
    Alexander Gordon vs. Horatio N. Kearney.
    A. G., in Pittsburgh, drew upon his debtors in Zanesville for $114 04, subject to his own order, and indorsed the draft to W. M. &> Co., Exchange Brokers at Pittsburgh, who indorsed and sent it to 1*1. N. K., an Exchange Broker at Zanesville, for collection, who received the money upon it. Before the payment of the draft. W. M. & Co. failed and were indebted to PI. PT. K. in a sum larger than the amount of the draft, which indebtedness grew out of their dealings as Exchange Brokers. When the latter received the draft he had no notice that A. G. was its owner, but had such notice before the money was paid.
    Held that H. N. K. might retain and apply the proceeds of this draft on his own account against W. M. & Co.
    This is a Writ of Error to the Court of Common Pleas of Muskingun County.
    The original action was Assumpsit, brought to recover the proceeds of a bill of exchange. It was submitted to the Court of Common Pleas, on an agreed statement of facts; and judgment was rendered for defendant, to reverse which this writ is brought. The error assigned is, that the judgment was given below for the defendant.
    The agreed statement is as follows:
    It is agreed by the parties that the following affidavit of J. Gardner Coffin, signed by him, and taken on the 12th day of June, 1848, and hereto attached, be received as if the same were his deposition, taken by the plaintiff in this cause, upon due notice to the defendant, but in his absence, and without any cross-examination. •
    It is further agreed, that the following statement shall be taken as testimony in the case, on the trial thereof: That on the 22d day of March, 1848, Messrs. Warrick Martin & Co., then and for several years previous thereto, exchange and money brokers in Pittsburgh, in the State of Pennsylvania, enclosed in a letter of that date, addressed to the defendant, then and for several years previous thereto, an exchange and money broker in Zanesville, Ohio, a certain bill of exchange, drawn by the plaintiff, payable to his order, and indorsed by him, to said Warrick Martin & Co., and by them indorsed to the defendant, of which bill and the indorsement thereon, the following are copies:
    [$114 04.] Pittsburgh, March 18th, 1848.
    Thirty days after date, pay to the order of myself, one hun dred and fourteen dollars four cents, value received, and charge the same to account of
    Very Respect’ly Yours, &c.,
    ALEXANDER GORDON.
    To Messrs. J. B. & S. L. Cochran, >
    Zanesville, Ohio. 5
    
      Indorsed —
    “ Alexander Gordon,”
    “ Pay to H. N. Kearney, Esq.
    Warrick Martin & Co.
    That said letter, with its enclosure, reached Zanesville on March 25th, 1848, where it was received by the clerk of the defendant, the defendant himself being absent at Pittsburgh, where he was also on the 24th March, 1848, and on that day, at Pittsburgh, in person, advanced and paid to Warrick Martin & Co., on account, the sum of $70 37, with which he was then credited in his account on their books.
    For several years prior to this, there had been very frequent correspondence, and transmitting, between the defendant and Warrick Martin & Co., growing out of their business as such brokers, as aforesaid, running accounts being kept between them, then, and during that period. Warrick Martin & Co. had frequently, from time to time, forwarded to defendant notes and bills for collection, and upon receiving payment thereof, the defendant credited Warrick Martin & Co. in their account on his books, with the amount collected, and the same was from time to time paid to Warrick Martin & Co., upon their checks, or by remittances. Statements of accounts were from time to time transmitted by one party to the other, showing how the accounts stood between them.
    On the llth day of February, 1848, Warrick Martin & Co. were indebted to the defendant, on their account with him, in a balance of $162 70, and so continued indebted until the 24th day of March following, when their indebtedness was increased $70 37, the amount on that day advanced and paid to them by defendant, at Pittsburgh, as above mentioned. And on the 18th day of April, their indebtedness was increased by the further charge of $3 24, for premiums, making in the whole the sum of $ . The defendant made no other advances or payments to Warrick Martin & Co., after the llth day of February, 1848, than those above mentioned.
    On the 7th day of April, 1848, the defendant received an order from Warrick Martin & Co., (who in the meantime, having failed, had suspended business,) directing him to return the bill to the plaintiff, which the defendant declined to do. He claimed that according to the course of dealing between himself and Warrick Martin & Co., he had a right to retain the bill until the balance of accounts due to him from them was paid, he having then, on the 7th day of April, for the first time received notice that any other person than themselves claimed any interest in the bill, or its proceeds.
    On the receipt of the bill by the clerk of the defendant, it was by him presented to the drawers, who accepted it, and the same was afterwards, on the 20th day of April, 1848, paid by them to the defendant, and the amount thereof, $114 04, passed to the credit of Warrick Martin & Co., on his books, the defendant claiming to retain the money on account of the balance due from them to him on the account current them, as above mentioned. No consideration was paid by defendant for said bill, other than that which arose from the character of the dealings between him and Warrick Martin & Co., as before stated, and of which the plaintiff had not notice, other than the fact that Warrick Martin & Co. were exchange and money brokers, as before stated. No credit was given by Kearney to said Warrick Martin & Co., for said bill, until the payment thereof. Plaintiff knew that Kearny was an exchange and money broker, as before stated.
    The affidavit of Coffin, referred to in the agreed statement, stated that he was the clerk of Warrick Martin & Co., that the bill of exchange was left with them for collection simply, and that they had no interest in it or in its proceeds.
    Upon this agreed statement and affidavit the Court ruled the law of the case to be in favor of the defendant, and gave judgment accordingly.
    
