92 N.Y.S. 666 | N.Y. App. Div. | 1905
The complaint avers that upon the 11th day of August, 1900, at the city of Detroit, in the state of Michigan, for value received, the firm of J. F. Hasty & Sons made their draft or bill of exchange, dated on that day, whereby they directed the defendants to pay to the order of A. Ives & Sons, 60 days after the date of said draft, the sum of $1,500, and to charge the same to the account of J. F. Hasty & Sons; that thereafter the said firm of A. Ives & Sons, for value received, indorsed the draft and delivered it to the plaintiff, who then became, and now is, the lawful owner and holder thereof; that the said draft was duly presented to the defendants herein for acceptance, and the defendants duly accepted the same by writing across the face thereof the following: “Accepted—payable at the New York Produce Exchange Bank—$1,-500.00—Due Oct. 10th, 1900—Fifteen hundred dollars—No. 15”— .and signed said acceptance in their firm name of Waydell & Co.; that on the 10th day of October, 1900, the day the said draft became due, it was duly presented for payment, and payment was refused, whereupon the same was duly protested for nonpayment, all of which presentment, demand, refusal, nonpayment, and protest the defendant had due notice. The complaint demanded judgment for the face of the draft, together with interest and protest fees. The defendants, by way of an affirmative defense, averred that the said dVaft was delivered to Ives & Sons for the purpose of collection only, and that Ives & Sons delivered it to the plaintiffs without value, and solely for the purpose of collecting the same; that the plaintiffs never became the owners and holders thereof; and that the plaintiffs were also notified before said draft became payable that Ives & Sons never were the owners and holders thereof, and that they held the said draft solely as agents of J. F. Hasty & Sons for the purpose of collection. Upon the trial it was conceded by the defendants that they accepted payment of the draft; that it was presented for payment at the place where payment was due, and
“Hereby give to the" said bank a lien for the amount of all the liability aforesaid, upon all the property or securities at any time given unto or left in the-possession of the said bank by the undersigned, and also upon any balance of the deposit account of the undersigned with the said bank. * * * The-undersigned do hereby further authorize the said bank at its option, at any time, to appropriate and apply to the payment of any of the said liabilities, whether now existing or hereafter contracted, any and all moneys now or hereafter in the hands of the said bank on deposit, or otherwise, to the credit of or belonging to the undersigned, whether the said liabilities are then due- or not due.”
Upon the 4th day of September, 1900, Ives & Sons had a credit, balance in the plaintiff bank of $1,767.75. The bank on that day-credited the collateral note account with the sum of $2,500, and charged the deposit account with the same sum; thereby reducing" the collateral note account to $5,000, and creating an overdraft in-the deposit account of $732.25. The amount of this overdraft was-increased thereafter,.and on said September 10, 1900, when Ives &. Sons went into bankruptcy, it amounted to $1,796.10. The credit upon the collateral note and the charge to the deposit account were-made without any direction from Ives & Sons. Before the draft became due, but after the bankruptcy of Ives & Sons, Hasty & Sons- and Ives & Sons notified the plaintiff of the true state of affairs concerning the draft—that it was delivered to Ives & Sons by Hasty &. Sons for collection, and Ives & Sons demanded that the bank immediately return the draft to them. Compliance with this demand by the bank was refused; it claiming that, under its agreement with Ives & Sons, it had a right to hold and to appropriate the proceeds-of the draft in extinguishment of its claim against Ives & Sons. By this action it is sought to enforce by legal remedy the claim thus-asserted.
We deem it to be settled law that the legal effect of the transaction between Ives & Sons and the plaintiff was to make the latter the agent of the former for the purpose of the collection of this-draft. The notice which accompanied the draft established beyond question the authority and right under which the bank held the.
“Where persons in the business of banking and collecting send to their correspondents or agents, in the regular course of business of receiving and sending notes between them for collection for mutual account, business paper received from customers for collection, the agent or correspondent acquires no better title to it or to its proceeds than was owned by the one transmitting it, unless there is a bona fide purchase of it for value, or advances made upon it in good faith, without notice of any defect in the title.”
