Chapman v. White — 6 N.Y. 412

Majority

p. 392

Chapman v. White.

Headnote

Bank check.

the holder of a check has no equitable lien upon the funds of the urawer; checks are payable, when presented (if the drawer has funds in the bank), . without regard to priority in the time of drawing.

Appeal from the general term of the. Supreme Court, in the sixth district, where a judgment had been rendered in favor of the plaintiff, in a case submitted pursuant to § 372 of the code. The defendant was the receiver of the Canal Bank at Albany.

The Bank of Geneva, having a general deposit in the Canal Bank .at Albany, upon which the latter paid interest, on the 7th July 1848, drew a draft or check on the' Canal Bank, payable to the order of its cashier, in the following words:

“500. *Bank of Geneva, July 8,1848. * 4131 i j 7 J Canal Bank, Albany. Pay to the order of Theo. Olcott, Esq., Cash’r, five hundred dollars.

C. A. Cook, Pres.”

The draff was dated the 8th July, having been issued after the usual banking-hours on the 7th. It was sold to the plaintiff, by whom it was inclosed in a letter, ad-. dressed to the cashier of the Canal Bank, forwarded by mail, stating that it was sent to pay the plaintiff’s note, due on the 12th July, and requesting that the note should be cancelled and sent to him by mail. The letter and draft were received at the bank, by the cashier, to whom it was addressed, on the 8th of July, after the

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close of business-hours. The plaintiff’s note was not then in the possession of the bank, and the officers of the bank had no knowledge by whom it was held, until it was presented for payment.

On the 11th July, the defendant commenced an examination of the assets of the bank, under an order of the comptroller, the bank being insolvent. Business was transacted by the bank, until the close of the 10th July, Olcott acting as cashier; on the 12th, the plaintiff’s note was presented, and not paid. The letter, with the draft inclosed, the seal having been broken, was found in the office of the cashier, by the defendant, during his examination, and on the 19th of July, the draft was returned to the plaintiff, at his request. The draft was not indorsed by Olcott, nor accepted by the bank, nor was the amount of it charged to the Bank of Geneva on the books. The deposit of the Bank of Geneva with the Canal Bank continued, up to the time of the insolvency and failure of the latter bank, much larger than the amount of the draft; and such deposit remained to the credit of the Bank of Geneva, on the books of the Canal Bank, when they came to the hands of the defendant, as receiver of its effects. The plaintiff requested the defendant, as such receiver, to pay him the amount of the draft out of such deposit, and he refused to do so.

*The supreme court, at general term, made an _ order, in accordance with the relief prayed, that ^ the defendant, as receiver, should pay the plaintiff the amount of the draft and interest, out of the assets of the bank, in his hands, in preference to the general creditors; whereupon, the receiver took this appeal.

Pruyn and Reynolds, for the appellant.

Quinn, North and Brown, for the respondent.

— The question upon the facts stated is, whether the draft, under these circumstances, operated as an assignment of the deposit of the Geneva Bank, to the amount of the draft, either at law or in equity. The question has been decided by this court, in Cowperthwaite v. Sheffield ( 3 N. Y. 243 ), Harris v. Clark (Id. 93), and in Winter v. Drury (5 Id. 525). The instrument in question was an ordinary bill of exchange; it did not purport to be drawn on a particular fund, even if one existed. But there is nothing to show that any part of the deposit of the Geneva Bank was held by the drawees, at the time when the draft was received, or transmitted, or when the note for the payment of which the proceeds were to be appropriated, matured, and was presented at the banking-house of the depositary.

The Canal Bank paid interest upon, and had the right to use, the deposit, by arrangement, in their own business ; they, probably, availed themselves of all the advantages secured by the agreement. The depositing bank was, therefore, a mere creditor at large of the insolvent corporation, and I do not see how their unaccepted bill of exchange placed the plaintiff in any better situation. The cashier was his agent, for the purpose Of paying the note, and, as it seems to me,-for procuring an acceptance of the bill. As this was not done, there can be no pretence, that he acquired any rights superior to that of his vendor, even if an acceptance would have availed him.

