Atkinson v. Rochester Printing Co.

This action was brought under the statute to recover back the value of certain drafts, amounting in the aggregate to the sum of -13,180.82, which it is claimed were transferred to the defendant in violation of the statute, and with the intent of giving a preference over other creditors of the bank, of which the plaintiff is the receiver.

It appears from the evidence taken upon the trial that the defendant was a depositor in the City Bank of Rochester, and that it made deposits in the bank on the 16th, 17th, 18th and 19th. days of December, 1882, and that on the close of business on the-19th there was a balance due the defendant from the bank of 13,004.22. That during these days the bank was insolvent, and.

It is contended in the first place that the court erred in refusing to submit to the jury the question of the intent with which thh drafts were transferred to the defendant.

The statute under which this action is brought provides as follows:

Section 186 : “ No conveyance, assignment or transfer not authorized by a previous resolution of its board of directors, shall be made by any such corporation of any of its real estate, or any of its effects, exceeding the value of one thousand dollars ; but this section shall not apply to the issuing of promissory notes, or other evidences of debt by the officers of the company in the transaction of its ordinary business, nor to payments ■in specie or other current money, or in bank bills made by such officers; nor shall it be construed to render void any conveyance, assignment or transfer in the hands of a purchaser for a valuable consideration and without notice.”

Section 187 : “ No such conveyance, assignment or transfer,

It will be observed that under the first section of the statute quoted an assignment or transfer of the effects of a bank, exceeding the value of one thousand dollars, not authorized by a previous resolution of the board of directors, is prohibited except in the cases reserved by the statute. The defendant was not paid in specie or other current money, and did not part with any valuable consideration on the receipt of the drafts. It was consequently not within the exceptions, and as we do not understand that under this section the question of intent is involved. The transfer of the drafts was one transaction. They were all enclosed in one envelope. The amount of them exceeded one thousand dollars. The fact that no one draft exceeded that sum is unimportant, for the statute evidently intended to protect the bank from the illegal and unauthorized acts of its officer or agent, and to limit the power of transfer < f any of its effects. To hold otherwise would in fact nullify the statute and permit the cashier to transfer, in one body and to one person, every note, draft or other paper under a thousand dollars in value, held by the bank, even though the aggregate value exceeded one hundred thousand dollars.

The other section of the statute prohibits the conveyance, assignment, transfer or payment by the corporation, when insolvent or in contemplation of insolvency, with the intent of giving a preference to any particular creditor, etc. Under this section the question of intent is involved and ordinarily becomes a question for the jury. But in this case the evidence as to the transfer by the cashier of the bank is undisputed, and the rule is that a party must intend the necessary consequences of his own act. It was conceded upon the trial that the bank was insolvent and had been for some days. The cashier knew this fact and of the action of the board of directors the evening before. The taking from the bank of the drafts in question and transferring them to the defendant, of necessity preferred their claim over that of the other creditors. Whether or not the defendant knew of the insolvency of the bank or the purpose of. the cashier in transferring the drafts was immaterial. The evidence upon this subject being undisputed, the court properly refused to submit the questions to the jury. National Security Bank v. Price, Rec’r, 22 Federal Reporter, 697.

Undoubtedly a bank may, in a legal sense, be guilty of a fraud. And where one has been induced to part with property by the fraud of an officer thereof, the party defrauded may, upon discovery of the fraud, rescind the contract and recover the property or the proceeds thereof, unless it has come to the possession of a bona fide holder. Cragie v. Hadley, 99 N. Y., 131 ; The National Bank v. Insurance Co., 104 U. S. R., 54, The People, etc., v. The City Bank of Rochester, 96 N. Y. 32 ; The Metropolitan National Bank v. Loyd, 90 N. Y., 530 . But the difficulty of the appellant’s position is that it was not following the property deposited in the City Bank or defending the possession of such property. The drafts that were transferred to the defendant were not drafts deposited by it in the bank. Had they been, a different question would have been presented. The right of the defendant to restoration of the property deposited or to defend its possession, is founded upon ownership. If a fraud was practiced upon the defendant to induce it to make the deposit, the bank obtained no title to the deposit by reason of the fraud, and consequently the defendant would have the right to a restoration of that which belonged to it, and, had the property been returned to it, it could properly have defended its possession. The right to restoration also depends upon the identity of the property which it is sought to have restored, and the right to defend the possession of the property must also depend upon such identity. The drafts transferred to the defendant not being those previously owned by it and deposited in the City Bank, the trial court properly excluded the evidence offered and refused to submit this branch of the case to the jury.

