National Bank v. Bonsor

Opinion by Porter, J., The defendant corporation gave to the Schuylkill Valley Match Company its check, dated December 16, 1904, upon the Southwark National Bank of Philadelphia for the sum of $700, payable to the order of the Schuylkill Valley Match Company. The Schuylkill Valley Match Company was a depositor of the National Bank of Phcenixville and, on December 17, 1904, which was Saturday, it deposited this check, with its general indorsement, with said bank and received credit for the amount thereof in its account, and at the close of business on that day the balance due the depositor, including the $700 check, was $982.49. The Phcenixville Bank sent the check to its Philadelphia correspondent for collection, and on Monday, December 19, 1904, the check was passed through the clearing house; the defendant had notified the Southwark National Bank not to pay, and the check was protested for nonpayment. The plaintiff bank received notice of such protest on Tuesday, December 20. The plaintiff bank had, on December 19, 1904, before receiving notice of the dishonor of the check, paid checks of the match company upon the account to the amount of $381.71, leaving a balance of $600.78 at the close of business on that day, including in the account as a credit of the depositor the $700 for the check in question. If the credit for this $700 check which had been entered in the account of the depositor is to be charged back, then the account on December 19, 1904, was overdrawn to the amount of $99.22, and there is no evidence in this case that this overdraft was ever made good to the bank. The Phcenixville National Bank brought this action upon the check against the maker thereof, who set up as a defense that there had been a failure of consideration, as between the maker and the drawee of the check, and that the plaintiff was not a [279] holder for value. There was a verdict and judgment in favor of the defendant in the court below and the plaintiff appeals. The plaintiff made out a prima facie case, by the presentation of the check with its indorsement and the certificate of protest for nonpayment; the burden was therefore upon the defendant. The defendant undertook to meet that burden by proving a failure of consideration as between the maker and drawee of the check, and that the plaintiff was not a holder for value. The evidence which is the subject of the first three specifications of error was directly relevant to the facts in dispute, and those specifications are overruled. The evidence produced would have warranted a finding that the consideration for which the check was given had wholly failed and that the plaintiff bank was not a holder of the check in due course and for value, to the full amount thereof; the request of the plaintiff for binding instructions that it was entitled to recover the full amount of the check, with interest, was therefore properly refused, and the fourth specification is dismissed. The fifth and sixth specifications of error may be considered together. The check had been given in payment for matches bought by Bonsor & Company from the match company, which were to be up to a certain standard. The defendants produced evidence, which, if believed, would certainly have warranted a finding that the matches actually delivered were worthless, and that there had been a failure of consideration. The learned judge of the court below instructed the jury, in effect, that there was but one question in the case, that if they believed there-had been a failure to deliver the matches required by the contract, that the matches actually delivered were not of the qualitf required, their verdict must be for the defendant. Che'charge, in explanation of the position thus taken, contains this language: “The Schuylkill Valley Match Company, being a depositor in the plaintiff bank, and the check in suit having been deposited in due course, the presum$(¿&h of law is that the check was taken for collection, in the absence of a special agreement. There is no proof of any special agreement on the subject, and if you believe there was the failure to deliver up to the standard which they contracted to deliver, that is a good defense in this [280] case.” This eliminated from the case any question of the right of the plaintiff bank, as a holder for value, to recover the amount which they had advanced to the match company upon the faith of the check, which it had deposited in its account. When a bank credits a customer with the amount of a check, indorsed by him in blank, deposited in his account, the bank does not in the absence of a special agreement from this fact standing alone become a holder of the paper for value; the title to the check remains in the depositor. When such paper is dishonored the bank may charge it back to the depositor, without taking the steps necessary to hold him as an indorser. The relation arising from such a transaction, as between the bank and the depositor, is that the former becomes the agent of the latter for the purpose of collection: Hazlett v. Commercial National Bank, 132 Pa. 118; First National Bank of Clarion v. Gregg, 79 Pa. 384; Rapp v. National Security Bank, 136 Pa. 426; Morris v. First National Bank of Allegheny, 201 Pa. 160. The learned judge of the court below applied this rule in the present case, but in doing so lost sight of another rule applicable to the dealings of banks with their customers and to the rights which they acquire under the securities which come into their possession. When a bank makes advances or gives new credit on the faith of a check or other commercial paper which a customer has deposited for collection and for which he has received credit in his account, it becomes entitled to a lien upon such paper, and the proceeds thereof, for the amount thus advanced: United States Bank v. Macalester, 9 Pa. 475; First National Bank of Clarion v. Gregg, 79 Pa. 384; Logan et al. v. Smith et al., 8 W. N. C. 102; Bank of the Metropolis v. New England Bank, 42 U. S. 234; Davis v. Bowsher, 5 T. R. 488. When the plaintiff bank, on December 19, 1904, paid checks of its depositor, the match company, to an amount which reduced the apparent balance below 8700, it is fair to presume that this extension of credit was based upon the state of its account, which included the very check now in question: Erisman’s Appeal, 1 Pa. Superior Ct. 144. The plaintiff bank clearly had a lien upon the check for the amount thus advanced. We do not deem it necessary to consider what the effect of such a lien upon the [281] rights of the bank, in the check, might be in other jurisdictions, that effect in Pennsylvania is controlled by statute. The Act relating to negotiable instruments, approved May 16, 1901, P. L. 194, sec. 27, provides that: “Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien,” and sec. 191 thus defines the meaning of the word “holder:” “'Holder’ means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.” The uncontradicted evidence in the court below established that the plaintiff bank had made advances on this check to the amount of $99.22, and, if that evidence was believed, it was certainly entitled to recover that amount, with interest. The fifth and sixth specifications of error are sustained. The judgment is reversed and a new venire awarded.