Hoffman v. Miller — 22 N.Y. Super. Ct. 334

Majority

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Charles B. Hoffman et al., Plaintiffs and Respondents, v. Daniel Miller et al., Defendants and Appellants.

Headnote

1. Where bankers and collecting agents receive from their correspondents engaged in. the same business at another place, negotiable paper indorsed to them by the latter, the indorsement being expressed to be “for collection,” and they do not credit their correspondents with it, but enter it in account as received for collection; and the circumstances and the course of dealing are such that they are not under any obligation to credit their correspondents with its amount until it be paid at maturity, and there is no understanding between them and their correspondents that remittances, or a delay to draw for cash balances, are to be influenced by the fact of holding paper sent for collection and not matured; they cannot, as against the owners who delivered the paper to their correspondents for collection, retain it on the ground of an unpaid balance due to them from such correspondents. Delay to draw for a cash balance, and the making of advances or remittances, after receiving the paper for collection, do not, under such circumstances, make them bona fide holders for value, so as to give them a superior title.

2. In such a case, testimony by the plaintiffs, the collecting agents, that in making remittances after receiving the bill in question, they looked to, and relied on, the unmatured paper in their hands for collection, is not entitled to any weight, if neither any agreement nor the course of dealing between them, authorized them so to rely, and their correspondents had no reason to suspect that any remittance made to them was influenced by any such consideration.

3. The cases of Warner v. Lee, (2 Seld., 144,) Scott v. The Ocean Bank, ( 5 Bosw., 192 ; 23 N. T. R, 289,) and The Bank of the Metropolis v. The New England Bank, (1 How. TJ. S., 234,) examined, and the two former followed, distinguishing the latter.

(Before Boswobth, Ch. J., and Barbour and Monell, J. J.)

Heard, April 21;

decided, May 24, 1862.

Appeal by the defendants from a judgment. This suit was brought by'Oharles B. Hoffman and John Gelston, on a bill of exchange, dated “ Houston, Texas, September 22,1860,” drawn by John Dickinson on Allan Hay & Co., of Hew York, for $1,100, payable thirty days after sight, to the order of Miller, Cloud & Miller,” and “ Accepted

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October 5, 1860, payable at the Bank of Commerce, in New York.” When received by the plaintiffs, the bill had the following indorsements: “Miller, Cloud & Miller “Pay Messrs. Hoffman & Co., or order, for collection, Josiah Lee & Co., .eleven hundred dollars.”

The original defendants in the action were the firm of Allan Hay & Co., the acceptors; but having no defense, except that they were ignorant to whom the bill should be paid, because the plaintiffs, and also Miller, Cloud & Miller, respectively claimed to own it, they were permitted, by an order made in the action, to pay the money into Court, and Miller, Cloud & Miller were made defendants in their stead. The question now was, does the money belong to the plaintiffs, or to the substituted defendants, Miller, Cloud & Miller ?

The cause was tried before Mr. Justice Bobertsoh, (a Jury being waived by consent,) on the 20th of November, 1861. It appeared that the plaintiffs’ firm, at and prior to receiving the bill, were bankers and collecting agents, doing business in the City of New York; and the firm of Josiah Lee & Co. were also bankers and collecting agents, doing business in the City of Baltimore.

Miller, Cloud & Miller, on the 20th of October, 1860, doing business in Baltimore, and then owning the bill in question, deposited it with Josiah Lee & Co., for collection, at the same time indorsing it, in blank, as before stated. On the 23d of October, 1860, Josiah Lee & Co., after indorsing it in the form mentioned, inclosed that and another bill for $77.31, in a letter of that date, directed to the plaintiffs, and reading thus:

“Messrs. Hoffman: & Co.: Dear Sirs—We inclose for collection and credit, bills stated below.

Bespectfully, yours, Josiah Lee & Co.

D. S. Cohen,...................... $77 31

Allan Hay & Co.,.................. 1,100 00”

The plaintiffs, by letter dated October 24,1860, replied, {inter alia,) as follows :

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“Messrs. Josiah Lee & Co., Baltimore: Dear Sirs—We have received your favor of 23d iust., with in closures as stated.

