Hyperlawhypertext legal database Thomson v. Bank of British North America 45 N.Y. Super. Ct. 1

← Cases

Thomson v. Bank of British North America

45 N.Y. Super. Ct. 1 13 Jones & S. 1 Court N.Y. Super. Ct. Decision date 1879-03-03 English

Contents

Majority

p. 1
WILLIAM T. THOMSON and another, Plaintiffs and Respondents, v. THE BANK OF BRITISH NORTH AMERICA, Defendant and Appellant.

Headnote

I. DEPOSITARY,
Liability op to depositor when not discharged by CHECK DRAWN BY HIM on account of the deposit upon a bank, and at the request of the depositor made payable to a third party, and delivered to the depositor.
1. Receipt. A bare receipt of the check will not discharge him.
(a) The depositor, upon returning the check unindorsed, in such state that the depositary’s rights had not been changed to his harm, and without having dealt with it in a way that had damaged the depositary, has still the right to demand the mon„ey on deposit.
2. Retention. A bare retention by the depositor for any period less than six years, the bank remaining solvent, will not.
3. Payment by bank. This, if made on a forged indorsement, will not.
4. Acquiescence op depositary in payment by bank.
p. 2
(a) This will not, if the payment was on a forged check, although, the forgery being unknown to the depositary, the acquiescence continued until the Statute of Limitations would prevent a recovery from the bank.
1. Notice by depositor. He being ignorant of the forgery, want of notice by him, will not alter the effect of the acquiescence.
H. Check.
1. CONVERSION OF, WHAT WILL CONSTITUTE.
(a) By hank.
1. A bank on which a check is drawn by A. for money deposited with him by B., and at B.’s request made payable to C., becomes liable to A. for conversion by taking and paying the cheek upon a forged indorsement, before its delivery to C.
(5) By dbaweb.
The drawer of such check, by, after its payment by the bank, assuming dominion over it for the purpose of finally extinguishing B.’s claim to the money on deposit, is also liable to B. for a conversion.
1. Demand and beetjsab.
(a) Not necessary in such a case.
3. Graves v. American Exchange Bank, 17 N. Y. 205 , explained.
(a) The court did not mean to hold by the language used that, under the facts of that case, there would not have been a conversion without a demand and refusal.
HI. Check, Cebti'eication oe.
1. DRAWER, EFFECT OF AS DISCHARGING HIM, OR NOT.
1. ’ A bare certification, of itself alone, at a time when the drawer is not entitled to be relieved from any risk connected with the funds in the bank, will not discharge him.
3. A holder of a check, with no specific day for payment, may withhold its presentation for payment for six years from date, and the drawer undertakes for that period to keep the drawee in funds. A certification .is a promise by a drawee to do, so far as the fund is concerned, the same thing that the drawer undertook. It follows that a mere certification of such 'a check will not discharge the drawer. He will only be dischargéd, either in the event of a loss or injury accruing .from a neglect to present for payment within a reasonable time after the date of the check, or in the event of a neglect to present for payment within six years from date.
p. 3
Before Curtis, Ch. J., Sedgwick and Freedman, JJ.
Decided March 3, 1879.
a fortiori,
Where the drawee, having previously certified a check given to A., payable to the order of B., pays it on a forged indorsement, and returns it to the drawer, the drawee at the time of such return being solvent, and there being up to that time no more delay than would have been allowed or expected by the drawer, for A. to deliver the check to B., or to return it in case a delivery was not made.
3. First National Bank v. Leech, 52 N T. 350, distinguished,.
(d) The rules there laid down do not apply to a case where, as between the parties, it had not become a duty tc present for payment, and payment in fact had not been demanded.
IV. FORGED INDORSEMENT.
1. Payment by a drawee of a certified check upon a forged indorsement of the payee’s name.
(a) Effect of as discharging drawee ; see supra,
V. Costs on appeal.
1. MODIFICATION OF JUDGMENT, WHEN IT WILL NOT DEPRIVE RESPONDENT OF COSTS.
(a) Where it appears to the appellate court that the court below would, if specific attention had been called to the point raised on appeal, and as to which a modification is desired, home held in accordance with the views of the appellate court, the modification need not be made to depend on the respondent’s being deprived of the costs of the appeal.
