White v.

National Bank
G.R. No. 93397—March 3, 1997
J. Torres, Jr.

Topic: Transfer—Kinds of Indorsements—Restrictive Indorsement

Petitioners: White
Respondents: Miner’s National Bank

Case Summary: White filed a suit against MNB as endorser of a protested draft. The endorsement
provides for the phrase: Pay S. V. White or order for account of Miners' National Bank, Georgetown,
Colorado. The declaration contained a special count on the draft and endorsement, and one for money
paid for the use of MNB at his request. White argues that the said words are merely directory and capable
of explanation, and when it is shown by parol testimony that he bought and paid full value for the draft,
with the understanding that he was buying it as commercial paper, with the usual incidents of such as
transaction, the endorser (MNB) is liable in the usual manner, notwithstanding the words quoted.
Moreover, he argues that such is the custom of bankers who deal in such paper in New York, where these
drafts are payable, and that the custom must control the construction of the contract. The Court held that
by the terms of the endorsement, White became merely the agent of MNB for the collection of the money.

Facts:

 This is an action by White for the sum of $60,000 against the Miner's National Bank of
Georgetown, Colorado
 The declaration contains 12 special counts, upon as many drafts, drawn by the Stewart Silver
Reducing Company on Thomas W. Phelps, payable in the city of New York to the order of the
MNB, and endorsed by J. L. Brownell, its president, to S. V. White, and duly protested for non-
payment.
 Another one1 is added to these counts.
o To this declaration Miner’s National Bank pleaded the general issue and several special
pleas.
 The case was tried by a jury. White recovered $15,000 debt and $2,625 damages for interest, on
account of three of the drafts. His claim on the other drafts, and for money paid at MNB's request,
was rejected.
 White brings this writ and assigns for error the rulings of the court in the progress of the trial
which are set forth in a bill of exceptions.

1
"And for that also, heretofore, to-wit, on the first day of April, A.D. 1876, at the said County of Clear Creek, the said defendant
was indebted to plaintiff in $60,000, for so much money by the plaintiff, before that time, paid to the use of said defendant at its
request, which said sum of money was to be paid to the plaintiff on request."
  J. L. Brownell, a partner in the firm of J. L. Brownell & Brother, doing business as bankers and
brokers in the City of New York, was also president of MNB, and interested in the Stewart Silver
Reducing Company during the time of the transactions involved in this suit.
o As such president, he sold or transferred the several drafts on which this suit is founded
to White and received of the latter for the use of the bank the amount of said drafts less
the discount.
o They were not paid at maturity, but due demand, protest, and notice were made. White
recovered from the others, but the others were rejected by the court as evidence against
MNB, on account of the form of the endorsement.
 The draft contains the phrase: Pay S. V. White or order for account of Miners' National Bank,
Georgetown, Colorado.
 Because of the words for account of Miners' National Bank of Georgetown, Colorado in such
endorsement by Brownell, as president of MNB, the circuit court ruled that there arose out of the
transaction no obligation on the part of the bank to pay the draft or return the money, although
due demand of the acceptor and refusal to pay was proved, with notice to the bank.
 The plaintiff relies largely on two propositions to establish his right to recover against MNB on
this endorsement.
o These words are merely directory and capable of explanation, and when it is shown by
parol testimony, as in this case, that White bought and paid full value for the draft, with
the understanding that he was buying it as commercial paper, with the usual incidents of
such as transaction, the endorser is liable in the usual manner, notwithstanding the words
quoted.
o Such is the custom of bankers who deal in such paper in New York, where these drafts
are payable, and that the custom must control the construction of the contract.

Issues + Held: WON has established his right to recover from MNB on the said indorsement—NO.

 The language of the endorsement is without ambiguity, and needs no explanation, either by parol
proof or by resort to usage.
 The plain meaning of it is that the acceptor of the draft is to pay it to the endorsee for the use of
the endorser. The endorsee is to receive it on account of the endorser. It does not purport to
transfer the title of the paper or the ownership of the money when received. Both these remain, by
the reasonable and almost necessary meaning of the language, in the endorser. By the terms of the
endorsement, White became merely the agent of MNB for the collection of the money.
 However, the Court thinks that White was still entitled to recover more than he did.
o The court below seems to have paid but little attention to the issue on the count for
money paid to the use of defendant.
o It appears distinctly by the evidence, and is uncontradicted, that the money paid by White
on account of these drafts was placed to the credit of MNB with its corresponding
bankers in New York, and paid out on checks of MNB, so that there is no question that
the latter received the money. White thought he was buying these drafts and that they
became his property by their delivery to him. Brownell, the president of the bank, thought
he was selling him the drafts, and there is evidence that neither White nor Brownell
noticed the restrictive words of the endorsement.
o If White paid his money as purchase money of the drafts, he paid it without any
consideration, for he did not purchase the drafts. He only burdened himself with the duty
of collecting the money for the bank, and the bank received and used his money without
giving him any consideration for it.
 o If White did not become the owner of the drafts, and if, when he should collect the
money on them, he would hold it, in the language of the endorsement, "for the account of
the bank," the jury might have been left at liberty to presume that the money which he
paid was a loan or advance on the security of the paper delivered to him at the time.
Either of these views of the transaction would justify a recovery under the money count,
in which the delivery of the money and the delivery of the drafts, with the qualified
endorsement, would be evidence of the payment and receipt of the money and the
circumstances which attended it.
 If the court below was correct, neither the title to the paper nor the right to the money under it
passed. The only effect was to justify the acceptor in paying to the endorsee for the account of the
bank. The legal effect of the transaction, as evidenced by the writing, was merely to enable White
to collect the money for the bank.
 Though a restricted endorsement, it was no assignment at all. It is not, therefore, a
contradiction or a varying of the meaning of the written instrument to prove that, in the delivery
of this paper to White, he and the bank were under a mistake as to the effect of it, or that he paid
this money to the bank without any consideration, or that he advanced money to the bank in the
idea that he was to be reimbursed out of the draft when collected.

Ruling: The judgment will be reversed, and the case remanded with directions to set aside the verdict and
grant a new trial.