Bank of Pittsburgh v. Neal
63 U.S. 96 (1859)

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U.S. Supreme Court

Bank of Pittsburgh v. Neal, 63 U.S. 22 How. 96 96 (1859)

Bank of Pittsburgh v. Neal

63 U.S. (22 How.) 96

Syllabus

A commercial house sent to a correspondent eight bills of exchange, four purporting to be the first and the other four the second of exchange, and the whole eight accepted on their face by that commercial house, and each of the four made payable to the order of their correspondent, but in blank as to the names of the drawers, and the address of the drawers, and as to date and amount and time and place of payment.

The correspondent filled up and had discounted the four which were the first of exchange, which were not involved in the present suit.

Page 63 U. S. 97

Two of the four of the second of exchange were filled up, varying from the others, not only in dates and amounts, but also as to time and place of payment.

These bills were discounted by a bank without any knowledge whatever that either had been perfected and filled up by the prayee without authority, or of the circumstances under which they had been entrusted to his care, unless the words "second of exchange, first unpaid" can be held to have that import.

The effect of these words was a question of law, and not of fact for the jury.

The bills described above were not parts of sets of bills of exchange. They were perfected, filled up, and negotiated, by the correspondent of the defendants, to whom the blank acceptances had been entrusted as single bills of exchange, and for the acts of their correspondent, in that behalf, the defendants are responsible to a bona fide holder for value without notice that the acts were performed without authority.

The case falls within the rule that where one of two innocent parties must suffer through the fraud or negligence of a third party, the loss shall fall upon him who gave the credit.

This was an action brought by the bank upon two bills of exchange, one dated on the 18th of August, 1857, at Pittsburgh, drawn by L. O. Reynolds & Son upon J. S. & R. E. Neal, at Madison, Indiana, requesting them to pay, four months after date of this second of exchange, first unpaid, to the order of L. O. Reynolds, at the Ohio Life Insurance and Trust Company, at Cincinnati, in the State of Ohio, two thousand one hundred and sixty-eight dollars. Reynolds endorsed this bill to L. Wilmarth & Co., who endorsed it to the bank. The bill was accepted by J. S. & R. E. Neal.

The other bill sued upon was similar in all its circumstances except that it was dated on the 1st of August, 1857, payable four months after the date of this second of exchange, first unpaid, for thirteen hundred and fifty dollars. It was endorsed and accepted like the other.

In order to present a distinct view of the transactions which led to this suit and the nature of the defense, it seems necessary to state particularly all the bills mentioned in the proceedings, designating each bill by a letter, which is the reporter's mark, and used for easy reference.

In June, 1857, J. S. & R. E. Neal, residents of Madison,

Page 63 U. S. 98

Indiana, for the purpose of raising money, delivered to L. O. Reynolds, of Pittsburgh, the four following bills, viz.:

"Exchange for $_____."

"_____ after _____ of this first of exchange, second unpaid, pay to the order of L. O. Reynolds _____ dollars, value received, without any relief from valuation or appraisement laws."

"To _____."

"Accepted: J. S. & R. E. NEAL."

(This bill we will call A)

"Exchange for $_____."

"_____ after _____ of this first of exchange, second unpaid, pay to the order of L. O. Reynolds _____ dollars, value received, without any relief from valuation or appraisement laws."

"To _____."

"Accepted: J. S. & R. E. NEAL."

(This bill we will call B)

"Exchange for $_____."

"_____ after _____ of this second of exchange, first unpaid, pay to the order of L. O. Reynolds _____ dollars, value received, without any relief from valuation or appraisement laws."

"To _____."

"Accepted: J. S. & R. E. NEAL."

(This bill we will call C)

"Exchange for $_____."

"_____ after _____ of this second of exchange, first unpaid, pay to the order of L. O. Reynolds _____ dollars, value received, without any relief from valuation or appraisement laws."

"To _____."

"Accepted: J. S. & R. E. NEAL."

(This bill we will call D)

With these bills, instructions were sent to Reynolds to have them filled up for sums not less than $1,500, nor more than $3,000 each, to have them discounted at Pittsburgh, and remit the proceeds to J. S. & R. E. Neal, at Madison, Indiana.

In July, 1857, four other bills like the preceding were sent to Reynolds. These last bills were sent to Reynolds at his

Page 63 U. S. 99

request, and intended for his use, as accommodation acceptances of the Neals.

These bills we will call E, F, G, H.

A was filled up by Reynolds as follows: Date, July 1; amount, $1,965; time, four months; drawers, L. O. Reynolds & Son; drawees, J. S. & R. E. Neal. Thus filled up, it was negotiated by Reynolds to the Mechanics' Bank of Pittsburgh. Reynolds failed to remit the proceeds according to instructions. When the paper matured, the defendants, as acceptors, paid it.

B was filled up as follows: Date, July 10; time, four months; amount, $2,035; drawers, L. O. Reynolds & Son; drawees, J. S. & R. E. Neal. Thus filled up, it was negotiated by Reynolds to the Merchants and Manufacturers' Bank of Pittsburgh. The proceeds of this bill were remitted by Reynolds to the defendants. Before the commencement of this suit, the Merchants and Manufacturers' Bank, as holder and owner of the bill, recovered judgment on it against the acceptor in the Jefferson Circuit Court of the State of Indiana. C and D were for the present retained by Reynolds in his own possession.

E, being similar to A, was filled up as follows: Date, July 30; time, four months; amount, $2,450; drawers, L. O. Reynolds & Son; drawees, J. S. & R. E. Neal. Thus filled up, it was negotiated by Reynolds to the Merchants and Manufacturers' Bank of Pittsburgh, Reynolds retaining the proceeds. The holders of this bill brought suit against the defendants, as acceptors, in the Jefferson Circuit Court, Indiana, which action was still pending when the pleas in this case were filed.

F, being similar to B, was filled up by Reynolds as follows: Date, July 24; time, four months; amount, $2,750; drawers, L. O. Reynolds & Son; drawees, J. S. & R. E. Neal. Thus filled up, it was negotiated by Reynolds to the Citizens' Bank of Pittsburgh, Reynolds retaining the proceeds. John Black & Co. became the holders, and after its maturity, and before the commencement of this suit, they recovered judgment against the acceptors of the bill for its full amount in the Jefferson Circuit Court of Indiana.

Page 63 U. S. 100

Thus, the bills A, B, E, F, being the first of exchange, second unpaid, are accounted for. What became of G and H, the record did not show. Let us now account for C and D.

C was filled up as follows: Date, August 1st; time, four months; amount, $1,350; drawers and drawees, as above.

D was filled up as follows: Date, August 18; time, four months; amount, $2,168; same drawers and drawees. These bills were both negotiated to the Bank of Pittsburgh, and were the ones sued on in this case. It will be observed that they were both second of exchange, first unpaid, and that the sums of money did not correspond in amount with any of those for which the first of exchange had been filled up, nor in date, time, or place of payment.

There were four counts in the declaration, and eight pleas, which were all demurred to except the plea of the general issue. It is not necessary to state these pleadings, because they were only intended to raise the questions of law which arise from the statement of facts given above. The court overruled the plaintiffs' demurrers, so that judgment went for the defendant; and upon this ruling upon the demurrers, the case was brought up by the plaintiff to this Court.

Page 63 U. S. 104

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