Appeal from judgment, upon decision of a judge, at special term, without a jury.
On and before March 9, 1870, the defendant was a banker at the city of New York, having funds of plaintiffs on deposit. The plaintiffs wishing to invest in bond and mortgage, their attorney-at-law told them that he had arranged with Mrs. Halpine that she should give her bond and a mortgage on land for a loan by plaintiffs of $17,500. On March 9, 1870, one of the plaintiffs went with the attorney to the defend
p. 4
ant’s bank. The plaintiffs drew on the defendant the following:
“New York, 9 March, 1870.
“ On demand, pay to me, or bearer, seventeen thousand five hundred and sixty-two dollars, and debit acct. of W. T. Thomson and W. M. Ramsay.
“W. M. RAMSAY.”
By due arrangement, the funds were under the control of Ramsay. On the delivery of this draft, the defendant paid the plaintiff $62 in money, and a check, drawn at the plaintiff’s request to the order of Mrs. Halpine, as follows :
“No. 169. New York, 9 March, 1870.
“The Merchants’ National Bank, pay to Margaret G. Halpine, or order, seventeen thousand five hundred dollars, in current funds.
“$17,500.”
Before this date, the attorney of the plaintiffs had been also the attorney of Mrs. Halpine. In addition, he- acted as her agent in caring for her property generally. She was in the habit of signing papers on his direction, without knowing their contents. She required $15,000, and negotiations to her knowledge were on foot to borrow it from the Widows & Orphans’ Loan Society upon her bond and mortgage. On March 9, at request of the attorney, and without knowledge of the contents, she signed a bond and mortgage for $17,500 to the plaintiffs.
On the same day, the attorney deposited in his bank the check having thereon the words “Margaret S. Halpine.” This indorsement was forged, being made without authority. Under this indorsement were'the indorsements of the attorney, and then of. Howes & Macy, who again deposited the check in their bank. On the day of its date, the check was
p. 5
certified by the Merchants’ Bank. The judge found that it did not appear by whom it was presented to be certified, nor was there any proof of the point in the various transfers when it was certified.
The attorney paid to and for Mrs. Halpine, down to May 13, various sums, amounting in all to $3,200, by checks upon his bank, but she was at all times, and until the final exposure of the fraud, in ignorance of the existence of the mortgage, or the check, or the fact of deposit.
On May 13 the loan for $15,000 was made upon Mrs. Halpine’s bond and mortgage. That mortgage having been forthwith recorded, the attorney caused to be recorded, in June, the mortgage made to plaintiffs for $17,500, and sent it with the bond to the plaintiffs, who resided in Canada. From that time, until the latter part of 1876, the attorney paid to the plaintiffs the interest, but ceased in 1876. Thereupon, the plaintiffs making inquiry, the nature of the transaction was disclosed, Mrs. Halpine brought her action to cancel the bond and mortgage to the plaintiffs, and had judgment to that effect.
The check having been paid by the Merchants’ Bank, its amount was charged to the defendant, and the check was sent to the defendants as a voucher for such charge, and retained by them. The defendants charged the amount to plaintiffs about the time of the transaction. They acquiesced in this until discovery of the fraud. This action is brought to open the account between the parties to the action, and for judgment for $17,500 and interest.
Cole & Kingsland, attorneys, and John D. Parsons and Hugh L. Cole, of counsel, for appellant, on the questions discussed by the court, urged:
I. As between the parties, it is the defendants who are entitled to the greater consideration. To them it was a
p. 6
matter of no concern whether they paid the $17,500 in bills, in a check to the order of Mr. Ramsay, in a check payable to bearer, or in any other way. (a) The check was charged by the defendants against the plaintiffs’ account on March 9, 1870. It was not until October, 1876, that the defendants were notified that there was any question about the indorsement. More than six years had then' elapsed. The Merchants’ Bank was thus enabled to defend any claim made by the defendants against them on the ground of the statute of limitations. During all that time the plaintiffs received interest upon the bond and mortgage; so that, however the case may be regarded as between the parties to the suit, the loss should fall upon the plaintiffs rather than upon the defendants.
