McLean v. Shuman, 38 N.C. 457, 3 Ired. Eq. 457 (1845)

June 1845 · Supreme Court of North Carolina

38 N.C. 457, 3 Ired. Eq. 457

JOSEPH A. McLEAN & AL. vs. FREDERICK H. SHUMAN.

In a case between two parties oh a money transaction, where the testimony seems to be nearly balanced, the' determination may he safely placed upon the want of preponderating proof on the side, upon which the error rests, and upon an exhibition in that party of a deficiency of the due caution, which prudence requires him to use.

A bank, that pays money to any person, as a loan, Without any written check or receipt, and especially pays the money of one man to another,-without taking something to charge him, ought to lose it, unless thefacts.canhe'. unquestionably established.

Case transmitted front the Court of Equity of Guilford County,- at the Spring Term, 1843, to the Supreme Court for hearing. , !

The bill states, that the Defendant is the1 Agent of the1 Bank of Cape Fear at Salem, and that- the notes negotiated there are made payable to the' defendant. The notes are delivered to the defendant,- to be1 offered-for discount, and are-generally sent by dealers, who reside in other places, to the' defendant, a considerable time before they are discounted ; especially when there- are many applications. The plaintiff, McLean, lived in Greensborough, and on the 10th of Septem1839, he sent a note, made by himself and other plaintiffs, as his sureties, for §400, to John C. Blum of Salem, to be 0g-ere(j for ¿pscount • which came to Blum’s hands and was by him delivered .to the defendant. Understanding that Blum had left home on a long journey, and not having heard from him, the plaintiff, McLean, on the 24th of September, (which was the weekly discount day) sent a messenger, with a letter to the defendant, requesting him to send him the money on his note, if discounted, and, if it was not, to let him know when it would be. The bill charges, that the defendant sent thereto a verbal reply, that the plaintiff had no note in bank, but that, if he would send one, it should be discounted. On the next discount day (1st October) the plaintiff, accordingly, sent another note for §400, and got the money on it. In January following, the plaintiff discovered, that the defendant held both of the notes for §400, each, and claimed the payment of both, which the plaintiff resisted upon the ground, that but one of them had been discounted, and that he had received but one sum of $400, deducting therefrom the discount. Upon learning that the defendant claimed the two debts, the plaintiff applied to Blum to know, whether he received the money upon the first note or could give any explanation of the matter, and was informed by Blum that he had delivered the note to the defendant, and that he never received any money on it, but left home about the time, and was absent for five or six weeks, and that some days after his return the defendant informed him, ¿here was some mistake in the bank with respect to the discounting for the plaintiff two notes for the same amount and the same sureties, very nearly at the same time, and asked him, Blum, whether he knew any thing about it, and upon Blum’s answer, that he did not, the defendant left him without saying more. The bill further states, that the plaintiff applied to the defendant himself for some explanation of the transaction, and to be informed when and to whom the defendant paid the money, and the defendant then showed him an account in a book in the bank, purporting to be an account of'new loans made by the bank on the 17th of September, 1839, in which the plaintiff’s note, September 10th, appears as one oí six then discounted, with a memorandum opposite to it, that the money was received by John C. Blum. The bill states, that the plaintiff then asked the defendant, whether he had any evidence, that he had paid the money to Blum, and whether he had any recollection of it himself; and the- defendant replied, that he did not remember paying Blum the money, and had no other evidence of it except his books5 but that his books could not be mistaken. The bill further states, that, to a suggestion, that possibly a mistake had been committed by the defendant by having counted the bills and set them apart in the expectation that Blum would call for them, and thereupon making a memorandum, that Blum had received the money, when in fact-he had not, and that it might be ascertained'how it probably was by the state of the defendant’s cash account, .the defendant still replied, that his books could not be mistaken, though he admitted, at the same time, that he had a considerable surplus of cash beyond the sum required by his cash account, and admitted also, that, in a list of debts due to the agency, which he had made out in November, 1830, the debt of the plaintiff was inserted at $400 only.

The plaintiff paid the note of the 1st of October, and, having been sued on that dated September 10th, 1839, he filed this bill against Shuman, the agent, to be relieved against it by injunction.

