Sloan v. Union Banking Co.

The opinion of the court was delivered, by Sharswood, J. It may certainly be considered as well established in this state, that before the holder of negotiable paper can be required to prove his bona fides, it must appear, either by direct evidence or by circumstances, that the instrument was obtained originally, or was put in circulation subsequently, by fraud or undue means. It is certain also that want or failure of consideration, or even that an agent or broker to whom it was intrusted for negotiation had fraudulently misappropriated the proceeds of its discount, will not be sufficient for that purpose. The maker, by its negotiable form, authorizes the payee to put' it in circulation. If he has issued the note imprudently, that ought not to impose upon the holder what may often be a very difficult, because an unexpected, burden. On the other hand, a man who has lost, or been robbed or defrauded, is to be considered in the light of an unfortunate rather than an imprudent man, and therefore has a claim to protection against maid fide holders. These are the grounds upon which the rule is placed in Knight v. Pugh, 4 W. & S. 445; Brown v. Street, 6 Id. 221; Albrecht v. Strimpler, 7 Barr 476; Gray v. The Bank, 5 Casey 365. The allegation made in the affidavit of defence filed in the court below, that the note sued upon was given for the balance appearing upon the settlement of a partnership account between the maker and the payee, in which it has since been discovered that there was a mistake, is after all nothing but want of consideration. It is not pretended that there was any fraud or falsehood on the part of the payee, or even that he was cognisant of the error when he received the note and put it in circulation. He was doing no moral wrong whatever. The bank who took it from him were justified, for aught that is alleged, in placing the most entire confidence in his integrity. Why, then, should they be required to prove affirmatively when and how they acquired possession of the note ? It would not be wise to extend the principle of Holme v. Karsper, 5 Binn. 469, any further than our determinations have already carried it, for it would be a very serious impediment to the free circulation of negotiable paper, which is so highly important in a commercial community. As to the remaining ground of defence, it is not easy to understand upon what principle the maker of a note can require the holder to appropriate money of the payee in his hands to its payment ; and this upon his own naked allegation that as between him and the payee he has a good defence. The bank, by the notice served upon them, were asked in effect to suspend proceedings against the maker, to pay themselves from the deposits of their own customer, and thus compel him to turn round and sue [473] the maker on the note. They have a right to do this, because they can pursue all or either of the parties, according to their discretion ; but there is no right or equity in the maker to require it. It would be a very unjust proceeding if this alleged defence is unfounded in law or fact. Must the bank be put to the trouble of ascertaining that ? The maker is the party who on the face of the paper is ultimately liable, and where he is able, it would seem most reasonable and just to pursue him in the first instance. Let him pay the note and bring his action of account or file his bill in equity against his former partner. If he can show the mistake, his remedy will be adequate and complete. As to the suggestion that the payee may draw all his deposits from the bank and abscond, it may be answered that the maker may do the same, and the payee be unable to follow him. Judgment affirmed.