Page, for the plaintiff.
I. The provisions of the charter and bylaws contained in the deposit-book must be
taken as part of the contract between the bank and the depositor. Heath v. P. Savings-Bank, 46
N.H. 78 . It is provided in Article 8 of the by-laws that the deposit may be withdrawn
"by the depositor, or by some person legally authorized by the depositor;" and Article
9 provides that "the production of the book of deposit will be held to show that
the person producing the same is legally authorized to receive the deposit." It
was therefore part of the contract that the person producing the book was to be
deemed duly authorized to receive the deposit. This was also agreed to by the written
contract or certificate of deposit signed by the depositor, as set forth in the
case; and this contract further provided that the deposit "may be withdrawn by the
person who may present the said book, entering the same thereon, and receipting
therefor to the bank." The book of deposit became then, in fact, a certificate of
a deposit of money
payable to the bearer, and in reality negotiable. Miller v. Austen, 13 How. 218;
Kilgore v. Bulkley, 14 Conn. 363 ; Fisher v. M. C. B. Co., 3 Am. Law. Reg. 423.
But whether regarded as negotiable or as quasi negotiable, or viewed solely with
regard to the contract between the bank and the depositor, it is apparent that by
the very terms of the deposit it was payable to the bearer; and it is a notorious
fact that such books of deposit are daily sold, and pass from hand to hand by mere
delivery. There can be no question that Mr. Norton could have presented the book
and withdrawn the deposit. There is no distinction between a pledge of the book
as collateral, and a collection of the deposit or sale of the book. Hotchkiss v.
Banks, 21 Wall. 354; Blanchard v. Stevens, 3 Cush. 162; N. Y. M. Iron Works v. Smith,
4 Duer 362; Swift v. Tyson, 16 Pet. 1.
It may be said that a part of the contract signed by the depositor provided that
withdrawals were to be entered on the book and receipted for to the bank. This contract
was one wholly for the protection of the bank, and the bank could observe it or
not as it pleased. The bylaws provided that the bearer of the book should be legally
entitled to receive the deposit, and the bank could insist that he sign a receipt
for its protection. But the pledging of the book gave the officers of the bank the
right, in case the indebtedness for which it was security was not paid, to withdraw
the deposit and apply it to the indebtedness, and to enter the withdrawal upon the
book and receipt for it to the bank as attorney for the depositor. If this was not
so, the bank could not in this case apply the deposit to the payment of the debt
for which it is security, even though the book had belonged to the pledgeor.
II. The bank had no notice or knowledge of any defect in Mr. Norton's title to
these books payable to bearer. A suspicion that there is a defect of title, or knowledge
of circumstances that might excite suspicion in the mind of a cautious person, or
even gross negligence at the time, will not defeat the title of the purchaser. That
result can only be produced by bad faith, which implies guilty knowledge or wilful
ignorance, and the burden of proof lies on the assailant of the title. Hotchkiss
v. Banks, 21 Wall. 354; Goodman v. Harvey, 4 Ad. Ell. 870. But in this case the
bank officers knew that the husband deposited this money. They could have had no
knowledge that the money was not his own, deposited as it is very frequently done
in fictitious names, or the names of wife or children. They delivered the books
to him, and in less than two months he returned with one of them and pledged it
in order to obtain a loan. The notorious fact was well known to them that books
of deposit pass from hand to hand, and the name of the party to whom they are issued
is never thought of, and, in the language of the bylaws, the person producing the
book "is legally authorized to receive the deposit."
III. The question whether the books were stolen or embezzled
from the wife is not important, because, being payable to bearer, and taken by the
bank for a valuable consideration in good faith, without knowledge of any defect
of title, the bank can hold them against all the world. Hotchkiss v. Banks, 21 Wall.
354; Tucker v. Bank, 58 N.H. 83 ; Paige v. Chapman, 58 N.H. 333 ; Emerson v. Crocker, 5
N.H. 162 ; Wheeler v. Guild, 20 Pick. 545.
Albert R. Hatch and John Hatch, for the defendants.
The deposit was made by Mrs. Norton, by the agency of her husband; and the usual
certificates of deposit were taken in the names of herself and of her daughter Emma.
The deposit in the name of the latter was intended as a gift to her, and she has
since accepted the donation, and ratified the deposit of the money in her name.
