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Atlantic City National Bank v. Commercial Lumber Co.

Decided: April 24, 1931.

ATLANTIC CITY NATIONAL BANK, A CORPORATION OF THE UNITED STATES, RESPONDENT,
v.
COMMERCIAL LUMBER COMPANY, A CORPORATION, APPELLANT



On appeal from the Supreme Court.

For the appellant, Stein, McGlynn & Hannoch.

For the respondent, Heine & Laird.

Bodine

The opinion of the court was delivered by

BODINE, J. This appeal brings up a judgment in the Essex Circuit entered after the defendant's answer has been struck as frivolous. The Atlantic City National Bank brought suit to recover the amount credited by it upon a check of the Commercial Lumber Company drawn to the order of the Atlantic Woodworking Company and deposited with it. The check was indorsed "for deposit only to the credit of the Atlantic Woodworking Company." The defendant's answer sets up that the endorsement was restrictive, and that the bank took subject to all defenses good against the payee. Principal among these defenses was a total failure of consideration.

It appears from the proofs that some time before the Atlantic Woodworking Company had given the Commercial Lumber Company its note payable at the Atlantic City National Bank. Unable to meet this note at maturity, the Atlantic Woodworking Company procured from the Commercial Lumber Company the check in suit, and deposited the same in

the manner mentioned. The check was immediately credited by the bank to the account of the Atlantic Woodworking Company. When the Commercial Lumber Company's check was sent for collection to the bank, on which it was drawn, it was returned marked "insufficient funds." Payment had been stopped because the Atlantic Woodworking Company had not sent forward the check it promised to send in order to reimburse the Commercial Lumber Company for this advance.

Section 36 of the Uniform Negotiable Instrument act, adopted in this state (Pamph. L. 1902, p. 590), provides: "An indorsement is restrictive, which either: 1. Prohibits the further negotiation of the instrument; or 2. Constitutes the indorsee the agent of the indorser; or 3. Vests the title in the indorsee in trust for or to the use of some other person. But the mere absence of words implying power to negotiate does not make an indorsement restrictive."

Section 37 (Pamph. L. 1902, p. 590) provides: "A restrictive indorsement confers upon the indorsee the right: 1. To receive payment of the instrument; 2. To bring any action thereon that the indorser could bring; 3. To transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so. But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement."

Section 47 (Pamph. L. 1902, p. 592) provides: "An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise."

"An indorsement using the words 'for collection,' or words of similar import, is restrictive, and merely makes the indorsee agent for the indorser to collect the paper, but does not vest in him the legal title to the paper, nor authorize him to sell or to indorse the paper to another, although it is held that such an indorsement transfers a sufficient title to support an action by the ...


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