$77.31 to your credit, and $1,100 acceptance, Allan Hay & Co., due November 4-7, 1860, which we enter for collection.”

Charles B. Hoffman, one of the plaintiffs, and the only witness on their part, testified thus: “ There were two accounts in the books of each; we kept an account of all paper sent to them, (Josiah Lee & Co.,) and it was called ‘ our account,’ and drafts drawn against it were entered in that account; all paper received from them and drafts ag’ainst us, constituted the other account, which was called * their account.’ ”

On cross-examination he was asked:

• “Was the acceptance in suit' ever passed to the credit of Josiah Lee & Co., upon your books?”

A. “No, sir; it was never passed upon the ledger; a memorandum of it was kept on the blotter and another small book; it was not our custom to pass paper to the credit of the remitting firm, in those accounts, until the paper matured and was paid, when we passed them on the ledger; of the two acceptances mentioned in the letter of October 22d, one was paid on sight, and immediately passed to the credit of Josiah Lee & Co.; the other, being the acceptance in suit, was treated differently.”

. [The entry in plaintiffs’ blotter was thus :

“ 351. October 24, 1860.

“ Josiah Lee & Co., Baltimore, (their account.) “Their remittance on D. P. Cohn,.. $77 31

' - $77 31

“ Allan Hay & Co.,................ $1,100 00”]

Q. “Did you ever draw against any particular remittance, payable in future ?

A. No, sir,

Q. Did you consider yourself entitled to draw as against remittances for collection, prior to their maturity ?

A. The question never came up.

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Q. Did you ever do it ?

A. Eo, sir, we never had occasion to do it.

Q. You did, at this time, a general collection business for account of customers ?

A. Yes, sir.

Q. Any one that chose to deposit paper with you for collection, you forwarded it for collection ?

Q. Was not that the general business of Josiah Lee & Go.?

A. Yes, sir;‘that was one branch; they were in the habit of receiving paper from other parties and transmitting it for collection.

Q. Was there any express and positive agreement between you and Josiah Lee & Go., in reference to this acceptance, except by the letter and order given in evidence ?

A. Eo, sir, there was not.”

Josiah Lee & Go. failed Eovember 1,1860, and on the 2d of that month delivered to defendants a written order on the plaintiffs, requiring them to deliver to the defendants the acceptance in question, the order stating, “ they (the defendants) being the rightful owners of the same, and we being agents to collect.” This order was presented to the plaintiffs, and the acceptance demanded of them before this suit was brought, and they refused to deliver it to the defendants. The plaintiffs received the acceptance on the morning of the 24th of October. On the 23d

there was a balance due to them from Josiah

Lee & Co.,.of,........................... $540 28

October 24, plaintiffs .paid A. M. Allen, on

Josiah Lee & Co.’s letter of credit,......... 200 00

October 24, plaintiffs remitted to Josiah Lee &

Go., drafts for collection, amounting to,____ 438 57

October 30, they also remitted to Josiah Lee &

Go., for collection, a draft for,............. 3,000 00

They drew on Lee & Co., October 29, for,..... 600 00

And October 30, for,................*........ 3,000 00

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These drafts’were protested; Lee & Co. collected the remittances of October 29th and 30th, and used the proceeds. They now owed the plaintiffs $3,901.53, excluding from the calculation the acceptance in question.

On the trial, Charles B. Hoffman was allowed, against the objection and exception of the defendants, to testify that for several months “we always took into account the paper that we had on hand, in remitting for collection, or drawing down our balances with them.”

The Judge before whom the action was tried, found as facts (among others) that the paper, remitted by the one firm to the other, “always appeared to be the property of the party transmitting the same; each treated the paper so received from the other as the property of the party from whom it was received. * * The plaintiffs, until the 2d of November, 1860, had no notice that said acceptance belonged to any person other than Josiah Lee & Co., and relying upon the possession of said acceptance, and other securities, amounting to $467.50, they paid the $200 October 24th, and made the remittances of $438.67 and $3,000; and from October 24th to October 29th, left the balance in plaintiffs’ favor, arising from the collection of such drafts, and otherwise, in the hands of Josiah Lee & Co., undrawn for.” He held, as matters of law, that the plaintiffs, as bankers, have a lien on the bill in question, for the balance due them from Josiah Lee & Co.; and that they have acquired a valid title to the said bill of exchange as bona fide holders thereof for value; and gave judgment for the plaintiffs for the amount of the bill, with interest, and ordered that the money paid into Court by the acceptors, be applied on said judgment. The defendants excepted to these conclusions, and appealed from the judgment to the General Term.