      George James, for Plaintiff in Error,
    relied upon the case of Lawrence et. al. v Stonington Bank, 6 Conn. Rep. 521.
    
      C. C. &f T. Corners, for Defendant,
    cited the following authorities :
    
      Barnet et. al. v. Brandao, 6 Man. & Grang. Rep. 630 ; Bolland et. al. v. Bygrave, Ry. & Mood. Rep. 21; Rosanquet et. al. v. Beedman, 1 Stark. Rep. 1 ; Scott et. al. v. Franklin, 15 East’s Rep. 428; Jourdain v. Lefevre, et. al., 1 Esp. Rep, 66; Bank of Metropolis v. New England Bank, 1 Howard’s Rep. 231 ; Hodgson v. Payson, et. al., 3 Har. & Johns. Rep. 339.
   Birchard, C. J.

This case presents the single question whether a party entrusting commercial paper before due, with another, under such circumstances as to enable him to deal with the apparent rightful owner, and he does so deal, can retain the paper or its proceeds, by proving his original equity. The bill in question when it came to the hands of the defendant, bore evidence upon its face that it was the property of Warrick Martin & Co. They were its apparent owners; the public had a right to so treat them. That firm were brokers, living in Pittsburg, and doing business with the defendant, also a broker, residing in Zanesville. Each firm had been in the habit of crediting the other for sums of money received in this way, and remitting balance. This bill took the usual course, and the defendant having a balance of account against the persons from whom he received it, retained it to offset and liquidate that balance.

It looks like a case of hardship for the actual owner of the bill to lose it for the bare error of entrusting its collection to irresponsible money brokers. It would be equally a case of hardship if the defendant should be compelled to lose the amount, when, but for the credit by this means given to War-rick Martin & Co., ho would probably have taken measures to secure the balance of account due him. The rule in such cases is, that where one of two persons must sustain loss, he shall be the sufferer who placed the means of imposition in the hands of the wrong doer. Between two innocent persons, he shall suffer who incautiously gave the means of obtaining the false credit.

It is admitted by the counsel for the plaintiff in error, that if we follow the doctrine of the Supreme Court of the United States, in the case of the Bank of the Metropolis v. The New England Bank, 17 Pet. R. 174, we must sustain the judgment below. In that case it is said to have been "long settled that wherever a banker has advanced money to another, he has a lien on all the paper securities which are in his hands for the amount of his general balance, unless such securities were delivered to him under a particular agreement.” In that case the paper bore prima facie evidence that it was the property of the Commonwealth Bank. It was in fact the property of the N. E. Bank, but the Bank of the Metropolis received it from the former without notice that they were not the owners, and the Court say “ if an advance of money had been made upon this paper to the Commonwealth Bank, the right to retain it for the amount, would hardly be disputed.”

“ We do not perceive any difference in principle, between an advance of money, and a balance suffered to remain upon the faith of their mutual dealing. In the one case as in the other credit is given upon the credit of the paper deposited.”

This case appears to be decisive of the question presented by the agreed case, and it is sustained' by the English cases, to which we have been referred, and is also sustained by reason as well as authority. A loss must be borne by one of the parties. The misplaced confidence of the plaintiff has occasioned the-loss which he sustained. It was his want of caution in trusting commercial paper in irresponsible hands, as the apparent true owners, which enabled Warrick Martin & Co. to deal with and transmit it as their own. He was not bound to do this, he might have pursued the usual and safe course by sending it to an attorney of Zanesville for collection, or to the defendant. Or by proper inquiry he might have ascertained the responsibility of Warrick Martin & Co., and their mode of doing business. Having neglected this, he cannot compel the defendant who is guilty of no fault, to bear the consequences of his want of caution in placing his own property in hands unworthy of trust.

Judgment affirmed.

Read, J., dissented.  