II. There is another position which furnishes a complete answer to the plaintiffs’ claim. The order signed by the plaintiff Ramsay shows that the check of the defendants upon the Merchants’ Bank was intended to be payable to bearer. The defendants were willing to pay in that way. It was at the request of the plaintiffs that the check was made payable to the order of Mrs. Halpine. The defendants did not know Mrs. Halpine, had never heard of .her, and could not possibly have honored Mr. Ramsay’s draft by a check to her order except upon his special request to pay his draft in that way. They obtained $62 in currency for him, and would have done the same for the amount of the draft, if requested. The intention of the parties was that the check, however drawn, should pay the $17,500. The case is very different to what it would be if the defendants had given a check upon themselves. They gave a check upon the Merchants’ Bank, good for the amount; they gave it to the plaintiffs in payment of their draft. Where it is the intention of the parties that commercial paper shall make payment, the debt is paid (2 Dan. Neg. Inst. 542; Smith v. Mil
p. 7
ler, 43 N. Y. 172 ; Herring v. Sanger, 3 Johns. Cas. 71 . Kent, J.: “ It is a settled rule of law that accepting a note for a debt due is no payment of the debt unless it be specially so agreed, or unless the creditor negotiates the note ”).
III. The certification of the check by the Merchants’ Bank operated not only like an acceptance of a bill of exchange, in making the Merchants’ Bank primarily liable, but as to the defendants it was equivalent to the payment of the check, and absolutely discharged them. As between the drawer and the payee the certification of a bank check is not merely the same as the acceptance of a bill of exchange. It is something more (Robson v. Bennett, 2 Taunt. 388; Willets v. Phœnix Bank, 2 Duer, 121 ; Farmers’ & Mechanics’ Bank v. Butchers’ & Drovers’ Bank, 4 Id. 219 ; Same Case on Appeal, 14 N. Y. 624 ; Mead v. Merchants’ Bank, 25 Id. 143; Merchants’ Bank v. State Bank, 10 Wall. 603 ; Cooke v. State National Bank of Boston, 25 N. Y. 97 ; First National Bank of Washington v. White, 4 Otto, 343; Marine National Bank v. National City Bank, 59 N. Y. 71 ; Freund v. Importers’ & Traders’ National Bank, 12 Hun, 737 ). These authorities fully disclose the course of the decisions, and the steps whereby the present state of the law has been reached. As soon as the question of the liability of the drawer to the holder of a certified check came to be considered, the difference between certification and acceptance was very broadly laid down, and it was held that the certification of a check not only operates like the acceptance of a bill to make the bank primarily liable to the holder ; but also that it operates, as far as the drawer is concerned, as payment, and absolutely discharges him from liability (First National Bank of Jersey City v. Leach, 52 N. Y. 350 ; First National Bank v. Whitman, 4 Otto, 343; Freund v. Importers’ and Traders’ National Bank, 12 Hun, 537 , General Term, October,
p. 8
1877). The distinction was arrived at because the theory of the law, and the practice of the banks, is that where a check is certified by a bank the amount thereof is immediately charged to the account of the drawer, and thereafter the drawer cannot draw- out or dispose of that portion of his deposit which is necessary to pay the accepted check (Merchants’ Bank v. State Bank, 10 Wall. 605 ; Marine National Bank v. National City Bank, 59 N. Y. 71 ; First National Bank v. Leach, 52 Id. 350; Freund v. Importers’ and Traders’ National Bank, 12 Hun, 537 ). And “ the reason ” for this practice “is so strong that the law presumes it to be adopted by the banks ” (First National Bank v. Leach, supra). But an acceptor of a bill of exchange has no ■ right “to charge it in an account against the drawer from the date of acceptance, unless he pays the whole amount at the time, or discharges the drawer from all responsibility” (1 Dan. Neg. Inst. 395; Bracken v. Willing, 4 Call [Va.], 288).
IV. It seems perfectly clear that, no matter who presented the check for certification, the effect of certification, as to the drawer, is the same. And so we find that, although Mr. Justice Peckham in an obiter dictum, in the First National Bank v. Leach, above cited, thought that the drawer would not so be discharged in a case where the check was first certified at the instance of the drawer and afterwards delivered ; nevertheless, Mr. Justice Hunt, of the supreme court of the United States, in the First National Bank v. Whitman, holds that the drawer is discharged by certification, whether the certificate be obtained before the check is delivered to the payee or afterwards. “It is a contract recognized by the law, valid in its character, which essentially changes the position of the parties. The privity of contract with the.drawee, which before pertained to the drawer alone, is now imparted to the payee, and the duty which before existed in the drawer
