Official Opinion

Thlí case ie ne arlsing out of the peculiar llnaiioial transactions of Hev. Dr. Earp u lliis city. The opinión recites ttie c:ic i n full and is very exhaustive. Ii Is one tliut vi!l ;i!so attract widespread atteiillon f rom the peculiar circumstances surronndlng it, and fiorn ccrtain points of law iicver before declded in our courts: The (,'ircutl Oonrt for the county of Washtenaw, in ohaneery. Rebeco Heurlques vs. the Ypsllaotl Savlpga liank, et al, Thls is a proceedlng íu equity, to restraln oollection, as agalnst tlie complatiiant, of two note, beailng date April 15th 1889, one of and the other of S4.000, executed by SaraDel Kan and Hebccca Heurlques, payable to tile order of the cashier of the defeudant bank and to declare sald notes vold. Theevideuce Ín Itiis case dlscloses, tbat on the IStb day of April, 1880, the sald bank held a note of$ii.5W), executed by Samuel Earp and Victoria C Morris, which had beeu dlscouuted by sald bank, umi was sonie two months past due. The loan had been made for the benefit of Mr. Earp, and Mrs. Morris who was a inarrlcd wonian, was asurety upon the note. Atter the paper matured she deolliied to renew it. und upon the 15th day of April, 1S8&, Mr. Karp, who was the pastor of the Episcopal church at Ann Arbor, lnduced the complalnant, who was one of hls parishionerH, to slgu the notes now lu controvcrsy. It appears that he was ostenslbly maltin; an ordinary pastoral cali and during the interview he suld tothe coraplalnant that he had a little matter at Y psilauti, and asked If slie wonld do hlm a favor. Supposlng thnt It was somethlng connected wlth the church, she at once nssunted, when he presented two papers for her slgnatnre; [remarking after she had slgned the flrst paper and when presenting the second paper that he wished to retalu one at Anu Arbor and send theother to Ypsllantl. It apuears that she did not 11 ui the papers, nor dia he state their Datore or oosten, and she lesllfled that she had no thoughL or susplcion tbat tliey were notes or other peeuniary obllgations; that wben Blgnlng tbe Bral paper she notlced the words "iweuty-flve" but not hing more; that he handed her the second paper wltli the left hand part contalnlng the figures $1,000 torned over and coacealed; that the papers were theu haslily slgued and he took hls depart ure. Wlillo It may reasonably be urged that the complalnanl must have known tiiat she was entering Into Bome unlinportant obllgatlon, lt is nevertneleaa cleur that she had no conoeptlon of the extent of her engagement, and no reason to suppose that she was slgulng two separate and Independent contraéis. ltla Incontestable that thls malden lady reposed t"e tallest confldeuce in the Rev. Samael Earp, and as her pastor and spiritual advlser, trusled hlm most lmpllcltly. To have doubted his honesty, or questloned the rectltu :e of hls intenllons, was as forelgD to hor thoughts as to have denled the iaori dnesi of hts hlsrh olllce. To her bewas llie orubodinient and representativo of holi ness in human oonduot. To niy mlnd lt is improbable that Mr. Earp contemplated any harm or loss to the complalnant or any om: else. but in the llght and loglc of present resul ts, so far as Miss Ilenriaues Is oonCerned, thls belrayal of her coufideiice can ouly be obaraoterlzed as nn unrighteous ti'atiNact Ion uud a gross fraud. It appears that on April 19th, 1889, Mr. Earp, by letter, transmits those two notes 10 the cashier of the bank, who recelved aml plnneil thiMii to the Morris notes and In which sltualkm they appear to have remnlned. The bank sow claims to have received the Ilenrique'8 notes not as further securlty, imt In poyment of the Morris note. Thls poslilon is disputed by llm complalnant and DQC01D6B au important contentlon lu the case. lt appears that the bank never made any enliy of any nature whatsoever upon any Of the hooks or records lndicating that lt liad recelved and iipplied the Henrlque's notes in pavment of the Morris note. No entry in made in the book of dlscounts or in the register of the bllls oayaule showlng that these notes had bteu dtacounted at the bank nor are they si classitled by any actlon of the bank, allhough Mr. Earp had an account Wlth the bank, lucludlng tbe Morris note. No credit Is glven blm thereon. No eudorsement of payment Is made opon the Morris note, and even to thls day thcre Is uot the süghtest vldence upon the booka or records of the bank that it has ever accepted and applled these notes as payment. lt all rests In the braln of the casnier. Ordtuarily it would be rather dangerous doe1 riñe to predícate corporate acllon uponaughtso intangible as the undlsclosed intentlon ofltt agenta. Mrs. Morris, who is a lady of high character, whose evldence is clcar, aud whose Intercsts, lf auy exi.st, would be opposed to her testlmony, testitles tliat at an interview at lho bank witti the cashter, in June 1889, after the maiurity of the Henrlques notes and after the misfortuues of Mr. Earp had become public; inqulrlng lf she, Mrs. Morris, was In any way involved iü Mr. Earp's transactions, the cashier tlien stated to her that the bank held her note of $ti 5üü, but that since she had algned that note Miss Henrlques had also signed a note which the bank held as addltional seeurlty, and further vtated to her that the bank held her, Mrs. Morris, responsilile jolntly witli Miss llenriques for $'i,öo i. Thls Btateocient of the cashier, as given to Mrs. Morris, is in perfect correspondence wlth the action of the bank, as evidenced wlth lts books iid records. Now, is lt uecessarily Inunit witli the letter ol Mr. Karp, who