The deposit of a promissory note with the agent of a third party
upon condition that it should be used by the agent's principal for
a specified purpose, confers no authority upon the principal to
hold the note for a different purpose.
An act passed by the Legislature of the State of Ohio,
respecting the administration of assignments by insolvent debtors,
provides as follows:
"Creditors shall present their claims . . . to the assignee for
allowance, and the assignee shall endorse his allowance or
rejection thereon, and claimants whose claims are rejected shall be
required to bring suit against the assignee to enforce such claims,
. . . in which, if he recover, the judgment shall be against the
assignee that he allow the same in the settlement of his trusts,
that the assignee may make any defense to
such action that the assignor might have made to a suit instituted
against him before the assignment for the same cause of
The bill in this case was filed in pursuance of this statute. It
was brought by the appellant, the Quebec Bank of Toronto, against
Max Hellman, assignee of P. Weyand and D. Jung, partners as Weyand
& Jung. The bill alleges an assignment by Weyand & Jung
under the insolvent laws of the state, and the qualification of the
assignee, and that Weyand & Jung at the time of the assignment,
were indebted to the Quebec Rank of Toronto upon a promissory note
of which the following is a copy:
"CINCINNATI, February 7, 1870"
"Sixty days after date, we promise to pay to the order of George
M. Bacon & Co. five thousand dollars at Merchants' National
Bank. Value received."
"5,000 P. WEYAND AND D. JUNG"
Page 110 U. S. 179
The note was endorsed as follows:
"George M. Bacon & Co."
The bill further alleged that the note was endorsed and
delivered to the plaintiff, before maturity, for value; that the
plaintiff was the owner thereof; that a claim based on the note had
been presented to the assignee for allowance against the estate of
Weyand & Jung, and disallowed. The prayer of the bill was that
the assignee be required to allow the claim of the plaintiff for
the amount due on said note, to-wit, $5,000, with interest, in the
settlement of his trust as assignee of Weyand & Jung.
Two defenses were set up in the answer -- first, that the
appellant was not the owner of the note, and second that the note
was without consideration and void.
Upon final hearing, the circuit court made a decree dismissing
the bill. That decree is brought up for review by this appeal.
MR. JUSTICE WOODS delivered the opinion of the Court.
The record discloses the following facts:
George M. Bacon & Co. were a firm dealing in barley and
other brewers' supplies in Cincinnati, Ohio. They purchased barley
at Toronto, Canada, and advanced a part of the price of the barley
purchased. When a shipment was made, a draft was drawn upon them by
the consignor for the balance remaining unpaid on the shipment,
which was usually a time draft, and accompanied by a bill of lading
for the barley shipped.
On November 10, 1869, a draft, accompanied by a bill of lading
for 15,000 bushels of barley, was drawn on Bacon & Co. by
Thomas Clarkson & Co., of Toronto, Canada, for the sum of
$6,502.56, payable in gold twenty-five days after date. This draft
was endorsed by Thomas Clarkson & Co., and on presentation to
the drawees, Bacon & Co., was accepted by them. Upon the
arrival of the barley in Cincinnati, Bacon & Co. received
Page 110 U. S. 180
and disposed of it. Before the draft matured, Bacon & Co.
made an arrangement with the appellant, the Quebec Bank of Toronto,
which was the holder of the draft, by which the time for payment
was to be extended forty-five days on their giving a note with
endorsers, which was to be substituted for the draft.
Bacon & Co. accordingly made their note, dated December 23,
1869, for $6,616.35, payable in gold forty-five days after date, to
the order of Thomas Clarkson & Co. and endorsed by John Hughes,
which they forwarded to the Quebec Bank. The note was not
acceptable to the bank and was returned by it to its correspondent
and agent at Cincinnati, the Merchants' National Bank, with the
information that Bacon & Co. had been requested to furnish a
new note properly drawn, with another endorser besides Hughes.
No such note was made or forwarded by Bacon & Co., and on
February 2, 1870, the Quebec Bank instructed the Merchants' bank to
demand payment of Bacon & Co. of the draft accepted by
On February 7, 1870, Bacon & Co. represented to Weyand &
Jung, a firm doing business in Cincinnati, that they were
embarrassed for want of means to pay the debt represented by the
draft of November 10, 1869, the extended credit on which was about
to expire, and, to aid in paying off said claim, obtained from them
the note in controversy in this suit, the same being an
accommodation note for which Weyand & Jung received no
Bacon & Co. presented this note to the Merchants' bank for
discount on the morning of February 7, with the purpose of having
it applied to the payment of the claim of the Quebec Bank. The
Merchants' bank, after submitting the note to its discount
committee at noon that day, refused to accept it, and it was handed
back to Bacon & Co.
So far, the facts are not disputed by either party. But here, a
controversy arises. The appellant contends that on the afternoon of
that day, February 7, Bacon & Co. again presented the note to
the Merchants' bank, which, acting for appellant, accepted it. The
defendant insists that the note never was delivered to the
Merchants' bank, but that, on February 9,
Page 110 U. S. 181
after Bacon & Co. had made an assignment for the benefit of
their creditors, the cashier of the bank, having induced George M.
