Case Name: Marshall Cutler et al., Resp'ts, v. The American Exchange Bank, App'lt
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1889-06-04
Citations: 23 N.Y. St. Rep. 665
Docket Number: 
Parties: Marshall Cutler et al., Resp’ts, v. The American Exchange Bank, App’lt.
Judges: 
Reporter: New York State Reporter
Volume: 23
Pages: 665–669

Head Matter:
Marshall Cutler et al., Resp’ts, v. The American Exchange Bank, App’lt.
(Court of Appeals,
Filed June 4, 1889.)
1. Banks and banking—Letter of advice — Liability when payment EEFUSED.
The plaintiffs were desirous to remit a certain sum of money to one Hall, in Leadville, Col., and to effect this, procured a letter of advice upon a Leadville bank Upon payment of the sum to be remitted, plaintiffs received back the letter addressed to the bank reciting that their “ account was credited ” with $500, “ for the use of Hall.” Plaintiffs forwarded the letter to Hall, but before he received it the bank failed. Whereupon plaintiffs demanded that defendants carry out their undertaking to transmit the money or pay it back. Upon their refusal this action was brought. Held, that when payment was refused and the letter of advice returned to plaintiffs, defendant became at once liable to repay the money received from plaintiffs.
2. Same—Special depositary—When liable.
. Held, that defendant became the special depositary of the fund in question, and bound itself to retain it until drawn out under the authority of the letter, nor could it avoid its liability on the ground that by the credit of the sum on the books to the Leadville bank’s account, it became a debt- or to that bank for the money.
3. Same—When special deposit cannot be applied to otheb purpose than that designated.
Held, that the deposit was a special one for a designated beneficiary, and could not be used or dedicated by the defendant to any other purpose; that no system of book-keeping entries should be allowed to cause the agreement of the parties to miscarry, either with respect to a payment to Hall, or to its return to the depositors, in the event of the failure of the defendant to cause such payment.
The plaintiffs were depositors with the defendant bank. Desiring to remit a sum of money to one Hall in Leadville, Col., they asked of the defendant’s officers if they could do it for them. They said they could, but refused to give the plaintiffs a draft on a bank in Leadville, saying they could not do that, but they would give plaintiffs a letter of advice, which, as they stated, was their way of doing business. To this plan plaintiffs assented, and paid in to the defendant the- sum of $500. They then received back from defendant the following writing:
“New York, July 20, 1883. Bank of Leadville, Leadville, Colorado:
Your account is credited this day, five hundred dollars, received from Culter, Hall & Co., for the use of J. Seymour Hall.
E. BURNS, Cashier.”
Plaintiffs forwarded this letter to Hall; but, before he received it, the Leadville Bank had failed, and had gone into a receiver’s hands, who refused to pay any money. Plaintiffs thereupon received back the letter, and then demanded that the defendant carry out their undertaking to transmit the money to Hall, or to pay back the money. Upon its refusal this action was brought.
L. B. Bunnell, for app’lt; Dudley It. Horton, for res’pts.
Affirming 1 N. Y. State Rep., 787.

Opinion:
Gray, J.
This appeal turns upon the understanding and agreement between these parties. That they made a distinct compact is not to be doubted, and the plaintiffs'' construction of it seems to us as logical as it is natural. The agreement must control the respective rights and duties, and is to be determined by what- was said and done between the parties when the plaintiffs paid their money to the defendant.
The plaintiffs wished to make a payment to a certain person in a distant state, and the defendant undertook to effect it for them in its own way. When the plaintiffs assented and paid in the sum desired to be remitted, they received the paper writing in question. From that moment the defendant became a depositary of a fund, which was, by its own agreement, devoted, to one particular purpose and to no other. If that purpose failed, or became incapapable of being effectuated, or was recalled by the plaintiffs, the absolute right to the money was in them and in no one else. The defendant's undertaking was to effect the payment of the sum deposited by plaintiffs to Hall, and at no time did the moneys become merged in the general funds of the defendant, or cease to be under its dominion for the purpose of its assumed agency.
Its, so called, letter of advice was equivalent to its certificate, to its western correspondent, of the deposit of a sum of money by the plaintiffs, for the use of the person mentioned therein. The paper was worthless, in the hands of any person, until it was accepted by the Leadville Bank, to which it was addressed. By its contract, the defendant agreed with the plaintiffs, in effect, that the Leadville Bank would pay $500 to Hall, upon the presentation of its letter of advice. When that payment was refused and the letter of advice was returned to the plaintiffs, the defendant became at once liable to repay the money to the plaintiffs.
