U.S. Fid. & Guar. Co. of Balt., Md. v. Forest Cnty. State Bank of Crandon

• Decision Date: 08 October 1929
• Citation: 199 Wis. 560,227 N.W. 27
• Court: Wisconsin Supreme Court
• Parties: UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD., ET AL. v. FOREST COUNTY STATE BANK OF CRANDON.

199 Wis. 560

227 N.W. 27

UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD., ET AL.

v.FOREST COUNTY STATE BANK OF CRANDON.

Supreme Court of Wisconsin.

Oct. 8, 1929.

Appeal from a judgment of the Circuit Court for Forest County; A. H. Reid, Judge.

Action by the United States Fidelity & Guaranty Company of Baltimore, Md., and another, against the Forest County State Bank of Crandon, Wis. From judgment for plaintiff, defendant appeals. Reversed with directions.--[By Editorial Staff.]

Action begun August 13, 1927; judgment entered January 30, 1929.

This is an appeal from a judgment in favor of the plaintiffs-respondents and against the defendant-appellant.Goggins, Brazeau & Graves, of Wisconsin Rapids, for appellant.

Allan Classon, of Oconto, for respondents.

CROWNHART, J.

This case comes here as a continuation of the litigation considered in Forest County v. Poppy, 193 Wis. 274, 213 N. W. 676. The facts are not in dispute. As related in that case and found in this case, Poppy was county treasurer of Forest county. He was required to make deposits of funds of the county in county depositories designated as such by the county board. This he neglected and refused to do until commanded by the judgment of the circuit court. After some delay he went to the First National Bank of Crandon, where he had county funds on deposit, and secured a blank check or draft, which he took to his office and filled out in the nature of a sight draft on the First National Bank of Crandon, in favor of the Forest County State Bank, which bank was situated in Crandon, across the street from the First National Bank, a distance of about 200 feet. He then took this sight draft or check to the Forest County State Bank, where he already had an account as county treasurer, made out a deposit slip for the amount, and deposited the same with the bank and received credit for the amount of the draft. This was done at about closing time of the bank that day.

On the following day, April 21, 1925, in accordance with the usual custom, the two banks cleared their accounts by charging checks or drafts against each other, and balancing the account by a draft on a correspondent bank. At this time it was found that the Forest County State Bank had a balance in its favor against the First National Bank of $2,347.74. The First National Bank thereupon issued a draft on the Federal Reserve Bank of Minneapolis to the Forest County State Bank for that amount, and debited Poppy's account on its books accordingly. The Forest County State Bank thereupon forwarded the draft on the Federal Reserve Bank to its correspondent in Milwaukee for collection.

On April 22, 1925, the First National Bank of Crandon was closed by order of the Federal Banking department, and a receiver was appointed, who stopped payment on all checks of that bank outstanding, including the draft to the Forest County State Bank. That draft, having been refused payment, on April 24th was returned to the Forest County State Bank and received there April 27, 1925, and was thereupon charged back to the account of Henry Poppy as county treasurer. Forest county brought suit for the amount claimed to be due the county, against Henry Poppy and the United States Fidelity & Guaranty Company, his surety, the respondent herein, and in that action recovered judgment for the amount of the draft in question $2,347.74, which judgment was paid by the respondent guaranty company, as surety of the treasurer. The guaranty company was thereupon subrogated to all the rights of Henry Poppy, the county treasurer, and brought this action as such, claiming that the Forest County State Bank became the owner of the sight draft here mentioned upon the same being deposited with it, and that the matter became a completed transaction at that time. It therefore demanded judgment against the Forest County State Bank because of its refusal to pay the amount of the draft so charged back to Henry Poppy.

The trial court held that the transaction between Poppy and the Forest County State Bank, when he deposited the sight draft therein on the 20th of April, 1925, amounted to a sale of the sight draft to the Forest County State Bank, and that it thereupon became the owner thereof with the right to charge it back to the drawer only in case of dishonor after presentment and notice to the drawee. In other words, the learned circuit judge held the sight draft to be a negotiable instrument, with the only liability attached to be that of an indorser on the contract.

[1][2] But there was no indorsement in this case. The sight draft was never used as a negotiable instrument, but remained in the hands of the original parties to it. There was no contract of indorsement, and could be none under the circumstances. The circuit court based its decision on Douglas v. Federal Reserve Bank, 271 U. S. 489, 46 S. Ct. 554, 70 L. Ed. 1051, and Aebi v. Bank of Evansville, 124 Wis. 73, 102 N. W. 329, 68 L. R. A. 964, 109 Am. St. Rep. 925. Whether or not there was a sale of the instrument in...