Gansevoort Bank v. Empire State Surety Co.

Houghton, J.: One Randolph M. Newman applied to the plaintiff for the discount of his note for $5,000, and the plaintiff demanding additional security this defendant executed an undertaking conditioned that if such discount was made it would pay such part of the indebtedness as Newman failed to discharge. Newman presented his note with the defendant’s undertaking to plaintiff, and the $5,000, less the discount, was placed to his credit. Immediately upon this being done, the plaintiff insisted that Newman give to it his check for $1,500, in order to insure a balance of that amount remaining on deposit , with it. Newman protested [332] against this, saying he wished to draw upon the whole amount; but plaintiff insisted that he should not, and certified his check, thus preventing him from drawing against his discount beyond $3,500. In addition to this action on the part of plaintiff, Newman was told he must draw his check to the plaintiff’s attorney for a comparatively large siim for services in supervising the loan. The note not having been paid, plaintiff credits' the $1,500 and brings action against the defendant for the balance. The defendant interposed the defense that by its undertaking it was agreed that Newman should have a discount of $5,000 available for .his use, and that by the act of plaintiff he was only permitted to have a discount of $3,500, and hence there was a variance of the .terms of guaranty which released defendant from, its bond. It is true that the discounting of the note and the demanding - and certifying of the check for $1,500 was all done at practically the same time. Nevertheless the plaintiff did discount Newman’s note for $5,000, and opened an account with him and credited that amount to him, less the discount of the note. Having this amount to his credit in plaintiff’s bank, plaintiff demanded that the $1,500 check be given. Although protesting that it was wrong, still Newman voluntarily gave it, as Well as the check to plaintiff’s attorney. So far as the legal aspect is concerned, Newman’s note for $5,000 was discounted and all of the money put to his credit. That he at the-same time, or subsequently, voluntarily chose to draw checks, against it in favor of plaintiff or anybody else, in our view, does not change the legal liability of the defendant. The situation discloses some quite extraordinary banking operations on the part of plaintiff, but we find nothing which releases the defendant from its legal obligation. It follows, therefore, that the judgment in favor of plaintiff must be affirmed. McLaughlin, Scott and Lambert, JJ., concurred; Patterson, P. J., dissented.