#### Isaac Albert and Herman Davidson, Respondents, *v.*The State Bank, Appellant.

(Supreme Court, Appellate Term, Second Department,

October, 1912.)

Banks — custom and usage among — negotiable instruments — corpora- . tions. . . ...

•In this state, a custom or usage among banks to accept checks in payment of claims held for collection to be binding on the customers of the bank must either be known to a depositor, or be so general and common as to raise the presumption that he had it in mind at the time he deposits commercial paper for collection.

Upon the presentation for payment of a corporation note, which had been entered in plaintiffs’ deposit book with the defendant bank as for collection, it was stamped “ accepted,” and returned to defendant, but before it had been put through the clearing house the defendant had entered in plaintiffs’ deposit book' the amount of the note as a credit and informed them through its agent that the note had been paid, and the bank where the note was payable .and . which at its maturity had sufficient funds of the maker to pay it having in the meantime failed, the note was *57returned to defendant unpaid. The reason why the note was not paid in cash at presentment was stated to be because of a custom among banks to stamp notes as accepted and send them through the clearing house for payment like other exchanges. In -an action to recover of defendant the amount of the note, held, that the burden was on defendant to establish a custom to accept in payment of the note, the acceptance thereof, and collection through the clearing house, and, further, that' the custom was of such age and character that the plaintiffs must be presumed to have acquiesced therein when they gave the note to defendant for collection.

Appeal by defendant from a judgment in favor of plaintiffs, in an action to recover the amount of a note deposited with defendant for collection.

Walter T. Kahn, for appellant.

Charles Burstein, for respondents.

Crane, J.

The plaintiffs deposited a note made by the Acme Column Company with the defendant for collection. The note was dated March 15, 1910, and payable twenty days after date at the "Union Bank of Brooklyn, Seventeenth Ward branch. The note was entered in the plaintiffs’ passbook as for collection. On the due date the defendant presented the note for payment at the Union Bank which was thereupon stamped “ accepted,” returned to the State Bank and sent with exchanges the next day through the clearing house. In the meantime the Union Bank had failed and the note was returned to the State Bank unpaid. There were sufficient funds.of the Acme Column Company on deposit in the Union Bank on the fourth day of April to have paid the note, but the reason cash was not given at the time of presentment was stated to be a custom among banks to stamp notes as accepted and send them through the clearing house for payment like other exchanges. When this note was returned to the State Bank stamped “ accepted ” and before it had been put through the clearing house the State Bank had entered in the plaintiffs’ deposit book the amount thereof as a *58credit and informed them through its agent that the note had been paid.

As the defendant has refused to recognize this credit the plaintiffs have brought this action to recover the amount of the note which the defendant attempted to collect in their behalf.

It is undoubtedly the general rule that a bank undertaking to collect a note for a depositor must accept in payment legal currency or bills which pass as money and has no right to accept certification of a.check instead of payment. Daniel Neg. Inst., § 335; Ward v. Smith, 74 U. S. 447. But this general rule must give way to a custom to the contrary well established among bankers and not unreasonable. Thus, a general and universal custom among'bankers to accept checks in payment of claims which they hold for collection is binding upon their customers and has been considered a careful discharge of the duties of collecting agents. Farmer’s Bank & Trust Co. of Stanford v. Newland, 97 Ky. 464; Kershaw v. Ladd, 44 L. R. A. 236; Jefferson County Savings Bank v. Commercial National Bank, 39 S. W. Rep. 338; Kirkham v. Bank of America, 165 N. Y. 132. In this state, however, such a custom or usage among banks must either be known to the depositor or be so general and common as to raise the presumption that -he had it in mind at the time of the deposit for collection. Walls v. Bailey, 49 N. Y. 464; Botany Worsted Works v. Wendt, 22 Misc. Rep. 156; Rickerson v. Hartford Fire Insurance Co., 149 N. Y. 307; Robertson v. National Steamship Company, Ltd., 139 id. 416.

It was for. the defendant, therefore, to establish in this case a custom to accept in payment of notes the acceptance thereof and the collection through the clearing house and to prove further that it was of such age and character that the plaintiffs must be presumed to have acquiesced in it when they gave their note to the defendant for collection. The only witness called to prove this custom was an officer of the bank with whom one of the plaintiffs had had a serious dispute and who was necessarily an interested witness. His testimony as to the usage did not state for how long a time *59such practice had been common. As the plaintiffs denied all knowledge of any such custom a question was raised for the jury to determine as to the validity of this defense, and having found for the plaintiffs their verdict should not be disturbed.

But the plaintiffs were entitled to recover, in our opinion, upon another ground, and that is the entry in their deposit book of this note as a credit and the statement to one of them by the defendant’s representative that it had been paid. *“*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.” Kirkman v. Bank of America, *supra.*The statement by Judge Gray in his opinion in that case is applicable here. “ 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.” See also, Moore v. Riverside Bank, 25 Misc. Rep. 720.

Even if the admission of the testimony of the witness Bedell as to the books of the Union Bank were error, it was harmless as it sufficiently appears by the acceptance of the Union Bank that the Acme Column Company had sufficient funds on deposit to meet the note.

Judgment affirmed with costs.

Aspinall and Putnam, JJ., concur.

Judgment affirmed.