
    The Bank of Marietta v. George Haynes.
    1. The discount by a state bank of a bill of exchange payable without the State of Ohio, with knowledge that the parties thereto do not expect to pay the same at the place of payment named, but with the bona fide expectation that a third person, for whose accommodation it was drawn,_ will thus pay it for the drawer, is not usurious within the meaning of section 5 of the act of March 19, 1850 (S. & C. 150).
    2. H. agreed “to lend his credit” to M. “for the sum of $2,000, for which amount” he agreed “to give his note or bill in blank, to be filled up and negotiated” by M., and to give “such other notes and bills of like tenor for the same amount” as should be required by M., to “renew or extend such loan” for a period named, M. agreeing “to pay the last of such notes or bills” when the same should become due. Held, that M. was not bound to indorse or become party to bills of exchange drawn by H. under the agreement, but might negotiate them without indorsement to parties having knowledge of the contract, and thus make them binding upon H. in the hands of such parties.
    3. A bill of exchange, which had been discounted in bank, was sent by the bank to the drawee for collection, indorsed by the cashier of the bank to the drawee or order; and was by the drawee, without the knowledge or consent of the bank, indorsed and delivered to a third party, who had no notice of the rights of the parties, except what appeared on the bill itself. After maturity of the bill, and while it was so in the hands of such third paTty, the drawee, ignorant of the fact that the bill had been so transferred, gave to the bank his second bill as a renewal or payment of the first; and the first bill was subsequently procured by the bank and tendered to the drawer. Held, that there was a sufficient consideration to support the second bill, and that the bank might maintain an action thereon against the drawer.
    Error reserved in the District Court of Ross county.
    The plaintiff brought its action against the defendant in the Common Pleas, in October, 1863, upon the following bill of exchange, claiming to be the owner thereof, and alleging that it had been duly protested for non-payment: “ [$2,000.] Chillicothe, Ohio, Sept. 15, 1857.
    “ Sixty days after date (acceptance waived), pay to the order of myself two thousand dollars, value received.
    “ George Haynes.
    “To Messrs. Winslow, Lanier & Co., New York City.”'
    Indorsed: “ George Haynes.”
    
      To this action the defendant set up four defenses: 1. 'That the plaintiff obtained the bill from him by fraud. 2. That the bill was not to be received, or become available in the hands of the plaintiff', unless indorsed by the Marietta and Cincinnati Railroad Company, and that it has never been so indorsed. 3. That the bill was executed and delivered to the plaintiff' without any sufficient consideration, or for a consideration which had failed. 4. That usurious interest was reserved on the bill, by making it payable in New York, as a mere device, when the parties intended, .and the plaintiff' had good reason to believe, it was to be paid in Marietta.
    Issue was taken on these several defenses, and on the trial a bill of exceptions was signed by the court, from which it appears that the following are the material facts of the case:
    On the 29th of May, 1856, the Marietta and Cincinnati Railroad Company, having in its possession a large amount of mortgage bonds, which it had no right to sell until its road should be completed to Marietta, in order to raise the necessary funds for finishing the road to that point, placed those bonds in the hands of Henry Massie and A. Spencer Nye, as trustees, to indemnify certain parties who had agreed to lend their money or credit to the railroad company for that purpose. Among those who thus agreed to lend their credit to the company was the defendant; and the company, by its treasurer, J. Madeira, executed to him the following agreement:
    “In consideration of the undertaking of George Haynes to lend his credit to the Marietta and Cincinnati Railroad Company for the sum of $2,000, for which amount he is to give his note or bill in blank, to be filled up and negotiated by said company, and such other notes and bills of like tenor, for the same amount, as shall be required by said company, to renew or extend such loan for a period not exceeding eighteen months from the date of the first of such notes or bills, said railroad company hereby undertake to pay the last of such notes or bills to become due as aforesaid, when the same shall become due, and the interest, damages, and costs, if any accrued thereon.
    “J. Madeira, Treasurer.
    
