National Park Bank v. Seaboard Bank , 7 N.Y. St. Rep. 406 ( 1887 )

Van Brunt, P. J.:

The ground upon which the learned justice founded his judgment was that the plaintiff could not recover from the defendant because the latter held the draft merely for collection and as agents of the Eldred Bank, and had paid over the proceeds to the Eldred Bank, before it, the defendant, had received any notice of the alteration. There is no claim that there was any neglect upon the part of either the plaintiff or the defendant in relation to the payment and collection of this draft.

The two questions, then, which are presented upon this appeal are, first, whether the learned court was correct in holding that the defendant was merely the agent of the Eldred Bank, and secondly, whether it paid over to the Eldred Bank the proceeds collected upon the draft, and was thus absolved from liability. There would seem to be no question as to the first proposition were it not for the fact that the defendant, upon the receipt of the draft, before its collection, had credited the same to the Eldred Bank in the account current between the two banks. If the defendant had kept this draft, collected it and remitted the identical proceeds to the Eldred Bank, then it is admitted, in view of the nature of the indorsement, that the defendant would be simply the agent for collection of the Eldred Bank.

The case of Dickerson v. Wason (47 N. Y., 439) seems to set at rest the proposition that the mere giving of credit in account, or even remitting in anticipation of collection changes the relations between the party remitting paper and the party receiving paper for collection. In that case paper had been deposited by the plaintiff with the firm of Van Saun & Son, in New York city, for collection ; Van Safin & Son sent the paper in a letter to the defendants stating : “ Inclosed we hand you for collection * * * and when paid remit proceeds in draft on New York, etc. Protest if not paid.” The note in question was indorsed by Yan Saun & Son as follows : “ Pay Wason Everett & Co. or order for collection.”

It was received by the defendants July twenty-fourth and collected at maturity, August twenty-seventh, on which day defendants heard that Yan Saun & Son had stopped payment. In anticipation of the collection of the note in question, the defendants had remitted various sums of money to Yan Saun & Son, prior to their failure. These remittances were made as a general remittance on account current. The plaintiffs, thereupon, commenced an action to recover from Wason Everett & Co. the amount collected upon this note. It was held that the plaintiffs never had, in fact, parted with the ownership of the note to Yan Saun & Son, and that as the defendants had not remitted the money after the collection of the note, the plaintiffs were entitled to recover the same as their property. Applying the case cited to the case at bar, it would, therefore, appear that the defendant acquired no title or property in the check or draft in question or in the proceeds of such draft after its collection, but that the same was the property of the Eldred Bank and could have been recovered from the Seaboard Bank had the same become insolvent immediately after its collection.

The next question to be considered is, whether, under these circumstances, the payment over of the money to the Eldred Bank discharged the defendant from all claim or liability to the plaintiff. This question is not entirely free from doubt. The eases of Butler v. Harrison (1 Cowp., 566); Mowatt v. McClelan (1 Wend., 174); LaFarge v. Kneeland (7 Cow., 460), and Herrick v. Gallagher (60 Barb., 566), seem to sustain the principle that if money be mispaid to an agent expressly for the use of his principal, and the agent has paid it over, he is not liable in- an-action by the person who mispaid it,'but the remedy is'against the principal. And this rule seems to be recognized in the case of the National Bank of Commerce v. The National Mechanics’ Banking Association (55 N. Y , 216). There are various cases, however, beginning "with the Bank of Commerce v. The Union Bank (3 Comst., 236), where recoveries have been had for money paid on raised commercial-paper through mistake, some of which seem to militate against this rule, although the question is not discussed, nor are the facts sufficiently distinctly stated in order to form an intelligent opinion. (Marine National Bank v. National City Bank, 59 N. Y., 67; White v. Continental National Bank, 64 id., 320, and cases there cited.) And, therefore, the distinct expression of opinion in the case of the National Bank of Commerce v. The National Mechanics’ Banking Association (supra) should govern.

It seems clear that it must be held that the Seaboard Bank has paid over the proceeds of this draft to the Eldred Bank. It is true that it has not paid the distinct money received in payment of the check, but it has credited it in account and has remitted very much more than sufficient to exhaust this amount and any credit which might have existed at the time the same was made, long before the discovery of the raising of the amount of the check. Applying the well settled rule that in cases of running accounts, where debits and credits are constantly occurring, payments must be applied to extinguish the debts according to the priority of time, the amount received upon the check in question had been paid over by the defendant to the Eldred Bank. The rule above stated is sustained by the cases of Sheppard v. Steele (43 N. Y., 52); Walden v. Davison (11 Wend., 65); Allen v. Culver (3 Denio, 293); United States v. Kirkpatrick (9 Wheat., 720); Bixby v. Drexel (56 How., 478); Clayton’s Case (1 Mer., 572); In re Hallett (L R. 13 Ch. Div., 696).

It is no answer to this rule that its application turns the plaintiff out of court and puts it to the trouble, expense and delay of a suit against the Eldred Bank, because the plaintiff in this action is entitled to no greater consideration at the hands of the court than is the Seaboard Bank, neither having been guilty of negligence and both having acted in the utmost good faith. The rules of law in reference to the application of payments should not be warped unless some great injustice is done thereby, which does not appear to be the effect of the application of the rule to the case at bar.

Under the circumstances, therefore, it does not appear that any error was committed in the progress of the trial, and the judgment appealed from should be affirmed, with costs.

Bradt and Daniels, JJ., concurred.

Judgment affirmed, with costs.