Brennan v. Merchants' & Manufacturers' National Bank

Campbell, C. J. This is a suit to recover from a bank money that it had before paid on the same check. On the sixteenth day of September, 18S5, Mr. McLennan, ¡a Detroit business man, purchased certain merchandise of Thomas Walsh, and gave his check on defendant, the Merchants’ & Manufacturers’ National Bank of Detroit, for the amount, payable to Walsh’s order. Walsh had a clerk named Phillips, who was his general agent, and had authority to receive, indorse, and otherwise deal with negotiable paper for Walsh, and this check was-put in his hands in payment for the goods by McLennan.^ Phillips at once put upon it a blank indorsement, but did not present it that day. That night Walsh died. Phillips gave the check to his widow, and on the twenty-first of Septem [346] her, at her request, he presented it to defendant for payment,, and it was paid to Phillips, and the money given to Mrs. Walsh. At that time defendant had no knowledge of Walsh’s-death. On MeLennan’s periodical settlement with the bank this-check was returned with the rest as paid. He subsequently handed the check back to plaintiff, who sues the bank upon-it. Why he returned it is not shown. Plaintiff sued specially as holder of the check, and added; the common counts. The court below gave him judgment.. In our opinion, the ruling was erroneous. As appears-from the case, and as was admitted on the argument, the indorsement by Phillips has the same effect as if made by Walsh. It is undoubtedly true that, generally, an indorsement not delivered is not sufficient to create the responsibility of an indorser. But where a person has, by his own act,, given negotiability in appearance to an instrument drawn by another, which is an existing contract and valid in his hands,. , and it gets into circulation, and is paid by the person on ■whom it is drawn, without notice of anything wrong, the payment will be protected. The bank in this case acted on the faith of an indorsement which was put upon the check by Walsh’s authority, and made the check payable to bearer. If it had been lost in that condition, any Iona fide purchaser, could have collected it. There is no authority that we have found which holds that the death of a payee or indorser after a note has been negotiated can affect its negotiability further or prevent the I drawee from safely paying it. A different question might. ' have arisen in case of the death of the drawer. But there is little dispute that even then a payment of a genuine check in the due course of business, by the bank, in ignorance of his death, would be protected. Byles, Bills, 24; Chit. Bills, 429 ; 2 Pars. Notes & Bills, 82; 2 Daniel, Notes & Bills, § 1618a. And while there is some authority for holding that death, when known to the banker, revokes the check, so far as the drawer is concerned, the authorities, such as they I are, go no further. [347] EEere the check itself was ■ undoubtedly good, and bound* the drawer. It had been made payable to bearer before-Walsh’s death, and the bank knew nothing to impeach that condition. The payment was authorized by the apparent condition of the paper, for which Walsh was responsible, and was protected. Daniel, Notes & Bills, § 1582, and citations. This is enough to dispose of the case, but there is another equally conclusive answer to the suit. The plaintiff claims entirely as holder of this check. There is nothing else in the case that he can rely on, whatever may be the theory of the suit. A bank is not liable on a check unless certified or accepted. Checks are sometimes certified, which amounts to an acceptance ; but that is the only form in which a liability can very well, be created, unless; perhaps, by some recognition by estoppel, and, under our statutes, every acceptance must be in writing. How. Stat. § 1583. Our statutes concerning the.assignment of choses in action expressly except negotiable paper. How. Stat. § 7344; Matteson v. Morris, 40 Mich. 55; Redmond v. Stansbury, 24 Id. 447; Robinson v. Wilkinson, 38 Id. 301. If the payment of the check was wrongful (which, however, we think it was not), Mr. McLennan may have had a right of action; but it is not set up in the declaration, and is not shown to have been assigned to plaintiff. All that he did was to hand back the paid check to plaintiff, with such rights as that check had lawfully attached to it, and no more. Some cases were cited from Pennsylvania and elsewhere, which purport to be based on a conjecture thrown out by Judge Davis in Bank of the Republic v. Millard, 10 Wall. 152, the decision in which seems to us not supported at all by the case itself, and inconsistent with it. That case held that where a check on a banker had been paid on a forged indorsement, the right holder had no action on the bank to. recover the same money over again. But a query was put whether, if the payment had been allowed in settlement with the drawer, the bank would not hold the fund for the payee instead of the drawer. But the court had already held that [348] such a payment was a misappropriation of the drawer’s funds, and the money would still be subject to his order, as if not drawn, and it is not obvious how the settlement made by mistake could change the case. Mr. Morse, in his treatise on Banking, regards the case in 10 Wall, as not warranting any such inference as was drawn by the cases cited before us on the argument. Upon the only theory suggested, which is that such an arrangement amounts to an acceptance, this would be contrary to our statute, which does not allow a parol acceptance unless there was some conduct which would ¡have an equivalent effect. Whatever force may have been given to the conjectural ■doubt of Judge Davis in the case /in 10 Wall, has been entirely destroyed by the subsequent carefully considered action ■of the same court in First Nat. Bank v. Whitman, 94 U. S. 343, where it was decided that there was no action in any case in favor of the true owner of a check against the bank where the bank had paid it on a forged indorsement, and that the fact that it had been included in settlements made no difference. This puts an end to any supposed favoring of the contrary doctrine in Bank of the Republic v. Millard, which is distinctly affirmed, while the other inference is denied, and reasons given for its fallacy. Our rulings upon the relations of banks and depositors have always denied any interest of the payee of an unaccepted check in the drawer’s funds in bank, and have followed those of the United States Supreme Court. Second Nat. Bank v. Williams, 13 Mich. 282; Grammel v. Carmer, 55 Id. 201. In England the same doctrine is well established, not only at law, but in equity. In Hopkinson v. Forster, 19 Eq. Cas. 74, a bank filed an interpleader bill against various claimants of a fund, including holders of drafts not accepted, and it was held they had no claim against the bank, at law or in equity, and must be dismissed from the controversy. We see no ground on- which the judgment can be supported, and it must be reversed, with costs. The other Justices concurred.