Olcott v. Erwin — 29 N.Y. St. Rep. 338

Majority

p. 338

John J. Olcott et al., Resp’ts, v. John Erwin et al., App’lts.

(Supreme Court, General Term, Third Department,

Filed February 4, 1890.)

Headnote

Lease—Bents—Payment—Delay nr presentation op check.

Plaintiffs lot premises to the defendants who sublet to McK. Plaintiffs did not accept McK. as their tenant, but gave to McK. upon his payment of the rent receipts in form as though payment had been made by defendants in person. On Friday McK. paid by his chock the rent and received a receipt therefor in the form stated. 'This check was good all day Saturday and was upon a bank in the same city which did not close until 2 p. m:. On Monday plaintiffs deposited the check in their own bank in the same city, which bank immediately presented it to the bank upon which it was drawn. Payment was refused. In the ordinary course of business had plaintiffs deposited the check in their own bank on Saturday it would not have been presented for payment to the other bank before Monday. Held, that as between plaintiffs and defendants there was no lack of diligence as to the check and it being worthless was no payment and defendants were liable for the rent.

Appeal by the defendants from a judgment in favor of the plaintiffs, in an action tried at the Albany circuit, January 18, 1889, before the court without a jury.

The action was to recover $356.29, being one-quarter’s rent due the plaintiffs November 1, 1888, upon premises leased by the plaintiffs to the defendants for the term of three years and one month from April 1, 1886. In January, 1887, the defendants sublet the premises to John McKinlay who entered and continued in possession until November 12, 1888. The plaintiffs did not accept McKinlay as their tenant, but after his entry he paid the rent as it fell due for the quarters prior to November 1, 1888, the plaintiffs giving him receipts acknowledging payment from the defendants. The plaintiffs intended to hold the defendants in case McKinlay did not pay, and such was the understanding of the defendants. The plaintiffs demanded of McKinlay the rents due November 1, 1888, on the same day, but the same was not then paid. On November 9, 1888, and after banking hours, McKinlay gave to the plaintiffs his check for the amount of the rent, $356.29, upon the National Commercial Bank of Albany, and plaintiffs gave him a receipt therefor, acknowledging payment from the defendants. November 9 was Friday. If the plaintiffs had presented the check on Saturday it would have been paid. They deposited it in the Mechanics & Farmers’ Bank on Monday, which bank caused it to be immediately presented to the Commercial Bank, when payment was refused. Had the plaintiffs deposited it in the Mechanics & Farmers’ Bank on Saturday it would not have been, in the usual course of business, presented to the Commercial Bank until Monday.

The Commercial Bank remains open on Saturday until two p. M.

Matthew Hale, for app’lts; Marcus T. Hun, for resp’ts.

The defendants concede that the plaintiffs used sufficient diligence to charge any party to the check with liability, and to exempt any person who received it for collection from the imputation of negligence. This concession is based upon chapter 289 of the Laws of 1887, relative to the presentation of bank paper upon holidays and half holidays.

The defendants, however, argue that as they were the debtors of the plaintiffs for the rent, and the plaintiffs presented the demand to McKinlay for payment, who as between defendants and McKinlay ought to pay it, and McKinlay did give the plaintiffs his check for the amount, which was good all of Saturday, and which was not paid because not presented on that day, the plaintiffs have by their negligence lost the money and have no recourse upon the defendants.

The defendants urge that it was the duty of the plaintiffs to present the check at the earliest reasonable opportunity, and since the creditor and drawee both resided in Albany it was practicable to present it on Saturday, and no valid excuse is shown for the omission. Also, that the rule as to the diligence required to charge drawers and endorsers has no application. In support of their contention the defendants cite Kobbe v. Clark, Selden’s Notes, 165; and Smith v. Miller, 43 N. Y.,172.

In the latter case the defendants residing in Buffalo being indebted to the plaintiffs residing in Mew York, sent them by mail a draft for the amount upon Place & Co. of Mew York. The plaintiffs presented the draft to Place & Co. at half past one in the afternoon of the same day that they received it. Place & Co. gave to the plaintiffs their own check for the amount upon the Manufacturer’s Bank and took up the draft. Had the plaintiffs presented the check to the bank that afternoon, and they had two hours in which to do it, the check would have been paid them. But they deposited it in the Citizens’ Bank the same afternoon and that bank did not present it to the Manufacturer’s Bank until the next day at noon, when payment was refused, Place & Co. having failed in the morning. The court held that the defendants were not liable for the debt for which they gave plaintiffs the draft on Place & Co. Why? Because the defendants had given the plaintiffs a draft on Place & Co, which, if Place & Co. did not pay upon presentment, it was the duty of the plaintiffs to give the defendants notice of the default. It was the duty of the plaintiffs upon presenting the draft to ascertain as soon as they reasonably could whether Place & Co. paid it or not. Place & Co’s, check was not money, and when the plaintiffs received it they could not know whether the defendant’s draft was paid by it until they presented the check to the bank upon which it was drawn. It was their duty to do that immediately, because it was their duty to find out immediately whether the draft was paid. By depositing the check in the Citizens’ Bank and awaiting its presentation to the Manufacturer’s Bank until the following day, the plaintiffs were delaying their duty to the defendants in respect to the draft, and thereby so dealing with the check as to make it their own and to

p. 340

take upon themselves the risk of Place & Co.’s failure during this unnecessary delay.

The plaintiffs might, by proper diligence, have collected defendants’ draft, but failed because they failed in diligence. The plaintiffs took substituted paper, and undertook to make the defendants’ rights depend upon the indulgence they extended to its maker. The defendants knew nothing of this, and were not bound by it beyond the time within which, by reasonable diligence, their draft could be presented and its value ascertained. In Kobbe v. Smith the action was upon the draft, the payment of which was lost because the plaintiff, instead of collecting the draft upon presentment to the drawee, took the drawee’s check good the day he received and might have collected it, but bad the following day when he presented it to the bank upon which it was drawn. The court held that the loss was caused by the plaintiffs’ failure in diligence with respect to the draft.

The present case is different. If defendants had drawn upon McKinlay for the amount of the rent and delivered the draft to the plaintiffs, or had delivered to them the draft of a third person upon McKinlay, and plaintiffs, upon presentation of the draft, had taken McKinlay’s check for the amount and surrendered the draft to him, the facts would be similar to those in the cases cited. The same questions respecting the plaintiffs’ delay in ascertaining whether the draft was paid would arise, and the same risk would have been incurred by the plaintiffs in dealing with substituted paper without the knowledge or consent of the defendants.

McKinlay’s check was not received by the plaintiffs in substitution for any paper given them by defendants. Here McKinlay undertook, with the consent both of . plaintiffs and defendants, to pay defendants’ debt to plaintiffs, and he gave plaintiffs his check for the purpose. Ho other commercial paper being involved, the only duty the plaintiffs undertook to perform was to present the check in the usual and permissible course of business. This they did; it was not paid, and hence the rent was not paid.

Judgment affirmed, with costs.

Fish, J., concurs; Learned, P. J., takes no part.