Fidelity Title & Trust Co. v. First National Bank

Opinion by Mr. Justice Simpson, At the instance of E. C. McFeaters (who falsely represented he was acting for defendant in this regard), Moore, Leonard & Lynch, purchased $5,000 par value of unregistered coupon bonds, and handed them to plaintiff, as collecting agent, to be forwarded to defendant, with a sight draft as follows: “Moore, Leonard & Lynch, Bankers & Brokers, Pittsburgh, Pa., May 24,1922. At sight...............................with exchange pay to the order of Fidelity Title & Trust Co........... Five thousand twenty-seven and 78-100........dollars $5,000 Lib. 4-4 1/4’s attached First National Bank, Spring Mills, Moore, Leonard & Lynch Centre Co., Pa. By John Garrett.” Plaintiff, the payee named, endorsed it: “Pay any bank, banker or trust company, or order, for collection and remittance to Fidelity Title & Trust Co., Eugene Murray, Treasurer.” and sent it to defendant by registered mail, accompanied by this letter: “Fidelity Title & Trust Co. Pittsburgh, Pa., May 24, 1922. First .National Bank, Spring Mills, Centre Co., Pa. I enclose for collection and return credit items as below. Yours truly, Eugene Murray, Treasurer. On whom drawn You 1 sight draft 5000 L. L. Bonds plus exchange.” Amount $5,027.78 attached. [405] The nest afternoon, defendant’s teller received and receipted for both these papers, and, on the morning of May 26, 1922, delivered them to the cashier of the bank. McFeaters, with whom defendant had had prior dealings, called at the bank, falsely stated that the bonds had been sent for his account, and when the cashier placed them within easy reach, picked them up and walked off with them, saying he would be back a few days later and settle for them. Apparently relying on this promise, defendant made no attempt to apprehend him, or to recover the bonds or their value, nor did it advise plaintiff or Moore, Leonard & Lynch of the loss. On May 29, 1922, McFeaters, in a telephone conversation with defendant’s cashier, again told the latter he was coming down in a few days to settle for the bonds. Neither plaintiff nor Moore, Leonard & Lynch learned of the theft until June 6, 1922, when the latter called up defendant on the telephone, and in the course of the ensuing conversation was so told by its cashier. In the interim McFeaters had disappeared and there was no possibility of a recovery from him. Both before and after it knew of the theft, plaintiff requested defendant to pay the draft or return the bonds; all these demands being ignored, the present action of trover and conversion was brought, and, from the judgment on an instructed verdict for plaintiff, this appeal was taken. Defendant avers that whether or not it was liable in that form of action was, under the evidence, for the jury and not for the court, and this raises the principal question in the case. In its affidavit of defense, defendant averred that Moore, Leonard & Lynch were the real owners of the bonds (which is true), and that they connived with Mc-Featers in relation to this matter, insinuating, but not averring, that the two were engaged in a conspiracy to defraud. No evidence was offered to sustain this unpleasantintimation; but it was shown that a few days after the bonds were stolen some unrecognized person, [406] supposed to- be connected with Moore, Leonard & Lynch, said telephonically to one of defendant’s directors “Mc-Featers was in their [firm’s] employ on trial for a week” and to its cashier that, in another and lat'er transaction, he was “their agent.” If we were to assume that these statements would have justified a finding that he was Moore, Leonard & Lynch’s employee or agent at the time he stole the bonds from defendant, it would not aid the latter, for there was no evidence he had any express or implied authority to take the bonds, and it' had the burden of proving this necessary fact' in its defense: Interstate Securities Co. v. Third National Bank, 231 Pa. 422. Appellant also avers it had not authorized t'he purchase of the bonds, and was unaware of the transaction until the papers were received. This being so, it knew, as soon as they were delivered to it, that a mistake had been made; from inspection it also knew the draft was a sight draft which it should honor or dishonor within twenty-four hours, if it did not wish to “be deemed to have accepted” it (sections 136 and 137 of t'he Negotiable Instruments Act of May 16, 1901, P. L. 194, 213); and it knew further that the bonds were of such a character their mere possession, by an innocent holder for value, would possibly give a good title to them, even though purchased from one who was later shown to be a thief. These facts called upon defendant to act with the “utmost promptness, diligence and good faith” after it received the draft and bonds (Iron City National Bank v. Fort Pitt National Bank, 159 Pa. 46, 49), in each of which respects, however, it wholly failed, and hence made itself liable for the resulting loss. Moreover the failure t'o give timely notice of the stealing of the bonds leads to the same conclusion. If defendant did not intend to become responsible for their value, it should have given immediate notice of the theft to plaintiff or Moore, Leonard & Lynch. If it had done so, McFeaters might have been arrested and the bonds or their value recovered. This opportunity was lost by [407] defendant’s silence, and the courts will not weigh, nor permit a jury to consider, whether or not anything might have been thereby recovered (Leather Manufacturers National Bank v. Morgan, 117 U. S. 96; McNeely v. Bank of North America, 221 Pa. 599), but will require defendant, because of its neglect in this respect, to make good the entire loss. Nor is there any real doubt but that plaintiff had such a special interest as entitles it ho maintain the action. It had a right to the possession of the bonds as against everybody but Moore, Leonard & Lynch, and had a duty of accounting to the latter for it's handling of them; defendant wholly failed to prove anything which would have relieved it from liability if it had been sued by that firm, and hence “has no concern in the question of actual ownership, [since] the defense [does not] turn upon points involving the personal conduct of the true owner, or those who preceded him,” and this is so although plaintiff “was a mere collecting bank”: Brown v. Clark, 14 Pa. 469; Farmers Deposit National Bank v. Penn Bank, 123 Pa. 283, 291; Gunzburger v. Rosenthal, 226 Pa. 300. We are thus brought to the important question in the case, viz: Was the court below justified in giving binding instructions for plaintiff, in view of the fact that this was á suit in trover and conversion? If nothing further had been shown except' the receipt of the bonds by defendant, and its refusal to return them on demand, of course the action would lie. But demand and refusal are only evidence from which a conversion may or may not be established, depending on the circumstances of the particular case (Blakey v. Douglass, 3 Sad. 495; 38 Cyc. 2031; 26 Ruling Case Law 1124); hence, when, as here, it could have been found by the jury that before demand made the bonds had been stolen, as a result of negligence only and not by reason of any tortious act, the question of conversion became a matter of fact for that tribunal to decide, and not of law for the court: Dearbourn v. [408] Union National Bank, 58 Me. 273; Bowers on Conversion, section 317; 26 Ruling Case Law 1112. It does not follow, however, that we must reverse the judgment because of this error. On its own showing defendant is liable to plaintiff in a proper form of action, and the change thereto may yet be made by an amendment in t’he present case. The right to maintain this kind of suit was raised in the affidavit of defense, but barely referred to at the trial. If it had been insisted upon at that time, it is not unlikely an amendment would have been applied for and granted, for, since defendant is a corporation, plaintiff can gain no advantage by a judgment in this action rather than in assumpsit or negligence; and, except as regards the costs, defendant will lose nothing if an amendment is made. In any event, however, it would be useless to reverse and send the case back for a retrial, with an amendment then allowable and a verdict for plaintiff inevitable; hence we will consider the amendment as if made, and affirm the judgment, but without costs in either court. Judgment affirmed, plaintiff to pay its own costs in the court below and here.