#### The Consolidated National Bank of New York, Respondent, *v.*First National Bank of Middletown, New York, Appellant.

Second Department,

December 30, 1908.

Bills and notes — banks — acceptance of check irrevocable — effect *of*subsequent judgment establishing claim to drawer’s account.

Where a bank upon which a check was drawn accepted the same on presentation, marked it paid, credited the amount to the account of the holder’s agent, and charged the amount against the drawer, the bank became the holder’s debtor for the amount of the check, and thereafter was powerless to rescind the acceptance and recredit the amount to the drawer’s account, although notified that the drawer’s deposit was claimed by a third person.

Although the person claiming the drawer’s deposit subsequently commenced an action to establish his claim, a judgment to that effect is no bar to an action by the holder against the acceptor to recover the amount placed to the holder’s credit.

This is true, although the holder was made defendant in said action under an allegation that it claimed to have an interest in the fund on deposit but without attacking the good faith of the holder, for as the credit for the amount of the check belonged to the holder as a matter of law upon the acceptance, the amount was no longer part of the drawer’s deposit and the holder was not notified by the complaint that an attack would be made upon the fairness or validity of the transaction.

Appeal by the defendant, the First National Bank of Middle-town, New York, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of *539Orange on the 23d day of May, 1907, upon the decision of the court rendered after a trial at the Orange Special Term.

*Abram F. Servin, [Thomas Watts*with him on the brief], for the appellant.

*Henry W. Wiggins [Russell Wiggins*with him on the brief], for the respondent.

Hooker, J.:

While the facts in this case are a little unusual, I see no difficulty in the application of one or two very plain principles of law which have been long established.

The facts are not in dispute. Davies & Co., a corporation, on the 8th day of September, 1904, drew its check for $150 in New York city upon the defendant bank to its own order, indorsed it and obtained the money thereon from the plaintiff bank. The plaintiff forwarded the check for collection to its Albany correspondent, the Albany Trust Company, which forwarded it to the defendant, by which it was received on Saturday, September tenth. On Monday, September twelfth, Davies & Co. had on deposit with the defendant bank to its credit $473. On that day the defendant bank marked the check paid and charged the amount thereof against the account of Davies *&*Co., and credited it on their books to the account of the Albany Trust Company, which was conceded to be plaintiff’s agent. Some time on that day, whether before or after the marking of the check paid and its entry in the books matters not, one Seaman called at the defendant bank and advised the officers thereof that the money to the credit of Davies *&*Co. in that bank belonged to him, and he forbade the payment of any checks drawn upon that account. The next day the defendant bank canceled the paid mark upon the check and made other entries upon its books, crediting the amount of the check to the account of Davies & Co. and charging the account of the Albany Trust Company therewith. The check was then protested and returned to the plaintiff. A few days later Seaman commenced an action in equity against this defendant, this plaintiff, Davies & Co., and the trustee in bankruptcy of Davies & Co., which had meanwhile been adjudged bankrupt, the purpose *540of the action being to declare the ownership of the $473 on deposit in the defendant bank to the credit of Davies *&*Co. to be in the plaintiff Seaman. This plaintiff, the Consolidated Rational Bank of Rew York, was served in that action, but did not appear or answer, and judgment was ultimately taken therein by default, adjudging that the sum of $473 specified in the complaint, and in possession of the defendant the First Rational Bank, was the sole property of Seaman, and that it be paid by the First Rational Bank of Middletown to Seaman.