This rule is precise in its application to this case. Ives & Sons were not holders of the draft for value, but were mere agents for its collection. It was received by the bank, accompanied by a notice of the character of the title of Ives & Sons; and the bank, in express terms, was directed to collect and credit it. The bank’s title was not higher than the title of Ives & Sons, and of such title the bank had notice, as matter of fact, in consequence of which its rights and obligations were measured by the title which it acquired. The rule announced in the Dickerson Case was reiterated and applied in Bank of Clarke Co. v. Gilman, 81 Hun, 486, 30 N. Y. Supp. 1111, by the General Term of this court, and the decision therein was affirmed by the Court of Appeals (152 N. Y. 634, 46 N. E. 1145) on the opinion below. That was an action brought to recover the proceeds of a check drawn upon, the National Bank of the Republic of New York City by the plaintiff bank, located at Berryville in the state of Virginia. It was indorsed: “For collection and credit of Bank of Clarke County. J. R. Nunn, Cashier.” It was sent by the plaintiff to J. J. Nicholson & Sons, bankers, at Baltimore, without any special instruction or any previous agreement varying the legal effect of the indorsement. The latter indorsed it, “Collect for J. J. Nicholson & Sons,” and sent it to the defendant Gilman. The latter, instead of presenting it for payment when received to the National Bank of the Republic, deposited it in the Manhattan Company, and added the indorsement, “For deposit in the Manhattan Company to the credit of Gilman, Son & Co.” The next day the Manhattan Company presented the check to the National Bank of the Republic. It was paid and charged to the account of the maker on January 15th. On January 14th J. J. Nicholson & Sons failed, and notice of the failure came to the defendant some time during the day. The plaintiff claimed to recover the proceeds of the check. The claim was upheld and a recovery permitted upon the ground that Gilman, Son & Co. obtained no title to the check or its proceeds ; that the indorsement upon the check was notice to all agents dealing with it of the purpose to be accomplished by it, to wit, the collection of the check, and the remittance of the proceeds to the plaintiff; that the defendant was not entitled to credit the proceeds
It is claimed, however, by the appellant that two cases in the Court of Appeals announce a different doctrine. The first is Hutchinson v. Manhattan Company, 150 N. Y. 250, 44 N. E. 775. Therein a draft was drawn by the Interstate Mortgage Trust Company of Greenfield, Mass., on the Packard National Bank, of the same place, payable to the order of G. H. Kaulback. This draft was deposited with Patton & Co., a firm of brokers in the city of New York. When deposited, it was indorsed: “Pay to the order of L. B. Hutchinson. G. H. ICaulback.” Also: “Pay W. L. Patton & Co., or order. L. B. Hutchinson.” Patton & Co. deposited the draft with the Manhattan Company, adding the indorsement: “For deposit to the credit of W. L. Patton & Co.” In fact, the draft was delivered by Hutchinson to Patton & Co. for collection only. At the time of the deposit of the draft by the latter with the Manhattan Company, it had no notice that Patton & Co. had received the same for collection, nor did it have any other notice than such as the indorsement thereon conveyed. The defendant bank forwarded the draft on May 4th to Massachusetts for collection. It was collected on the 5th day of May, and the proceeds remitted to the defendant bank, which received it on the next day. On the 5th of May, Patton & Co., being insolvent, made a general assignment for the benefit of their creditors, and filed it in the office of the clerk of the city and county of New York at 3:16 o’clock of that afternoon. Patton & Co. were indebted to the defendant bank upon two promissory notes, and the bank, by virtue of a contract in all respects similar to the one held by the plaintiff in this case, acquired a lien upon all of the securities or money in its hands for the payment of such promissory notes. Hutchinson, who delivered the draft to Patton & Co., sought to recover its proceeds. His claim was defeated upon the ground that, when the money was collected in. Massachusetts, it was received for and on account of the defendant bank, and that, as such collection was made prior to the assignment by Patton & Co., the bank was authorized to receive and apply the money upon its indebtedness; that Hutchinson having indorsed the draft gen
The judgment should therefore be affirmed, with costs. All concur.