Kuder v. Greene

Riddick, J., (after stating the facts.) This is an action by plaintiff Kuder against C. M. Greene and R. T. Knight, partners doing business under the firm name of the Citizens’ Bank, to recover the proceeds of a check which he claims to have deposited with the bank for collection. The check was made payable to the cashier of the bank, and was delivered to the bank by one Cole, to whom the proceeds of the check were paid. The defendants claim that Kuder authorized Cole to collect the check, and had him to present the check to the bank for the purpose of avoiding payment of exchange and collection charges. They say that the money was paid over to Cole in the usual course of business, and in accordance with commercial custom, and without notice, and that the bank was a bona fide holder, and should be protected. But as to whether or not Cole was authorized to collect the check the evidence was conflicting, and, the court having found that Cole had no authority to collect the check, we must assume 'that this was true. The question presented is then whether the bank was a bona fide holder of the check for value, and as such entitled to be protected against the equities of the drawer of the check ? It was said by Rord Russell, in Lewis v. Clay, 67 L. J. Q. B. (N. S.), 224, Huff cut, Neg. Inst. 440, that the payee of a note or check could not, under the English statute, be a bona fideholder, so as to protect him against the equities of the maker; but it has been held that there are exceptions to this rule. For instance, it has been said that it is customary for a debtor wishing to pay his debt to procure a check or draft drawn by another payable direct to the creditor, and that when such a check is delivered to the creditor in payment of his debt, the creditor, though the payee, may still become a bona fide holder of such check, and be protected as such. Boston v. Steurer, 183 Mass. 140; Tabor v. Bank, 28 Ark. 454. Now, if Cole had been indebted to the bank, and had delivered the check in payment of his debt, this might have furnished to the bank reasonable ground for believing that Cole was the owner of the check, and that it was made payable to the cashier for convenience to be used in paying the debt. But that is not the case here, for it is not claimed that Cole owed the bank, or that the check was delivered bo the bank in settlement of a debt. Cole brought two checks to the bank, one for $150, payable to himself, the other for $600, payable to the cashier of the bank. These checks were both drawn by Kuder on the same day, while in Harrison where the bank was located, and were presented by Cole to the bank at the same time. The usual custom, when one draws a check in favor of another in payment of a debt due him or as a -loan to him, is to make such person the payee in the check. It seems not in accordance with the usual custom that Kuder should draw two checks at the same time in payment of a debt he owed Cole and malee one of them payable to Cole, and the other payable to the cashier of the bank in the town where the checks were drawn, and this it seems to us, in the absence of any reason why it was made payable to the cashier instead of to Cole, should have aroused the suspicions of the bank, and put it upon inquiry. Suppose that this check had been picked up by Cole on the street where Kuder had dropped it, would the bank be justified in paying the proceeds of it to Cole when by its terms it was payable to the cashier of the bank? .We think not. And so when Cole presented these two checks to the bank we think that the circumstances were such that the bank must be held to have had notice that Kuder had an interest in the check which he had made payable to the cashier, and which he had not authorized Cole to collect, and that defendants are not entitled to the protection of bona fide holders. But the last finding made by the court was to the effect that Kuder gave Cole authority to cash the check, and directed him to deposit the proceeds thereof in the bank to the credit of Kuder. If Cole had authority to collect the check, the bank would not be responsible for his failure to deposit the proceeds; and if this finding was correct, the judgment in favor of the defendants was right. But this finding seems to us to be in conflict with other findings of the court to which we have called attention, and we are therefore of the opinion that the judgment should be reversed, and the case remanded for a new trial.