Davenport v. Palmer

Hirschberg, J.: The action is in equity for the cancellation of a satisfaction piece and for the consequent foreclosure of the real estate mort [762] gage which was satisfied thereby. The defendant Mary Ann Elizabeth Palmer was the owner of certain real estate in the borough of Brooklyn upon which were two mortgages, the first for $2,200, held by one Lillian B. Barton, and the. second for $1,500, held by the defendant John Officer. About the time that the Barton mortgage became due the defendant Palmer entered into an agreement with the defendant Mary J. Mayne for the loan of $4,000, to be used in paying said two mortgages and to be secured by a bond and a mortgage on the premises in question. The defendant Mayne gave the $4,000 to one George W. Dalton and instructed him to pay the mortgages on the Palmer property. Dalton placed the $4,000 in his trustee account in the Union Bank of Brooklyn and a mortgage for $4,000, covering the property in question, was executed by the defendant Palmer to the defendant Mayne. Thereafter Dalton went to the plaintiff, who was acting as attorney for the mortgagee Barton, and asked the plaintiff if he desired payment of the mortgage in cash or by a certified check. The plaintiff said that a certified check would do. Thereafter Dalton tendered the plaintiff a certified check for the amount due, payable to the order of Lillian B, Barton and drawn on the Union Bank of Brooklyn. The plaintiff objected to that check on the ground that he desired the check payable to his order so that he could obtain his fees. Whereupon Dalton made the check payable to the plaintiff’s order as well as to Lillian B. Barton by interlining the plaintiff’s name in the body of the check and had the change noted on the books of the Union Bank, after which he gave the check to the plaintiff and received a satisfaction of the Barton bond and mortgage. The plaintiff deposited the check with the Kings County Trust Company within ten minutes of its receipt by him. The Union Bank of Brooklyn closed the following day, and the check was dishonored when presented for payment. The plaintiff brought this action as the assignee of Lillian B. Barton to obtain a judgment canceling the satisfaction piece and foreclosing the Barton mortgage. The learned Special Term dismissed the ■ complaint on the merits, on the ground that the addition of the plaintiff’s name, as payee,, in the check and the certification of the check, having been done [763] pursuant to the plaintiff’s request, released the drawer from liability and operated as a payment of the mortgage. The judgment appealed from also determines certain other matters, such as the validity of the Mayne mortgage for $4,000 and the priority of the various mortgages on the property in question, but those matters are dependent upon the soundness of the determination that the certified check was a payment of the Barton mortgage. I think the learned Special Term erred in holding that there was a final payment of the Barton mortgage so far as to preclude a court of equity from restoring it under the circumstances. It is well settled, of course, that if the holder or payee of a check procures the certification of the same by the drawee bank, the drawer of the check is released from further liability thereon. The contract between the maker and the payee of the check is that the latter shall he entitled to payment upon presentation of the check to the bank upon which it is drawn, and not that the payee may accept the bank’s certification in lieu of immediate payment. When the payee, instead of insisting upon immediate payment, causes the check to be certified he in effect causes the funds to be withdrawn from the control of the maker and leaves them with the bank for his own accommodation. Such certification operates substantially as a certificate of deposit in favor of the payee, and the law treats his act in obtaining it as a discharge of the drawer. (First Nat. Bank of Jersey City v. Leach, 52 N. Y. 350; Dunn v. Whalen, 120 App. Div. 729; Neg. Inst. Law [Consol. Laws, chap. 38; Laws of 1909, chap. 43], § 324.) Where, however, the drawer causes the check to be certified before delivery, the same reason does not exist for holding him discharged from liability. The certification under such circumstances merely operates as an assurance that the check is genuine, and the certifying bank becomes bound with the drawer. (First Nat. Bank of Jersey City v. Leach, supra, 350; Minot v. Buss, 156 Mass. 458; Born v. First Nat. Bank of Indianapolis, 123 Ind. 78; Oyster & Fish Co. v. Bank, 51 Ohio St. 106; Andrews v. German Nat. Bank, 9 Heisk. 211; Bickford v. First Nat. Bank of Chicago, 42 111. 238; Brown v. Leckie, 43 id. 497.) [764] In the case at bar the check was certified prior to its delivery to the plaintiff. I see no reason in principle why the plaintiff’s consent to accept a certified check and his request that the certified check offered be changed so as to include his name as payee should operate to change the rule that certification prior to delivery does not release the drawer. Dalton’s testimony regarding what was said between him and the plaintiff is given in these words: “I said, HoW do you want' the money ? Do you want it in cash or a certified check ? ’ He said, ‘ A certified check Will do. ’” That was neither a binding tender of cash on behalf of the mortgagee, nor a refusal to accept the same had it been offered. It merely showed that the plaintiff was willing to take a certified check, and he cannot be presumed to have intended that the acceptance of such a check, certified prior to delivery, should change the usual obligations of the drawer. The subsequent addition of the plaintiff’s name as one of the payees in the check before its delivery necessitated only an annotation in the books of the drawee bank, which was made prior to the delivery of the check and could not in any Way lessen the drawer’s obligation on the check. There is no finding that the plaintiff ever refused a tender of cash or insisted upon a certified check instead of legal tender. His testimony is to the effect that he wanted either cash or a certified check to his order, and the testimony of Dalton does not establish an actual tender of cash or a statement by the plaintiff that - the same would have been refused if tendered. It is unnecessary, therefore, to consider or to determine what effect, if any, such a tender or refusal might have had upon the relative rights of the parties. In Randolph Nat. Bank v. Hornblower (160 Mass. 401) it was held that the certification of a check by the drawer prior to delivery, even although made at the request of the payee, does not release the drawer; and such is, I think, the proper rule. Ho case to the contrary has been cited or found. Certainly the reasons for releasing the drawer from liability when the check has been certified by the holder after delivery do not exist in such a case. The purpose of requesting the drawer to have the check certified before delivery is generally that the bank may be made liable thereon as well as the drawer, thereby [765] enabling the payee to more readily negotiate the check. A request by the payee for such a certification should not, therefore, be deemed an election to take the certified check in payment of the debt. It follows that the judgment appealed from should be reversed and a new trial granted. Jenks, P. J., and Woodward, J., concurred; Burr, J., read for affirmance, with whom Rich, J., concurred.