Haugan v. Sunwall

COLLIN'S, J. This appeal is from an order granting defendant’s motion for a new trial after a verdict had been rendered against -him, by direction of the court, for the full amount claimed to be due on his negotiable promissory note. This note had been made payable to the order of the American Exchange Bank, and before maturity had been .transferred, indorsed, and delivered by the cashier of the' bank to the plaintiff as collateral security for money belonging to the city of Minneapolis, which the latter had previously ■deposited in the bank in his own name as treasurer. The indorsement and delivery were made June 24, 1893. Three days afterward the bank closed its doors, and on July 1 it made an assignment for the benefit of its creditors under the insolvency laws of the state. The principal question in the case is whether the court below erred when it excluded from the jury all consideration of certain evidence introduced by defendant which tended to show that at the time of the transfer of the note to plaintiff, and up to the time the bank suspended payment, the former had a sum of money exceeding $800 on deposit therein. The object of the evidence was to render available to defendant as a set-off pro tanto the amount of the deposit. It was undisputed that plaintiff had no knowledge of the fact when he took the note. As it stands conceded that the indorse [371] ment and delivery were before the maturity of the note, and the consideration therefor was a pre-existing debt, the rule laid down recently in the case of Rosemond v. Graham, 54 Minn. 323, 56 N. W. 38, is exactly in point. It was there held, after a thorough examination of the authorities, that the indorsee of negotiable paper taken before maturity as collateral security for an antecedent indebtedness, in good faith, and without notice of defenses which might have been available between the original parties, holds the same free*from such defenses. The ruling whereby the evidence in respect to the deposit account was taken from the jury was correct if plaintiff took the note in good faith, and by this his good faith simply is meant. His title cannot be impeached unless he had actual or constructive notice of facts such as to subject him to the imputation of fraud or bad faith in the transaction. Merchants’ Bank v. McNeir, 51 Minn. 123, 53 N. W. 178. We fail to discover in the testimony offered and received, or in that offered and excluded, anything which could be used by defendant tending to indicate fraud or bad faith on plaintiff’s part. The transaction took place early in the morning, but the bank was open and doing business. The plaintiff dealt with the cashier, and the court below seems to have thought that the transfer should have been authorized by the board of directors. But the cashier of a bank is virtute officii generally intrusted with its notes and securities, and is held out to the world by it as its general agent in the negotiation, management, and disposal of them. Prima facie, therefore, he must be deemed to have authority to transfer and indorse negotiable securities held by the bank, for its Use and in its behalf. Wild v. Bank of Passamaquoddy, 3 Mason, 505, Fed. Gas. No. 17,646, a leading case; Morse, Banks, §§ 157, 158a, 158g, 160; 2 Am. & E. Enc. Law, 114. See, also, Merchants’ Bank v. McNeir, supra. It is claimed, however, by counsel for defendant, that none of the authorities go to the extent of holding that a cashier has power, without express written authority from the board of directors, to transfer and indorse its notes and bills as security for pre-existing debts, citing Hoyt v. Thompson, 5 N. Y. 320. Even if this be the law, the act of the cashier here questioned was not void. It was merely voidable, and can only be questioned by the assignee in insolvency, not by defendant, for as to him plaintiff’s title is good. The trial court seemed to be of the [372] opinion, when granting a new trial, that the insolvency of the bank, the cashier’s knowledge of it, and that by a transfer of the note under such circumstances he was giving a preference to a creditor forbidden by the insolvency law, was perpetrating a fraud upon other creditors, could be shown by defendant to prevent a recovery. It is 'well settled in this jurisdiction that such a defense is not available to defendant. Berry v. O’Connor, 33 Minn. 29, 21 N. W. 840; Smith v. Brainerd, 37 Minn. 479, 35 N. W. 271. The assignee of the bank can alone inquire into transactions in violation of'the provisions of the insolvency law. If it were otherwise, we might witness an unsuccessful proceeding on the part of an- assignee to avoid a transaction of this character on the ground of a fraudulent preference, the maker of the note not being a party to such proceeding, and the next day see such maker successfully defend on precisely the same grounds in an action brought against him by an indorsee to recover on the note;, the result being that we should have the note afloat in the world without a holder who could enforce its payment. ■ There is nothing in the contention that plaintiff is not the real party in interest, and entitled to maintain the action. Order reversed.