The answer states, that on the 17th of September, 1839, Blum presented for discount the plaintiff’s note for $400, dated September 10th, at 90 days, and miso a letter requesting the money to be paid to Blum; that it was discounted that day, and the proceeds paid immediately to Blum. The defendant admits, that, in a few days thereafter, the plaintiff’s messenger, by the name of Thorn, applied with a letter for the money, and that the defendant,, after looking among a file of notes, that remained in bank to be discounted, informed Thorn, that the plaintiff’ had no notes in bank to be discounted, and directed him to say to the plaintiff, if he wanted more money senc^ ano^ier note; for, as the note offered by Blum had been already discounted, the defendant understood the p[ajn(:¡ff t0 want a new loan. The succeeding week the plain•tiff sent a note for $400 by another agent, which was discounted. The defendant admits, that he has none of the several .letters of the plaintiff, directing the payment of the money to Blum and his other agents; and he says, that it has been his invariable practice to destroy all such papers, because the possession of the note is the highest evidence of the debt, and that he has paid the money on it, without the aid of letters or orders for the money.

The answer then states, that, in confirmation of the defendant’s remembrance of the whole transaction, the bank books sustain him, and that he is certain they are correct; that the discount book shews in his own writing, among the new discounts of September 17th, the note of the plaintiff' of September 10th, at .90 days, and that the money was received by John •C. Blum. The defendant admits that he prepared a list of debts to the bank of .Salem, in November, 1839, for the purpose of making his half yearly return to the principal bank, ..and therein at first he charged the plaintiff’s debt at $400; but he says that he afterwards discovered his mistake by comparing the books, and corrected his return by making the debt ¡$800, being for two notes of $400, each.

The defendant admits, that there was an excess of cash on .hand; but says that it had been accumulating for several .years, .and that in the beginning of 1839 it was about $300, ,and that in closing the accounts of that year it was found to ¡be about the same.; which satisfies him, that he paid this money to Blum, as the excess would otherwise have been about ..$700.

Replication was taken to the answer, and the parties proceeded to take proofs; and, when ready, the cause was transferred to this court for hearing.

John O. Blum, who was the cashier of the bank for eleven .years immediately preceding .the plaintiff’s coming jn, and who if now a director, was examined and states, that he has no recollection of having received or offered the plaintiff’s note of the 10th of September, though he has no doubt, from the statements of both the plaintiff and defendant, that he did. He-says, that, at the time, he was very busy in preparing to leave home for Philadelphia, to lay in a stock of merchandize, and having no interest in the matter, he did not charge his memory respecting it. He however denies positively having, received any sum whatever on the plaintiff’s note, on the 17th of September or at any other time ; and he says that he is absolutely sure he did not, for he had no excess of cash, and, if he had received the money, he could not have-forgotten it. The note of September 10th was shown him and is exhibited, having on the back the word “ offered," which he says is in the writing of the defendant, and is the usual memorandum on notes that are offered and approved, but not discounted on one offering day and are kept for another day, when they take their turn. He states, that he received from the defendant on the 17th or 18th of September in the bank, a small sum of money, which the defendant owed him upon their private dealings, and some exchanges, but none on any other account; and that he left home on the 19th of September, and was absent about five weeks. About two or three weeks after his return, the defendant told him, that some error existed about McLean’s notes, two appearing to be discounted for him for the same sum in a short time, and asked the witness, if he recollected any thing about it, and the witness informed him that he did not. To the question by the defendant: “When you returned from the north, was I not the first person who mentioned that some error in discounting McLean’s notes had taken place ?” the witness answers, that the defendant informed him, that there was some error in the discounts for McLean, and that he was the first person who'did mention it to him.

3. H. Dobson states, that, on the 17th of September, 1839,, , he was in the bank at Salem, and some money transaction oc-curred between the defendant and Blum, in which he thought the defendant’s conduct was similar to his acts towards the in discounting notes for him before that time; which he explains by saying, that the defendant counted out the jjan]c notes in parcels of $ 100, and then took the discount from one of the parcels; and he says, that on that occasion the defendant counted out four parcels, which Blum took; and he did not see Blum pay the defendant any money in exchange or otherwise. He says upon cross examination, that he did not know the sum paid to Blum, nor on what account, as the parties conversed in German', which he did not understand ; and that upon discounting notes, defendant generally uses an interest table to ascertain the discount, and he cannot recollect that he had it when he paid the money to Blum.

