Opinion of the Court.

Mr. H. Winship Wheatley for the appellee.

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Mr. Chief Justice SHEPARD delivered the opinion of the Court:

The general contention of the appellant is correct, nor has it been denied that the verdict cannot have any support in the evidence of the defendant tending to show that plaintiff had agreed to the condition that he was not permitted to draw against uncollected checks received as deposits, as that evidence was disputed. Nor on the other hand, did the plaintiff testify that defendant had agreed that he might draw against such checks as if they were deposits of money. The farthest he went was to say that occasional checks drawn by him in part against deposited checks had been honored during the period of his account with the bank. It is proper to say, also, that while the natural inference from the simple statement of the plaintiff that the check was indorsed by him when delivered doubtless is that the indorsement was in blank, that is to say, of his name without the prefix "for collection," or "for credit" even, it is an inference that must necessarily be deduced on the motion to direct a verdict.

The single question presented by the motion to direct the verdict is whether the receipt of the check, indorsed in blank, as a deposit, and its entry in the bank book of the plaintiff, was equivalent in law to a deposit of money, and therefore made it the duty of defendant to honor the note when presented? In other words, was it the legal effect of the transaction to vest the ownership of the check in the defendant, or simply to constitute it the agent of the plaintiff, merely, for its collection? If the defendant became the owner of the check, the direction of the verdict for the defendant was erroneous. it became merely the agent for collection, the verdict was right, because the collection had not been made at the time the note was dishonored, and without its inclusion plaintiff did not have sufficient funds in the defendant's hands to meet it. It is settled law that when money is deposited generally in a

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bank, its ownership passes to the bank, and the relation of debtor and creditor is at once created. But as regards the relations created by the indorsement and deposit of negotiable paper, there is a great conflict of opinion. Probably many of these apparently conflicting decisions of the courts of last resort might be reconciled by an analysis of the particular facts respectively involved. In the case at bar, we are not embarrassed by any restrictive indorsement of the check, or by any special form of receipt. The indorsement was in blank, and the deposit was entered in the bank book as cash. Under such conditions the rule in Maryland is that the bank becomes the owner of the paper by such indorsement. Tyson v. Western Nat. Bank, 77 Md. 412-417, 23 L.R.A. 161, 26 Atl. 520; Ditch v. Western Nat. Bank, 79 Md. 192, 23 L.R.A. 164, 47 Am. St. Rep. 375, 29 Atl. 72, 138. The court of appeals was divided, and the rule was established by the majority. It may be, as contended by the appellee, that the decisions establishing the opposite view are in the majority. It would serve no useful purpose, however, to review the cases cited on each side of this vexed question, because we understand that the question has been set at rest in this jurisdiction by a recent decision of the Supreme Court of the United States. Burton v. United States, 196 U. S. 283-302, 49 Atl. 482-488, 25 Sup. Ct. Rep. 243. Although that was a criminal case, the point was directly involved, and it was said: "When a check is taken to a bank, and the bank receives it and places the amount to the credit of a customer, the relation of creditor and debtor between them subsists, and it is not that of principal and agent."

-Of course, this relation of creditor and debtor created by the receipt of the indorsed check, and its entry to the credit of the depositor as money, would not subsist in the face of a direct notice and understanding to the contrary. But whether there was such understanding in this case is a disputed fact, which must be submitted to the jury.

Being of the opinion, for the reasons given, that it was

error to direct a verdict for the defendant, the judgment will be reversed, with costs, and the cause remanded for another trial. Reversed.

SOUTHERN SURETY COMPANY v. BAGLIN.

BONDS; PRINCIPAL AND SURETY; FRAUD.

In an action by the obligee against the surety on a bond under seal which recited that the obligee had loaned to the principal obligor bonds which were to be returned within a specified time, and conditioned upon the return of the bonds within that time, evidence on behalf of the defendant is admissible which tends to show that the plaintiff never in fact loaned the bonds to the principal obligor, and that the defendant was induced to execute the bond by means of a fraudulent conspiracy between the plaintiff and the principal obligor, whereby the former was to pretend to loan the bonds to the latter. (Citing Lyons v. Allen, 11 App. D. C. 543, and distinguishing United States v. Boyd, 8 App. D. C. 440.)

No. 2193. Submitted December 6, 1910. Decided April 3, 1911.

