Thomas v. Supervisors of Westchester County — 23 N.Y. St. Rep. 851

Majority

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James B. Thomas, Resp’t, v. Supervisors of Westchester County, App’lt.

(Court of Appeals,

Filed June 4, 1889.)

Headnote

1. Payment—Check—Receipt—When equivalent to payment.

The county of Westchester being indebted to the Willard asylum, on October 1, 1889, the treasurer of the asylum sent a bill to the county, requesting that its amount be remitted by draft with exchange on New York. Instead of so doing, the county treasurer returned his check as such, dated October 31st, drawn upon M & Co., bankers, at Mount Vernon, New York The check was received, by the asylum, on November 3d. On that day, and on the assumption that the check would be paid,

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the treasurer of the asylum sent a receipt for the amount of the indebtedness. Immediately, upon the receipt of the check, and on the day of its receipt, the treasurer of the asylum sent it by mail to the First National bank of New York, for collection (November 4th was election day), and the bank received the check November 5th, and on the same day sent it by mail to the drawees for collection and remittance. This was in accordance with a custom quite common among bankers, and ndt at all unusual. It is the custom for the drawee in such cases to remit by draft, and such a draft the drawee sent. It was dated November 6th, and on that day M. & Co. failed and made a general assignment for the benefit of creditors, which was dated and acknowledged that day, and recorded the next morning before the draft was received. The First National Bank presented the draft, on the day of its receipt, to the National Citizens' Bank, and demanded payment which was refused, and thereupon, and still on the same day, a messenger was sent to M. & Co., who tendered back the draft and demanded the check, which was refused although it was still in their possession, and was not returned to the county treasurer until some days later. Held, not to amount to payment of the debt of the county. That in such a case, and in the absence of a proved intention or agreement, the acceptance of the draft is sub modo only, and upon the condition that when presented with due diligence it will lie paid; that there was either a mutual mistake of fact which would prevent the receipt of the draft from operating as payment, or fraud on the part of M & Co.

2. WlLLABD ASYLUM—CONSTBUCTION OB STATUTE BELATBTG TO.

The statute relating to the Willard Asylum, Westchester county, expressly authorizes an action by its treasurer to collect bills due to the asylum from the county, and does not intend to leave the treasurer without a remedy in case of n,on-payment by the county, until the meeting of the supervisors, and subject it to their audit.

Close & Robertson, for appl’t; Chas. A. Hawley, for resp’t.

The indebtedness of the county of Westchester to the Willard Asylum, is not disputed, but the controversy arises over the defense of payment. On October 1st, 1884, the treasurer of the asylum sent a bill to the county, requesting that its amount be remitted by draft with exchange on New York, instead of so doing, the county treasurer returned his check as such, dated October thirty-first, drawn upon J. M. Masterton & Co., bankers, at Mount Vernon, N. Y. The check was received by the asylum on November third. On that day, and on the assumption that the check would be paid, the treasurer of the asylum sent a receipt for the amount of the indebtedness. The check did not thereby become payment. Burkhalter v. The Second National Bank of Erie, 42 N. Y., 538 . The defendant does not claim the contrary, but rests its defense upon what afterward occurred. Immediately upon the receipt of the check, and on the day of its receipt,- the treasurer of the •asylum sent it by mail to the. First National Bank of New York, for collection. November fourth was election day, and the bank received the check November fifth, and on the same day sent it by mail to the drawees for collection and remittance. This appears to have been done in accordance with a custom quite common among bankers, and not at all unusual. It is shown that the custom, also, is for the drawee

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to remit by draft, and it must be assumed that the collecting agent expected that the remittance would be made in that manner and through the means and intervention of a draft. Such a draft the drawees sent. It was dated November sixth, and drawn on the National Citizens’ Bank of New York. It was not mailed, however, until November seventh, and on that day Masterson & Co. failed, and made a general assignment for the benefit of creditors, which was dated and acknowledged that day, and recorded the next morning at 9 -30 o’clock, and before the draft was received, or about the hour of its receipt by the collecting agent which was at the opening of business on that day. The draft was worthless when received, and would not have been accepted at all, had the facts been known. While it was on its way, the drawees were busy with the action which made it waste paper, and were withdrawing the fund upon which it purported to have been drawn. They must have known when they mailed it, that the crash was at hand, that the draft was unavailing, and their possession of the check not perfected or justified by any payment. The First National Bank presented the draft on the day of its receipt to the National Citizens’ Bank, and demanded payment, which was refused, and thereupon and still on the same day, a messenger was sent to Master-ton & Co., who tendered back the draft, and demanded the check, which was refused, although it was still in their possession, and was not returned to the county treasurer until some days later. The draft was formally protested on November eighth.

