147 N.Y. 184 | NY | 1895
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *186
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *187 We ought to affirm this judgment upon a single ground, which rests upon facts not at all controverted or in dispute. For that purpose we may assume, as true, the plaintiff's version of what actually occurred, without criticism at doubtful points of the way. She was the owner of a certificate of stock of the Adams Express Company, of the par *190 value of fifteen thousand dollars. That certificate, in a negotiable form and capable of transfer by delivery, she intrusted to the temporary custody of Mills, Robeson Smith. Her son and agent, E.S. Sanford, placed it in a sealed envelope, marking it on the outside with his name, and left it with the firm to be placed in their safe until the following Monday. On the day of that deposit, the firm, acting through Smith, borrowed of Ferris Kimball the sum of twenty thousand dollars, giving the note of the partnership therefor, and depositing as collateral the certificate which the plaintiff had committed to the care of the firm, and which Smith converted to its use. We may admit that his act was, in substance, a larceny, and the certificate in his hands stolen property, but, nevertheless, the title of Ferris Kimball to the pledged certificate which they sold upon default in the payment of the loan, and to the proceeds of such sale, is not here and now questioned or assailed. The plaintiff's certificate was but a part of the collateral which stood as security for the note. It is found that eight shares of Chicago, Cincinnati, Cleveland and St. Louis preferred stock, raised by a forgery to eighty shares, and two Union Pacific first mortgage bonds of one thousand dollars each, also formed part of the collateral. The lenders gave their check for the twenty thousand dollars thus borrowed to Mills, Robeson Smith, and they indorsed it and deposited it to their own credit in the Fourth National Bank. That bank held the deposit upon an express contract with its customer, which gave to it rights beyond those flowing from the ordinary relation, and outside of the mere banker's lien. The deposit was made on the afternoon of November 14th, 1890. Previous to that date Mills, Robeson Smith had borrowed of the bank, first the sum of fifty thousand dollars, and next the sum of five thousand dollars, giving in each case their note, payable on demand, and certain collateral securities. The special agreement between the parties added to such collateral any balance of the customer's deposit accounts standing to their credit on the books of the bank, and contained the following *191 explicit provision: "The undersigned do hereby authorize and empower the said bank at its option, at any time, to appropriate and apply to the payment of the above-named obligations or 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 obligations or liabilities are then due or not due." On November 15, 1890, the balance standing to the credit of the firm was a little more than sixteen thousand dollars. On that day Mills, Robeson Smith failed and made a general assignment. On November 17th, which was the next business day thereafter, the bank demanded payment of the loan, and in default thereof applied the credit balance of the firm to the payment of its debt, thereby so far canceling and extinguishing that liability. This act the plaintiff resists, contending that the sixteen thousand dollars was her money as proceeds of her stock stolen from her by Smith, and which proceeds she was able to trace into the thief's deposit account and sufficiently identify as her own money. There is more or less of difficulty in that identification, and the subject has occasioned a large part of the argument addressed to us, but need not now be discussed. For the purposes of the decision, at least until we reach the case of Mrs. Crabb, we may concede that the credit balance was proceeds of the stolen stock and sufficiently identified, and yet the opinion of the General Term will remain intact and unanswered.
If Mills, Robeson Smith, on receiving the check of Ferris
Kimball, had at once collected it and turned it into money, and then had paid that money to the bank in discharge of their debt to it, and the bank had accepted that payment in ignorance of the source from which the money had been derived, and had surrendered the notes and discharged their debtors' liability in entire good faith, the owner of the stolen money would have had no right of recovery against the bank. (Justh v. Bank,
The recent case of American Sugar Refining Co. v. Fancher
(
Nor does the case of Van Alen v. American Nat. Bank
(
The rule we have applied is further resisted upon the ground that the application of the credit balance was made after the debtor's failure and assignment, and with knowledge of that fact on the part of the bank. The inference sought to be drawn is that the payment was not in good faith, but under circumstances sufficient at least to put the bank on inquiry. But business embarrassment or a general assignment does not warrant or suggest a presumption of fraud; and certainly not of a theft producing moneys on deposit. The fact of the failure undoubtedly led to a call of the loan and a resort to the contract right. It was just such an emergency that the agreement *194 was framed to meet and against which it was to serve as a protection. The fact of the failure had not the least tendency to indicate that the deposit balance was the product of a larceny.
The further question in the case is over the right of Mrs. Crabb, which has been sustained. After the failure the whole credit balance of Mills, Robeson and Smith was first applied to the debt due to the bank. It was not enough to pay that debt. When it was wholly exhausted, so that no surplus was left, there still remained a sum due to the bank. Thereupon it resorted to its collateral, as it had a right to do. Among the securities pledged by the debtor firm were some belonging to Mrs. Crabb, which she had deposited for safe-keeping, and which Smith had appropriated for collateral. To these pledged securities the bank resorted, and sold most of them after the failure and after the credit balance had been fully exhausted. The result of that sale produced a surplus after completed payment of the bank's debt. The proceeds were credited by the bank after payment of their debt in full to the deposit account, and that surplus has been awarded to Mrs. Crabb. Obviously, no part of it could be said to be proceeds of plaintiff's stock. Those proceeds had been previously applied in payment of the bank debt and utterly exhausted. What remained was the collateral, and that produced the surplus, and such surplus was clearly the product of Mrs. Crabb's bonds, together with what is conceded to have been Fay's.
The judgment should be affirmed, with costs.
All concur.
Judgment affirmed. *195