J. E. Thorne deposes that, on the 24th September 1839, he went to the bank at Salem, for the purpose of ascertaining whether a note of his own had been discounted, which had been offered fiye or six weeks before. He carried a letter from the plaintiff to the defendant, requesting him to. pay to the witness the proceeds of his note for $400, which had been sent to the bank the week before. He states that, after the defendant had read the ietter, without making any remark, he searched in several places for the plaintiff's note, for some time ; at first, in a drawer from which he had taken the deponent’s note ; then he looked carefully through a desk in anothet part of the room; and then mentioned, “that he could not find any note of McLean’s ,” that the defendant shewed anxiety and searched the same places again, and took up several bundles of filed notes, or papers that looked like them, and examined them, turning up the end of each so as to see the name on it; and that, after he had made this second search, he turned to the deponent and said, “that he had no note of McLean’s in his possession ; and he said further, that “ the money was ready, and if McLean would send the note he could have the money.” Of all this the witness informed the plaintiff, on his return to Greens, borough. The witness says, that he is positive as to what occurred, because it was the first time he was ever in a bank, and the misunderstanding arose so soon afterwards, that the circumstances were impressed on his memory.

Joseph Rankin states, that, on the first of October, he carried the plaintiff’s second note in a letter directed to the fendant, and requesting him to send the money by the witness and that, as soon as the défehdant read the letter, he took out of the desk a bundle of money and handed it to the witness and when lie began to look over it the defendant told him was right, and that there was the sum of $400, except that the/discount was taken out. Fie says the money ,was right and in a single parcel.

A witness, W. J. McElray, states that he was in the bank when Thorn delivered the plaintiff’s letter, and that he saw the defendant then look into a drawer, in which he usually keeps notes offered for discount, and after examining a bundle of notes, he thinks the defendant said, if Mr. McLean wishes a discount, he must send in a new bond. He cannot state, whether the defendant did or did not say, that McLean did not owe any bond there; though he recollects nothing of if.

Mr. Gilmer, an attorney, states that at the request of the plaintiff he had, in December 1839, an interview with the defendant and Blum, upon this subject; that Blum denied receiving any money for the plaintiff from the defendant; and that, when the witness informed the defendant of that denial he showed the witness the entry of the discounts of September 17th, on which it appeared that Blum had received it. The witness asked the defendant, if he had any recollection that Blum received the money; to which he replied, that he had not, but that he relied on his book. He said, he would not have made the entry, if he had not paid the money to Blum; and that his books could not be mistaken ; but that Blum got the money, though he had never paid it to McLean. The witness fflso then told the defendant what Thorn said, which was what he has stated in his deposition ; and the defendant admitted, that he told Thorn “that McLean had no note in bankbut he said, he meant that he had no note to be discounted. The witness told him, that Mr. Shober, a director of the bank, had told him, that in the list of debts made out by the defendant, there was but one debt of $400 against Me Lean, and he requested the defendant to let him see that list; but the defendant declined doing so, and said he had discover - ed the mistake, and that in the list sent to ■Wilmington, Mc-Lenrj,g debt was $g()Q.

Upon the foregoing evidence the cause was heard, and, as • there was such a conflict between the recollection of Mr. Shuman and Mr. Blum, the Court was desirous to obtain further information upon the point, whether there were two discounts for the plaintiff, or only one, which an inquiry would afford; and it was referred to the Master to make that inquiry, with directions to inspect the books of the agency containing all entries in relation to the notes, and all returns made by the agent to the principal bank, which would include the transactions of the agency of the 17th of September, and 1st of October 1839, or any other in which either of the notes, or the amount thereof, or the profit upon the discount thereof, was or ought to be included, and to collate such returns with the books of the agency in their present state. The Master reported copies of the entries on the discount book for September 17th and October 1st., on which the two notes of the plaintiff appear, and it is stated in the margin of the entry of the former day, that Blum received the money. The note is stated to be1 dated September 10th, at 90 days, and to be discounted September 17th for $400, with 92 days to run from that time, and the discount for 92 days is taken, to wit, $6 13. From the principal bank was obtained the return of the list of debts dated November 30th, 1839, which states McLean’s debt to be $800; and also the half yearly statements of the "Cash account,” “Billsand Notes discounted,” “ Profit and loss,” and “ Account Current,’’ between the agency and the principal bank — all shewing exact balances. With respect to the “ weekly returns” of the agent, the President of the hank states, that they are mere generalities and give no details, which could elucidate the subject of the inquiry, and he does not send them.

The Master also examined the defendant upon interrogatories, and Mr. Shober, one of the directors.