p. 9
now exists in the payee.” And this conclusion is reached with the opinion of Mr. Justice Peokham immediately under review. This decision has been followed by our own courts in a very recent case (Freund v. Importers’ and Traders’ National Bank, 12 Hun, 537 ).
Y. But whether or not the certification of the check amounted to a. payment, and absolutely discharged the drawer, it is certain that the effect was to make the Merchants’ Bank primarily liable, and to make it the duty of the holder of the check to present it to the acceptor for payment. It is only after such presentation and a refusal to pay that the holder of the check can have recourse to the drawer. No such presentation for payment was made ; nor is any such alleged or pretended to have been made. And no demand for the check was made upon the defendants ; a different case would be presented if such a demand had been made and refused. The plaintiffs have sued upon a wholly different allegation.
YI. The plaintiffs were ordinary depositors in the defendant’s bank. Their deposits did not bear interest. Interest on this $17,500 in controversy could not begin to run therefore until actual demand for payment had been made by the depositors (Reid v. Duncan, 1 La. Ann. 265 ; Downes v. Phœnix Bank of Charlestown, 6 Hill, 299 ; Payne v. Gardiner, 29 N. Y. 164 ). The only communications which transpired on the subject between the parties or their attorneys are the conversation between Mr. Hill and Mr. McNab, of October 4,1876 ; the letter of Messrs. Bedfield & Hill, of January 24, 1877 ; the reply thereto of January 27, 1877; the complaint which was served June 21, 1877, and the answer which was served October 24, 1877. None of these demanded the payment of the deposit, and certainly none of them could be the basis of a charge for interest from Sep - tember 15, 1878. In fact, however, the interest was
p. 10
not calculated from any supposed or alleged demand, either actual or constructive, but from the date when Mr. Barrett ceased to pay the plaintiff’s interest on the bond and mortgage. Interest was payable on the bond on March 9 and September 9. Mr. Barrett paid it regularly up to his disappearance in 1876. The next interest was due September 9, 1876, and the plaintiffs have been charged with it ever since. Why the fifteenth of September was selected it is impossible to guess, as that date corresponds with nothing in the case.
Redfield & Hill, attorneys, A. A. Redfield and Thos. G. Shearman of counsel, for respondents, on the questions discussed by the court, urged:
I. The whole argument for the defense rests upon the assumption that the defendant will suffer loss by the correction of this account, and that it stands in a position which entitles it to more favor from the court than the plaintiffs. But this assumption is unfounded. (1.) The defendant has this money as much within its control now as it ever had. In March, 1870, when the plaintiffs applied for the money, it did not have the actual currency in its possession, nor any fund in bank to which it had specific title. It had simply a lawful claim against the Merchants’ National Bank for that amount, which claim, at the request of the plaintiffs, it undertook to transfer to Mrs. Halpine. But this transfer was never, in fact, completed ; and the Merchants’ Bank never having paid anything by authority of the defendant, or of Mrs. Halpine, is still liable to the defendant for the $17,500, exactly as it was in March, 1870. The indorsement being a forgery, is no justification to the Merchants’ Bank; and the position of the defendant has never for an instant been changed by the forged indorsement. (2.) The only doubt which can be suggested upon this point arises .concerning the effect of the statute of limitations. But the defendant having
p. 11
