Butler ex rel. Northampton Bank v. Chapin

Walker, J. The note in controversy was indorsed by the agent of the payees, to the Northampton Bank, on the 17th day of August, 1857. On the 20th day of the same month, it was forwarded by the bank to the American Exchange Bank, New York, for collection. It matured on the 30th, and.on the 12th of September the bank paid to the agent of the payee, who indorsed the note, the sum of $100, under the supposition that the note had been paid by the makers, to the Exchange Bank., But, on the 20th of September, it was returned to the Northampton Bank, unpaid. Parshley, the agent of the payee, afterwards, on the 12th day of J anuary, 1859, received of the makers the full amount of the note, and gave to them a receipt, in which it is recited, that the note had been lost or mislaid. This payment was made after notice to the makers, that the note had been returned unpaid to the Northampton Bank. They, by letter, on the 29th of September, acknowledged the receipt of this notice, and promised to pay the note to the bank, between the 10th and 15th of October following. This then presents the question, whether the makers were protected in paying the note to Parshley under these circumstances. The note was payable to the order of the makers, and indorsed by Parshley, their agent. The note, by this indorsement, for the first time became operative as such, and thereby became payable to the assignee, or if, as in this case, the indorsement was general, then to the holder who should receive it in the regular course of business. It appears, that the Northampton Bank received it for collection, so indorsed, and sent it forward for collection; and after waiting a sufficient time to have received notice of its dishonor if it had not been met, paid on it the four hundred^ dollars. The bank received the note before it was due, and paid the money to Parshley, in perfect good faith, so far as can be discovered from the evidence embodied in the record. The bank gave the requisite notice to the makers, sufficient to have put them upon inquiry. They knew the bank had the note on the 22nd of September, 1857, and that Parshley did not have it in his . possession when they made the payment. They do not seem to have made any inquiry of the bank to learn what disposition, if any, it had made of the note. They knew that the bank had held it, and they had promised to pay it to the bank. The indorsement of the note vested the legal title of the note in the bank. Yet the equitable title remained in the payees. When, however, the bank paid Parshley’s check, on the strength of the note, the equitable title became united with the legal title in the bank. Or if the note was made to enable Parshley to raise money, when it was indorsed to the bank, it was thereby made payable to the bank, and it had the right to sue and recover the money. Even if Parshley is to be believed when he says that he had the note after it was dishonored, it may be that it was handed to him in the confidence that he would collect and hand the money to the bank. But there is no evidence that appellees knew that he had, for any purpose, repossessed himself of the note, and when he returned it to the bank, it was the same as though it had not been delivered to him. If one of two innocent persons must sustain a loss, it must be borne by him who has contributed to it, or has acted with negligence of his rights. In this case the bank had employed every reasonable caution to protect its interests, by giving notice that it was the holder; and the presumption prevailing that when a fact is shown to exist, it continues until shown to have ceased, it was incumbent on the makers to institute inquiry, whether or not the note was still held by the bank before they paid it to another. They had no right to presume that Parshley had again become the owner of the instrument, simply because he affirmed the fact. The bank having been guilty of no negligence, and the makers having paid the money in their own wrong, they must sustain the loss. The judgment of the court below must be reversed, and the cause remanded. Judgment reversed.