Mr. Shuman states, that no book was kept which shewed the notes offered, but only those discounted; and that nótes not discounted often lie a great length of time in his hands.— He says that he did not carry the discounts weekly into the leger; but that months elapsed without his.posting the books, until it became necessary, in order to make his half yearly returns and settlements with the principal bank. That when, with that view, he was posting the accounts into the leger in November, he discovered that there were two discounts for McLean, and upon seeing the second, it struck hi's memory that some difficulty had occurred about a note being inquired for as-in his hands, and not being found 'among the notes of. fered for discount; and that, not having a suspicion of any dishonesty, he went to Blum, who had then returned home) and mentioned the difficulty, and requested him to tell the defendant what he recollected about it; to which Blum answered, that he had no distinct recollection of any transaction of that kind. He states that he invited Blum to examine the books, which he promised 'to do; but that he did not, until the defendant was obliged to post them with a view to making up his accounts, and then he posted the second discount. His first list of debts was made out before that additional entry in the leger, and was- not altered until January 1840, after this controversy had arisen; but the list sent to Wilmington was made out after the posting was completed by adding Me Lean’s second note.

He says, that his half yearly accounts did not balance, but there was always an excess of assets — which' excess was not taken notice of in the books. Finding the charges against him on the books, he merely balanced them. He is 'utiablo to say, what was the excess in May 1839, or November of that year, or at any time before May 1842, since which time the surplus has been noted.

It was then $849 68

In November, 1842, 792 71

In May, 1843, 1400 12

In November, not noted.

In May, 1844, 1343 52

Mr. Shober states that he was one of the Board of Direetors on the 17th of September, and that McLean’s note was offered on that day.' It was approved by the board, but not (j¡scountec¡¡ as the amount, to which they meant to discount, was full before they came to McLean’s; but it was approved and the defendant wrote “’offered” on it, as a memorandum that it was to be discounted at some other time, when the agent should have funds. But he says also, that the board was not particular with the agent; and that had he, after the adjournment of the board, received payments enough, the directors would have sanctioned his discounting the note that day. He says, that it is the practice for dealers to deposit their notes with the agent, and leave them in his hands, for weeks and months for discount. That in examining the half yearly accounts, when there were large surpluses, he has several times discovered errors in charging debts as still outstanding, which had been paid ; so that, upon giving the proper credit on them, the surplus would be nearly exhausted.

J II Bryan and Iredell for the plaintiff.

Morehead for the defendant.

Ruffin, C. J.'

This case presents one of those instances of unhappy misunderstanding between persons of equal respectability, which arises from the defects of memory and an extreme looseness in transacting business. The persons most concerned in feeling in the cause are the two witnesses, Mr. Blum and Mr. Shuman — for the latter, though the party, is really not so in interest, being the mere payee of the note in trust for the bank. It is admitted on all sides, that the plaintiff is entitled to relief in the premises from one or the other of those persons, as no part of the money ever came to his hands. The doubt in the case is, whether the defendant never paid the money to any one, or paid it to Mr. Blum. The defendant avers, that he did pay it to Blum; and the latter as positively affirms, that he did. not. It is the unpleasant task of the Court to decide between them. But in making the decision, it would be no less our inclination than our duty in every case, to proceed, as far as we may, upon grounds consistent with the integrity of persons, thus implicated, in giving contradictory accounts of the same transaction. Much more should the Court thus act between two persons, occupying stations in society so entirely equal, as the two gentlemen before us seem to do. The one is the Cashier of a bank, and the other was the Cashier for a long, time, and he is now a direct- or of the same bank. It is incumbent on the Court, then, to give both of those persons credit for their characters, in point of uprightness, if we can find any-fair grounds of decision, compatible with such characters. And we believe that there are such grounds, on which we can give our judgment on sound legal principles and leave each of these persons’ reputation unimpeached, at least by us.

In cases, in which credit seems to be so nearly balanced, very often the determination may be safely placed upon the want of preponderating proof on the side, upon which the error rests, and upon an exhibition in that party of a deficiency of that due caution, which prudence required him to use.— For in such a case, negligence, far from that grossness which amounts to fraud, may yet be sufficient to prevent á Court from yielding to the evidence given by a party, who ought to have taken care tq provide better evidence — especially when, according to the common course of business, it would have been proper and easy to provide conclusive proof. And we are free to say, that this view of the present case seems to be decisive against the defendant.