Bacon to let him see the note, and thus getting it into his
possession, fraudulently retained possession against the protest of
Bacon & Co.
In the view we take of this case, it is unnecessary to settle
the question whether or not there was a manual delivery of the note
on February 7. We shall assume that the note was left by Bacon
& Co. with the Merchants' bank, as agent of the appellant, on
The purpose for which Bacon & Co. presented the note of
Weyand & Jung to the Merchants' bank is not left in doubt by
the testimony. It was that the note or its proceeds might to
credited on the claim against Bacon & Co. held by the
appellant, the Quebec Bank of Toronto. They were of opinion that if
they could thus reduce the amount due on the claim, they would be
able to raise money enough to pay off the residue, and thus save
their credit and go on with their business. The note, assuming that
it was left with the Merchants' bank on February 7, as claimed by
appellant, was taken for the very purpose which Bacon & Co. had
in view. On this point Fallis, the President of the Merchants'
bank, testified as follows:
"The note was left with us about that time. I told him (George
M. Bacon, of Bacon & Co.) it would not be discounted to check
against, but we would take it and credit proceeds on claim of
Quebec Bank, taking said note on account of said claim."
The testimony of Yerguson, the cashier of the Merchants' bank,
confirms the evidence of Fallis in respect to the terms on which
the bank took the note of Weyand & Jung from Bacon & Co.
If, therefore, there was a manual delivery of the note to the
Merchants' bank on February 17, it was on the condition, as the
officers of the bank concede, that either the note or its proceeds
should be credited on the claim of the Quebec Bank of Toronto. This
condition was not performed. On the contrary, it is not disputed
that the Merchants' bank, as the agent of appellant,
Page 110 U. S. 182
after it had got possession of the note of Weyand & Jung,
retained and still retains the draft of November 10, 1869, for
$6,502.56, accepted by Bacon & Co. with the bill of lading for
15,000 bushels of barley accompanying its, and also the note of
George M. Bacon & Co., endorsed by Hughes, for $6,616.35; that
no credit whatever was ever endorsed on either said draft or note;
that on February 9, 1870, two days after the note of Weyand &
Jung had been received by the Merchants' bank, the note of Bacon
& Co. for $6,616.35 was at the instance of the Merchants' bank,
protested for nonpayment, and on the same day Bacon & Co.
executed a deed of assignment for the benefit of their creditors,
for the reason, as they alleged and testified, that they were
unable to pay said note or draft. On February 25, 1870, suit was
brought by the Quebec Bank of Toronto in the Superior Court of
Cincinnati against Bacon & Co., as makers, and John Hughes, as
endorser, on the note above mentioned, for the full amount thereof
-- namely, $6,616.35 and interest.
It is clear that the deposit of a promissory note with an agent
of a third party, on the condition that it should be used by the
agent's principal for a specified purpose, will not confer title so
as to authorize the principal to hold the note for a different
purpose. Thus, in Smith v. Knox,
3 Esp. 46, it was said by
"If a person give a bill for a particular purpose, and that is
known to the party taking the bill, as, for example, to answer a
particular demand, then the party taking the bill cannot apply it
to a different purpose."
See also Delauney v. Mitchell,
1 Stark. 439; Puget
1 Esp. 117; Evans v. Kymer,
1 Barn. &
Under such circumstances, without the performance of the
condition, there is no delivery in the commercial sense, and no
title passes. The present suit is an attempt by the appellant to
use the note for a purpose not contemplated by either party when
the manual delivery of the note took place. The case of appellant
is not aided by the fact that on March 25, 1871,
Page 110 U. S. 183
more than a year after Bacon & Co. had failed in business
and made an assignment for the benefit of their creditors, it
amended its petition in the suit brought on the note of Bacon &
Co. for $6,616.35, by averring that the note of Weyand & Jung
was taken as a payment on the note sued on in that case, and
demanding judgment for only $1,616.35, the balance due after
allowing the credit. According to the version of the appellant's
witnesses, the understanding was that the credit should be made on
February 7, 1870, when the note of Weyand & Jung was handed to
the Merchants' bank. By the omission of the Merchants' bank on that
day to credit the proceeds of the note of Weyand & Jung, on the
claim of appellant, Bacon & Co. were deprived of all the
advantages to secure which the note was left with the bank.
The appellant is bound by the acts and omissions of its agent.
Having failed in 1870 to use this note for the only purpose for
which it was placed in the possession of its agent, it cannot now
exact payment thereof as a bona fide
Under the circumstances of this case, we are of opinion that
there was no delivery of the note of Weyand & Jung to the
appellant, and that no title passed to it. As the controversy is
between the original parties, and the appellant is not an innocent
holder, it is not entitled to the relief prayed for in its bill.
The decree of the circuit court by which the bill was dismissed was
therefore right, and must be