kept a continuous deposit with, the Merchants’ Bank, and never having demanded payment of its entire balance, nor of this particular $17,500, which is a mere undivided part of such balance, the statute of limitations is not running. It will not begin to run until a formal demand has been made by the defendant upon the Merchants’ Bank for the payment of the balance, including this amount. This proposition is, indeed, self-evident, without reference to authorities; for the very object and purpose of keeping a bank account is, that the depositor may let his money lie as long as he chooses ; and, on the other hand, no banker would think of accepting a deposit account, if he could be made liable to the expense and annoyance of a lawsuit, when he had never been asked to return the money. But the authorities are direct upon this point (Downes v. Phœnix Bank, 6 Hill, 297 ; Payne v. Gardiner, 29 N. Y. 146 ; Boughton v. Flint, Ct. Appeals, 18 Alb. L. J. 337). (3.) The defendant has the check in its possession, certified by the Merchants’ Bank as good, and, if it chose to enforce its rights by the medium of that check, could easily obtain the genuine indorsement of Mrs. Halpine, and draw the money. The payment by the Merchants’ Bank upon a forged indorsement would be no defense to that bank (Graves v. American Exchange Bank, 17 N. Y. 205 ; Talbot v. Bank of Rochester, 1 Hill, 295 ). (4.) But the defendant can enforce its rights without the indorsement of Mrs. Halpine; for she has, on two occasions, under oath, disclaimed all interest in the check, and denied the authority of Mr. Barrett to obtain it for her. The Merchants’ Bank would, therefore, be bound to cancel its certification upon the demand of the defendant, and could not set up such certification as any defense to the defendant’s claim. Substantially, the certification was obtained by mistake; and upon Mrs. Halpine’s disclaimer of all interest in the funds thus transferred
p. 12
to her credit upon the books of the Merchants’ Bank, the liability of that bank to the defendant revives, and the defendant is entitled to recover the amount of its deposit with the Merchants’ Bank, precisely as though no certification had ever been put upon the check. (5.) Thus it may be seen that the defendant has all the necessary remedies in its possession, and' stands in as good a position as it ever did ; while the plaintiffs have no claim against any one except the defendant, and are deprived by the willful act of the defendant of all power to sue the Merchants’ Bank upon the check. If the defendant had offered to give the plaintiffs the check, it would now stand in a much better position ; but not only has it never offered to do this, but in the letter of January 27, 1877, it expressly disclaimed all liability, and refused to do anything whatsoever to relieve the plaintiffs from loss. (6.) It thus appears that the plaintiffs are remediless, except in this action, while the defendant is. abundantly protected by means of the responsibility of the Merchants’ Bank.
II. The receipt of a check upon the bank did not operate as a payment of the defendant’s debt; and the plaintiffs had a right to demand payment of the original debt from the defendant, without having recourse to the check (Bradford v. Fox, 38 N. Y. 239 ; Turner v. Bank of Foxlake, 4 Abb. Ct. of App. 434).
III. The defendant relies upon the certification of the check as a defense to our action in its present form. But that certification, by whomsoever obtained, was obtained without authority, and the Merchants’ Bank would be bound to cancel it upon the defendant’s application. The drawer of a check is not discharged by its mere certification. It is the fact of leaving the money in the bank, and thus delaying the demand of payment, which is held to discharge the drawer. This is clearly shown by the very case in the court of appeals, which is cited by the defendant’s counsel.
p. 13
After describing the process of certification as a declaration by the bank that the check is good, and that it has the money of the drawer ready to pay it, which money the holder of the check refuses to receive, the opinion of the court says, “The law will not permit a check when due to be thus presented, and the money left with the bank for the accommodation of the holder, without discharging the drawer” (First Nat’l B’k v. Leach, 52 N. Y. 350 ).
IV. There has been no such delay or acquiescence on the part of the plaintiffs as to constitute any bar to their claim. It is expressly admitted by the answer that whatever acquiescence there was, was made without knowledge of the facts ; and acquiescence, like the ratification of an unauthorized act, if made without full knowledge of the circumstances, is no bar (Weisser v. Denison, 10 N. Y. 68 ; Life Association v. Siddal, 8 De Gex, F. & J. 58, 74; Perry on Trusts, §§ 849, 851).