L. B. Woodruff and C. F. Sanford; for appellants.

I. Cited, as to the banker’s general lien on securities in Ms hands, for a general balance due, (2 Kent, 641; 2 Selw., 1385, and cases cited; MeBride v. Farmers’ Bank of

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Salem, 25 Barb., 657 ; Van Amee v. Bank of Troy, 8 Barb., 312 ; Lawrence v. Stonington Bank, 6 Conn. R., 521; Arnold v. Clark, 1 Sandf., 491 ; Scott v. Ocean Bank, 5 Bosw., 192 ; 23 N. Y. R., 289; Clark v. Merchants’ Bank, 1 Sandf., 498 ; S. C., (reversed,) 2 Comst., 380; Warner v. Lee, 2 Seld., 144.)

II. Plaintiffs were not the “hankers” of Josiah Lee & Co., but both were merely agents of the defendants. The acceptance was virtually delivered to the plaintiffs by the defendants. (Lawrence v. Stonington Bank, 6 Conn. R., 521.)

III. There is no evidence of any agreement that all remittances should be considered as made upon the faith of any prior remittances, unless Notice was given of the interest of others in the first paper remitted.

IV. The plaintiffs’ knowledge of the general nature of Josiah Lee & Co.’s business, as collection agents, especially in connection with the indorsements on the bill, the correspondence and the other circumstances of the case, was sufficient to put plaintiffs upon inquiry, and should be deemed notice that the acceptance was held for collection, and that Josiah Lee & Co., were not the owners. (Van Amee v. Bank of Troy, Warner v. Lee, Arnold v. Clark, supra.)

V. Knowledge that a great portion of the paper mutually transmitted was not the property of the remitter, of itself, forbade any agreement between plaintiffs and Josiah Lee & Co., the effect of which would be to create a general lien upon all the paper remitted; and such an agreement, if made, being known only to themselves, would have been void against these defendants, who confided to Josiah Lee ■ & Co. the collection of this acceptance, without notice, either express or implied, of the existence of such an agreement, or of their peculiar mode of transacting business. (Lawrence v. Stonington Bank, supra.)

VI. Bor could such an agreement, though subject to the qualification suggested in the opinion of the Court, viz., that such lien should attach “ unless notice was given of the interest of others in the paper remitted,” be upheld between dealers mutually cognizant that each acted as the

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collection agents tor others, as against third parties, where, as in the present case, no distinction between the two classes of paper was ever pointed out or observed in any single instance; «where all was treated as belonging to the remitting party; where the party claiming the lien does not remember in the whole course of his business of ever receiving any notice of the interest of others in any paper.

William C. Russell and G. Spring, Jr., for respondents.

I. The defendants were guilty of laches in indorsing the draft 'unrestrictedly and in blank, thereby misleading the plaintiffs into® the belief that the paper when remitted to them belonged to Josiah Lee & Co.

The plaintiffs are in nowise in fault; they received this paper in the usual course of their business, and advanced moneys and gave a credit on the faith of it, in good faith and without notice.

II. The plaintiffs, as.bankers, have, by law, a lien on this acceptance. (2 Kent’s Com., 7th ed., 798, 820, note; Bank of the Metropolis v. New England Bank, 1 How. U. S., 234; S. C., 6 How., 212 ; Wilson v. Smith, 3 Id., 763; Rathbone v. Sanders, 9 Ind., 217 ; McBride v. Farmers’ Bank of Salem, 25 Barb., 657 .)

III. Independently of their lien as bankers, the plaintiffs are 'bona, fide holders of the acceptance in controversy, and entitled to hold the same against the defendants.

