Statement of the Case. The cheque was not endorsed by the bondsmen, and they had no account at that bank. Hollister endorsed several other cheques making up the deposit, but was not asked to endorse this one. Bailey then said to McKinney, "That is a pretty good size cheque; you had better go and get your money on it." McKinney said that he would collect it or see that their doors did not open the next morning. Twice that afternoon plaintiff presented the cheque to the First National Bank for payment, which was refused upon the ground that plaintiff had no right to the cheque, and that it was given without consideration. In the evening a conference was held at the plaintiff bank between its officers and attorney, and those of the First National Bank, at which the plaintiff was again notified that the cheque was without consideration, and had been fraudulently diverted from the purpose for which it was issued, and was urged to charge the same back to the bondsmen. This the plaintiff bank refused to do, the plaintiff's cashier remarking that if the bank did not pay it they knew a way to make it. The next morning, January 14, the plaintiff commenced this action. On January 18, the board of county commissioners, having found the treasurer's account correct, by resolution approved the same, and thereupon Howard tendered his resig nation as treasurer, and C. L. Norton, cashier of the plaintiff bank, was appointed his successor. On the next day, January 19, by further resolution of said board, the bondsmen were required to turn over to the county commissioners all the evidences of deposit and all funds belonging to the county, and thereupon the cheque of the bondsmen in the sum of $27,236.63, certified by McKinney, president of the plaintiff bank, was accepted by the county commissioners in full discharge of the bondsmen for the funds received of the county January 13, and Norton as county treasurer receipted to the commissioners for that sum of money in currency. Prior to taking possession of Howard's funds and the cheque in suit by the county commissioners, there was evidence tending to show that the board was notified by one Wilkes not to take the cheque under consideration; that the payment of the cheque would be resisted. This testimony was disputed. Argument for Defendant in Error. The case was removed for trial to Moody County, and the court, upon motion of the plaintiff at the close of the defendants' testimony, directed a verdict for the amount of the cheque, upon which judgment was rendered by the District Court for $18,417.24. The case was appealed to the Supreme Court of the Territory, where the judgment below was affirmed, and the defendant sued out a writ of error from this court. Mr. Thomas B. McMartin for plaintiffs in error. Mr. William A. Wilkes, Mr. F. L. Boyce, and Mr. R. J. Wells filed a brief for the First National Bank of Sioux Falls, plaintiff in error. Mr. George A. Madill and Mr. Cushman K. Davis for defendant in error. The District Court did not err in directing a verdict and in entering judgment for the plaintiff. The instrument issued on January 12, 1886, by the First National Bank (plaintiff in error), payable "to the order of C. K. Howard, Co. treasurer," for the sum of $16,571.61, was a cashier's cheque. It is idle to discuss what other instrument known to the law merchant is similar to it or has some element in common with it. The fact is that it is a form of instrument in general use in the business of the country. It is issued by banks because of its convenience, and has been assigned and occupies a prominent and permanent place in commercial transactions because of its negotiability, after endorsement in blank by the payee, by mere delivery and because the confidence in it is coextensive with the character and responsibility of the bank issuing it. This cheque was made by the bank to Howard for the express and understood purpose of enabling him to make his settlement with the Board of County Commissioners. The plaintiffs in error are estopped from setting up any secret understanding as to it, had between Howard and the officers of the bank, contrary to the legal effect of the cheque itself and to the admitted purpose for which it was given. Opinion of the Court. The cheque was regular upon its face. It was presented by Howard to the board as it was by the bank intended to be in settlement of his accounts. Howard endorsed it and the board took it in satisfaction. This exonerated the sureties from all liability up to and including that settlement. The power of a national bank to issue such a cheque to its customer is as clear as its power to certify the cheque of such customer, and the power to do the latter has long been recognized and sanctioned by the courts. Espy v. Bank of Cincinnati, 18 Wall. 604, 620; Merchants' Bank v. State Bank, 10 Wall. 604; First National Bank of Washington v. Whitman, 94 U. S. 343; Bull v. Bank of Kasson, 123 U. S. 105. Nor can the authority of the cashier of a national bank to issue a cashier's cheque be questioned by the bank in a suit against it upon such cheque. Nor can the bank be permitted in such suit to urge, as a defence, that the amount for which the cheque was issued exceeded a tenth part of the amount of the capital stock of the bank actually paid in by the stockholders. Wyman v. Citizens' National Bank of Faribault, 29 Fed. Rep. 734; Gold Mining Co. v. National