Lampson v. Illinois Trust & Savings Bank

Mr. Presiding Justice Gary delivered the opinion oe the Court. The appellants were heavy dealers as grain and commission merchants, keeping an account with the appellee. Charles Smith was cashier of the appellants, “ ran the cash, kept track of the cash items, and made up the deposits," as the abstract says. August 17,1891, he went to the bank with funds to the amount of $94,017.53, among which was a $10,000 draft on New York by the appellants to the order of the cashier of the bank, which draft he did not deposit5 but obtained for it from the bank its draft on New York for the same amount, to the order of W. H. Martin—a fictitious payee. Both drafts were paid, so that as the transactions now stand the appellants have lost $10,000, but the bank has neither gained nor lost. If in fact the appellants had wanted from the bank a draft on New York, to the order of Martin, the business of obtaining it would have been quite as likely to be attended to by Smith, as by any person. It is unusual, but not extraordinary, that “ merchants will require bank drafts in preference to their own, in sending out of town around.” (Quoted from testimony in record.) The transaction was so much out of the common run, that the exchange clerk did confer with the third vice-president of the bank about exchanging the drafts, and he authorized the exchange. There is also contradictory testimony whether, on the same day after the exchange, the president of the bank and one of the appellants conversed as to the opportunity the appellants were giving Smith to defraud. How, the question is, did the bank get a good title to the draft by appellants, as bona fide purchasers 2 for if it did, then what became of the draft by the bank, is immaterial. The appellants are suing for the proceeds of the draft made by themselves. In Comstock v. Hannah, 76 Ill. 530, the Supreme Court adopts, from the New York Court of Appeals, the proposition that “ it is now, however, the settled law, that mere negligence, however gross, is not sufficient to deprive a party of the character of a bona fide holder. There must be proof of bad faith.” That case is approved in Shreeves v. Allen, 79 Ill. 553, and followed, without alluding to it, in Murray v. Beckwith, 81 Ill. 43. The appellants say that the “ case turns upon the question as to whether or not the circumstances were such as should have aroused, or, in fact, did arouse, the bank’s suspicions that Smith was misappropriating ” the draft by appellants. But in the case cited from 76 Ill., the rule is held to be that “ suspicion of defect of title, or the knowledge of circumstances which would excite suspicion in the mind of a prudent man, or gross negligence on the part of the taker, at the time of the transfer, will not defeat his title.” The appellants do not—can not fairly—contend that the bank acted in bad faith in exchanging drafts. The judgment is affirmed.