Nolan v. Bank of New York National Banking Ass'n

By the Court, Brady, J. The view adopted on the trial of this action seems to have been, that the check in judgment of law was dishonored at the time of its transfer to the plaintiff, and therefore subject to all the equities existing in favor of the owners at the time it was stolen. The check is dated 21st of Jan. 1865, drawn by M. Morgan’s Sons, payable to their own order and indorsed by them. It was, on or about that date, accepted by the defendants and not only certified to be good, but registered. On the 4th of February, 1865, it was in the — 31 — possession of the firm of Meyer & Greve of this city, and on that day stolen from their book-keeper. It appears that notice of the theft was given to the defendants, or the payment of it stopped, on the same day, and that nothing further was heard of it by Meyer & Greve until May or June of 1868. The circumstances disclosed seem to establish that the check was designed for circulation, and not for immediate payment by the defendants. It was in the hands of Meyer & Greve as late as the 4th of February, but it does not appear in what manner they obtained it. Whether it was passed to them by the drawers or reached them through a line of holders does not appear. The plaintiff gave value for it, and took it in a legitimate manner. Regarding it as worth its face and desirous of investing her money, she made the only inquiries which she was called upon to make, before accepting it. If the signatures to the check and certificate were genuine, she was not bound by anything appearing upon the face of it, to exercise any other caution, vigilance or diligence, so far as the defendants were concerned. They had appropriated the funds to pay the check. It was in fact paid by the drawers because the certificate and registry was not only a debit against their account and a withdrawal of its amount from their funds, but an appropriation of such sum for the holder, whoever he might be. The check was honored, therefore, because it was accepted, and so far as the drawers were concerned, was by such acceptance paid. If the holder after acceptance and certification delayed presentation for payment, it was to his prejudice only. He might lose the interest which he could have made by proper investment, but whether he thought such a result judicious or not, was a matter resting entirely within his own power or discretion. The proposition, therefore, that from the delay in presenting it for payment, it might be deemed dishonored like a promissory note payable on demand is utterly untena — 32 — ble. The answer to it is that the check was not dishonored ; on the contrary it was paid by the drawers by an absolute appropriation of their funds to meet it, which the defendants held for the transferee, whoever he might be. No element of this kind marks the circulation or transfer of the promissory note which has not been paid, and for which no fund has been specially created. We were not referred to any case maintaining the proposition stated, and none has beefi. found. The certificate “imports that the drawer has funds or means convertible into funds, in the hands of the drawee, at the time, which shall be retained and devoted to the payment of the paper on presentation. If it does not mean this it is a sham and a snare.” Brown, J., in Farm. and Mech. Bank v. B. and Drov. Bank (28 N. Y. Rep., 428,) says: “Unless the word good, as said in Massey v. The Eagle Bank, (9 Metcalf, 309,) carries with it a binding evidence of the fact that the money is in the bank to meet that particular check, and that it will be paid to bearer at any time when presented, it is of no practical utility.” “Checks drawn upon banks or bankers thus marked and certified enter largely into the commercial and financial transactions of the country. They pass from hand to hand in the payment of debts, the purchase of property, and in the transfer of balances from one bank to another. In the great commercial centres they make up no inconsiderable portion of the circulation, and thus perform a useful, valuable, nay, an almost indispensable office.” These are views also expressed by Brown, J., in the case (28 N. Y.) above cited, and are utterly inconsistent with the proposition that checks may not at any time during the running of the statute of limitations be employed in the manner indicated. Chief Justice Denio (14 N. Y. Rep., 624,) said: “The object of a dealer, in procuring his check to be certified, is to enable him to obtain credit with others who might not be willing to — 33 — trust to his personal representations of the existence of funds to meet the draft, or his assurance that he would not withdraw them to the-prejudice of the holder. This effect belonging to certified checks enables them to be extensively used in payments and settlements at the place where they are drawn and, to a more limited extent, as remittances to other places.” The character thus assigned these instruments, makes them in effect a circulating medium capable of being passed from hand to hand by delivery and chiefly upon the credit of the bank as primary liable. And hence lies the difference between them and inland bills of exchange which, for the purpose of charging the various parties, they are considered to resemble. The object of certifying the check is to give it currency—is to induce third persons to accept it freely as they would bills of the bank; and hence it does not lie with the bank to assert that though the bill was good on the day it was certified, it has since become worthless by the withdrawal of the drawer’s funds. Unless the certificate be treated as a compact or agreement that the check shall be paid, it fails to answer the purpose for which it is sought and given. (Edwards on Prom. Notes and Bills, 406, 407.) “The sole and manifest object of the maker or holder of a check, in requiring it to be certified, is to enable him to use it as money.” (Per Oakley, J., in Willetts v. The Phoenix Bank, 2 Duer, 121;) and again he said: “The certificate is a useless form unless it means, not .merely that the check was good when certified, but that it will be good when presented for payment. * * - The obligation of the bank is simple and unconditional, to pay upon demand, and in all such cases the demand may be made whenever it suits the convenience of the party entitled to the stipulated payment.” The certificate is to be regarded as an acceptance payable on demand, and was obligatory until paid or the statute of limitation should attach as a bar. (Mead v. Merchants' Bank of — 34 — Albany, 25 N. Y., 150. 16 N. Y. Rep., 128, per Wright and Selden, Justices.) The effect of those cases is, that the bank becomes the party dealing with the holder, being primarily liable; and if the bank has no valid defence the holder must recover. The question of equities between any of the prior parties cannot intervene against a bona fide holder for value. He deals upon the paper alone, looking to the bank as the primary, and, in most instances, the only reliable debtor. It is the financial character of acceptor that enters into the purchase or acceptance of the check, and its assumed ability to pay, which does not exist with reference to individuals. The result is, in regard to this case, that the learned justice erred in deciding that the plaintiff was not entitled to recover because the check was in judgment of law dishonored. An acceptor is not discharged by the bill not being presented for payment for three or four-years after it becomes due; he is only discharged by payment of the bill, or by a distinct and direct agreement by the holder to discharge' him. (Farquhar v. Southey, 2 Carr. & P., 497. Dingwall v. Dunster, Doug., 247. Story on Bills, § 252.) The acceptor of a bill or note always remains liable. The acceptance is proof of his having assets in his hands, and he ought never to part with them unless he is sure that the bill has been paid by the drawee. He may, however, be relieved by the statute of limitations, as already suggested. As between the holder and the bank, the acceptance renders the latter the primary debtor, and the cases relating to the duty to demand payment in a reasonable time become inapplicable. These cases govern the relation between the holder and drawer. (Little v. Phenix Bank, 2 Hill, 429. Willetts v. The Phenix Bank, supra. Farm. and Mech. Bank of Kent v. B. and Drov. Bank, 4 Duer, 219.) The check having been stolen, it became the duty of — 35 — the plaintiff to establish that she was a bona fide holder for value, and upon that question she asked to go to the jury, which was denied. There was evidence on that subject which was independent of that of the witness Crane, and that of the plaintiff, which was stricken out; and the refusal to submit the question was in accordance, no doubt, with the view entertained by the learned justice and already suggested—that the check was overdue and taken subject to existing equities. For these reasons the plaintiff was prejudiced, and a new trial should be granted. [First Department, General Term at New York, November, 1873. Ordered accordingly. Ingraham and Dams, Justices.]