The check, when presented to the defendant, was paid by its acceptance by the defendant as valid, by marking the same paid, crediting the amount to the account of the plaintiff’s agent, the Albany Trust Company, and charging it against the account of Davies *&*Co. As a matter of law, that closed the transaction without power of revocation. The defendant bank had become the debtor of the plaintiff’s agent to the extent of the amount of the credit given, which was the amount of the check. In *Oddie*v. *Nat. City Bank of New York*(45 N. Y. 735, 741) the court says: “Here the plaintiffs clearly put in the check as a deposit, and the defendants as clearly received it as such, and credited the plaintiff with it. The credit on the deposit ticket was as significant an act, evincing the consent of the defendants to the payment of it, as if made upon the pass-book of the plaintiffs and entered upon the books of the bank. Financial business is transacted at banks in large amounts with great rapidity, but according to definite and certain rules, which are well understood and acted upon by those engaged in that business. Yery little is said, but very much is understood, and there is an absence of all formalities which tend to embarrass the facility of doing the business. In determining the legal effect of such transactions, we must apply the same rules applicable to all contracts and business affairs and effectuate and carry out the intention of the parties, to be gathered from their acts and declarations and the accustomed and understood course of the particular business. Applying these rules, there can be no doubt but there was an express demand on one side and consent on the other, that this check should be placed to the credit of the plaintiffs as a deposit. The legal effect of the transaction was precisely the same as though the money had been first paid to the plaintiffs and then deposited. *541When a cheek is presented to a bank for deposit, drawn directly upon itself, it is the same as though payment in any other form was demanded. It is the right of the bank to reject it, or to refuse to pay it, or to receive it conditionally, as in *Pratt*v. *Foote*(9 N. Y. 463), but if it accepts such a check and pays it, either by delivering the currency or giving the party credit for it, the transaction is closed between the bank and such party, provided the paper is genuine. In the case of a deposit, the bank becomes at once the debtor of the depositor, and the title of the deposit passes to the bank. The bank always has the means of knowing the state of the account of the drawer, and if it elects to pay the paper, it voluntarily takes upon itself the risk of securing it out of the drawer’s account or otherwise. If there has ever been any doubt upon this point, there should be none hereafter.”

In legal effect there was just as much a payment of the check of $150 by the defendant to the plaintiff through its Albany correspondent, as though a messenger from the plaintiff bank had presented the check at the teller’s window of the defendant bank and received therefor the currency. Inasmuch as this conduct took place before the commencement of the Seaman action and before judgment therein, that action cannot of course be a bar to the maintenance of this. Suppose that an officer of the plaintiff bank had presented this check personally to the defendant bank on the twelfth of September and received therefor $150 in currency. The ti-ansaction was perfectly valid; Davies & Co. had nominally to. its credit with the defendant bank a sum sufficient to pay the check, and it cannot be supposed that Seaman, in the action which he brought, could have reached this sum of $150 in the hands of the plaintiff bank after such actual payment in cash. The defendant is in no better position, as the facts are. If there had been, as there was in law, actual payment of this check by the defendant on the twelfth of September, the Seaman action could not rightfully reach the $150 of such payment; if the defendant has paid out the full sum of $473 to Seaman, it has of course done so at its peril, and is unfortunately the loser. The adjudication in the Seaman case that $473 should be paid by the First National Bank of Middletown to him, merely contemplated that all of the moneys with the First National Bank to the credit of Davies *&*Co. should be paid to Sea*542man. According to the legal interpretation of the acts in connection with the presentment of the $150 check, there was not $473 to the credit of Davies *&*Co. with the defendant bank, but rather that sum less $150 which had been paid out of that account upon the twelfth day of September. The failure of the plaintiff in this case to answer in the Seaman case deprived it of none of its rights which theretofore had become vested; the only allegation in the complaint in the Seaman- case touching the transaction of the payment of this check was: “Consolidated National Bank of New York, claims to have an interest in the said fund remaining on deposit to the extent of at least one hundred and fifty dollars ($150).” The Consolidated National Bank had no such interest in any fund, for there was in strict law no fund. By reason of the deposit with the First National Bank of Middletown it was indebted to Davies & Co. By reason of the acquiescence in the demand of the plaintiff by its Albany correspondent, the demand being based upon the presentment of the $150 check, the First National Bank of Middletown became indebted to Davies & Co. for $150 less, and became indebted to the agent of the plaintiff for $150 more. No allegation of the complaint in the Seaman case attacks the good, faith of the payment of the check, or of the- transfer of credit, which amounted to the same thing, and the plaintiff was entirely justified in failing to appear or answer in the Seaman case without, waiving any of its rights, for no notice was given in the complaint that the validity or fairness of the transaction which resulted in the payment of the $150 check would be attacked.

The judgment ought, therefore, to be affirmed, with costs.

Jenks, Gaynor, Rich and Miller, JJ., concurred.

Judgment affirmed, with costs.