Irving Bank of New York v. Wetherald

Hunt, J. Both the judge at the Circuit, and the General Term, are of the opinion that the notice by the Plaintiffs to the Seventh Ward Bank, of the mistake in certifying Wilson’s check to be good, before any steps had been taken, or any measures omitted by the Seventh Ward Bank, and while there was still time to fix all the parties upon the note, relieved the Plaintiffs from their liability on the certificate. In this opinion I concur. Such a certificate possessed no extraordinary or hidden power. It should impose no greater liability than its terms fairly require. Divested of all technical terms, the transaction in question was simply this: The Seventh Ward Bank present for payment, at the Irving Bank, where it was made payable, the note of Morris Wilson. The making the note payable there, was a warrant from the maker to the latter bank, to pay it from his funds, and charge it to him. When the note is presented, the teller of the paying bank infoxuns the presenter that the note is good; in other woi'ds, that the maker has the funds in the bank to meet it. This information may be communicated verbally, by letter, or by a memorandum on the note, ordinai-ily called a certificate. If the note were presented by an individual, the money would ordinarily be paid to him, in satisfaction, and the note left with the paying *122 bank. In tbe case of a bank, tbe note is taken back by tbe party owning it, to be returned tbe next day in tbe settlement of exchanges, as an item of credit in its favor and against the certifying bank. This is tbe usual course of business in tbe city of New York. The correctness of this certificate is a matter which tbe certifying bank has tbe means of knowing, and it is bound to state correctly. If tbe presenting bank relies upon its accuracy, and fails to charge tbe endorsers, as upon non-payment on presentation, tbe certifying bank- is estopped from denying tbe truth of its statement. Having asserted ,of its own knowledge that tbe maker had funds in its bank to meet the note, and tbe resenting bank having omitted to charge its endorsers in reliance upon such statement, tbe certifying bank will not be permitted to go behind its own statements. Tbe teller of tbe bank is tbe proper officer to make this statement, and bis statement binds tbe bank, whether accurate or erroneous. These principles were established in Meads v. The Merchants’ Bank of Albany (25 N. Y. 143), and in Farmers’ and Mechanics’ Bank of Kent County v. Butchers’ and Drovers’ Bank (16 N. Y. 125). In the present case, the Irving Bank discovered its error in stating that it bad funds for the payment of Wilson’s note, in sufficient time to prevent any loss in consequence of tbe error. It immediately notified the Seventh Ward Bank of the error, and in time to enable it to make a representment, if necessary, and to charge tbe endorsers. No damage, therefore, could accrue to tbe latter bank from tbe erroneous information. They were bound to accept and to act upon tbe corrected information, if there were time and opportunity to do so. I agree with tbe Court below that tbe Plaintiffs might have stopped at that point, and there would have been no liability on their part to the Seventh Ward Bank. That bank went farther, however, and upon the refusal of the Seventh Ward Bank to cancel them certificate, paid to that bank the amount of the note, represented it at their own counter, and gave notice of non-payment to the Defendants as endorsers thereof. This the judge at Special Term held to amount in law to a payment of the note. The General Term held otherwise, and reversed his *123 judgment. It was agreed by the judge at Special Term, that the certificate of the paying teller was not payment of the note. In this he was no doubt correct. It has also been held, and correctly, that the stamping a note as “ paid,” or marking it with a cancelling hammer, does not constitute a payment (Scott v. Betts, Lalor’s Sup. to H. & D. 363, and note; Watervliet Bank v. White, 1 Denio, 608). That the advance of the amount of the note by the Plaintiffs to the Seventh Ward Bank was made to relieve them from an apprehended liability on their certificate, and was not intended by them to be in discharge of the note, is obvious from the immediate representment of the note for payment, and notice to the endorsers that the same had not been paid. There could have been no other purpose in this than to charge the parties to an existing note. So, if they had intended a payment and discharge of the note, they woidd have allowed its return in the exchanges of the day following, in the usual course of business, instead of making a special payment of the same. The judge has not found as a fact that the note was intended to be paid by the Irving Bank, or that it was paid by them. He could not have so found upon the testimony with propriety. He simply finds that the Plaintiffs paid “ the amount of the note” to the Seventh Ward Bank, and he holds as a legal result, that the advance of the money, under the circumstances stated, operated to discharge and cancel the note. In this conclusion I think he erred. The Plaintiffs took the note as a purchaser, and acquired the rights of a holder. See Watervliet Bank v. White (1 Denio, 608). In that case the Watervliet Bank, at whose counter the note was made payable, received it from the holder for collection, and having an account with the maker, which, however, was not good for the amount, charged it to him, and paid it to the holder, at the same time placing upon it a cancelling mark. By the practice of the bank this mark only denoted that the note was charged. In a suit on the note by the bank, as endorser, against the maker, it was held that the bank held it with the rights of a purchaser, and could maintain the action. In the present case, the Plaintiffs feared a liability to the *124 Seventh. Ward Bank, by reason of their mistaken certificate of the goodness of the note. They advanced to that bank its amount for the purpose of representing it for payment, notifying the endorsers, and holding it as an existing security. The Defendants are endorsers duly charged. They received, themselves, the amount of the note upon its discount. It has never been paid, and is now an available security in the hands of the Plaintiffs. Order of the G-eneral Term should be affirmed, and judgment absolute ordered in favor of the Plaintiffs for the amount of the note and interest. Affirmed. JOEL TIFFANY, State Reporter.