
150 U.S. 231 (1893)
THOMPSON
v.
SIOUX FALLS NATIONAL BANK.
No. 53.
Supreme Court of United States.
Argued October 24, 25, 1893.
Decided November 20, 1893.
ERROR TO THE SUPREME COURT OF THE TERRITORY OF DAKOTA.
*237 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.
*238 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 *239 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.
*240 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 settlement *241 of his accounts. If they have the authority to accept cheques and other evidences of debt, where does that authority cease? May they not also receive notes, drafts, bonds, or other obligations which in their opinion may then or thereafter be good? As was said in Cawley v. People, 95 Illinois, 249, 256, speaking of the duty of auditing boards: "They are limited and controlled in their official acts, and they are not, unless authorized, empowered to do or not to do official acts. In this class of cases they are empowered, and it is enjoined on the board, to require sufficient bond from the treasurer and to approve it. They have no power to dispense with the duty, nor can they, without a proper consideration, release sureties from their obligations under the bond. If they were to do so, in fraud of the rights of the people, the act would have no binding effect and would be void... . There can be no question that the treasurer could only discharge himself for county funds in his hands by paying to the county, in money, county orders or jury warrants. The statute requires him to pay in such funds. It is not intended that he may pay in promissory notes, cheques, drafts, and other paper." Indeed, it is doubtful whether the county commissioners who, under the laws of Dakota, are simply an auditing body, had any authority to receive moneys of the county from the treasurer, for which they gave no bonds, and whether their act in taking possession of his assets, including this cheque, was not beyond the scope of their authority. They did, however, receive the money and the cheque, and at the same time, and as a part of the same transaction, turned them over to the sureties upon his bond, although they did not at that time, or until six days thereafter, pass his accounts or release his sureties. What warrant they had for turning over these securities to the bondsmen does not appear, but there was evidently no intention on their part of releasing the sureties, nor was the county placed in any worse position by that act. If the commissioners had received this cheque believing it to have been issued in good faith and retained it, it is possible the county might have stood in the position of an innocent purchaser. But their receipt of it and their turning it over to the sureties *242 was evidently a single act, and intended to assist the sureties in protecting themselves. It was wholly inconsistent with the idea of releasing them from their obligation.
Aside from the somewhat suspicious circumstances attending the sudden production of a cheque of this large amount, which could scarcely be said to be in the ordinary course of business, there was evidence tending to show that about the time of the receipt of the cheque, on January 12, Mr. Wright, the county attorney, was informed by the counsel of the bank that the board should not take the cheque into consideration; that the bank would defend against it, as in the hands of Howard, and refuse payment; and that the next day, when the board was in session, a similar notice was given to them. It is true that some of this testimony, with regard to the notice, is disputed; but in determining whether the case should have been left to the jury, or not, we are to consider only the uncontradicted facts. Beyond this, however, there is some testimony tending to show that the cheque was not delivered by Howard voluntarily, as such delivery involved a plain violation of the condition upon which he had received it; but was extorted by the bondsmen and commissioners under a show of force. If this be true, it was clearly not a receipt of the cheque in the ordinary course of business. Be this as it may, at does not appear that the county commissioners took any action prejudicial to their rights against the county treasurer and his sureties until the 18th, when his settlement was approved, and on the 19th the cheque of the bondsmen, certified by the president of the plaintiff bank, was received in full discharge of such bondsmen.
Without expressing an opinion of our own whether the evidence did or did not establish the fact that the county was an innocent holder for value of this cheque, we are clear that the testimony upon this point should have been submitted to the jury.
There was certainly evidence enough to go to the jury that the plaintiff bank as well as the sureties upon the bond received the paper with notice that its collection would be resisted. The sureties received the paper simply as bailee for *243 the county. They paid no consideration for it. It simply passed through their hands to the plaintiff bank, which consented to receive it on deposit and to credit them with the amount.
With regard to the possession of the plaintiff bank, the evident anxiety of McKinney, its president, to obtain for it the treasurer's deposit; his inquiry whether it was a straight cashier's cheque; his threat that the bank should pay it or close its doors; the substitution of Norton, the cashier of this bank, for Howard as county treasurer; the suspicious manner in which the money was brought to the bank; the prompt commencement of the action against the defendant on the morning after the cheque was refused; the conversation on the following morning, the 15th, between the assistant cashier of the plaintiff bank and the editor of a local paper, in which the former said: "The Sioux Falls National Bank had done a great deal for me, and now was the time for me to stand by them; it was a matter of vital importance to them;" were all suspicious circumstances tending to throw grave doubt upon the claim of the plaintiff bank to be a bona fide holder of the paper. Add to this the fact that twice during the afternoon of the 13th the plaintiff bank presented the cheque for payment, which was refused upon the ground that it was given without consideration, and had been fraudulently diverted from the purpose for which it was issued; that this notice was repeated at a conference between the officers of the two banks the same evening, and the plaintiff bank requested to charge it back to the bondsmen, and it is too clear for argument that the plaintiff did not itself stand in the position of an innocent holder. Bad as the conduct of the defendant bank was in issuing the cheque, the testimony is calculated to engender a strong suspicion that the motive of the plaintiff bank in receiving it was to secure to itself the deposit of the county moneys, and perhaps also to crush out a rival institution.
While it is true the plaintiff bank credited the bondsmen with the amount of the cheque on its receipt, it parted with nothing upon the faith of it until nearly a week thereafter. *244 If it had cancelled the cheque on the evening of the 13th, as it was requested to do, it would have done no more than the law required of it. The mere credit of a cheque upon the books of a bank, which may be cancelled at any time, does not make the bank a bona fide purchaser for value. If after such credit and before payment for value upon the faith thereof, the holder receives notice of the invalidity of the cheque, he cannot become a bona fide holder by subsequent payment. Dresser v. Missouri &c. Construction Co., 93 U.S. 92; Mann v. Second Nat. Bank, 30 Kansas, 412; Central Nat. Bank v. Valentine, 18 Hun, 417; Manf. Nat. Bank v. Newell, 71 Wisconsin, 309; Buller v. Harrison, Cowp. 565.
The claim that defendant was estopped by its cheque to deny that the bank was indebted to the county in the amount of such cheque, depends practically upon the same considerations as the question of innocent purchaser. If, upon the faith of such representations, the county commissioners did any act prejudicial to the interests of the county, an estoppel might arise; but if, before such act was done, the commissioners were informed that the cheque was fictitious, they could not be said to have acted upon the faith of its representation, and there could be no estoppel. Even if such estoppel had arisen in favor of the county, it is, at least, doubtful whether the plaintiff bank could avail itself of it. Deery v. Cray, 5 Wall. 795; Mayenborg v. Haynes, 50 N.Y. 675.
We have not deemed it necessary to consider whether this cheque falls within the class upon which we have held that no action will lie in favor of the holder against the drawee before acceptance. Bank of Republic v. Millard, 10 Wall. 152; First Nat. Bank of Washington v. Whitman, 94 U.S. 343; Bull v. Bank of Kasson, 123 N.Y. 105.
In any view we have been able to take of this case, we think the question of plaintiff's title to this cheque and its right to recover upon the same should have been left to the jury under proper instructions.
The judgment of the court below is, therefore, reversed, and the case remanded to the Supreme Court of the State of *245 South Dakota with instructions to remand the case to the proper court of Moody County, and to direct the verdict and judgment to be set aside and a new trial granted.
MR. JUSTICE BREWER dissented.
