Blacher v. Nat. Bank of Balto.

Parke, J., delivered the opinion of the Court. Bernstein, Cohen & Company was the name under which Max Cohen had long conducted a private bank in Baltimore, and Samuel Blacher, the appellant, a merchant of that city, was one of its old and active depositors. On February 6th, 1925, he made a deposit of fifteen hundred and eighty-nine dollars by endorsing in blank every one of three checks which were drawn on distant banks, payable to his order, and of that aggregate amount. The deposit was. contemporaneously entered as a credit on the depositor’s pass book, which had on the inside of its cover notice to the effect that items payable out of town, whether credited upon receipt or not, were received and collected by the banking house as the agent of the depositor and at his risk, that the liability of the depositor for such items continued until the bank had received payment thereof, and that until then the bank reserved the right to dishonor any checks issued against such deposits.

After the appellant had endorsed in blank these three checks and the credit had been so given on his deposit book, Bernstein, Cohen & Company endorsed in blank the three checks and, on the same day, deposited them, along with quite a number of other checks, in its general deposit account in the National Bank of Baltimore’, appellee, and credit, subject to final payment, was immediately given by the appellee to the account for the aggregate amount of all the checks as though they were cash items.. The three checks involved in this litigation were, in turn, endorsed by the appellee in blank and were afterwards paid, and the money was secured by the appellee. Max Cohen, the proprietor of the private bank, died on February 7th, 1925, and the doors of his banking house were closed on that day. According to the testimony he was, at the time of his death, a millionaire by common repute, but an audit after his death revealed that the banking house had ⁵¹⁸ been insolvent for four years before his death, although the bank had continuously carried on its business and its insolvency was not known by the depositors nor the public until a week after his death.

There is no proof on the record from which it co.uld be found that the appellee had actual or implied notice, either of the terms upon which the appellant made his deposits with Bernstein, Cohen & Company, or of the private bank’s insolvency before or at the time of the deposit of the three checks mentioned. The facts stated, together with a refusal of the appellee to pay the appellant the deposit, were established by the proof of the appellant, as no other testimony was offered, and the principal question for resolution is, Was the granting of a prayer directing a verdict for the appellee a sound application of the law to- the facts ? The theory upon which the appellant proceeded was that he had deposited for collection the three checks with Bernstein, Cohen & Company, and that, therefore, the title to the checks did not pass, and the relation between the depositor and the depositary was not that of creditor and debtor but of principal and agent; and that the appellee was simply a sub-agent for collection, and that, therefore, he could recover the amount collected by the sub-agent on the insolvency of the original depositary. 'Where the relation of agency is dependent upon the acts of the parties, the law makes no' presumption of agency, and ■then it is always a fact to^ be proved, with the burden of proof resting upon the person alleging the agency to show not only the fact of its existence but also its nature and extent. Mechem on Agency (2nd Ed.), secs. 255, 281, 298, 316, 318, 1344.

It may be conceded that, as between the appellant and the original depositary, the effect of the notice on the inside of the cover of the appellant’s pass book was to' make the depositary the agent of the appellant for the collection of the checks deposited; but this relation did not preclude 'the transfer by- the 'depositary of 'a title superior to its own. The general rule that-the mere possession by an alleged agent of his principal’s' property is not sufficient' evidence either ⁵¹⁹ of title in the agent or of authority in the agent k> dispose of it has an exception, when the property is negotiable. In the instant case, the checks were endorsed in blank by the payee, who by his own act thereby made them payable to bearer and their title to pass by mere delivery. Code, art. 13, secs. 49, 53.

Although the depositary of such negotiable paper had no authority to transfer it, except for the purpose of collection, yet, if the agent’s endorsement in blank of the checks was to one which, without notice, took them in the usual course of business, in good faith, before maturity, and for a valuable consideration, there passed to such endorsee a title which the principal could not defeat. Mechem on Agency, secs. 978, 2110, 2111 et seq.; Cecil Bank v. Farmers’ Bank of Maryland, 22 Md. 148, 156 ; Cecil Bank v. Heald, 25 Md. 562, 573, 574 ; Miller v. Farmers’ and Mechanics’ Bank, 30 Md. 392, 398, 400, 401 ; Maitland v. Citizens’ Nat. Bank of Baltimore, 40 Md. 540, 567-569 ; Bradford v. Harris and Birckhead, 77 Md. 154, 160; et infra. The checks were negotiable instruments payable on demand, and, there being, under the circumstances, no unreasonable delay in their presentment, they were due when payment was demanded, which was after their endorsement by Bernstein, Cohen & Company and the appellee.

It follows that the appellee acquired title before maturity. .The appellee, also, took them without notice of any of the facts which would have tended to establish that the endorsement in blank by the appellant was understood by him and his depositary not to be an authorization of the depositary to negotiate the paper, but was an endorsement and delivery for collection only, and with the agreement that the ownership of the cheeks should remain in the endorser, and that his endorsee was only his agent for the purpose of collecting the checks and placing the proceeds to credit of his bank deposit account with the endorsee. The endorsement in blank of the three cheeks by the payee imported property in the holder, and the appellee, who received it from such holder, had the right to treat the holder, who was the appellant, as the owner in good faith. Moreover, the agreement between Bernstein, Cohen ⁵²⁰ & Company and the payee that the three cheeks, although endorsed in blank, were taken by the depositary as an agent for their collection, was set forth on the inside of appellant’s bank deposit book issued to him by Bernstein, Cohen & Company. It was effective only between the depositary and the depositor, and cannot be read into the endorsement in blank so as to vary its tenor in the hands of a third party, without notice, since the statute expressly provides that an endorsement must be in writing and contained on the instrument itself or upon paper attached thereto'.

Code, art. 13, sec. 50; Hammond v. Amer. Express Co., 107 Md. 295, 312 . Instead of endorsing the checks restrietively (i. &., for collection) and thereby assuring that all subsequent endorsees would acquire only the title of his first endorser under the restrictive endorsement, the payee of the checks endorsed them in blank, and by his election became liable as an endorser who endorses without qualification. Code, art. 13, secs. 84-88 and secs. 55, 56.

And the endorsement in blank by Bernstein, Cohen & Company was a guaranty that it had a clear title to the three checks it endorsed, supra. Under such circumstances, the appellee was not bound to make inquiry of Bernstein, Cohen & Company if it held the checks as agent or in any other way than as owner. First Denton Nat. Bank v. Kenney, 116 Md. 24, 31 ; Miller v. Farmers’ and Mechanics’ Bank, 30 Md. 392, 398 ; Edelen v. First Nat.

Bank, 139 Md. 412, 418 ; Maitland v. Citizens’ Nat. Bank, 40 Md. 540, 568, 569 . With .nothing in the form of the three checks or in their endorsement to put the appellee on inquiry, these checks, along with a number of others, were listed by the depositing bank on a deposit slip, and then sent to the banking house of the appellee for deposit as money to- the credit of the general deposit account of Bernstein, Cohen & Company, and the appellee forthwith accepted the checks and at once so credited their aggregate sum. This was done at the request of Bernstein, Cohen & Company and in the daily routine of the appellee’s banking business.

The good faith of the appellee cannot be impugned from the fact that subsequent to the ⁵²¹ deposit it became known that