The test of the character of a holder for value is, whether the party claiming it has, in good faith and without notice, so dealt with the paper and upon the security of its possession, that he will be in a worse position than before such dealing, if it be taken away from him. (Coddington v. Bay, 20 Johns., 637 ; Stalker v. McDonald, 6 Hill, 93 ; McBride v. Farmers’ Bank, 25 Barb., 657 , and cases cited under 2d Point; White v. Springfield Bank, 3 Sandf., 222 ; Youngs v. Lee, 18 Barb., 187 ; S. C., 2 Kern., 551.)

IV. The course of dealing between the plaintiff and Lee & Co., proven in this case, and found as matter of fact by the Court below, establishes an agreement between

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the parties that all remittances made by either to the other should be considered as made upon the faith of prior remittances by the latter to the former, unless notice was given of the interest of others in the paper first remitted. Such an agreement can be established as thoroughly by a continuous course of dealing, as by express contract in terms. (Bank Metropolis v. N. E. Bank, 1 How. U. S., 234; S. C., 6 How., 212 ; Scott v. Ocean Bank, 5 Bosw., 192 ; S. C., 23 N. Y. R., 289.)

V. The plaintiffs had no notice, when they received the draft in question, that it belonged to any other party than Josiah Lee & Co.

VI. The relations of the.plaintiffs and Josiah Lee &rCo. in regard to this paper were not those of mere principal and agent. These parties' were mutual correspondents, each a principal as to the other, each remitting to the other and drawing drafts, not in reference to any particular remittance, but in reference to general balances and securities in the hands of either, arising from prior remittances.

VII. Hone of the cases which have been decided in favor of the original owner contain the fact of advances having been made, or securities having been parted with, on the strength of the paper. (Van Amee v. Bank of Troy, 8 Barb., 312 ; McBride v. Farmers’ Bank of Salem, 25 Id., 657; Scott v. Ocean Bank, 5 Bosw., 192 , and 23 N. Y. R., 289; Arnold, v. Clark, 1 Sandf., 491 .)

On the facts, which the evidence will justify a Judge or Jury in finding, we think no discrimination, favorable to the plaintiffs, can be made between this case and Warner v. Lee, (2 Seld., 144,) and Scott v. The Ocean Bank, ( 5 Bosw., 192 , and 23 N. Y. R., 289.)

In Warner v. Lee, John T. Smith & Co., with whom the plaintiffs had' deposited for collection a note owned by them, made by Osborn & Whallon, sent it in a letter to the defendant, a banker, which letter stated that it was “ inclosed for collection.” In the present case, the indors

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ment to the plaintiffs stated that it was “ for collection.” The letter inclosing it (and another draft) stated that they were inclosed “ for collection and credit.” This, in the light of the evidence'given, means that the draft for $77.31 was inclosed to be credited to Josiah Lee & Co., and the one for $1,100, for collection. The small one was paid at sight, and was credited to Josiah Lee & Co. The large one — the one in question—was entered on the plaintiffs’ blotter as received for collection, and was never otherwise credited to Josiah Lee & Co.

In Warner v. Lee, the plaintiffs had received.no advances from John T. Smith & Co. The present defendants received none from Josiah Lee & Co.

In Warner v. Lee, Smith & Co. were largely engaged in making collections of notes for merchants in Sew York, and the defendant was aware of that fact. In the present case, Lee & Co. “ were in the habit of receiving paper from other parties, and transmitting it for collection.” One of the plaintiffs so testifies, and, of course, he was aware of that fact.

In each case the accruing balances were collected in a similar manner.

In Warner v. Lee, the Beferee did not find that any advances were made by defendant to John T. Smith & Co., on the credit of the' note there in question. In the present case, the Judge has found, that the plaintiffs made advances to Josiah Lee & Co., on the credit of the acceptance in question. We shall attempt to show that this finding is not warranted by the evidence. Assuming, for the present, that this is susceptible of demonstration, then there is no difference between the facts of these two cases, except that, in Warner v. Lee, the note there in question was collected, and the proceeds received by the defendant, before any formal notice was given to him that the note was not the property of Smith & Co.; while, in the present case, the plaintiffs did not collect the acceptance in question, and had formal notice before this suit was commenced, that it was the property of the defendants.

