National Park Bank of New York v. Seaboard Bank

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] When the draft in question was paid by the plaintiff under a mistake of fact, the defendant either owned it or simply held it for collection as the agent of the Eldred Bank. If the defendant had then owned the draft it would have become liable, upon discovery of the facts, to refund the amount mispaid, provided its condition had not in the meantime changed so that this would be unjust. (Nat. Bk. of Commerce v. Nat. Mechanics' BankingAssn., 55 N.Y. 211; White v. Continental Nat. Bk., 64 id. 316.) If, however, the defendant did not then own the draft, but merely presented it for payment as the agent of another bank, it could not be required to repay, provided it had paid over to its principal before notice of the mistake. (La Farge v.Kneeland, 7 Cow. 460; Mowatt v. McLelan, 1 Wend. 173; Herrick v.Gallagher, 60 Barb. 566; Story on Agency, § 300.)

The plaintiff claimed that the entry made by the defendant on its books to the credit of the Eldred Bank, upon the receipt of the draft, proved that it belonged to the defendant, while the defendant claimed that the restrictive indorsement of the draft by the Eldred Bank prevented any change of title and simply created an agency for collection. A question of fact thus arose as to the intention of the parties to the transaction, to be determined by considering their words and acts, their course of business and all of the surrounding circumstances. We think that the decision of this question in favor of the defendant by the trial court, acting in the place of a jury, is conclusive upon us. Moreover, it seems to be settled that the title to commercial paper received for collection by a bank and forwarded to its correspondent in the usual course of business, without any express agreement in reference thereto, does not vest in such correspondent, even if it has remitted upon the general account in anticipation of collections. (Dickerson v. Wason, 47 N.Y. 439. ) Title passes only by a contract to that effect, to be either expressly proved or inferred from an unequivocal course of dealing. (Scott v. Ocean Bank, 23 N.Y. 289.)

This would involve in the case at bar an agreement on the part of the defendant to become absolutely responsible to the Eldred Bank for the amount of the draft, whether it was collected or not, without any right to reimbursement for advances. (Id.) This was not the agreement of the parties to the transaction in question, either as found by the trial court or as appears from the undisputed evidence. In the case of Metropolitan NationalBank v. Loyd (90 N.Y. 530), relied upon by the plaintiff, the referee found that the owner of a check endorsed it in blank and deposited it in a bank, which received it as a deposit of money, entered the amount as cash to his credit in his pass-book and returned the book to him. It was held that under those circumstances the property in the check passed from the customer and vested in the bank. No other result could follow a transfer, absolute in form and in fact, by one party and its receipt as cash by the other.

The learned counsel for the plaintiff concedes that an agent who has received money paid by mistake cannot be compelled to repay it where he has paid it over to his principal without notice, but he contends that as the specific proceeds of this draft were not paid over, the rule has no application. The trial court found, and the evidence clearly shows, that the proceeds of the draft, including the entire amount that the Eldred Bank had to its credit with the defendant when the draft was paid, had been drawn out at least two weeks before the alteration of the draft was discovered.

Where a payment is made upon general account with no direction as to its application, the law applies it to the oldest items. That is, the first debits are to be charged against the first credits and the debt paid according to priority of time. (Sheppard v. Steele, 43 N.Y. 52; Allen v. Culver, 3 Denio, 284; Webb v. Dickinson, 11 Wend. 65.)

In Allen v. Culver (surpra, 293), the court said: "In the case of a running account between parties, where there are various items of debit on one side and of credit on the other, occurring at different times, and no special appropriation of payments, constituting the credits, has been made by either party, the successive payments and credits are to be applied in discharge of the items of debit antecedently due in the order of time in which they stand in the account. In other words, each item of payment or credit is applied in extinguishment of the earliest items of debt until it is exhausted."

We think that this rule should be applied to the case under consideration and that the amount received upon the draft had been paid over by the defendant to the Eldred Bank before it was notified that the draft had been altered.

The judgment appealed from should be affirmed, with costs.

All concur.

Judgment affirmed.