Mazukiewicz v. Hanover National Bank

Andrews, J. Having purchased from the defendant as drawer in 1914 two foreign drafts or bills of exchange aggregating 15,000 rubles the plaintiff duly presented them for payment to the drawee in Lomza, Russia, but payment was refused. No notice of dishonor of either draft was given to the defendant. The plaintiff was detained in Russia by the war and subsequently by lack of funds but he returned to New York in 1921 and in April of that year presented the original drafts to the defendant. He then asked for the money which he had paid for them but this was refused. The present action was then begun to recover that sum and at the close of the evidence, bqth *321 parties having moved for a directed verdict? the court directed a verdict for the plaintiff and the judgment subsequently entered has been unanimously affirmed by the Appellate Division. The question for us to consider is whether there is any evidence to justify the verdict so directed by the trial court. Section 111 of the Negotiable Instruments Law (Cons. Laws, ch. 38) provides that the drawer of such instruments as are involved in this action engages that upon due presentment the same will be accepted and paid, or both according to the tenor, and if they are dishonored and the necessary proceedings on dishonor are duly taken he will pay the amount thereof to the holder. Section 160 of the same law provides that unless notice of dishonor be given to the drawer he is discharged unless it is one of the cases specified in section 185. These exceptions, so far as applicable here, are where the drawer has countermanded payment or where he has no right to expect or require that the drawee or acceptor will honor the instrument. In his complaint the plaintiff alleges that the defendant had countermanded payment and later he was allowed to amend by alleging that at the time the drafts were drawn the defendant had no funds with the drawee. As to the question of countermand we find no evidence that would permit a finding in favor of the plaintiff. He testifies that when the drafts were presented the drawee told him that the Hanover National Bank had notified him not to pay. As to the defendant this evidence was purely hearsay. The drawee was not the agent of the defendant in any such sense' that his statements were competent as against it. (Carle v. White, 9 Me. 104; Forbes v. Eldridge, 9 Mass. 497; Baldwin’s Bank of Penn Yan v. Smith, 215 N. Y. 76, 82.) Indeed, neither of the courts below seem to have placed their decision upon any such theory. *322 It is quite true that the defendant at the time it drew the drafts had no funds with the drawee. It might not, therefore, require their payment. But if it had a right to expect that they would be paid it was entitled to notice of dishonor. The uncontradicted evidence is that it was in correspondence with the Commerce Bank of Warsaw, with whom it had a sufficient balance on deposit. The bank in Lomza was in turn one of the correspondents of this latter bank. The agreement and practice was for the defendant to draw a draft directly upon such correspondents, notify the latter that the draft had been drawn, ask them to charge it against the Commerce Bank of Warsaw and the latter bank, being also notified that the draft was drawn, instructed its correspondents to honor the draft and charge it to the Warsaw bank which bank in turn charged it against the account of the Hanover National Bank with it. Following this procedure, drafts had been previously drawn on this very bank in Lomza and it seems to have been the regular course of New York banks with relation to foreign drafts and the only practicable course. They could not keep accounts with banks in each of the smaller foreign towns and if all they could do would be to draw upon the central banks in each country, business transactions would be impeded. In view of this uncontradicted evidence the only possible inference is that the defendant had a right to expect that these drafts would be paid when presented and that is sufficient. (Ro binson v. Ames, 20 Johns. 146; Rucker v. Hiller, 16 East, 43; Knickerbocker Life Insurance Company v. Pendleton, 112 U. S. 696; Simonoff v. Granite City National Bank, 279 Ill. 248.) It, therefore, was entitled to notice of dishonor. The judgments appealed from must be reversed and, as it is possible that upon a new trial the plaintiff may show by competent evidence that payment was countermanded, a new trial must be granted, with costs to abide the event.