    
      “ Chillicothe, Ohio, May 29, 1856.”
    The railroad company, at the same time, delivered to the defendant the agreement of said trustees, by which they promised to hold for the defendant’s indemnity $2,000 of said bonds.
    The plaintiffs had notice of this arrangement.
    After the defendant had given to the railroad company two successive bills of exchange, in part execution of his .agreement, on the 10th of June, 1857, he signed, with others, an agreement that the time for which said credit was to be loaned should be extended to September 1, 1858, and that another description of bonds should be substituted for those in the hands of the trustees; which was done accordingly.
    Soon after the date of the last-named agreement, on the 15th of June, 1857, the defendant made, indorsed, and delivered to the railroad company, his third bill, drawn upon E. Ludlow, cashier of the Ohio Life Insurance and Trust Company, which bill, indorsed in blank by the treasurer of the railroad company, was by him delivered to the plaintiff. This bill is as follows:
    “ [$2,000-.] Chillicothe, Ohio, June 15, 1857.
    “ Three months after date, pay to the order of myself two thousand dollars, value received.
    “ George Haynes.
    “ E. Ludlow, Esq., Cashier, New York, N. Y.”
    Indorsed: “ George Haynes.” “ J. R. Crawford, Treasurer P. T., M. & C. R. R. Co.”
    This bill was discounted by the plaintiff for the railroad company, and the net proceeds credited to the company’s account. It was sent, before its maturity, to said Ludlow, cashier of the Ohio Life Insurance and Trust Company, for collection only, but with an indorsement thereon by the cashier of the plaintiff', to the order of Ludlow, cashier. The trust company failed in August, 1857, and its cashier,, -wrongfully, and without the plaintiff’s knowledge, indorsed and delivered this paper to Dennistown, Wood & Co. The-plaintiff demanded the paper of the Trust Company, and received an order for it on D., W. & Co., stating that it belonged to the plaintiff. D., W. & Co. having refused to give up the paper, it was replevied from them by the plaintiff; but the replevin bond was quashed, and the paper-restored to D., W. & Co. In September, 1857, an agent of the railroad company, who in no wise acted as agent of the plaintiff, procured from the defendant the bill in suit, for the purpose of paying or renewing the debt evidenced by the bill of June 15, agreeably to his contract, and the same-was afterward, on the 16th of October, 1857, discounted by the plaintiff, its net proceeds credited to the railroad company, and the company charged with the amount of the--bill of June 15th. Between the time of procuring the bill in suit from defendant by the railroad company’s agent, and the time it was so discounted by the plaintiff, namely, on-the 20th of September, 1857, the bill of June 15, which was still in the hands of Dennistown, Wood & Co., was protested for non-payment, and notice of the protest given to defendant.
    At the time the plaintiff discounted the bill in suit, the cashier of the bank executed and sent to the defendant a receipt and agreement of indemnity, against the outstanding-bill of June 15, and this act of the cashier was subsequently, and before bringing this action, approved and ratified by the directors of the bank. On receipt of this paper by the-defendant, he took it to his attorney for explanation and. advice, and left it with said attorney among defendant’s-other papers, where it remained until after this suit was-brought. The only evidence offered tending to show that-the defendant did not intend to receive and rely upon said paper, was his own testimony, to the effect that when the-paper was read and explained to him by the attorney, he, the defendant, remarked, “ This is adding insult to injury.” This item of the defendant’s testimony was objected to by the plaintiff, on the ground that it had never been communicated to the plaintiff'; but the objection was overruled, and the plaintiff excepted. The court also, in its charge to the jury, told them that this item of testimony should be considered as evidence in determining whether defendant accepted or rejected the paper, although the defendant’s said declaration and conduct were in no way made known to the plaintiff or its officers or agents; and the plaintiff' excepted to this part of the charge.
    Suit was subsequently brought by Dennistown, "Wood & Co., against the defendant, upon the bill of June 15, and he, as well as the plaintiff, employed counsel therein, and defended the same. The suit was subsequently withdrawn, or compromised, the Bank of Marietta having paid to the Trust Company $6,000, in consideration of which a large amount of the bank’s paper, some $60,000, including this bill, was given up by D., W. & Co., and restored to the Marietta Bank. Before bringing the present action, the bill so restored was tendered by the plaintiff to the defendant, and by him declined to be received.
    There was no evidence directly showing that the bill in suit was to have been indorsed by the railroad company before being discounted by the bank.; but it is claimed that the fact that it was to be so indorsed is to be inferred from the nature of the contract between the company and the defendant.
    The only evidence tending to sustain the defense that the bill was obtained by fraud, was that of the defendant himself, who swore that the company’s agent, at the time he obtained the bill in suit, represented that the bill of June 15 was then in the possession of the bank. This was denied by the agent. But there was no evidence to show that the plaintiff', or its agents, if any such fraud was practiced, were implicated in or knew of the same.
    As to the defense of usury, the evidence was, that at the time the bill in suit was discounted by the plaintiff, the defendant had not, and was not expected to have, any funds of his own in New York, to meet the bill at its maturity; that the defendant did not expect to pay the bill at any place, but expected that it would be paid by the railroad company, and that the railroad company had funds in New York, and were expected to meet and pay the bill there, as the company had met and paid the preceding bills of defendant.
    These issues having been found for the defendant, the plaintiff moved.for a new trial on the grounds: 1. That the court erred in its charge to the jury. 2. That the verdict was not sustained by sufficient evidence. 3. That the verdict was contrary to law.
    The motion was overruled, and judgment was entered on the verdict.
    Proceedings in error to reverse this judgment were instituted in the District Court, and the questions involved have been reserved into this court for decision.
    The errors assigned are :
    That the court erred in the admission of evidence.
    That"the court erred in its charge to the jury.
    That the court erred in overruling said motion for a new trial.
    