Bank, 96 U. S. 640; National Bank v. Matthews, 98 U. S. 621; National Bank v. Whitney, 103 U. S. 99; National Bank v. Graham, 100 U. S. 699. MR. JUSTICE BROWN, after stating the case, delivered the opinion of the court. As the cheque in this case is admitted to have been obtained without consideration, and to have been invalid in the hands of the immediate payee, the plaintiff, to sustain its own title, must prove either that it was itself a bona fide holder without notice, or that the county commissioners, of whom it received the paper, had taken the same for value without notice of any defect in its inception. Lytle v. Lansing, 147 U. S. 59. The circumstances under which the cheque was issued were a plain fraud upon the law and also upon the county commissioners. It seems that Howard kept his deposit as county treasurer with the defendant bank, and had been personally Opinion of the Court. interested with it in different enterprises. He says that, a few days before his semi-annual settlement, he had a talk with Mr. Wells, president of the bank, in which the latter agreed to assist him in this settlement. He told them that it would take about $15,000 to make the settlement. He proposed to the cashier to give him a note for the amount, but the cashier told him it would be better to make some drafts to cover that amount of credit. He thereupon made three drafts, aggregating $15,000, upon M. D. Steevers & Co. of Chicago, who had before this honored his drafts, at the same time telling the cashier that he had not the proper credit to obtain payment of them. The bank thereupon gave him a deposit book showing a balance of $15,625.01 on deposit. This the board refused to accept, and demanded a certified cheque, which the bank refused to give, but gave the cashier's cheque in suit. At the time this cheque was issued, the bank had a capital stock of $50,000, and if this cheque be regarded as a loan, as it must be, it was in express violation of Revised Statutes, 5200, which provides that "the total liabilities to any association, of any person, or of any company, corporation, or firm, for money borrowed, including, in the liabilities of a company or firm, the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of capital stock of such association actually paid in.” The substance of the transaction was, that the bank, with knowledge that Howard had not funds of the county sufficient to balance his accounts as treasurer, - in short, that he was a defaulter, consented to give him a fictitious credit, in order to enable him to impose upon the county commissioners. But the vital question is, whether the commissioners received this cheque in the ordinary course of business, believing it to represent an actual debt of the bank to Howard as county treasurer to the amount of the cheque. To recover upon paper which has been diverted from its original destination and fraudulently put in circulation, the holder must show that he received it in good faith, in the ordinary course of business, and paid for it a valuable consideration. Wardell v. Howell, 9 Wend. 170; Farmers' & Citizens' Bank v. Noxon, 45 N. Y. 762. Opinion of the Court. By the Compiled Laws of Dakota, § 4487, "an indorsee in due course" is defined as "one who in good faith, in the ordinary course of business, and for value, before its apparent maturity or presumptive dishonor, and without knowledge of its actual dishonor, acquires a negotiable instrument duly indorsed to him, or indorsed generally, or payable to the bearer." And by § 4739, "good faith consists in an honest. intention to abstain from taking any unconscientious advantage of another, even through the forms or technicalities of law, together with an absence of all information or belief of facts which would render the transaction unconscientious." Applying the law thus stated to the facts of this case, it appeared that before the cheque was presented, the county commissioners had refused to receive a deposit book, as well as a written statement of the bank that Howard had a credit to the amount of $15,625.01 upon the books of the bank as a part of his official assets, and demanded either the money or a certified cheque, as they doubtless had a right to do. Indeed, it is doubtful whether the commissioners had a right to recognize anything but current money in the settlement of the treasurer's accounts. By the Compiled Laws of Dakota, § 1598, territorial warrants are receivable for general territorial taxes, county warrants for county taxes, city warrants for city taxes, school warrants for school taxes, "but United States Treasury notes or their equivalent only are receivable for such taxes as are or may be required by law to be paid in cash." And by § 1656: "If any county treasurer shall fail to make return, fail to make settlement, or fail to pay over all money with which he may stand charged, at the time and in the manner prescribed by law, it shall be the duty of the county clerk, on receiving instructions for that purpose from the territorial auditor, or from the county commissioners of his county, to cause suit to be instituted against such treasurer and his sureties," etc. Now, if the county treasurer had no authority to receive anything but coin, Treasury notes, national bank notes, or other current money, it is difficult to see what authority the county commissioners had to accept anything less in the set |