Kirkham v. . Bank of America

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The facts, which were either proved without dispute, or were conceded, raised the question of law whether the defendant had made itself liable to the demand of the plaintiff in the amount of the draft deposited with it for collection. The determination, which was made by the court, at Special Term, in favor of the defendant, has been reversed by the Appellate Division solely upon the law. The view of that learned court was that, as between the defendant and the drawee of the draft in collection, the receipt of the check of the latter was a payment of the draft and that the crediting by the defendant of the amount to the plaintiff's account made it his debtor. It was considered that the presumption, that the check of the drawee of the draft was received by the defendant's agent in payment, became absolute, in the absence of any repudiation of the agreement to accept it as payment, or of its return to the South Hutchinson Bank with a demand for the return of the draft. This view was rested upon the proposition that the defendant was bound to return to the plaintiff the draft which he had deposited, or the money, and that, to justify the cancellation of the credit given him for the amount and the refusal to pay him the money, the defendant was bound to return to him the draft properly protested. The discussion of this case at the Appellate Division was very extended; but I think that the question involved resolves itself into this simple proposition: was the defendant not concluded by its conduct from denying that it had rendered itself liable to the plaintiff? If that is true, then that result must be attributed to its negligent conduct of the transaction; which, in its consequences, places it in a position where it can not gainsay its liability. I think that, upon the undisputed facts of this case, there was but the one legal conclusion possible and that is, that the defendant must be deemed to have intended to treat the draft as paid and that that intention was conclusively expressed when it entered the item as a credit to the plaintiff. The question of that intention was, of course, under the circumstances, purely one of law. (Clark v.Merchants' Bank, 2 N.Y. 380.)

The complaint alleged all the facts, upon which to predicate the liability of the defendant, and within the rule, as laid down in Whiting v. City Bank, (77 N.Y. 363), the plaintiff was entitled to recover; notwithstanding that he may have stated the ground inartificially, or erroneously.

It may be observed that this is not the case of the collection of the simple draft of the plaintiff's debtor; but that it is one where the draft bore the indorsement of another. When the defendant assumed the duty of collecting the draft, it was bound to exercise reasonable care in the performance of that duty and the measure of its responsibility was, if it failed to collect the amount of the draft, to account to the plaintiff for the draft, properly protested for non-payment. Assuming that the defendant was entitled to rely upon the custom among banks of taking the check of the drawee of the draft for the payment of the same, it was bound to the exercise of care for the protection of all of its depositor's rights and, to preserve itself from assuming any further liability to him in the matter, to be reasonably cautious in what it did, that its relation to him of a collecting agent should not be changed. When, on November 3d, it was in receipt of the drawee's check, it might have retained the check until after presentation for payment; when, if payment was refused, it might have caused the check to be returned to the South Hutchinson Bank, in order that, by the return of the draft, and its due protest for non-payment, the plaintiff's rights upon it should be fully protected. But it appears to have rested upon its agent's responsibility in accepting the check of the drawee of the draft, by, immediately upon its receipt, giving credit to the plaintiff as for a collection made. It was not until November 26th, twenty-one days after giving that credit, that it appears to have undertaken to revoke the credit given.

The plaintiff was no party to the proceedings for collection and the agencies selected by his bank to collect the draft were, in no sense, his agencies. (St. Nicholas Bank v. State Nat.Bank, 128 N.Y. 26.) He had the right to look for the return of his draft properly protested, if unpaid; or to a credit of its amount. When, therefore, on November 3d, he was notified by the defendant that he was credited with the amount of the draft, and the amount was placed to his credit by the entry in the pass book, brought to the bank upon its request, he was entitled then to regard the bank as having become his debtor for its amount. The general rule is that credit given in a pass book binds the bank and, in the absence of some clerical mistake with respect to the entry, when the credit entry has been made, the bank has then charged itself with a debt absolutely due to its customer. (Metropolitan Nat. Bank v. Loyd, 90 N.Y. 530,537.) The result of the action of the defendant on November 3d, in sending for the plaintiff and in making the credit entry in his pass book, was to close the transaction of collection and to charge itself as a debtor to him for the amount of the draft. The plaintiff could have drawn out all of the money on that day standing to his credit and the bank, upon the non-payment of the check when presented on November 5th, would have had no legal claim upon him to compel repayment. By admitting an indebtedness for the money on November 3d, it had assumed all the risks of its agent's transaction. I think that the action of the defendant was conclusive evidence of an intention to change its status from that of a mere collecting agent to that of a debtor to the plaintiff for the amount of the draft. The relations of a bank to its depositor, while within the influence of morals, are, nevertheless, governed by legal rules. The plaintiff had the right to hold the defendant to the obligation it had assumed and, especially, as he had done nothing to influence its action. The defendant having acknowledged the relation of debtor, how could the plaintiff be estopped from insisting upon the defendant's liability, because of any part which he may have taken in aiding the latter to procure the payment of the check by Blanchard, the indorser upon the draft? The plaintiff never consented to the cancellation of the credit and I do not think that it was within the right, or the power, of his debtor, alone, to vary the agreement implied from the previously assumed relation of debtor and creditor.

I think the order should be affirmed and, under the stipulation, that judgment absolute should be ordered against the defendant, with costs.

PARKER, Ch. J., MARTIN, VANN, CULLEN and WERNER, JJ., concur; BARTLETT, J., concurs in result.

Ordered accordingly.