First National Bank of Carlisle v. Graham.

FIRST NATIONAL BANK OF CARLISLE V. GRAHAM.

(85 Penn. St. 91.)

National bank — liability as bailee for special deposit.

In accordance with its habit, well known to the directors, a national bank received from a customer some bonds for safe-keeping, and the cashier gave a receipt for them. The bonds subsequently disappeared, but in what manner was not shown, and the president and cashier assured the depositor that she should lose nothing, and the interest was paid her for two years. Held, that there was sufficient evidence of gross negligence on the part of the bank to go to the jury, and that the bank was liable for such gross negligence of its officers.*

A

SSUMPSIT to recover bonds deposited by plaintiff with defendant upon the receipt of the cashier, "for safe-keeping," and to be returned on return of this receipt."

The plaintiff had judgment. The opinion states the other facts.

W. F. Sadler and S. Hepburn, Jr., for plaintiff in error. The bank had no authority to take deposits for safe-keeping. First Nat. Bank of Lyons v. Ocean Nat. Bank, 60 N. Y. 278; Wiley v. Nat. Bank of Brattleboro, 47 Vt. 546; Fowler v. Scully, 22 P. F. Smith, 456; Bank of Pennsylvania v. Commonwealth, 7 Harr. 155; Bank of United States v. Dandridge, 12 Wheat. 64; Head v. Providence Ins. Co., 2 Cranch, 167; Venango Nat. Bank v. Taylor, 6 P. F. Smith, 14.

John Hays and J. H. Graham & Son, for defendant in error.

PER CURIAM. Looking at the almost universal practice of banks of all kinds to accept special deposits of valuable securities from their customers, and the evidence in this case that such was the habit of this bank with the privity and knowledge of the directors and officers, we are of opinion that a liability for safe-keeping is

* See First Nat. Bank of Lyons v. Ocean Nat. Bank (60 N. Y. 278), 19 Am. Rep. 181, and note, 192; Wiley v. First Nat. Bank (47 Vt. 546), 19 Am. Rep. 122; First Nat. Bank v. Graham (79 Penn. St. 106), 21 Am. Rep. 49; Scott v. Nat. Bank of Chester Valley (72 Penn. St. 471), 13 Am. Rep. 711. In Whitney v. First Nat. Bank, 50 Vt. 388, it was held that a national bank was not liable for a deposit for gratuitous safe-keeping, though made according to usage and with the knowledge and acquiescence of the directors.

First National Bank of Carlisle v. Graham.

raised by the receipt given to the plaintiff in this case for her bonds. If the bonds be lost or stolen through the gross negligence of the bank this liability becomes fixed. The debatable question in this case is whether there was sufficient evidence of such negligence to be submitted to the jury. Upon the whole evidence we think there was. Whether the bonds in question were lost, stolen or abstracted by some one in the bank does not clearly appear. It certainly is a circumstance of some weight that a satisfactory solution of the manner of the loss has never been given by the bank. If, then, we refer to the structure and arrangement of the banking house and the vault, we find it almost impossible that this vault could have been entered in broad daylight, as alleged it must have been, by a person entering to steal these bonds, without his being seen by the officers of the bank. If we add to this an entire absence of any breach of the windows, doors, vault and floors, through which an entry might have been effected, and that no information was given to the plaintiff of the loss of her bonds until she called herself, and then she was called into a private room to communicate the loss, the case acquires more strength. And then, if finally she was told by the bank that the loss would not be hers but that of the bank, and that the bank would continue to pay her the interest, and accordingly did so for about two years, carrying the payments into the books of the bank, implying a consciousness of the officers that the loss was caused by some fault of the bank, we reach a point in the evidence of such strong import as to the fact of gross negligence, the evidence could not be withheld from the jury. Having been submitted to them, and gross negligence found by them, and a new trial refused, we cannot say that the evidence was insufficient, and that an error was committed. The verdict establishes the negligence. We discover no error in the record and the judgment is affirmed.

Judgment affirmed.

A negotiable promissory note was indorsed by the payees in the usual position. The defendant had previously written his name across the back of the note near the other end, in an inverted position. Held, that the defendant was liable as second indorser.*

SSUMPSIT. The opinion states the facts. Defendant had

A judgment.

M. F. Elliott, for plaintiff in error.

Henry Sherwood and C. H. Seymour, for defendant in error.