The testimony sustains the finding of the learned judge, that the attorney was not the agent either of the plaintiffs or of Mrs. Halpine, in obtaining the money upon the check by means of the forged indorsement, neither had she authorized the indorsement.

The testimony as to the bond and mortgage was important for the purpose only of determining whether there had ever been an actual or constructive delivery of the check to Mrs. Halpine, or whether the indorsement was hers as made by her agent. It is not necessary to give this matter further attention.

When the plaintiffs presented their order for the money to the defendants and received upon it the check in question, drawn to the order of Mrs. Halpine, the mere receiving of this check was not a final or absolute satisfaction of the plaintiffs’ rights as to their

p. 14
money deposited with defendants. The plaintiffs had the right still to demand the money on deposit, if at the same time they returned the check, unindorsed, and in such a state that the defendants’ rights had not been changed to their harm, and if the plaintiffs had not dealt with the check in a way that had damaged the defendants. It is to be particularly observed, that the holder is not chargeable with damage for negligence arising only from his keeping the check unpresented, until the day after its delivery.

In the present case, the check is in possession of defendants, without payment, for the payee never indorsed. The bank on which it was drawn took it on the day next its date. If the defendants have suffered damage from a dealing by plaintiff with the check, it has come from the check being certified by the bank, the subsequent taking of that check by the bank, the charging its amount to the defendants, and the defendants acquiescing in that charge, until a time, when, as the learned counsel for defendants argues, the statute of limitation prevents the defendant recovering from the bank the amount improperly charged by the latter.

A scrutiny of these acts shows that for the most part they are either tortious as to the plaintiffs, or voluntary by the defendants and the bank, as not the performance of any valid obligation between them.

The check having been made to a third party, was, to the knowledge of the parties, inchoate, and would be so until delivered to the payee. This affected to a due extent the implied contract. No cause of action could exist on the check as a chose in action, until the payee received it. At no time could the defendant get any right, as if upon a payment, until she indorsed it. The bank had no right to take the check and pay its amount until she had indorsed it.

The bank, in taking that check as it did, and as

p. 15
suming the right to pay it, was liable to plaintiffs for a conversion of it. They were the owners of the piece of paper, with the inchoate contract upon its face. It is not necessary to determine the measure of the plaintiffs’ damages for such conversion. It may be that it would be a sufficient reason, under thé circumstances, to place the damages at a nominal amount; that the only value of the check was that plaintiffs must have it in order to bring an action against defendants for the original deposit, and that, as the bank had returned it to defendants, such an action could be brought without possession of the check. The quality of the act of the bank is of importance. It was wrongful to the plaintiffs. The defendants were also liable to the plaintiffs for a conversion of the check, when the defendants assumed dominion of the check, for the purpose of finally extinguishing plaintiffs’ right as to the money deposited with them, in derogation of the true title and right to possession.

In Graves v. American Exchange Bank ( 17 N. Y. 205 ), the defendant was the drawee of a bill of exchange, payable to the order of one who afterwards assigned to the plaintiff. A person having the same name as the payee, indorsed and presented the bill to the defendants, who paid it to Mm. The action was for a conversion of the bill, and judgment against defendant affirmed.' Judge Comstock, in the opinion, said: “ The defendant having got possession of it through a false or forged indorsement, and having refused to deliver it up or pay it to the owner, was liable for its conversion.” The learned judge did not, however, mean to say that it would not have been a conversion, if the plaintiff had not demanded it. The check, as in the present case, was never rightfully in possession of the bank, but the original taking was tortious, and no demand was necessary to put an end to a previous rightful holding. The bank and the de

p. 16
fend ants were jointly liable as to the act by which the latter received the check from the former (White v. Sweeny, 4 Daly, 223 ; White v. Mechanics’ National Bank, Id. 225 ).