It has been hers, therefore, from the time it was appropriated to her use. Howard
v. Bank, 40 Vt. 597 ; Blasdel v. Locke, 52 N.H. 238 ; Grangiac v. Arden, 10 Johns.
293.
I. The bylaws of the bank, which were made part of the condition of the deposit,
authorized the officers of the corporation to pay the deposit to the person producing
the book, upon the express ground that "it will be impossible for them to identify
every depositor;" and it is upon this ground only that such a by-law has been held
to be reasonable. The reason does not exist when it is known to the officers of
the bank that the person who presents the book is not the true owner. Cessante ratione,
cessat quoque lex. Accordingly it has been uniformly held that such a bylaw or such
a contract as is alleged in the plaintiff's bill does not dispense with ordinary
care on the part of the officers of the bank. Appleby v. E. Sav. Bank, 62 N.Y.
17 ; Allen v. W. Sav. Bank, 69 N.Y. 320 ; Sullivan v. L. Inst. of Savings, 56
Me. 509 . The officers of the bank must have known that the books were not presented
by the real owner, because (1) both the depositors were women (Allen v. W. Sav.
Bank, 69 N.Y. 320 ); (2) the books were not presented for payment, but as security
for a loan to the person who produced them. Either of these circumstances was sufficient
to put the officers of the bank upon inquiry. The bearer in effect said to them,
I am about to apply this money to my own use. Even the question, Have you the right
to do so? was not asked; nor was any order or written contract of the depositor
presented or required.
The plaintiff suggests that such deposits are often made in the names of persons
who are not the true owners, and that they are commonly understood to belong to
the bearer. But no such fact is found in the case, and if it existed it could not
be cited to prejudice the true owners of this money. There is no evidence that the
deposit was understood to belong to Mr. Norton; no officer of the bank has so testified.
His agency to make the deposit cannot be construed into an authority to withdraw
it.
II. The pledging of the deposit was not within the terms either
of the by-law or the contract. The by-law, Art. 9, says that the production of the
book will be held to show that the person producing the same is legally authorized
"to receive the deposit;" and that "payment entered on the book produced" shall
discharge the corporation from all further claim "for the amount so paid." The contract
said to have been signed at the time of the deposit is, that the money "may be withdrawn
by the person who may present the book, entering the same thereon and receipting
therefor to the bank." These are provisions valuable to the depositor and tending
to his security, and they constitute reasonable limits to a rule otherwise too loose
to be countenanced by the law. No such payment or withdrawal has, in fact, ever
been made. The books were pledged by Mr. Norton; and that is the only title of the
bank to them. But neither the by-law nor the contract authorizes any person but
the owner to pledge the deposit, nor would there be any reasonable occasion for
such a provision. This case comes not within the exception suggested in Tucker v.
Bank, 58 N.H. 83 , for the books were not entrusted to Mr. Norton, nor were they
rightfully or lawfully in his possession. The rule is, that one who has no property
in goods, c., cannot sell them to another. 1 Chitty Con. 538; Com. Bank v. Kortright,
22 Wend. 348. Nor is it within the rule applicable to commercial paper, because
securities of that kind constitute an exception to the general rule. Murray v. Lardner,
2 Wall. 110; Miller v. Race, 1 Burr. 432. This rule has never been extended further
than to corporation bonds, and on the express ground that they have the same qualities
as commercial negotiable instruments. Mercer Co. v. Hacket, 1 Wall. 83. Money is
also an exception. L. R. Bank v. Plimpton, 17 Pick. 161; but not if taken without
right as by gaming. Mason v. Waite, 17 Mass. 560 . A bank deposit-book is not a
negotiable instrument. Witte v. Vincenot, 43 Cal. 325 ; Stewart v. State, 42 Texas
242[ 42 Tex. 242 ].
The distinction between the rule applicable to promissory notes and the like taken
in pledge, and the same when taken in payment, is firmly established in this state,
and is to be regarded as a law of property. Jenness v. Bean, 10 N.H. 266 ; Williams
v. Little, 11 N.H. 66 ; Bank v. Kent, 15 N.H. 579 ; Fletcher v. Chase, 16 N.H.
40 ; Rice v. Raitt, 17 N.H. 118 ; Doe v. Burnham, 31 N.H. 433 .