Union Nat. Bank of Columbus v. Windsor

• Decision Date: 05 July 1907
• Citation: 101 Minn. 470,112 N.W. 999
• Parties: UNION NAT. BANK OF COLUMBUS, OHIO, v. WINDSOR et al.
• Court: Minnesota Supreme Court

101 Minn. 470

112 N.W. 999

UNION NAT. BANK OF COLUMBUS, OHIO,

v.WINDSOR et al.

Supreme Court of Minnesota.

July 5, 1907.

Appeal from District Court, Mille Lacs County; D. B. Searle and M. D. Taylor, Judges.

Action by the Union National Bank of Columbus, Ohio, against Samuel Windsor and others. Verdict for plaintiff. From an order denying a new trial, defendants appeal. Reversed.

Syllabus by the Court

A bank, by purchasing on discounting a note for a depositor and giving him credit for the proceeds on his deposit account, does not, so long as no part of the deposit is drawn out or the balance of the account exceeds the amount of the proceeds of the account exceeds the a bona fide purchaser of the note for value, so as to be protected against infirmities in the paper. Charles A. Dickey and George C. Stiles, for appellants.

Reynolds & Roeser, for respondent.

ELLIOTT, J.

The Union National Bank of Columbus, Ohio, brought an action against Samuel Windsor and 12 other persons to recover the sum of $840 and interest thereon, alleged to be due upon a certain promissory note dated July 11, 1902, due July 1, 1905, signed by the defendants, payable to McLaughlin Bros., and by said payees claimed to have been transferred, sold, and assigned for a good and valuable consideration to the bank before maturity. The answer denied that the bank was a bona fide purchaser of the note for value before maturity, and alleged that the note was obtained by McLaughlin Bros. through fraud and false representation. When the case came to trial it was conceded, for the purposes of a motion to direct a verdict in favor of the plaintiff on the ground that it was a bona fide purchaser of the note for value, that the note was obtained by fraud, and that as between McLaughlin Bros. and defendants a defense existed, or at least that the evidence was such as required the issue to be submitted to the jury. The court directed a verdict for the plaintiff on the ground that the undisputed evidence showed that the plaintiff bank purchased the note in good faith before it became due and paid therefor the sum of $840. The appeal is from an order denying the defendants' motion for a new trial.

The question is whether the evidence required the court to direct a verdict in favor of the plaintiff. McLaughlin Bros. were dealers in horses, and through their agents sold a stallion to the appellants. The note upon which this suit was brought was one of three given as a consideration for a horse. McLaughlin Bros., who resided in Ohio, assigned and delivered the note to the Union National Bank of Columbus. It appears that the bank took the note in good faith without knowledge of the fraud; but it also appears that the bank paid McLaughlin Bros. nothing for the note. John R. McLaughlin, a member of the firm of McLaughlin Bros., testified that he sold the note to the Union National Bank and that the money received therefor was placed to the credit of McLaughlin Bros. The cashier of the bank testified as follows: ‘Q. How much, if anything, did the bank pay McLaughlin Bros. for this note? A. $840. Q. How was this amount paid? A. It was credited to their account in the ledger. * * * Q. You may state from your personal knowledge, if you can, how soon after credit was given McLaughlin Bros. for this note that they drew the money out of the bank? A. The only answer I could give to that question would be that all of the deposits of McLaughlin Bros. are checked out from time to time in the regular course of business. This, as all others, was checked out in the regular course of business. Q. Can you state what their balance was on April 24, 1905? A. Yes, I can; $19,002.66 is the amount of their balance after this credit was given them on April 24, 1905. Q. Can you state from your personal knowledge what their balance was on July 1, 1905? A. $6,927.16.’ It does not appear that the account of McLaughlin Bros. was at any time less than the sum last mentioned. This does not show that the bank was a purchaser for value.Where a bank discounts paper for a depositor, and gives him credit upon its books for the proceeds of such paper, it is not a bona fide holder for value, so as to be protected against infirmities in the paper, unless, in addition to the mere fact of crediting the depositor with the proceeds of the paper, some other...