EASTER & CO. brought trover, in the Circuit Court for the District of Columbia, against Sweeny, Rittenhouse, Fant & Co., bankers of Washington City, to recover the value of certain negotiable notes belonging to them, the first named persons, and which they had indorsed in blank and placed in the hands of Harris & Sons, bankers of Baltimore, for collection and for no other purpose. Harris & Sons forwarded the notes to Sweeny, Rittenhouse, Fant & Co., who were their correspondents in Washington, having first indorsed them thus: 'Pay Sweeny, R., F. & Co., or order, for collection. SAM'L HARRIS & SONS.' Before the notes fell due, Harris & Sons failed, owing Sweeny, Rittenhouse, Fant & Co., a balance in general account. The last-named house claimed accordingly to hold this paper, forwarded to them as before said, to cover whatever sum might be found due on a settlement. And this was the defence to the suit. At the trial of the cause the plaintiffs offered R. H. Harris, one of the firm of Harris & Sons, to prove that the notes in controversy were the property of plaintiffs, and that they had deposited them with Harris & Sons for collection only. The defendants objected to the witness on the ground of his being one of the indorsers. The court overruled the exception. On being held competent, the witness testified that the plaintiffs, after their indorsement in blank, continued to be the owners of the notes, and that such indorsement was merely to enable Harris & Sons to collect; that Harris & Sons, in remitting discounted paper, having time to run, to the defendants, indorsed the same generally, 'Pay to the order of,' without saying, 'for collection,' and that where paper was not discounted, but deposited for collection, it was the practice of Harris & Sons to notify to the defendants, either by a mark on the paper or by the letter of advice, not to protest the same, and that the private transactions between Harris & Sons and the defendants were kept distinct from their business as collection agents, and were carried on by Harris & Sons in separate letter-books.
The opinion of the court was delivered by: Mr. Justice Miller delivered the opinion of the court:*fn2
On cross-examination he testified, that this practice of Harris & Sons, of distinguishing in transmitting paper to the defendants, was not uniform, but depended on the wish of the customer depositing the paper not discounted, and that it extended only to paper having time to run, and did not apply to checks, or sight drafts, or other cash paper, as to which the business was managed as if Harris & Sons were the absolute owners of the paper; and that said practice was only the private practice of Harris & Sons, and that witness never informed defendants of the same, nor did he know they were ever informed thereof; nor, so far as he knows, did they ever have any information as to the practice of Harris & Sons of keeping distinct the business relating to discounted time paper and to time paper belonging to customers, by the use of separate letter-books, or otherwise, as testified by him.
The defendants then proved that for about two years prior to the date of these transactions, there had been mutual and extensive dealings between them and Harris & Sons; that Harris & Sons transmitted, from time to time, to the defendants, negotiable paper for collection; and that, by the uniform course of dealing between the parties, Harris & Sons were treated and dealt with as the owners of the paper so transmitted; that accounts current were kept by the defendants, in which the proceeds of such paper were, when received, credited to said Harris & Sons, and they were charged with all expenses; and that accounts were transmitted monthly to said Harris & Sons, and acquiesced in by them; that upon the credit of such negotiable paper so transmitted or expected in the ordinary course of business, and of such course of dealings, large drafts were drawn from time to time by Harris & Sons, and paid by the latter, and that, upon such credit, large ascertained balances were allowed to remain in the hands of said Harris & Sons, to be met by the proceeds of such negotiable paper; and that, in all respects, the paper so transmitted was regarded, treated, and dealt with by the defendants, and said Harris & Sons, as the property of the latter; and that a similar course of dealing obtained in regard to negotiable paper transmitted by defendants to said Harris & Sons; that the notes in controversy were regarded, and dealt with as the property of Harris & Sons, and that the defendants had no notice or knowledge, until after the insolvency, that this paper was not their property, or that the plaintiffs had any interest in it; and that the balance due the defendants on general account, at the time of the insolvency, had been suffered to remain undrawn, on the faith and credit of the paper in controversy, and the course of dealing aforesaid. The defendants further proved that Harris & Sons, at a date specified, and about three months before the failure, when there was a balance against them, on general account, of $3326.94, had drawn on the defendants for $244.08, the defendants being then the holders of a large amount of negotiable paper, indorsed and transmitted in the same manner as the notes in controversy, and among it certain notes, indorsed by the plaintiffs in blank, and transmitted in a similar manner to the notes in controversy. And the defendants offered evidence, by witnesses largely engaged in the business of banking, that by the general custom and usage of bankers, negotiable paper transmitted and indorsed as the notes in controversy, would be held and treated as the property of the bankers transmitting them.
The court instructed the jury as follows:
'1. If Sweeny, Rittenhouse, Fant & Co., the defendants in this action, at the time of the mutual dealings between them and S. Harris & Sons, had notice that Harris & Sons had no interest in the notes in question, and that they transmitted them for collection merely as agents, then the defendants are not entitled to retain against the plaintiffs for the general balance of their account with S. Harris & Sons.
'2. And if the defendants had not notice that Harris & Sons were merely agents, but regarded and treated them as the owners of the paper transmitted, yet the defendants are not entitled to retain against the real owners, unless credit was given to Harris & Sons, or balances suffered to remain in their hands to be met by the negotiable paper transmitted, or expected to be transmitted, in the usual course of dealing between them.
'3. But if the defendants regarded and treated Harris & Sons as the owners of the negotiable paper which they transmitted for collection, and had no notice to the contrary, and upon the credit of such remittances made, or anticipated, in the usual course of dealing between them, balances were from time to time suffered to remain in the hands of Harris & Sons, to be met by the proceeds of such negotiable paper, then the defendants are entitled to retain against the plaintiffs for the balance of account due from Sam. Harris & Sons.'
No exception was taken by the defendants to these instructions; but they prayed the following additional instructions, to wit:
'That the private practice of Harris & Sons, in transmitting negotiable paper having time to run, whereby they intended to distinguish between negotiable paper discounted by them and that received for collection, as given in evidence by the witness Harris, was not competent to charge the defendants with notice as to whether the paper in controversy was discounted by and belonged to the said Harris & Sons, or was transmitted for collection, unless the jury shall find from all the evidence in the case, that the defendants had knowledge of such private practice. And that in the absence of such knowledge the defendants were authorized to treat such paper according to what it purported on its face to be, and the general custom of bankers in the District of Columbia and elsewhere offered in evidence.'
This instruction the court declined to give. The jury found for the plaintiff.
Two exceptions were taken in the case.
The first, to the admission of R. H. Harris, one of the firm which indorsed the paper, to prove what he did prove.
The second, to the refusal of the court to give the additional ...