It is also claimed by the appellant that the plaintiff’s statement in reference to the account of the bank and the payment of the overdraft, was an account stated between the plaintiff and the defendant, and by that act the plaintiff’s claim was settled. The plaintiff had recently been appointed the receiver of the corporation, and had had to acquaint himself with the affairs of the bank. As we have seen, the defendant’s check that was given upon the receipt of the drafts, was dated back to the 19th day of December, the day upon which the bank did'business. The plaintiff, it appears, did not know at the time of the

Among the drafts transferred to the defendant was one drawn on Loomis & Woodworth for 198.363. dated the 19th of December, 1882. This draft had been presented for payment by the defendant and payment refused. ' An action had been brought to recover the amount thereof and an answer had been interposed by Loomis & Woodworth. Upon tire trial the defendant sought to show the value of this draft, by Mr. Pond, a witness. He was asked if he was acquainted with the value of commercial paper and if he had owned and known of its being bought and sold; he answered that his experience was teaching him something of the worth and worthlessness of commercial paper. He was also asked whether in his judgment the draft was worth its face at the time the defendant got it, under; the circumstances which have since been disclosed. This was objected to as immaterial and incompetent and the objection sustained. The defendant’s counsel offered to show by the witness that he was acquainted with the value of such paper, and that this paper was not worth thirty-five cents on the dollar, in his opinion. This was also excluded.

The rule is that where promissory notes or commercial paper is converted, the measure of damages is the nominal or face value of the paper, unless it be reduced by showing payment, insolvency or some fact to invalidate the paper. Ingalls v. Lord. 1 Cowen, 240; Allen v. Boyd, 20 Wendell, 321; Becker v. Matthews, 5 Sandford, 439; Thayer v. Manley, 8 Hun, 550 . It is undoubtedly proper to show the value of property by witnesses who are familiar with the property and its value; but as to choses in action, such as commercial paper, a different rule exists. The paper itself is of no value, but it is the evidence of debt or an agreement to pay. The question is therefore as to the ability to pay of the maker or person who, by the terms of the instrument is to pay the same, and as to whether the instrument is valid. It would have been competent for the defendant to have shown the insolvency of Loomis & Woodworth, or that the draft had been paid, or that it' was worthless by reason of a valid defense existing thereto. But in the absence of such evidence, the presumption is that the paper was worth the amount called for by it. Potter v. The Merchant's Bank, 28 N. Y., 641 -655. It appeared, as we have seen, that Loomis & Woodworth had interposed an answer in the action brought by the defendant to recover the amount of the draft. The defendant offered the summons and complaint and answer in evidence;

We are inclined to the opinion that this evidence was competent. The defendant had the right to show that an action had been brought, that a defense had been interposed, what the defense was, and that it was true. If Loomis & Woodworth had any defense to the draft, such defense would necessarily be disclosed by the answer. After the defense had been disclosed, the defendant might have shown that it was true, and that the draft was consequently worthless. It appearing that an answer had been interposed by Loomis & Woodwor-th, they were bound by the defense set forth in their answer. The defendant in this action had the right to'show what the defense was, for the purpose of establishing the fact that it was not attempting to show or rely upon defenses not actually made, by the parties charged with its payment.

For these reasons the judgment should be reversed, and anew trial granted, with costs to abide the event unless the plaintiff stipulates within twenty days that the judgment may be reduced in the amount of the Loomis & Woodworth draft, to wit, $988.63, and interest thereon from' December 19th, 1882, in which event the judgment be so modified, and as so modified, affirmed, without costs of this appeal to either party.

So ordered.

BRADLEY & ANGLE. J J., COnCUl’.