HEARING on an appeal by the defendant from a judgment of the Supreme Court of the District of Columbia, on a verdict directed by the court, in an action on a bond against the surety.

Reversed.

The COURT in the opinion stated the facts as follows:

This is an appeal from the judgment of the supreme court of the District of Columbia in a suit upon a bond. The declaration alleged that the appellant, the Southern Surety Company, defendant below, was indebted to the appellee, George Baglin, plaintiff, on a certain bond executed and delivered by defendant to plaintiff on July 10, 1907, conditioned that one Garrett B. Linderman should return to plaintiff on or before Septem

ber 25th, following, certain government bonds, known as "Old 4's," of the par value of $45,000. The declaration was in two counts, the first declaring upon the obligatory part of the bond only, and the second setting out also the condition.

To the declaration defendant interposed the pleas that it was not indebted to plaintiff; that plaintiff never loaned the government bonds to Linderman; that the bond was obtained by means of a fraudulent conspiracy between plaintiff and Linderman, whereby plaintiff was to pretend that he was to lend, or about to lend, the government bonds, with a secret agreement between them, unknown to defendant, that the bonds should not in fact be loaned; that plaintiff, instead of lending the government bonds to Linderman, sold them within six hours after his purchase thereof, and appropriated the money to his own use, with the purpose of defrauding defendant; that by the action of plaintiff in furtherance of said conspiracy in altering and abandoning the agreement between himself and Linderman for the performance of which the bond in suit was given, Linderman was unable to fulfil his obligation to defendant; that after the execution of the bond, and without the knowledge of defendant, plaintiff and Linderman entered into an agreement whereby plaintiff released Linderman from the obligation of returning the bonds, agreeing to take the value thereof instead; that the entire transaction on the part of plaintiff was to secure by this means sufficient money to satisfy an outstanding obligation from Linderman to plaintiff; that a portion of the money received by plaintiff from the sale of the bonds was used to pay Linderman's indebtedness to plaintiff, and that, by reason of the fraud so practised by plaintiff, defendant is released from any obligation on its bond.

The transaction out of which this suit arose is in fact between Linderman and one Augustus Heinze, plaintiff being an employee of Heinze, and apparently used as a figurehead to keep Heinze's name out of the transaction. It was originally intended to obtain a loan of $200,000 from the Metropolitan Trust Company, of New York, to be secured by 6,700 shares of United Copper Company's stock belonging to Heinze. It

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was agreed that $75,000 of this loan should go to Linderman, to be repaid on September 26, 1907, its return to be secured by a bond of the People's Surety Company. This arrangement was embodied in an agreement between plaintiff and Linderman, dated June 19, 1907. In addition to the above condition, the agreement provided that plaintiff, on securing the loan from the trust company, should forthwith lend to Linderman, out of the proceeds, the sum of $15,000, to be secured by Linderman's one-day note, and that, as soon as Linderman should obtain a bond from the surety company to secure the repayment of the entire $75,000, the remaining $60,000 should be paid to him by plaintiff, and the one-day note canceled.

It appears that, after the $15,000 loan was made, it was ascertained that the surety company would not enter into a bond to secure the return of money; whereupon, in Heinze's office in New York, another method of procuring a security bond was suggested. Pursuant to the suggestion, Linderman secured a bond from the Title Guaranty & Surety Company to secure the return to plaintiff of "Old 4" government bonds of the par value of $30,000, and secured the bond in question from defendant company to secure the return to plaintiff, on or before September 25, 1907, of United States government bonds of the denomination of "Old 4's" of the par value of $45,000. The condition of the bond is as follows:

"That the Southern Surety Company * * * is held and firmly bound unto George Baglin, in the city of New York, in the sum of Forty-five thousand dollars ($45,000), to be paid to the said George Baglin, his heirs and assigns, at its office in the city of New York, the payment whereof well and truly to be made and done, the said company binds itself, its successors and assigns firmly by these presents. Sealed with its seal and dated this 10th day of July, 1907.

"Whereas, the said George Baglin has loaned, or is about to loan, to Garrett B. Linderman, of South Bethlehem, Pennsylvania, United States government bonds known as "Old 4's" of the par value of forty-five thousand dollars ($45,000), redeemable after July 1, 1907; and