      Harrison & Olds, for plaintiff in error.
    
      Wm. H. Safford and Thad. A. Minshall, for defendants in error.
   Welch, J.

We do not see how the finding of the jury can be sustained on this evidence.

As to the first defense, that the bill was procured by fraud, it is enough to say that there is no evidence tending to implicate the plaintiff, or any of its agents. If there was any fraud, it was practiced by the agent of the railroad company, and without the knowledge of the plaintiff, so far as appears by the evidence.

The second ground of defense is, that the bill was not indorsed by the railroad company. This indorsement, it is claimed, the company were bound to make under their contract. We think otherwise. No such condition is expressed in the contract. It binds the defendant to “ loan his credit” to the company, by giving “ notes or bills in blank,” to be “filled up and negotiated” by the company. The bill was “filled up and negotiated” by the company. The company were already bound by their contract to see the loan ultimately paid, and its indorsement would have availed the defendant nothing. The company were not a party to the bill, and the question whether the company should indorse it, was a matter which concerned only the company and the bank.

The defense of usury also, as we understand the evidence, is wholly without proof. It is claimed the case comes within the provision against usury contained in section 5 of the act of March 19, 1850, because the drawer of the bill, the defendant, did not himself expect to pay the bill in New York. The answer to this is, that the drawer did not expect to pay it anywhere, but expected the railroad company to pay it for him., and to pay it in New York, as the company had paid the former bills. Payment by the company for the defendant would have been payment by the defendant. The bank, then, did expect the defendant, by and through the railroad company, to pay the bill at its maturity in New York.

The ground of defense mainly relied upon, however, is, that there is no sufficient consideration to support the bill. It was given under a mistake, the defendant at the time supposing that the bank owned the bill of June 15, 1857, and could control it, whereas it then belonged to Dennis-town, Wood & Co., and was in their possession.

I think there are two answers to this ground of defense. The first answer is, that the bank did own the bill of June 15. The drawee of that bill had no authority to sell it, and the fact that he was the drawee of the bill was prima facie evidence, and notice to a subsequent indorsee, that the bill had run its course, and was not to be negotiated farther. Being the owner of the bill, it matters not at what time the bank repossessed itself of the bill, and restored or tendered it to the defendant, provided that was done before payment of the new bill was demanded. It seems, however, that the bank, at the time the bill in suit was discounted, tendered to the defendant, if he did not in fact receive it, a full acquittance and guaranty against the former bill; and the subsequent procuring of the bill, and its tender to the defendant, were only a fulfillment of that guaranty. This guaranty gave the defendant timely notice of the course the plaintiff proposed to pursue, and that is the only significance, perhaps, which it has in the case.

In the second place, it seems to me, there is a good answer to this defense, even were we to admit that the title to the bill of June 15, at the time of giving the bill in suit, was not in the bank, and that the bank has since bought it in. The latter bill was intended to take the place of the former. By procuring and'tendering the one, and demanding payment of the other, the bank but carried into effect the actual intention of the parties. The defendant has paid neither. He resisted the enforcement of the former, we must presume, on the ground that it belonged to the bank, and he defends the present action on the ground that it did not belong to the bank. The intention of the parties was, that the bill of June 15 should be extinguished, that the new bill should be substituted for it, and that the credit should be prolonged for the time stipulated in the new bill; all which is effectually accomplished, by causing the old bill to be canceled or surrendered, and by enforcing payment of the new bill. Most clearly, the bank is entitled to maintain its action on one or the other of the two bills; and it is placing the defense on shadowy ground indeed, to say that the action, under the circumstances, has been brought upon the wrong bill. Had the action been brought upon the old bill, I have no hesitation in saying that a successful defense might have been maintained, even without relying upon the receipt and guaranty sent by the bank to the defendant.

This view of the case renders it immaterial to inquire whether the receipt and guaranty so sent to the defendant . were accepted by him, or whether the court erred in admitting his testimony in relation thereto, or in its charge to the jury as to the effect of that testimony.

Judgment reversed, and cause remanded for a new trial and further proceedings.  