, *It is said, that the instrument is a check; but * 4-171 7 7 J a check is a bill of exchange, payable on demand. (Harker v. Anderson, 21 Wend. 373 , and cases cited; Franklin v. Vanderpool, 1 Hall 80 .) The drawee owes no duty to the holder, until the check is presented and accepted. Baron Parke remarked, in a case decided in February last, that the holder “could not sue the drawee unless he had accepted the check, a practice not usual.”

Dissent

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(Bellamy v. Majoribanks, 7 Exch. 389.) And in Harker v. Anderson (supra), it was decided, that no action could be maintained against the drawer, until after presentment and refusal of payment by the drawee, and notice to the former. Money deposited generally with a banker, becomes the property of the depositary; the right of the depositor is a chose in action. It is immaterial, whether the implied engagement upon the part of the banker is to pay the sum in gross, or in parcels, as it shall be required by the depositor. In either case, the draft or check of the latter, would not, of itself, transfer the debt, or a lien upon it, to a third person, without the assent of the depositary. (Dykers v. Leather Manufacturers’ Bank, 11 Paige 616 .) As Judge Cowen remarked, in Marker v. Anderson, there are dicta of learned judges, taking a distinction between checks and bills of exchange, but the whole current of authority is the other way.

The supreme court, I think, erred, in determining that the plaintiff was entitled to a preference in the payment of his debt, over the other creditors of the bank, and the judgment should be reversed.

(Dissenting) — I fully concur with the supreme court, in the conclusion at which they arrived in this case, and in the reasons which have conducted them to that conclusion.

There is, however, another consideration, not adverted to by that court, which has its influence with me; and that is, that the instrument on which this suit is brought is not a draft or bill of exchange, but a check. The whole argument of the appellant is based on the idea that it is a bill of exchange, because it answers *the general description of such an instrument, being [ *418 “a written order or request, by one person to another, for the payment of money, absolutely, and at all events.” This definition, being equally applicable to a check and a bill of exchange, would necessarily abolish all distinc

p. 396

tian between them; yet nothing is better settled, than that there is a marked difference between them, both as to their nature and effect. These incidents characterize a check: it must always be drawn on a banker; it must be payable on demand; it has no days of grace; and it need not be presented for acceptance, and, consequently, no protest for non-acceptance is necessary to hold the drawer. If any one of these incidents be wanting, the instrument is not a check, but if all unite (as they do in this case), it is. ( 2 Story 513 ; 3 Kent’s Com. 104, note a.)

These principles are well recognised in the English courts, and even in their statutes, which have put a restriction upon checks, which deprives them of this character, unless drawn upon a banker within fifteen miles of the residence of the drawer. But we have no such restriction here, and when all the incidents unite, the instrument is a check, no matter what the residence: of the parties. When the instrument is a check, it is an -absolute appropriation of so much money, in the hands of the banker to the holder of the check, and there it ought to remain, till called for, and the .drawer has no reason to complain, unless upon the intermediate failure of the banker.' (3 Kent’s Com. 104, note a; Cruger v. Armstrong, 2 Johns. Cas. 5 ; Little v. Phœnix Bank, 2 Hill 430 ; 2 Story 516 .)

Upon the remaining point there is also a consideration not dwelt upon below, and that is, what-was the intention, and, consequently, the duty of the parties ? . The intention of the plaintiff clearly was, that the $500 should be a special deposit with the Canal Bank for a specific purpose, and it was the duty of the bank, upon receiving the check, either to return it and decline the task imposed upon it, or if it retained it, then, instantly to transfer that sum from the account of the drawers of-the check, and place it to the account of the owner of it, for the special *purpose mentioned. By retaining 4iy J the check, the Canal Bank undertook,-to carry

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out the intentions of the plaintiff, and those intentions clearly were, to have that money put aside for a specific purpose, or, in other words, to have it made a special deposit. I think, the judgment should be affirmed.

Judgment reversed.1

Footnotes

[1] That a check upon a bank does not operate as an assignment pro tanto of the fund, against which it is drawn, is well settled, by many decisions. See Ætna Bank v. Fourth National Bank, 46 N. Y. 87 ; Attorney General v. Continental Life Insurance Co., 71 Ibid. 325 ; Lloyd v. Caffrey, 46 Penn. St. 410 ; Bank of the Republic v. Millard, 10 Wall. 152 .

Cases cited

Cowperthwaite v. Sheffield 3 N. Y. 243 N.Y. p. 393