Chemical Nat'l Bank of N.Y. v. . Kohner

*192 Earl, J. This action was brought upon four promissory notes, amounting in the aggregate to over $15,000, made by Griffith and Prentiss and indorsed by Joseph Kohner, defendants’ intestate.. The defendants set up as a defense a composition agreement. The referee sustained the defense and ordered judgment for the defendants. Upon appeal by the plaintiff to the General Term, that judgment was reversed upon the ground that the agreement was made by plaintiff’s cashier, without its authority, and, therefore, was not binding upon it. It appears that beside the • notes held by the plaintiff, the same parties were indebted upon notes held by the Central Kational Bank and the Bank of Hew York,.and that Kohner was desirous óf compromising his liability to the three banks by paying or securing twenty-five-per cent of the indebtedness, and that one or both of the other banks agreed to accept the twenty-five per cent if the plaintiff would. In November, 1813, the notes held by the several banks being all over due, Griffith, one of the makers, on behalf of Kohner, went to plaintiff’s bank and opened a negotiation with its cashier to effect the compromise, and there proposed to-such cashier to secure twenty-five per cent of the indebtedness due his bank upon the four notes in suit, by giving the note of Kohner for the amount, indorsed by one Goldsmith, payable in six months. The cashier consulted with the president, and had several interviews with Griffith upon the subject, and finally, at the request of Griffith, he addressed to the president of the Bank of New York, knowing that it was intended to induce him to enter into the compromise, the following letter: "OHEMIOAL NATIONAL BAEX, NEW YORK, lYovember 14, 1873. "JoHN Q. Joi~s, Freside~t. “Geo. G. Williams, Oashier. "O. P. Leverich, Esq.: “Dear Sir—At the request of Hr. Griffith, I beg to say that we propose to take the notes of Joseph Kohner, indorsed by J. A. Goldsmith, for twenty-five cents on the dollar of *193 his indebtedness to us and discharge him. in full when the notes are paid,.holding, of course, Griffith and P. for the balance. “ Very respectfully, “G. G. WILLIAMS, Cashier.” •Soon after the writing of this letter, Williams informed J ones, the president, of it, and they discussed the bearings of the proposed compromise upon a suit then pending against the bank, and the president then stated to the cashier that in reference to that suit the proposed compromise was not wise and that they had better not yet settle with Kohner, and thereafter, when the note of Kohner, indorsed by Goldsmith, was tendered, the cashier refused to accept it and repudiated the compromise. -It appears that the president and cashier were the active managers of the bank; all these transactions took place in the bank of the plaintiff, and there was no evidence showing, or tending to show, that the cashier was not authorized to make the compromise, and the compromise was never, at any stage of the transactions, repudiated on the ground that the cashier entered into it without authority. The cashier and the president were both sworn for the plaintiff upon the trial, and they gave no evidence showing, or tending to show, that the cashier acted without authority in making the composition agreement. Under all the circumstances we think it must be presumed that he had such authority, either by usage known to the directors of the bank, or by some general by-law or resolution of the board of directors. (Bank of Vergennes v. Warren, 7 Hill, 91.) It was proved that' compromises were matters of common occurrence in plaintiff’s bank, and it cannot be presumed that this compromise, made by the cashier after consultation with the president, was made without authority, nor can it be presumed that in an ordinary matter of this kind the formal sanction of the board of directors was necessary. If the plaintiff had proved, affirmatively that the cashier had transcended his authority, a different question ■wpuld have been presented for our consideration. In The Bank of Vergennes v. Warren, it was held, that where the *194 cashier of a hank assigns a certificate of sale owned by it, affixing the corporate seal to the assignment, his authority to do so will be presumed until the contrary appears; and that the presumption of authority on the part of the cashier will not be overcome by evidence that the board of directors had passed no resolution on the subject. We cannot see, therefore, that the referee erred in holding that this composition agreement was made by the bank. It is scarcely disputed that the agreement made was a-valid composition agreement. Kohner was liable to the three banks, and it does not appear that he was otherwise indebted. He proposed to compromise all of these liabilities, and it was so understood by each of the banks. It was not necessary that the composition agreement should be in writing. If in writing, each bank could have executed a separate instrument. Being by paroi, each bank could make a separate paroi agreement for the purpose of carrying into effect the compromise. After the -agreement was once made, neither party could withdraw from it without the consent of the debtor. Here, before Kphner knew that the plaintiff repudiated the compromise agreement, he paid the 'twenty-five per cent to the Central Bank, and gave his note, indorsed by Goldsmith, to the Bank of Hew York, and was discharged by those banks. After that, certainly, it was too late for the plaintiff to recede from its agreement. (Fellows v. Stevens, 24 Wend. 294; Williams v. Carrington, 1 Hilt. 515; Smythe v. Graydon, 29 How. Pr. 11; Renard v. Tuller, 4 Bosw. 107; Hall v. Merrill, 5 id. 266; Horstman v. Miller, 35 N. Y. Supr. C. 29; Good v. Chessman, 2 Barn. & Adol. 328; Boyd v. Hind, 40 Eng. L. and Eq. 428.) The plaintiff claimed upon the trial, and gave evidence tending to show, that the next day after the writing of the letter above set out, it notified the president of the Bank of Hew York that it had repudiated the compromise agreement, and that it should not rely upon the letter; but the referee found that no such notification had been given. This case, therefore, must stand as if there had been no repudiation of *195 the compromise agreement until Kohner tendered performance thereof. There was, therefore, no error by the referee in holding that the plaintiff had entered into a valid compromise agreement. But the claim is made, on the part of the bank, that the compromise agreement was not performed as to it, and hence that it had a right to sue upon the original indebtedness. Kohner in the first place, tendered to the bank a note indorsed by Goldsmith, as required by the agreement, and it refused to receive it. Kohner then tendered to the bank a certified check for the twenty-five per cent, and that was also refused, but not upon the ground that it was not money. Both refusals were upon the ground that there was an action pending against the plaintiff which might be affected by the compromise. Having thus repudiated the compromise, and refused to accept performance thereof, the plaintiff cannot now allege non-performance for the purpose of depriving defendants of their defense to this action. After such refusals, the plaintiff could put Kohner in default only by demanding of him the indorsed note, as agreed, or the twenty-five per cent in money. Such tender of performance was sufficient to defeat any suit upon the original indebtedness. (Fellows v. Stevens, supra; Reay v. White, 1 Cromp. & M. 748.) It appeared, however, that after the plaintiff had refused to accept the note and the certified check, Goldsmith destroyed them. Whether such destruction was before or after the commencement of this action does not appear. The learned counsel for the plaintiff now claims that the tender' was unavailing, because it was not kept good. If a suit had been brought upon the composition agreement, a claim that the tender should have been-kept good would probably-have been a good answer to a defense based upon such tender, but the destruction of the note and check did not destroy the composition agreement. That remained in force until Kohner was in some way put in default. Until such default no action could be maintained upon the original indebtedness. The composition agree *196 ment and tender of performance thereof, on the part of Kohner, is a defense to such action. Thé further claim is made, on the part of the plaintiff, that it should have recovered in this action, at least, the twenty-ffve per cent of its claims. After the composition agreement was made, and so long as it remained in force, it was a substitution for and took the place of the original indebtedness, and the only claim plaintiff thereafter had against Iiohner was upon the composition agreement. It had no cause of action upon the original indebtedness, and- it could, therefore, recover-nothing in this action, which was based solely upon that indebtedness. We are, therefore, of opinion that the learned General Term erred and that its order should be reversed, and the judgment entered upon the report of the referee affirmed, with costs. All concur. Order reversed and judgment affirmed.