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In Warner v. Lee, the Court said, that “when the defendant received this note, he had notice, from its indorsement, from the course of business of Smith & Co., with which he was acquainted, and from the letter which inclosed the note to him, that it was placed in their hands for collection only, on account of the owners, the plaintiffs . in this suit. Under these circumstances, if he had made advances upon account of it, he could not have held the note nor its proceeds, against the plaintiffs. (Clark v. Merchants' Bank, 2 Comst., 380.)”

In the present case, the plaintiff had the same notice, except such as the indorsement furnished. In Warner v. Lee, the plaintiffs indorsed the note in blank on delivering it to Smith & Co., and they filled up the blank indorsement with the defendant’s name; whereby it was, in form, specially indorsed by the plaintiffs to the defendant. In the present case, the blank indorsement of the defendants was left as they wrote it, and Josiah Lee & Co. wrote under it a special indorsement by themselves to the plaintiffs, in terms stating it was for collection. The present plaintiffs had notice, therefore, that Lee & Co. had received it for collection, that they sent it for collection for the owners; and the natural inference would be that the payees were the owners, it being indorsed only by them, and by Josiah Lee & Co. Arnold v. Clark, (1 Saudf. S. C. R., 491,) supports these views. If it be thought that the decision in Warner v. Lee conflicts with that in The Bank of the Metropolis v. The New England Bank, (1 How. U. S. R., 234,) it would, nevertheless, be our duty to follow it, it being the decision of the Court of last resort of this State, and controlling upon us. The latter case was cited in Warner v. Lee, (2 Seld., 146,) and of course was not overlooked.

In Clark v. The Merchants’ Bank, (2 Comst., 380,) the Court treated the material and controlling question as being, “ whether the bill in question was transmitted to Smith & Co., for collection merely, or was to be credited to the plaintiffs when received by the former, whether

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collected or not.” (Id.) And to complete the statement of the material elements entering into the question," Gar-direr, J., added : “As the bill was indorsed in blank by the plaintiffs, the legal title passed to Smith & Co. prima facie, and the plaintiffs must establish the fact that it was indorsed and forwarded for the purpose of collection.”

In the present case, the plaintiffs have proved by evidence which is uncontradicted, that Miller, Cloud & Miller deposited the bill with Josiah Lee & Co. for collection; that the latter indorsed it specially to the present plaintiffs, and stated in the indorsement itself that they indorsed it to the plaintiff's for collection, and that the plaintiffs, on receiving it, entered it in their books as having been received for collection, and, by letter to Josiah Lee & Co.» informed them that they had entered it for collection.

In Clark v. The Merchants’ Bank, (supra,) Gardener, , J., discusses the evidence therein, as to the classes of funds remitted, and came to the conclusion that one class was remitted to be credited as cash when received, and to be drawn against, whether paid or not, at the time of so drawing; and that another class was remitted for collection, and was not to be credited or drawn against, until actually paid.

■ As to the class which was to be credited as cash when received, the Court held that the title passed to John T. Smith & Go,, on their reception of the same, and that their application of the proceeds to the payment of their own debt, could not be questioned in a suit against creditors (of John T. Smith & Co.) receiving "them in good faith.

The error of the Court below was stated to consist in the assumption “ that nothing went into account properly” until collected in the course of business, (or in other words that nothing was to be credited as cash wheii received.) (Id., 385.) Gardener, J., summarily states the position of the parties, inter se, with reference to the different classes of remittances, thus: “ Eor the first class they were to be credited, with the right to draw upon their correspondents; as to the second and third, the Few York

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firm were the agents of the plaintiff's, and had no other interest in, and control over, the assets, than such as was necessary to the discharge of their agency.” Id., 385.

In Scott v. The Ocean Bank, ( 5 Bosw., 192 , and 23 N. Y. R., 289,) the Court held, that:

1. The property in notes or bills transmitted to a banker by his customer, to be credited the latter, vests in the- banker only when he has become absolutely responsible for the amount to the depositor.