On whom is the onus here ? The defendant admits that it is on him ; but he says the possession of the bond establishes every thing, until the contrary be proved. Therefore he contends, that it changes the burden of proof. But we think quite the contrary, as the facts appear here. We acknowledge that, in ordinary transactions between individuals, the possession of a bond by the obligee is not only evidence of its delivery but of its justice. But here the witnesses state, and the defendant admits, that he came into possession of this note— payable to himself nominally, for another — not as his proper-but merely to offer to the bank for discount; and that notes are necessarily in all cases entrusted to his custody for that purpose, and that in many instances he retains them for This, then, takes away in this Court all force from the possession ; for it would be monstrous, if every person, who sends in a note to a bank for discount, should be obliged to prove, that he did not receive the money. It would reverse the common course of business. Generally speaking, indeed, the negative might be readily proved even in those cases; because the cashiers and clerks are competent witnesses between the bank and the dealer. Nevertheless, we believe it is the invariable course in all banks and branches, that we have hitherto known, to pay money upon the discount of notes, only upon the written order of the person entitled to it. Such orders are so necessary to protect the rights of dealers and as vouchers for the paying officers, that they have received the name of checks, which appropriately expresses their office. But when, as in this case, the paper, upon which loans are made, is in the form of a note payable to the cashier himself, who thus gets by possession a right of action, which is irresistable at law, and he cannot be there called on to testify for a defendant, the necessity for some check on the cashier against unjust demands is so obvious, that one is astonished to find that it was ever omitted. We believe it is common to dispose of bills of exchange at the bank counter, that is to say, by a stranger, who has no regular account at the bank ; because bills are rather bought and sold by the ministerial officers than the subjects of proper discounts, by the directors. But it argues culpable carelessness, to be without any formal written check for the proceeds of ordinary discounts. And, above all, when one man claims -an authority to receive another man’s money. The bank was bound in good faith, when the plaintiff went to ask the defendant, whether he could prove the payment of the money to Mr. Blum to be able to say, “Yes — here is his check : or here is your order and his receipt on it.” Instead of that, the defendant could only say, “1 destroyed your order, but here is my book, which says Blum received the money;” and when the plaintiff was ing out for evidence on which he could charge Blum, if necessary, the defendant informed him, that he had no recollection of paying the money. So the defendant could not prove the payment, and the plaintiff would be completely at the mercy of the defendant and Blum. The plaintiff' has a right to say to the bank or to the defendant, it is your own fault, that the receipt of the money by Blum cannot be established, and as you have left me without remedy against him, you ought to make the loss your owti. It is true, that, if it appeared, that Blum actually received this money, he would be made to account lor it, and the plaintiff would be bound to look to him as his agent. But the question is, did he get it? He says he did not; and the defendant says he did. How can we judge between them ? But it is said, the defendant is supported by his books. But that is not so ; for he has no recollection, to be refreshed. The books do not sustain the defendant ; but he looks altogether to them. And here, again, wo must say, that, as a witness, the books are much less satisfactory than the defendant himself — for, plainly they are entitled to but little consideration. In the case of this very note, it is remarkable, that a gross error, either in fact or law, was committed ; for 92 days interest was on the 17th of September taken off a 90 days note dated the 10th September. Either the discount was entered as of the wrong day, (as Mr. Shober’s testimony renders probable) or usurious interest was taken. We endeavored to get the “ weekly return” of that week, but the bank has not put it in, for the reason alleged, that it has no details, but consists of mere generalities. Now it was because it deals in generals that \ve wanted it; in order that we might see, whether the aggregate of notes discounted that week, as then. returned, and the discount on them would include or exclude this note, which now appears on the books of the agency among the discounts of that week; and the withholding such a document affords a presumption, that its contents, if produced, would benefit the opposite party. But above all, such large and fluctuating surpluses, for such long periods, prove completely, that there was either such a of attention or skill in keeping the books, that no reli1 & 7 anee can be placed on them. • Indeed, Mr. Shober says, the defendant tías often kept debts on his list, as parts of the assets, after they had been paid. Now, it is just as easy to suppose, that he entered the payment to Blum, when he made the list of discounts, upon putting to itself the money for that purpose, and afterwards forgetting it, as that he should receive a debt and forget to credit the debtor. The defendant was wrong, when hesaid his books could not be mistaken ; for he is obliged to own, that there are undiscovered errors in them to more than three times this debt.

We do not take into consideration the evidence of Thom and Dobson, which raise opposing probabilities; for we do not decide the cause'upon the higher or lower personal credit of Mr. Shuman or Mr. Blum; because, without going into that, it is sufficient, if under the circumstances, the question of fact be left doubtful, to entitle the plaintiff to a decree. A bank, that pays money to any person as a loan, without a check or receipt, and especially pays the money of one man to another, without taking something to charge him, ought to lose it, unless the facts can be unquestionably established.

Per, Curiam, Injunction perpetuated, with costs.