When the bank sent the check to the defendants as voucher for charging them with the amount paid upon it, the defendants’ acquiescence in that charge was purely voluntary on their part. By reason of the original understanding and contract, the check was to be paid to the order of a third party. The defendants could not base a right as against the plaintiffs upon a payment to any one else. They suffered the charge, made by the bank unnecessarily and voluntarily (Morgan v. Bank of the State of New York, 11 N. Y. 404 , affirming 1 Duer, 434 ). At this point it is to be seen that the omission of plaintiffs to notify the defendants of the fact does not place the defendants in the better position. The defendants had contracted against paying on a forged indorsement. They did pay, or acquiesced in the payment, within a short time from the actual forgery. The plaintiffs, ignorant of the forgery, at most could only have instigated the defendants to bring an action against the bank, based upon a transaction which, as against the plaintiffs, should never have- taken place.

The only facts left upon which the defendants can rely, as a cause of damage, from neglect or laches of plaintiff, are that the check was actually certified, and remained so for a period of time, viz.: about thirty days before it came into defendants’ possession. It is argued the certification was a discharge of the defendants.

It does not clearly appear at what point the bank certified the' check, or in whose hands it then was. There is no finding as to this. On the testimony it appears that it was certified on the day of its date, but no reason was shown for its being certified by the

p. 17
attorney who procured the money upon it, more than by the private bankers, with whom it was deposited by the attorney, and who may either have wished to draw upon it themselves at once, or to protect themselves against its being drawn upon by their depositor. There was, of course, no reason for certifying it for Mrs. Halpine’s protection, as there was clearly no intention of carrying out the matter of the bond and mortgage on her behalf.

It would not, however, in view of the peculiarity of the case, be satisfactory to determine it upon the assumption that the attorney did not have the check certified, and if he did I would hesitate unnecessarily to decide, that, where a person placed a check in possession of another it did not imply to the bank sufficient authority from the owner to present the check for certification. ' The issues here may be determined without passing upon such a proposition. It is only necessary to decide whether, upon any assumption, the certification in this case discharged the defendants.

The position of the defendants is, that upon certifying the check the presumption is, that the bank withdrew the amount from the credit of the defendants and placed it to the credit of the certified check, and that that resulted in the defendants’ discharge. It is argued that a check is given for presentation for payment and not for certification, and that if the holder choose to have it certified he uses the funds of the drawee in a manner unauthorized by him.

An important fact must be kept in mind. The defendants knowing that the check was inchoate in plaintiffs’ hands, contemplated a delivery to the payee according to the usual methods and delays of business, and the question is whether a person situated as plaintiffs could before delivery have a check certified without-discharging the drawer.

As a check is a chose in action, not an assignment

p. 18
of a fund, it is executory or promissory. If it remain promissory after certification the drawer remains liable. This is clearly the case when the drawer has it certified" before delivery by him. It is also, clear, that if the holder choose voluntarily to take a certification or rely upon one already made, at a time when it is his duty to relieve the drawer from any risk connected with the funds remaining with the bank, the drawer is discharged. But there is a middle ground to be examined, and that is when by the contract the holder can refrain from presenting the check for payment, and yet the drawer is bound to keep the bank in funds.

The fact taken by itself, that the bank certifying transfers the amount from the drawer’s credit, does not absolutely work the discharge of the drawer. That is done by the acceptor in funds when he accepts a time bill. The discharge is prevented by the fact that the drawer contemplates this transfer of his funds, and impliedly contracts that the acceptor will pay it over, at maturity. And at maturity the holder must present and rfeceive payment, for he has no authority by the contract to allow the funds to remain longer with the acceptor at the drawer’s risk.

When a check is paid out, the presumption is that it is drawn against funds, and, therefore, the contract implies that the drawer will keep the funds there to meet the check. If the bank remain solvent, the drawer must keep the funds at the bank to meet the check, for six years, or if he withdraw them, he is liable upon the original demand if not upon the check. The holder brings the check to maturity at his pleasure. He may present forthwith if he please, or he may withhold.

The specific and the general rules as to presentation, demand and notice, that are applied to commercial paper, are based upon presumptions or proof of damage from an omission to present, or demand, or

p. 19
notify. Notices and demands are excused in certain cases upon proof that no damage could occur.