The defendant seeks to avoid what seems to be this very plain liability on its part, on the ground that by the credit of the sum to the Leadville Bank's account on the books, the defendant became a debtor to that bank for the money, and that the plaintiffs had assented that it should be so credited. But that was not the agreement, and no such construction is possible. The plaintiffs paid the money to defendant, as a conduit for its transmission to Hall, and its undertaking was that Hall should get it. The letter of advice, which plaintiffs received, by its terms, limited the use of the money to him alone. The defendant became the special depositary of the fund, and bound itself to retain it until drawn out, under the authority of the letter. The letter was Hall's warrant for demanding payment of the bank, to which it was addressed, and upon payment, became the bank's voucher for xeimbursement by the defendant. • The form of the writing m question is not ma terial, if its meaning is unobstructed and clear. In stating therein, that the foreign bank's "account was credited" with the money, those words were controlled, in their general application and sense, by the remainder of the clause, that it was "for the use of Hall/' Thus, the meaning of the instrument was obvious to the plaintiffs, to Hall and to the_ foreign bank. It evidenced a special deposit made by plaintiffs, and warranted and protected the foreign bank in paying the sum mentioned to Hall, upon its production and surrender.
The appellant argues that by the deposit of the money, and by passing it to the credit of the account of the Lead-ville Bank, a promise to pay the sum was implied by law on the part of that bank. That proposition, of necessity, involves the idea that actually or constructively the foreign bank became a party to the arrangement in New York, and also that the plaintiffs in some way consented to its substitution for the defendant in the performance of the engagement entered into.
As there was an express contract made with plaintiffs by defendant to do the particular thing, the defendant must be bound by its terms and legal effect. As we have said, the compact was clear enough, and whatever forms the defendant went through, they would not be allowed to change it, or to divert the moneys to any other purpose or use, and yet that is what it is striving for in its present contention. If allowed to be applied on account of the foreign bank's indebtedness, as would be the effect, if we could hold that the credit on the books of the defendant to its account passed the title to the moneys, to that extent the defendant would be the gainer and the plaintiffs would be the losers, by being remitted to a claim upon the receiver of the insolvent foreign bank. But the claim of the defendant that the Leadville Bank became a party to, or bound by the transaction in question, is quite untenable in the absence of any evidence of its assent, or of some act on its part equivalent to the assumption of the obligation. Here was an express agreement entered into between these parties for the accomplishment of a particular purpose, and to which the money paid to the defendant was dedicated from the moment of its receipt. No contractual relations existed between the plaintiffs and the foreign bank. They were strangers to each other. That bank did not know of the transaction, and the contractual elements of mutuality or of assent were wholly wanting No duty was imposed upon it, and it could come under no obligation until it adopted the defendant's act. How then can it be argued that some obligation on its part was implied by the law ~<¡ And can in be seriously contended that the law im plied on plaintiffs' part that they looked to and relied upon the promise of the Leadville Bank ? I think that would be carrying the idea of implied contracts to an unknown and unwarranted extent.
The relations of correspondence between defendant and the Leadville Bank enabled such an arrangement to be-made; but the fact of the defendant being a correspondent and maintaining an account with the Leadville Bank in no wise affects the case. The defendant did not say in its let • ter that the account of the Leadville Bank was credited generally with the moneys. The advice to it was of the-deposit to its credit for a particular and designated purpose, namely, for the use of Hall. If the defendant had become insolvent the next day after the transaction, would the Leadville Bank have been the loser as to the money, or the-plaintiffs? It seems pretty plain that the loss would have-been the plaintiffs' inasmuch as the Leadville Bank had not become bound to anything, expressly or impliedly The argument of the appellant fails to appreciate the legal effect of the transaction between these parties. The deposit was a special one for a designated beneficiary, and could not be-used or dedicated by the defendant to any other purpose. No system of bookkeeping entries would be allowed to cause the plain agreement of the parties to miscarry, either with respect to a payment to Hall, or to its return to the-depositors, in the event of the failure of the defendant to cause such payment.
The case of Drovers Bank v. O'Hare (119 Ill., 646), was not unlike the present one in its features, and the conclusions of the court were that the owner of the fund deposited must receive it back. In that case, the Drovers'" Bank gave to the agents of one O'Hare, depositing a sum of money to the credit ot the Henry Bank, for the use of said O'Hare, its certificate that the amount had been carried to the credit of the Henry Bank for the use of O'Hare. The Henry Bank failed the same day, but the Drovers' Bank transferred the sum to the N. W. Bank to the credit of the Henry Bank, without mentioning for whose use the funds, had been deposited with it. The N. W. Bank carried the moneys to the account of the Henry Bank, and applied them upon the indebtedness due it from that bank, and refused to account to O'Hare for the moneys. The court held that the Drovers' Bank received and held the funds to the use of O'Hare, and must account to him for the same.
The opinion of the court below, at general term, upon a first trial of this action, was well considered, and a more extended expression of our views seems uncalled for.
The judgment should be affirmed, with costs.
All concur.