Peaslee-Gaulbert Co. v. Dixon

AlleN, J. His Honor sustained tbe plea of payment of tbe defendant, and tbe question for decision is whether tbis ruling is correct on tbe agreed facts. Tbe note was payable at tbe Bank of Caswell, and tbis was “equivalent to an order to tbe bank to pay tbe same for tbe account of tbe principal debtor thereon” (tbe defendant). Eev.-, sec. 2237. In addition to tbis, tbe Bank of Caswell was tbe agent of tbe plaintiff for collection (3 R. C. L., 639; 7 C. J., 597; Bank v. Floyd, 142 N. C., 187), and when the note was presented to tbe defendant for payment be wrote on it a direction to tbe bank to- charge to bis account, which tbe cashier said was all right. Tbe note remained in tbe bank for twelve days, with tbis order indorsed thereon unrevoked, and while tbe amount to tbe credit of tbe defendant when tbe order was given was slightly less than tbe note, and tbe bank bad no right without special authority to accept a part payment (7 C. J., 615), the defendant on the next day after tbe order was given deposited with tbe bank money amounting to more than tbe note, and thereafter kept more than that amount to bis credit. These facts, in our opinion, constitute a payment of tbe note. The question has been decided in favor of tbe defendant by tbe courts of New York, which, like our State, has adopted the uniform *414 Negotiable Instrument Law, in an opinion supported by reasoning satisfactory to us, from which we quote at some length. “The plaintiff knew when it sent' the note to its agent that if the makers were in funds it would be paid by charging it to their account. Thus the subsequent transaction is to be viewed as though it had occurred directly between the plaintiff and the defendants, the latter being depositors of the former. What would constitute, payment between the immediate parties should equally constitute payment though an agent for one intervened. The case in brief is this: A bank, the holder of a note, or the agent of the holder .to collect, has funds in its hands upon which the makers are entitled to draw; after the note is due it is directed to charge the note against that credit, and says it will do so. All that is necessary to constitute payment is the intention to make the application, which may be evidenced in a variety of ways, e. g., by bookkeeping entries, by canceling the note and surrendering it to the makers, by the drawing of a check by the makers and its acceptance in payment by the bank. It must be borne in mind that the plaintiff selected an agent to collect, knowing that in the usual course of business payment would be made by a mere transfer of credits. If the makers had actually gone to the bank and passed the necessary currency over its counter to pay the note, with a direction thus to apply it,, that would plainly have constituted payment. (Smith v. Essex County Bank, 22 Barb. (N. Y.), 627.) If they had sent a check drawn on the bank to pay the note, the acceptance of it would have been per se an appropriation of the funds of the drawer, or, to be accurate, of the funds subject to the drawer’s order, to the payment of the note. Oddie v. National City Bank, 45 N. Y., 735; 6 Am. R., 160; Commercial Bank v. Union Bank, 11 N. Y., 203; Pratt v. Foote, 9 N. Y., 463. The verbal order, with the statement of the president of the bank that it would be acted upon, was the equivalent in legal effect of -a written order and its acceptance. It is to be noted that in the second of the cases just cited the bank to which payment was made was an agent to collect. That mere bookkeeping entries, or even the cancellation and surrender of the paper, is but evidence of and does not constitute payment is established by the cases holding that where payment is made by a draft or check which is not paid, the paper can be reclaimed and an action maintained upon it. See Burkhalter v. Erie Second Nat. Bank, 42 N. Y., 538, and cases cited. The converse must be true, that payment may be made without that particular evidence of it. . . . In considering the cases on the question of payment, it is essential to keep in mind the precise relation of the parties. The agency of the Watkins bank is the vital fact in this case. If it in fact *415 accepted an appropriation, of tbe maker’s credit witb it in payment of the note, that should constitute payment in view of the fact that the plaintiff in sending the note to it for collection must have expected that payment would be made in exactly that way. That risk at least is taken in appointing a bank, where a note is payable, agent to collect it. It is not important how the bank evidenced its acceptance of the maker’s verbal order, or whether it did anything- to remit the proceeds to its principal. . . . The act and the evidence of it must not be confused. The act in this case was the acceptance of the maker’s verbal order to charge the note to their account. Making the bookkeeping entries would merely have created evidence of that act. When that verbal order was accepted the maker’s credit was irrevocably appropriated pro tanto to the payment of the note precisely as though a written order in the form of a check had been presented and accepted. . . . Thereafter it was of no concern to the defendants what bookkeeping entries were made by the plaintiff’s agent or whether it remitted the proceeds of the note.” Bank v. Smith, 215 N. Y., 76; 7 C. J., 627; Shafer v. Olson, 43 L. R. A. (N. S.), 762. As was said in 3 R. C. L., 641, referring to the right of a collecting bank to receive a check on itself as a payment, the defendant should not have been required “to go through the idle ceremony of withdrawing the money from the bank and paying it back to the bank.” The defense of the defendant in this action is stronger than in the New York case because here the defendant gave a written order to charge to his account, and while this order was held by the bank, he paid in money more than the amount of the note to- the bank. No error.