Hamilton Machine Tool Co. v. Memphis National Bank

Citations

• 84 Ohio St. (N.S.) 184

Syllabus

<p>Maker sends note to payee — With request to have discounted— And proceeds returned to maker — Bank discounts note — Payee overdrawn at bank — Bank appropriates amount of overdraft from principal of note — Bank sues maker of note — Maker’s defense, payee’s overdraft pre-existing debt — And, therefore, no consideration — Bank held to be bona tide purchaser.</p> <p>On the 12th day of November, 1904, the H. M. T. Co., of Hamilton, Ohio, executed its note for the sum of $948.15, payable to the order of Y. & L., of Knoxville, Tennessee, in four months after date, and sent it by mail to Y. & L. requesting them to procure its discount and remit the proceeds to the maker of the note. On the 14th day of November, 1904, Y. & L., being indebted to the Memphis National Bank on overdraft in -the sum of $436.55, sent said note endorsed in blank to that bank with which they had an account, requesting it to discount it and place the proceeds to their account, all of which was done, the bank having no knowledge of the instructions by the maker to Y. & L., thus extinguishing the overdraft and leaving a credit balance of $491.85 in favor of Y. & L.</p> <p>On the 17th day of November, 1904, Y. & L. drew their check against the credit balance for the sum of $500, which was honored by the bank, leaving their account overdrawn in the sum of $8.15, and shortly thereafter, the account was closed and Y. & L. ceased business with the bank. The note was not paid at maturity, and the bank brought suit thereon against the maker who claimed1 in partial defense, that the amount of said overdraft of $436.55 extinguished by the proceeds of the discounted note, should be deducted, because such overdraft was a pre-existing debt.</p> <p>Held: That the bank, having no knowledge of the instructions sent by the maker to Y. & L., and believing the note belonged to them, purchased it in good faith before maturity, and it is entitled to recover on the same without deduction of the amount of such overdraft.