2. Such an obligation, previous to the collection of the bill, can only be established by a contract to be expressly proved, or inferred from an unequivocal course of dealing.

That case, in all of its material facts, bears a close resemblance to the one before us. And the Court of Appeals says: “ When, therefore, it appears that the bill in question was retained in the possession of the company, (the party to whom it was sent for collection,) after its acceptance, and that no credit had been given for it at the time it was passed to the defendants, and when nothing is disclosed in the whole course of dealings between the parties to show that any bill was ever credited or agreed to be credited in account, before its collection, or that By ell (the remitter) ever drew or was entitled to draw on the company, or that it was bound to accept drafts otherwise than upon and for funds actually received in cash, it must be considered that the company, at the time of the transfer, stood in the relation of agents for its collection merely.” In that case, the defendants received the bill from the company to secure a pre-existing indebtedness, and credited its proceeds to the company after it was paid, and they were held liable to the plaintiff for its amount.

If, therefore, it is clear upon the evidence that the present plaintiffs did not, and were not under any obligation to credit the bill in question to Josiah Lee & Go., when received, and that there was no agreement or understanding between them that remittances for collection, or a delay to draw for cash balances, was to be based upon or influenced by the consideration of holding paper sent for

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collection and not matured, then it will follow that the judgméut in this case is in conflict with Warner v. Lee, and Scott v. The Ocean Bank, (supra.)

With reference to this question, it may be observed, first, that the learned Judge who tried this cause states in his opinion “ that the only ground upon which the plaintiff’s claim, can rest, is a mutual agreement between themselves and Josiah Lee & Co., that all remittances, made by either to the other, should be considered as made upon the faith of any prior remittances by the latter to the former, unless notice was given of the interest of others in the paper first remittedand, second, that the learned Judge did not find as a fact that any such agreement was ever made.

There is no .evidence that any express agreeuient to that effect was ever made. And we think_ it quite clear that no such agreement can be inferred from the course of dealing between those parties.

Charles B. Hoffman, one of the plaintiffs, testified as to the course of dealing between his firm of Josiah Lee & Co., thus: “We remitted to them, and they to us; they kept an account with us, and we with them ; they drew upon us, and we upon them; sent paper for collection, and so on;' their remittances to us, if at sight, were collected at once and passed to, their credit; the same course was pursued with the paper we sent them.” That the question whether the plaintiffs “were entitled to draw as against remittances for collection before their maturity,” “never came up;” that they never did it, nor had occasion to do it; and that he does not remember that his firm ever drew “ otherwise than against balances ” of collections actually made.

The only circumstances furnishing any evidence of any exception to this, as the uniform course of business, is in the testimony of Mr. Hoffman, to the effect' that he remembered “one insta¡nce where we (his firm) paid a large overdraft by them,” (Jqsiah Lee & Co.) By overdraft, as here spoken of, we understand a draft for a

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larger amount than the cash balance then standing to the credit of Josiah Lee & Co. Mr. Hoffman testifies, that neither firm was “ ever under obligation to pay any such draft,” and that he thinks there were two or three instances of overdrafts by Josiah Lee & Co.

In opposition to this exceptional transaction, and in support of the understanding being .in accordance with that indicated by the usual and common course of them business, is the fact that bills on time, when received, were entered in the books of the plaintiffs as having been received for collection, and were never otherwise credited, until actually collected; that the bill in question was sent, entered, and by plaintiffs’ letter is admitted to have been received, for collection, and never was otherwise credited-to Josiah Lee & Co.

This evidence.does not in any manner justify the finding of such an agreement as the Court at Special Term held it essential for the plaintiffs to establish in order to recover; nor' does it furnish any evidence of an obligation on the part of the plaintiffs, to give credit to Josiah Lee & Co. for it, until actually paid; or of any assent on their part that it, or other bills received under like circumstances, should be held by the plaintiffs as security for remittances subsequently made by them, or for the payment of any cash balance in their favor, that might then happen to exist, or might subsequently accrue.

Under such circumstances, evidence by. Mr. Hoffman, “ that we (his firm) always took into account the paper that Ave had on hand, in remitting for collection or drawing doAvn our balances with them, at least we did for several months,” should not be allowed any weight.

