs. Medlin, 1 Murphy, (N. C.,) 223; Hall vs. Smith, 14 Vesey, Jr., 432: Mourray vs. Ballou, 1 Johnson Ch. Rep., 575-6-7-81; U.S. vs. Sturges, 1 Paine, 535.

An administrator or executor cannot bind the estate by a promissory note executed as executor. Kepler vs. Hall, 64 N. C., 60; McFarlin vs. Stinson, 56 Ga., 396; Daniel vs. Deevy, 40 Iowa, 252.

Nor by accepting a draft even for a debt due by the estate. Wisdom vs. Becker, 52 Illinois, 346; Livingston vs. Gaussen, 21 La. Annual, 286.

An administrator cannot barter or sell the notes or property of the estate for his own use. Thomason, &c. vs. Brown, &c., 43 Indiana, 206; Miller, &c. vs. Williamson, 5 Md., 230; Walker vs. Taylor, 8 Jurist, N. S., 684; Booyer vs. Hodges, &c., 45 Miss., 80; Miles vs. Helm, 2 Smedes & Marshall, 696, &c.

Certificates of stock executed in trust cannot be pledged for a loan to the trustee. Where a certificate reveals a trust, the duty of enquiry is imposed on a lender. Duncan vs. Jandon, 15 Wall., 173-175, &c. Sturterant vs. Jarques, 14 Allen, 523; Bancroft vs. Consen, 13 Allen, 50; Shaw vs. Spencer, 100 Mass., 388 to 394; Trull vs. Trull, 13 Allen, 407; 2 Parsons' Leading Cases in Equity, 22.

A trustee cannot deal with the security for deferred payments for his own benefit, or in any other way than prescribed by the terms of sale. Wallis vs. Thornton's Admr's, 2 Brockenborough, 427 to 435-- By Chief Justice MARSHALL; Story on Agency, sec. 228.

Albert Ritchie, for the appellees, Flynn & Emerich and J. Regester & Sons.

J. Regester & Sons were, by conclusion of law, joint makers, and their relation to the note in question cannot be changed by the act of other parties. Ives vs. Bosley, 35 Md., 263; Walz vs. Albach, 37 Md., 404.

They cannot be charged on any distinct contract of guaranty or endorsement which never existed; and when this note shall be once paid, they are discharged from all liability in respect to it.

The endorsement of a note may be a guaranty that prior endorsements and signatures are genuine and made by competent parties, (Condon vs. Pearce, 43 Md., 83,) but that extends only to such endorsement and signatures as were on the note at the time the endorsement sought to be held liable was put there, and cannot be taken to make an endorser the guarantor of signatures subsequently and fraudulently placed above his own; nor can such fraudulent superscription change the relation of a joint maker into that of an endorser.

The appellant, as a national bank, had no power to buy the note in question, and derives no title from its pretended purchase. Revised Statutes, page 999, sec. 5136, sec. 7; Natl. Bank of Charlotte vs. Natl. Exchange Bank of Balto., 39 Md., 600; Wecker vs. National Bank, 42 Md., 581; Boyd vs. National Bank, 44 Md., 47; Morse on Banks, 4, 5, 20; National Bank vs. Pierson, (Minn. R.,) Law Review, January, 1878, p. 397; Farmers and Mechanics' Bank vs. Baldwin, 23 Minn., 198.

BRENT J., delivered the opinion of the Court.

The note, about which this case has arisen, is as follows:

$1100. BALTIMORE, Feby. 8th, 1876.

Twelve months after date we promise to pay to the order N.W. Watkins, trustee, eleven hundred dollars with interest, value received.

FLYNN & EMERICH."

The names of "N. W. Watkins, trustee," and "J. Regester & Sons," are endorsed upon it.

This note was given for the purchase of property sold by N.W. Watkins, as trustee under a decree of the Circuit Court of Baltimore City, and is for one of the deferred payments, as authorized by that decree. At the time of its delivery to the trustee, it was endorsed by J. Regester & Sons as securities for the drawers,--the terms of sale requiring the deferred payments to be secured in that form.

Subsequently N.W. Watkins wrote above the names of J. Regester & Sons the endorsement "N. W. Watkins, Trustee," and applied to the Union Banking Company to buy the note, offering to sell it for 12 per cent. off. The Banking Company not being willing to buy it, its cashier offered to sell it for Watkins, and placed it in the hands of a bill broker for that purpose. After getting into the hands of a second bill broker it was taken by him to The Third National Bank, the appellant, and offered to it for sale. The bank...