STERRETT, J. Suit was brought by the plaintiff in error against the defendant as indorser of a note, made by Houghton, Orr & Co. to the order of Booth, Dounce, Rose & Co., and by them indorsed. The name of the payees appears on the back of the note in the usual position of the first indorser, about three inches from the left end, and that of the defendant is written in the opposite direction, about the same distance from the right end of the note; so that the latter indorsement with reference to the former may be said to be inverted. This inartistic peculiarity, in the relative position of the names, has given rise to the question of defendant's liability as second indorser. This depends on whether the payees, from their position on the note, are to be regarded as first indorsers. If the defendant, in case he is required to pay, will have recourse to the payees, it follows that he is liable, as second indorser, to the holder. Whether he would have such recourse or not is really the test of his liability.

It appears from the testimony that in pursuance of an understanding between the makers and the payees, to the effect that the former was to furnish security, in addition to the firm name, the defendant by request indorsed the note before it was delivered to and indorsed by the payees. This, however, is immaterial, so far

* See Burton v. Hansford, ante, p. 571, and note, p. 580.

Arnott's Administrator v. Symonds.

at least as the plaintiff is concerned. Both names were on the note, just as they now appear, when it was presented to his bank for discount. He had no knowledge of the transaction except what might be derived from the face of the paper and the position of the indorsements thereon. The only ground of defense was that the defendant's indorsement, as shown by the note itself, was irregular or anomalous, and, therefore, on the authority of Schafer v. Farmers and Mechanics' Bank, 9 P. F. Smith, 145, and kindred cases, he was not liable. The learned judge entertained this view of the case and accordingly directed a verdict for the defendant. In this we think there was error. It cannot be doubted that a person who puts his name on the back of negotiable paper, before the payee has indorsed it, means to pledge in some shape, his responsibility for the payment of it; and it has been settled by this court, that, in the absence of legal evidence of any different contract, he assumes the position of second indorser, and that to render his engagement binding, as to any holder of the note, the implied condition that the payee shall indorse before him must be complied with, so as to give him recourse against such payee. Schafer v. Bank, supra; Eilbert v. Finkbeiner, 18 P. F. Smith, 247; 8 Am. Rep. 176. As was said in Herrick v. Carman, 12 Johns. 160, the fact of his indorsing first, in point of time, can have no influence, for he must have known, and we are bound to presume that he had acted on the knowledge that though the first to indorse, his indorsement would be nugatory unless preceded by that of the payee. Before the act of 1853 went into effect it was competent to prove by parol that the irregular indorser agreed to become surety for the maker or undertook to guaranty the payment of the note, etc.; but the statute effectually closes the door against this species of proof, and requires such agreement or understanding to be evidenced by some memorandum or note thereof in writing, signed by the party. Hence, in the absence of legal evidence to the contrary, the position of one who indorses in point of time before the payee is that of second indorser, and he cannot be held unless the payee assumes the place of first indorser. Taking the note then just as it was when presented for discount, what was the legal relation of the indorsers? The payees had placed their firm name on the note in the position usually occupied by the first indorser, and there is nothing to justify the inference that they intended to avoid the responsibility which usually attaches to a party occupying that posi

Arnott's Administrator v. Symonds.

tion. If they had written their name in the same direction and immediately under the indorsement of the defendant, the inference would have been quite plain that they did not intend that he should have recourse to them. The legal effect of placing their name where it is, without any indorsement above it, is to make them liable as first indorsers.

When the payee negotiates a note made to his own order, he naturally and ordinarily becomes first indorser, and in the absence of competent evidence to the contrary, the holders or indorsees will have recourse to him, if the paper is dishonored. There is nothing on the face of the note or in the position of the indorsements in this case, to make it an exception to the rule. The fact that the defendant's name, considered in relation to the payee's indorsement, is inverted, can make no difference. Instead of having been written in the opposite direction and parallel to that of the payee's, it might have been placed diagonally thereto, or in any other position so that it was not over or above it. There is no evidence that the plaintiff knew which indorsement was made first in point of time; nor would it be material if there was. The only knowledge he had was such as the paper itself imparted, and from this he had no notice that could in any way affect his right to recover against either of the indorsers.

It may be that this view of their legal relation, as derived from the position of the indorsements, will defeat the object the payees had in requiring the makers to furnish an indorser. If so, it must be accepted as the result of their mistake in taking the note, made to their own order, instead of to the order of the defendant. The same result would flow from the ruling of the court below. If suit were brought against them by the defendant, they could not successfully say that they do not appear on the note as first indorsers, nor would they be permitted to prove by parol that their liability was secondary to that of the defendant.

Judgment reversed and a venire facias de novo awarded.

Judgment reversed.