Great Atlantic & Pacific Tea Co. v. Hood

OlaeksoN, J. The question involved is succinctly set forth in the 4th paragraph of the complaint, as f.ollows: “That on Saturday, 12 September, 1931, the plaintiff (through its local manager) at Beaufort, North Carolina, purchased over the counter from the Bank of Beaufort *316 a cheek on the Hanover Bank of New York in the sum of $330.00 and on Monday, 14 September, 1931, it purchased a similar check in the sum of $254.58, and that on each occasion the cash was paid to the Bank of Beaufort for said checks. That the Bank of Beaufort closed its doors on Tuesday, 15 September, 1931, and the two- checks aforesaid on the Hanover Bank of New York were turned down by said bank.” In the distribution of the assets of the insolvent bank, is this a preference? We think not. The statutory order of preference in distribution of the assets of an insolvent bank, is as follows: “The following shall be the order and preference in the distribution of the assets of any bank liquidation hereunder: (1) Taxes and fees due the Commissioner of Banks for examination or other services; (2) wages and salaries due officers and employees of the bank, for a period of not more than four months; (3) expenses of liquidation; (4) certified checks and cashier’s checks in the hands of third party as a holder for value and amounts due on collections made and unremitted for or for which final actual payment has not been made by the bank; (5) amounts due creditors other than stockholders,” etc. N. C. Code of 1931 (Michie), section 218(c), part subsec. (14). It will be observed that the complaint does not allege that the check was a “certified check” or “cashier’s check in the hands of third party as a holder for value” or “amounts due on collections,” etc., as contemplated by the statute. The transaction is that of debtor and creditor. If it were otherwise in every transaction involving the relationship of debtor and creditor, near to a bank’s going into- liquidation on account of insolvency, it would be claimed a preference — thus destroying the well recognized maxim that “equality is equity.” Citing a wealth of authorities (where there is no statute), the principle is thus stated in Standard Oil Co. v. Veigel (Minn.), 219 N. W., p. 863 (864) : “It is well settled that the purchase of a bank draft, a cashier’s check or a certified check creates the relation of debtor and creditor between the bank and the purchaser, and that the purchaser is not entitled to a preference over other general creditors of the bank from which it was purchased.” The matter is exhaustively discussed in Harrison, receiver, v. Wright, 100 Ind., 516, the headnote is as follows: “When properly filled out with the date, amount, the names of drawer and payee, the following is a banker’s check: . . . ‘Indianapolis, Ind., ., 1883. No. Pay to the order of., . dollars. , cashier. To the United States National Bank, New York.’ . . . Such a check, drawn upon the drawers’ bank, without words of transfer, *317 and drawn upon no particular designated fund, does not, of itself, either as between the drawer and drawee, or drawer and payee or holder of the check, operate as an appropriation or equitable assignment of a fund in the hands of the drawee. Nor does it operate as an assignment of a part of the drawee’s chose in action against the drawee; and hence the holder of such a check is not entitled to a preference as against the depositors and general creditors of an insolvent drawer.” At pp. 543-544 it is said: “Some of the checks were purchased with cash by persons who were not depositors with the bank; others by depositors giving their cheeks. The court below held that the checks purchased with cash should, for that reason, be paid in full, and that the other checks should share pro rata with the other debts. We can see no substantial reason for such a preference. If the depositors had withdrawn the amount from the bank, and with this purchased the checks, it might well be said that they purchased them with cash. Whether the checks were paid for in cash or by the checks, the bank in each case received the amount of them. . . . There is nothing in the case to create a superior equity in favor of the check-holders as against the depositors and other creditors. No fraud is charged or shown whereby the payees were induced to part with their money for the checks. They were purchased in the usual course of business. The assets of the bank will not pay its debts in full. The depositors deposited their money, relying upon the credit of the bank, that the amounts would be repaid to them when called for. The payees purchased the checks, relying upon the credit of the bank, that the amounts paid for them would be refunded if, for any cause, the checks should not be paid by the drawees. It is a case where equality among the creditors is equity.” Williams v. Hood, Comr., 204 N. C., 140; In re Bank of Pender, 204 N. C., 143; Board of Education v. Hood, Comr., 204 N. C., 353; Bassett v. West Haven Bk. & Tr. Co. (Conn.), 165 Atl., 895. The allegations in section 5 of the complaint is a conclusion of law'. The demurrer to the plaintiff’s pleading admits plaintiff’s allegations of fact, but not inference or conclusions of law. Phifer v. Berry, 202 N. C., 388. There seems to be a conflict of law in the different jurisdictions on the question involved in this action, but we believe the majority opinion is in conformity with the view we take. For the reasons given, the judgment in the court below is Eeversed.