The answer imports that this mental operation to which he testifies, was of late occurrence and short duration; there is no pretense that it had been disclosed to- Josiah Lee & Co., or was authorize"! or suspected by them, and so long as it is essential to a valid agreement that there should be at least two parties to it, evidence of what the plaintiffs “ took into account or consideration,” or “ looked

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to very closely and relied upon,” in making remittances or delaying to draw cash balances, ■ should be disregarded when it is clear that it was unauthorized, and that Josiah Lee & Co. had not the slightest reason to suspect anything of the kind.

We think, therefore, that no discrimination favorable to the plaintiffs, can be made between this case and Warner v. Lee, and Scott v. The Ocean Bank, (supra;) that on the evidence, it is clear that the plaintiffs received the bill for collection, and knowing that Josiah Lee & Co., received and forwarded to them for collection, paper belonging to third persons, as well as paper owned by themselves; that Lee & Co. were not entitled to be credited with the bill until actually collected; and that there is no evidence justi- • fying the claim of a mutual agreement or understanding that remittances for collection by either, were made on the faith and security of paper in their hands, not matured and previously' received for the like purpose, from the house to which such remittances were made.

We do not deem it material or useful to attempt to discriminate between The Bank of the Metropolis v. The New England Bank, and Warner v. Lee, or Scott v. The Ocean Bank, (supra) If it be supposed that no material difference exists, it is none the less our duty to conform our decision to the law, as declared by the Court of dernier resort of this State.

It is not to be denied, however much it is to be regretted, that there is an apparent conflict between the Courts of this and other States, as to the circumstances sufficient to constitute an indorser of paper a hona fide holder for value, so as to exclude the equities of third persons, or defenses that could be made in a suit between the original parties. (Stalker v.McDonald, 6 Hill, 93 ; Warner v. Lee; Scott v. The Ocean Bank, supra; Swift v. Tyson, 16 Peters, 1; Le Breton v. Pierce, vol. 9, Am. L. R., 737, and note thereto, in vol. 1, Id., N. S., p. 35.)

It may be observed, however, that the head note in Swift v. Tyson, enunciates no rule in conflict with the

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decisions in this State, and if the fact was proved in that case, (as asserted in the argument of Mr. Fessenden,) viz.: “ That on receiving the acceptance, he (the plaintiff) had given up the note of Norton & Keith, which had been indorsed by one Child,” the decision is in harmony with those of this State.

The learned author of the note upon Le Breton v. Pierce, (1 Am. L. R., N. S., p. 38,) states that “ it has always seemed to us that most of the controversy upon this subject has grown out of the different sense in which the terms are understood. If the term ‘ collateral ’ is understood to import that the bills thus held are not taken on account of the existing debt, but only to be held until due, and if paid, tire amount to be applied, and in the meantime the creditor assumes no responsibility in regard to them, except as the mere agent of the debtor for collection, there could be no ground of claim that any property passed, or that existing equities in former parties were extinguished.”

In The Bank of the Metropolis v. The Bank of New England, (supra,) the Court says: “ There does not, indeed, appear to be any express agreement that those balances should not be immediately drawn for, but it may be implied, from the manner in which the business was conducted; and if the accounts show that it was their practice and understanding to allow them to stand and await the collection of the paper remitted, the rights of the parties are the same as if there had been a positive and express agreement.” This seems to hold that either an express agreement, or one justly inferable from competent evidence, of the actual understanding of the parties, of the character stated, would make a holder of bills, received under that agreement, a holder for value to the extent of any balance due to him.

This may be conceded to be law, and yet, if we have taken a correct view of the evidence in the present case, and of its legal effect, the plaintiffs .have failed to bring themselves within this rule. They have not shown an express agreement of this character; they have not fur

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nished any evidence that it was their practice, or the understanding between them and Josiah Lee & Go., that cash balances should stand and await the collection of paper remitted to the party in whose favor a balance might exist.

The judgment must be reversed and a new*trial granted, with costs to abide the event.

Ordered accordingly.