Northrup v. American Exchange Bank — 7 N.Y. St. Rep. 582

Majority

p. 582

Eliza C. Northrup, Resp’t, v. The American Exchange Bank, App’lt.

(Supreme Court, General Term, Fourth Department,

Filed April. 1887.)

Headnote

Title—Who is not bona eide holder for value as against owner OF PROPERTY.

A person who in payment of a precedent debt receives the proceeds of bonds from one who misappropriates them, is not a holder in good faith and for value as against the true owner.

On the 5th of July, 1866, the plaintiff owned certain county bonds, but the interest coupons attached thereto belonged to one, Dewarren Northrup. On that day, pursuant to a previous arrangement between said Northrup and one Abner M. Durfee, the latter deposited said bonds and coupons with the Hungerford National Bank, of Adams, N. Y., and received therefor a certificate signed by the cashier, which provided' in substance, for the safe keeping of the bonds and coupons at the annual charge of $1.30, and for the delivery of the same to said Durfee upon the return of the certificate.

Subsequently Hungerford’s National Bank went out of existence and without any further arrangement, the bonds and coupons passed into the hands of one, Solon D. Hungerford, a private banker and the former president of Hungerford’s National Bank. On the 31st of January, 1884, said Hungerford, without authority from any one, sent the bonds and unpaid coupons to the defendant for collection and two days later wrote to its cashier to credit the proceeds to his account. The defendant accordingly collected the bonds amounting to $1,300, certain coupons past due amounting to $273, and the remaining coupons to become due amounting to $45,50 or $1,618.50 in all, and credited the same to Hungerford’s account. At

p. 583

the time that such credit was made Hungerford was indebted to the defendant in the sum of $3,066.58, in open account, upon which said proceeds were applied.

The defendant surrendered no security and parted with no value on the strength of said bonds otherwise than by making such credit.

After this the defendant continued to do business with Hungerford as before for several months until he died on the 12th of May, 1884, but from the date of the credit to the date of his death he deposited a greater amount than he drew out, and when he died his debt to defendant was but $332.21.

At the time of this transaction Mr Hungerford was a man of good repute. The delendant had dealt with him while he was in business as a private banker, and for many years prior thereto, with Hungerford's National Bank, while he was its president.

Aside from the application of said proceeds upon the overdrawn account and the fact that some of the coupons were past due, there was nothing to distinguish the affair from the ordinary course of business between Hungerford and the defendant. Durfee and Dewarren Northup assigned their rights to the. plaintiff who, after demand made, brought this action to recover from the defendant the amount it received for said bonds and coupons.

L. B. Bunnell, for def’t; appit, John C. McCartin, for pl’ff, resp’t.

Appeal from a ^judgment entered upon the ■decision of a special term.

The position taken on this appeal that defendant received the bonds as the agent of Hungerford for the purpose of collection, and is not liable because he accounted, as agent, to Hungerford. in good faith, is not supported by the evidence. Hungerford’s letter of January 31, 1884", to defendant, which accompanied the bonds, -tated that they were sent, “for credit,” at which time' Hungerford was indebted to defendant, on account, m the sum of $682.48. When the bonds were collected by defendant and credited to Hungerford, he (Hungerford) was indebted to defendant in the sum of $3,056.58, and remained indebted at the close of business, February 16, 1884, after the bends were credited, in a considerable sum. February 21, 1884, Hungerford renewed his direction, “ pass to my credit ” the bonds. This is precisely what was done, and by the law governing the application of payments, and the avails of these bonds were applied in law, as well as in fact, to the part payment of the sum then due from Hungerford to defendant.

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Under the rule of the courts in this state, the avails of these bonds having been received by defendant in payment of a precedent debt, the defendant is not a holder in good faith and for value as against the true owner.

The fact that defendant subsequently gave Hungerford credit by reason of the condition of his account, which was strengthened by the disputed item, does not strengthen the defendant’s defense in law.

The opinion delivered at special term covers the case, and the case may well be affirmed on that opinion.

The judgment is affirmed, with costs.

Boardman, J., concurs; Hardin, P. J., not voting.