On this state of facts the appellant contends that the draft of Masterton & Co. operated as payment of the debt as between the present parties, and when met by the finding of fact that there was no agreement, understanding or intention that the draft should be taken as payment, answers by assailing that finding and by a special reliance upon the decision of this court in the case of People v. Cromwell, 102 N. Y., 477 ; 2 N. Y. State Rep., 437. A comparison of the two cases will disclose vital points of difference, although the controversy in the case cited arose, as in this, from the failure of Masterton & Co. In that case the relator held certain bonds of the county of Westchester, interest coupons upon which had matured. Notice had been given that they would be paid by Masterton & Co. He presented them at their counter. They had on hand the means of payment furnished by the county, and could and would have paid the coupons in cash, but for what further transpired. The relator was offered his choice of the money or a draft, and chose to accept a draft, which was given him. This was on the 6th of November. If it had been presented that day or the next, it might and probably would have been paid. The court said that the relator had not removed the imputation of loches. Here no loches either existed oris pretended. Due diligence was used all along the line, and the failure to

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collect was shown to be without fault of the plaintiff or its agent. In the cited case, it is observed that Masterton & Co. were not liable upon the coupons, and in no manner connected with the obligation to be paid, and so their sole authority was to make payment. Here the original liability was represented by a check to which Masterton & Co. had been made parties, and upon their agency to pay was super-induced a liability as drawees, which they could only discharge by their own payment, in default of which it would continue. But beyond both of these differences, which seem to us important and vital, there is disclosed another, which is decisive.

Upon the facts in the case cited, it was impossible to deny that the draft was delivered and accepted as payment, without either mutual mistake of fact, or fraud on the part of the paying agent. The relator was offered his choice between the money and a draft, and chose the latter and surrendered his coupons as paid. He could have taken the cash, and was not at liberty to refuse it when offered, and take in its stead the liability of Masterton & Co., without subjecting himself conclusively to the inference that he voluntarily, and of his free choice, took their draft as payment. Here the facts point to the contrary inference. "The collecting bank was offered no choice, and refused no payment in money. Its request was to remit, and undoubtedly it expected a draft, but never agreed to accept it as payment. The custom proved does not reach to that result. It was merely for the debtor bank to send a draft as a means of transferring the money. It was not that such drafts are accepted absolutely as payment. Neither from custom, therefore, nor from any express agreement, was the draft accepted as payment, or otherwise than as an expected means of obtaining payment. And no such intention or agreement can be implied. The collecting bank did not part with the check on the faith of the draft. It parted with it on the faith, and in the expectation, of payment, to be made undoubtedly .through the medium of a draft, but a draft that would produce the money and be, in truth, its equivalent. In such a case, and in the absence of a proved intention or agreement, the acceptance of the draft is sub modo only, and upon the condition that when presented, with due diligence, it will be paid. But beyond that, the fact here is that there was either a mutual mistake of fact which would prevent the receipt of the draft from operating as payment, or fraud on the part of Masterton & Co. If, when they mailed the draft on the morning of the seventh, they knew, as it is reasonably certain they must have known, that it was bad and would be worthless on its arrival, and proceeded at once to make it worthless, their

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draft, instead of payment, was a fraud, from which they could gain no advantage, and through which the drawers could obtain none. No refinement of reasoning can convert such a fraud into payment, either as to the drawees or the drawer. If, on the other hand, the improbable supposition is indulged, that Masterton & Co., when they mailed the draft on the seventh, honestly thought it good, and themselves able to continue business, then they were honestly mistaken and the draft was sent and received under a mutual mistake as to existing facts.

The case of Roberts v. Fisher ( 43 N. Y., 159 ), was one in which the note of a third person was delivered by a debtor to his creditor in payment for goods purchased, and which the latter received in payment and discharge of the debt. The maker of the note was insolvent when the transfer was made, though the fact was unknown to the coritracting parties. The question raised was which of them should bear the loss.

The court said: “ Upon broad principles of justice, it would seem that a man should not be allowed to pay a debt with worthless paper, though both parties supposed it to be good; ” and added that the loss had already occurred when the note was received. The loss had actually fallen upon and happened to the vendee before the note was received by the vendor, and the vendee could not shift his own loss upon the vendor, both parties acting innocently, as payment for the goods bought.

So here, before the draft was received, and while it was on its way, the county of Westchester had lost its money on deposit with Masterton & Co., by the failure of that firm. Its check was unpaid, and its liability remained, and even if the collecting bank could be said to have accepted the draft, it did so, under a mutual mistake of fact, if Masterton & Co. were innocent in sending it, and had not, as in the People v. Cromwell, taken all risks of the paper by a new dealing put in the place of, and intended to take the place of, the money actually tendered. We think, therefore, the decidion below was correct.

Nor is that conclusion averted by the objection taken that the plaintiff should have proceeded by mandamus directed to the board of supervisors, rather than by action, because the statute conferring the latter right, by its terms was intended not to change the remedy, but dictate^ in whose name it might be enforced. The construction claimed is very narrow, and somewhat artificial, but defended mainly upon the ground that otherwise the statute providing for the presentation of claims to the supervisors, and their audit thereof would be partially repealed by implication.

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We expressed a doubt in People v. Cromwell, whether the remedy by mandamus applied at all to .a case like the present; but, assuming that it does, it only follows that an additional remedy by action has been given. The two provisions can stand together as furnishing a double remedy for the same default.

The statute relating to the asylum expressly authorizes an action by its treasurer, and a study of its origin leaves ho doubt of its meaning and intention. The bills of the asylum are payable monthly out of a necessary regard for its maintenance, and it was clearly not intended to leave it without remedy until the meeting of the supervisors, and subject it to th.Gr audit.

We find no error in the judgment, and it should be affirmed, with costs.

All concur.