In cases like the present, there is no damage or presumption of it, from the nature of the certification, as it was made at a time when the plaintiffs were at liberty to keep the check unpresented. The certificate was a promise of the bank to do, so far as the fund was concerned, the same thing that the drawer had promised. The modification of the original contract was in the drawer’s favor, as they become only secondarily liable.

Whether or not an entire omission by plaintiff to present for payment, after the check had been certified, would have discharged the defendants, does not call for d ecision. The bank took it in its possession the next day after certification, and shortly thereafter the defendants received and kept it. These periods were no greater than it is presumed the plaintiffs were at liberty to hold the check, before delivering it to the payee, and until delivery the defendants did not require it to be presented for payment, and were bound to keep the bank in funds. These are proper deductions from the case of First Nat. Bank v. Leech ( 52 N. Y. 350 ), in which Judge Peckham delivered the opinion. For that case was one where the check had been presented on the day on which it was specifically made payable by its terms. The most of the illustrations in the opinion are of checks stated to be due. There was no intention of applying the rules to a case where, as between the parties, it had not become a duty to present for payment, and payment, in fact, had not been demanded.

I perceive that in the opinion last cited are statements from which it might be argued, that the drawer is discharged if the bank withdraws from- his credit the amount of a check, at a time when the money might have been demanded. The opinion, however, was written to decide a case in which the check had

p. 20
a day fixed for its payment. It was avowedly based upon the position, that allowing the funds to remain with the bank was an act for which the drawer was not responsible. But the drawer in a case like the present contracts that the funds shall remain for a certain time. They remain by his consent. The certification does not deprive him of a use of the funds for any time, that he did not intend. They remain for his benefit; while it might be otherwise if they remained for a period not contemplated by the parties, and therefore solely for the benefit of the holder.

The general custom is to have checks certified on the day they are received. This is generally done by or on behalf of the drawers., But in many cases the certification is procured on that day by or for the payee, and the check is then deposited, to be collected the next day. It is not thought that the drawer is to be discharged by such a certification, although the question can seldom arise, as it is very rarely that a bank becomes insolvent.

My general conclusions are that the certification did not, at the time it was made, lead to a transfer of * funds to the injury of defendants, and "that the funds would remain for the benefit and by the consent of defendants at least to the next day, that time being named as the limit within which the obligations of the defendant were absolute to provide for payment, irrespective of any omission by the holder, and that in this case the defendants contemplated some delay in the plaintiffs delivering the check to the payee or in returning it if not delivered.

If I am correct in the views expressed, it is not material that the plaintiffs gave no proof as to the present solvency of the bank in order to show that the defendants might still recover the amount from it. It sufficiently appeared that down to the time when the defendants took the check into their possession, the

p. 21
bank was solvent, and it further appeared that up to that time there was no more delay than would have been allowed or expected by the defendants, for the plaintiffs to deliver to the payee, or to return to the defendants in case a delivery was not made, whatever the reason. In fact, it seems to me that' upon the defendants taking exclusive possession of the undelivered certified check that belonged to the plaintiffs, they assented to the use of the fund actually made by the bank. The fact that the check never went into the hands of the payee makes it unnecessary to determine what rights the defendants would have otherwise had to require presentment for payment to the bank before resorting to defendants. The rights of the defendants are confined to any damage, it appears or is presumed, followed any negligence of the plaintiffs. I do not see that any negligence can be attributed to the plaintiffs beyond their permitting or being responsible for the certification.

The case is not complicated by the plaintiffs becoming repossessed of the check before this action. The assignment made by Mrs. Halpine would have only justified an action upon the check as such, if it had been returned to plaintiffs, but it never was, and the plaintiffs would not have been bound to retake it from a wrong doer.

On the evidence, as I read it, interest should not have been calculated from an earlier date than January 34, 1877, that being the time of the first defendants’ demand. As I think the court below would have so held, if specific attention had been called to this, it is not necessary to make this modification depend upon the plaintiffs being deprived of the costs of the appeal.

With the reduction suggested the judgment should be affirmed with costs.

Freedman, J., concurred.

Cases cited