Butterworth v. Peck — 18 N.Y. Super. Ct. 341

Majority

p. 341

John F. Butterworth, Receiver of the Island City Bank, Plaintiff and Respondent, v. Zachary Peck and Nathaniel Terpenny, Defendants and Appellants.

Headnote

1. The drawing of a check on a Bank by one who keeps an account in it, and has, at the time, moneys to the same or a larger amount to his credit on its books, and a delivery of the check to the person named in it as payee, do not, of themselves, operate as an assignment to such payee of the title to any of the moneys thus standing to the credit of the drawer of the check.

(Before Hoffman, Pierrepont, and Moncrief, J. J.)

Heard, November 1;

decided, November 12, 1859.

This is an appeal by Zachary Peck and Nathaniel Terpenny, (the defendants,) from a judgment in favor of John F. Butter-worth, Receiver of the Island City Bank, (the plaintiff,) entered on a verdict rendered on a trial had before Mr. Justice Wood-ruff and a jury, March 10, 1859.

The action is on a note for $1,000, dated July 16, 1857, made by Peck, and payable to the order of Terpenny three months after its date.

The Bank discounted the note for Terpenny, and $280 of its proceeds were standing to Terpenny’s credit on the books of the Bank, when it become insolvent—he being a stockholder of the Bank, and keeping an account in it. It was, admitted to have become insolvent on or before the 25th of September,. 1857, and that Butterworth was then appointed a Receiver of its effects.

The note was made without consideration,, and solely to accommodate Terpenny. Before the maturity of the note,, the Bank declared a dividend of $70 in favor of Terpenny, and this sum and the $280 were standing to his credit on the books of the Bank when the note matured. . On the 2d of September, 1857, Terpenny drew his two several checks on said Bank, and delivered them to Peck—one being for-the $280, and the other for the $70; and at the same time indorsed and delivered to Peck a check of the same date, drawn on said Bank by one Thomas J. Mooney to Terpenny’s order, for $700! The last named check was drawn against funds on deposit to. Mooney’s credit in said Bank.

p. 342

PecK presented these three cheeks to the Bank on the 2d or 3d of September, 1857, for payment, and payment was refused. At the maturity of the note, he offered them at the Bank of the Republic, where the note in suit then was, in payment of said note; and made a like offer of them to the Receiver before this action was commenced, and both offers were declined. The defendants offered these three checks in evidence: the Judge admitted the checks for $280 and $70; and the plaintiff excepted. The Judge excluded the check for $700; and the defendants excepted. The Judge charged the jury that the checks for $280 and $70 “were properly chargeable against the note,” but that the check for $700 was not, and that it could not be allowed as a set-off, or counterclaim: that they should render a verdict for the plaintiff for the amount of the note and interest, less the two checks for $280 and $70. The defendants excepted to so much of the charge as relates to the Mooney check: the plaintiff did not except to any part of it. The jury rendered a verdict for the plaintiff for $712.44; and, from the judgment entered on that verdict, the present appeal is taken. No question arose upon the pleadings.

Gf. Gflark, for appellants,

Insisted that the drawing of the check by Mooney in favor of Terpenny operated as an assignment to Terpenny of that amount of Mooney’s funds held by the Bank, and cited 3 J. C., 264; id., 5; 6 Cow., 484 , 485; 3 Kent Com., 104, note a; 2 Story’s R., 502, 516, 517; 1 Barb. R., 454; 1 E. D. Smith, 273; 1 Hill, 583 -585; 1 Ves., 280, 332; 9 Cow., 414 .

C. A. Peabody, for respondent,

Contended that a check drawn on a person having funds of, or being indebted to the drawer, does not, alone, transfer them to the payee of the check; and cited and commented on 5 Duer, 574 ; 26 Penn. R, 85; 11 Paige, 612; 3 Comst., 93; id., 243; 3 J. C., 5.

The only question presented to the Court relates to the check of $700, drawn by Mooney in favor of Terpenny upon the Bank, and transferred to Peck. Is this check, or the amount expressed in it, a proper set-off, or counterclaim, against the note sued upon ?

p. 343

The case of Chapman v. White, (2 Seld., 412,) seems to me to cover the present question entirely. It involves the position that the Island City Bank became the owner of the fund deposited by Mooney, and the latter had only a right of action against that Bank, and was in truth its creditor. The check was not an appropriation of a specific fund. It gave no right of action, as against the Bank, without acceptance; and if it gave no right of action, it cannot constitute a right of set-off, or counterclaim.

It may be that, when the Receiver shall wind up the affairs of the Bank, the holder of Mooney’s check may claim a pro rata dividend of what the Bank owed Mooney, and the proportion of the assets coming to him. It is impossible, in the present action, to liquidate accounts so as to ascertain what this sum would be, and thus allow an offset to that sum.

The case of Dykers v. The Leather Manufacturing Bank, referred to by Justice Gardiner, was first before Assistant Vice-Chancellor Hoffman, in December, 1841. He held that the drawing of a check upon a bank was not a specific appropriation of the funds of the borrower to the payment of that particular debt, in preference to holders of checks subsequently drawn. The drawer, therefore, might countermand the order at any time before his draft was actually paid or accepted by the bank. This proposition was recognized by the Chancellor. (11 Paige, 617.) Without acceptance, or some act, such as certifying the check to be good, no liability is created between the Bank and the holder of the check.

The line of reasoning which the case of Chapman v. White appears to warrant, might seem to extend to the cases of the other checks given by Terpenny, which were allowed to be deducted by the learned Judge below. But the distinction is this: The Bank had, in discounting the note, expressly appropriated its avails to the demand of the party on whose account it was discounted. It was a fund specially set apart. Terpenny had not withdrawn the whole of this sum by the amount of the check for $280. He gave Peck this particular sum by his check.

So as to the dividend of $70, the Bank had declared the right . of Terpenny to this specific amount, as a specific fund. Terpenny, therefore, had a right to say that the Bank held so much money on these two accounts particularly belonging to him, and

p. 344

applicable to the reduction of the note for which he was principally liable.

Had Terpenny drawn out these two funds and then redeposited them in one sum, the case would have been different. The judgment must be affirmed, with costs.

Judgment affirmed.^[1]

1 As to the main point discussed, see 6 Duer, 463 , 483,484, and 19 N. Y. R., 499. As to the charge in respect to the two checks of $380 and $70; it may he suggested that the plaintiff did not appeal; and therefore the appeal taken did not involve the question of its accuracy. But if the Receiver stood in no better situation in this respect than the insolvent Bank would if plaintiff (2 R. S.,464, [§42] 469, [§§68-74,] id., 41, [§7] 47, [§36] 6 Paige 320 , 2 id., 581, 9 Cow., 409 , 212 N. Y. R., 159,) it is difficult to see why Terpenny, whose moneys the Bank held and to whom the moneys were due at the time the Bankhecame insolvent to the extent of the $280 and $70, had npt a clear right of set-off, and if he availed himself of that right as he did on the trial, it would necessarily avail to the ‘same extent in favor of the other defendant, an accommodation maker of the note in suit. Reporter.