Lumsdon v. Gilman — 63 N.Y. St. Rep. 261

Majority

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John W. Lumsdon, App'lt, v. Theodore Gilman et al., Resp’ts.

(Supreme Court, General Term, First Department,

Filed November 16, 1894.)

Headnote

Banks—Deposit—Right to charge back check.

When a bank receives a check under an agreement with the depositor, that, if there was any trouble about it, it should be charged back to the latter’s account, such agreement cuts off the questions as to the bank’s negligence and the ordinary effect of the payment of a check by the drawee to the holder.

Appeal from a judgment entered on a verdict in favor of defendants, and from an order denying a motion for a new trial, made on the minutes.

For several years past the defendants have been engaged in the business of banking, under the firm name of Gilman, Son & Co., at Ho. 62 Cedar street, New York. For six or eight years past the plaintiff has kept an account with the defendants,—the ordi

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nary one kept by a customer with a bank. J. J. Nicholson & Sons were engaged in banking at the city of Baltimore, kept an account with Gilman, Son & Go., and were accustomed to send items to that firm for collection against bankers, firms, and persons in New York and in Eastern cities. When items due on demand were received from J. J. Nicholson & Sons for collection, it was the practice of Gilman, Son & Co. to credit them to J. J. Nicholson &-Sons, and, if any of the items were subsequently dishonored, to charge them back. So oftentimes the apparent credit of J. J. Nicholson & Sons was greater than that which they were entitled to have. January 14, 1892, the plaintiff owned a draft for $500, payable to his order, drawn by J. J. Nicholson & Sons on defendant. After banking hours of that day, plaintiff learned that J. J. Nicholson & Sons had failed; and he went to defendants’ place of business, which was closed for the day, but secured an entrance, and found defendants’ bookkeeper, assistant bookkeeper, and assistant corresponding clerk in the office. The plaintiff told them of the failure of J. J. Nicholson & Sons, which fact they knew, presented his draft, and asked to have it credited to his account. The plaintiff testified “I went up to the bank about four o’clock, and, in my frank way, I stated the fact that the banking house in Baltimore had failed, and asked them if they could place that to my credit. The young man who was present at the time (I think, that young man there)— In a few moments the bookkeeper came in (sitting by Mr. Gilman there), and he said the account was all right; they had balance enough to cover it, and they would accept it, as they had not received any official announcement of the failure, provided we did not hold him,—he he did not know how Mr. Gilman would take it,—if I did not hold him personally responsible he would accept it. I sent my book up afterwards, the next day, and it was duly entered up. I considered it then settled. I did not have my book with me, and I simply left the draft until he had consulted with Mr. Gilman, and sent my book up the next day, and it was duly entered on my book. Sometimes I might send up my deposit, and if I did not have the book it would be entered on their books, and sent my book afterwards, and it was entered there.” This was all the evidence given by or in behalf of the plaintiff, as to, what occurred when the draft was credited. The bookkeeper testified in behalf of the defendants : “ He [Lumsdon] said he had a draft of J. J. Nicholson & Sons ($500), drawn to his order, and he carried it around in his pocket during the day, and forgot to deposit it, and wanted to know if I could not help him out, and credit his account. I told him we had heard of the failure, and were not paying drafts of theirs, and although, according to our books, he had a credit, I could not credit it to him. He wanted to know, as a favor, if I could help him out. I told him, as he was an old customer of ours, I would rather see him get the credit, and any favor I could do him I would be very glad. He said, if I would only credit his account, if there was anything occurred,— if anything was not all right,—I might charge it back to his account. I said, of course, if that was the case, I should be glad to do it. I told

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him, although Nicholson & Sons’ account showed a balance enough for this amount, items that we had received and deposited we had not heard from, and that I was not sure of that account. If anything came up, he said, 1 If you will do that, I will see Gil-man, Son & Co. will lose nothing, if you will credit my account, —if there is anything the matter you can charge it back.’ Our accounts were all taken off, our books footed up and balanced for the night. So I had the young man erase Nicholson’s account there, and add his draft in there. We knew of Nicholson’s failure during the day,—along during business hours,—two or three hours before business closed.” The assistant bookkeeper and the assistant corresponding clerk, who were present at the interview, corroborated the evidence of the bookkeeper. At the time of the credit of the account there was an apparent balance to the credit of J. J. Nicholson & Sons of $1,000, but a few days afterwards it was discovered that there was an error in the account, and that there was a small balance due from J. J. Nicholson & Sons to the defendants; and thereupon the draft for $500. was charged to the plaintiff in his account, who refused to recognize the validity of the charge, and brought this action for the recovery of that sum.

Henry B. Johnson, for app’lt; D. B. Ogden, for resp’ts.

The only issue of fact in the case was, what was the agreement between the plaintiff and the defendants’ clerks ? The learned trial justice submitted this issue to the jury, which found.in favor of the defendants. The verdict controls the rights of the litigants, and it underlies and cuts off the questions which the plaintiff seeks to raise on this appeal. Whether the defendants were negligent in not knowing the true state of the account of J. J. Nicholson & Sons, and the ordinary effect of the payment of a check or draft by the drawee to the holder, become immaterial questions, in the face of the agreement as found ‘by the jury. The fact that the defendants bad not returned the draft, but had forwarded it to the assignee of J. J. Nicholson & Sons, did not give the plaintiff the right to recover the amount for which it was drawn. It had never been demanded, and if the plaintiff demands it, and the defendants fail to deliver it, the question of the plaintiff’s right to recover damages can be raised in another action, but not in this.

The judgment and order should be affirmed, with costs.

Parker, J.-, consurs.

Van Brunt, P. J.—It is apparent from plaintiff’s own evidence that the bookkeeper, in accepting this check after business hours, was acting without authority, and also that he accepted it subject to Mr. Gilman’s approval. Upon the undisputed evidence, no right of recovery was shown.