aulhorizes the retention of the Morris note u il tl I the defendanl Is pald. The fact that the bank aome days alter, lt Is clalmed that 11 had discountL'd the Henrlques notes and applled thera in psyment Í the Morris note, tfiephoned to paitles at Aun Arbor, respectiug the llnancial standing of Miss Henriques, tends strougly to conrlrm the theory that these botei had not been taken as payment but held as further securlty. In the hlstory of this truusactlon there was probably some time w!icn this bank learned lht the siguatureot.a marrled woninn, as amere surety upon a promisory note h:vl but llttle value, but at, what exact period this Information carne is notdisclosed by the testimony, but it was probably subsequenl to the Interview wllh Mrs. Morris, in whieh the cashier stlll adhered to the opinión, that Mr. Karp was re.sponslhlo and would sooa meet tlrs obllgauon, llow niuch this dlscovery and the final m siortuiH's of Mr. Earp had lo do wlth lh decisión oí tlie bank as lo wheiher the llenrlquos notes shonld be deemed a payment or a security it Is not necessary here to determine, for 1 am of the opinión tbat the wi'lghl of evidence is strongly wlth the complalnaut upon tliU question and that the Donk must bc regarded as holding and applylng these notes, not as dUcounled in the payment of the Morris note but as a further security for the debt of Mr. Earp. lt seein.s to me that the facts and circumstances lu this case eau be reconclled upou no otner theory. It also appears that the cishior was personally acqualnted with the complainant; that be han known her aml her lainlly for some thiriy yjHt: ílial he iiiitvv lier to be a member of tbe Episcopal church; tl. at he knew that Mr Earp was rectorof sald church at Aun Arbor; aud thnt he was not aware of the exístence ol bul one Episcopal church at Ann Arbor; the claim ol the complainant may not be unreasonable, thal under the circumstances the cashier had reason to believc that the compluiuaul was a parlshloiur of Mr. Karp, and tbat henee he Is chargeable with nutice of the exlstence of coufldentlal relations between them. Itremalna to determine what principies of law are appllcable to the forcgolng couclusions of tat-t. Kir.-t. lt Is clear that as botween theoomplalnant and Mr. Earp this trausautlou eannot .-i;in 1 !or a m unenl iu a court of equlty. The more Important and serlous question Is: IIow does tliJs ell'ect tliö bank? Counsel für compliiinant eouteiKl, t!mt as this transactlun eatinot be stistained as betweeu Miss Henrlqucs and Earp, and as the bank, under the faets of the case, raay be chargeable wlth notice ol tlie coufldentlal relations cxi.siln betweeu thnm, lt had constructivo nottce of the fraud, and tlius, even lf tlie b:ink regalary .liseouuted the notes In questlon, the complalDaut is not Hable tbereln. I n m nut preparad lo assem to thls doctrine. Secoud. Tlicy farther inslst, that as complaloant never dellvered these papers, supposiiiK tütm 10 be notes, they are vold In the hands oí all partles. The bank replies that the oomplaftl&nt was gullty of negliïfiice in the sluing of these papers, and aenoe it xliould not suffer thcreby. The test of negligence lies Iu the questlon whether or nol a persou of ordlnary prudence, under llke clrcuinslances, would have acted dlflerently? And In detlrmlning thls quextlon the relatiou whlch exitted between these parties may, I thlnk, be cousidered. H Is also somewhat exlraordlnary that this bank, after dlscountlng paper during maní rnontba wltli Mr. .Morris as surety lor Ihe beneüt of Mr. Earp, who was engaged in uo secular labor, should uot have paused and investlgated the rather remarkable proceedure of agaln presenting to thls haak tho endorsement of another lady for m large i gnm of mouoy. Can tliis be considered good banking? The eyes of the bank are supposed lo be wlde open and constantly upon the lookout of lts management, based upou alert business principies. It raay weil be doubted if the .bank, under the record In thls cuse, has not been gullty of greater negligencc thau eau be lmputed to the complainant. Courts should vouchFafe to individuals as well as to corporatlons. Wllh the view that I have taken of thls case, the principies abo ve asscrted by counsel for complalnant becorac unimportant. although I may not be disponed t deny but tbat lt mlght defoat the collectlon of the note of (M.ooo. Thlrd. The followlng seemR to me to be the correct view of the case, aud is decíslve of the questlons involved: The oomrlalnant and tho bank aro alike Innocent, t may be urged as above that as the negllgence of Miss Henriques enabled the Mud to be commltted, sue should snffei. Thls propoeltlon mlght be avallable if the bank had sufTered through her negllgence. 11 the bank, in rellance of thls new paper, had taken any actlon, parted wit h any monpy, or surrendered any proporty or valnable thiiiR but nothlng of tne kind Ir establisbed, not even an eztenilon of time. The notes of KIM Henriques were held and upplltd a a mere securlty for aproceedent dobt. The element of a bonafide holdcr for value, on the part of the bank, are wanting. The bank i li us possesseB no equitles superior to tho complalnant, and must be held to have taken tho noten subject to all Fluitles exIsting between Miss Henriques and Mr. Earp. The burden Is thus cast npon the bank, to establlsb that the transaction betweeu Mr. Earp and Miss Henriques Is consclonable and rlghteoun, utulcr tho evldcnce In thls case, thls Is linpossible. It followa therefore that the relief sought by the oomplalnant must be granted and a decreu wltli costs may beentered accordlngly.