Case Name: Mary Ross Potter, as Administratrix c. t. a., of John J. Morley, Deceased, Respondent, v. Albert E. Sager and Frances W. Sager, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1918-07-02
Citations: 184 A.D. 327
Docket Number: 
Parties: Mary Ross Potter, as Administratrix c. t. a., of John J. Morley, Deceased, Respondent, v. Albert E. Sager and Frances W. Sager, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 184
Pages: 327–332

Head Matter:
Mary Ross Potter, as Administratrix c. t. a., of John J. Morley, Deceased, Respondent, v. Albert E. Sager and Frances W. Sager, Appellants.
Fourth Department,
July 2, 1918.
Principal and agent — when payment to agent is payment to principal — delivery of checks by mortgagors to agent of mortgagee authorized to collect — payment of said checks by drawee constitutes payment to mortgagee.
Where a mortgagee appointed an agent to collect the principal and interest to become due on the mortgage and the mortgagors gave checks to said agent payable to his order, which-cheeks were cashed by the bank upon which they were drawn and the proceeds were appropriated by the agent to his own use, there was a payment upon the mortgage binding upon the mortgagee.
The mere delivery of the checks in question to the mortgagee’s agent did not of itself constitute payment to the mortgagee which only occurred when the checks were actually paid by the drawee in due course. Lambert and De Angelas, JJ., dissented, with memorandum.
Appeal by the defendants, Albert E. Sager and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Monroe on the 27th day of April, 1917, upon the decision of the court after a trial at the Monroe Special Term, and also from an order entered in said clerk’s office on the 28th day of December, 1916, granting plaintiff an extra allowance.
The judgment decreed the foreclosure of a mortgage and the sale of the mortgaged premises.
The plaintiff was a non-resident of Monroe county who held certain real estate mortgages on property situate in the city of Rochester, said county. She appointed a man by the name of Sherwood her agent to collect principal and interest on said mortgages. For years the agent duly accounted for the money collected. The time came when he collected from the defendants two payments upon a mortgage for which he failed to account. Those payments were made by checks given by the defendant Albert E. Sager to said agent Sherwood and payable to said agent’s own order. The checks were cashed by the bank upon which they were drawn. The Special Term held that said checks did not constitute payments upon the mortgage. (98 Mise. Rep. 25.)
Hiram, R. Wood [Richard L. Saunders, attorney], for the appellants.
Eugene Van Voorhis [John Van Voorhis’ Sons, attorneys], for the respondent.

Opinion:
Hubbs, J.:
The delivery of the checks in question by the defendant Albert E. Sager to the plaintiff's agent Sherwood did not of itself constitute payment. The question is whether or not the checks constituted payments when actually paid by the bank upon which they were drawn.
Where a person is an agent with authority from his principal to collect principal and interest, the general rule is that a payment by a debtor to such agent, to constitute a good payment, must be made in cash. The reason for this rule is that a payment in any other medium is not as good as cash — is not the exact equivalent of cash. Thus it has been held that the giving of a note, mortgage, postdated check, property, etc., does not constitute a payment because the acceptance of those things by the agent exceeds his authority and constitutes the exercise of a discretion by the agent not vested in him by his principal.
It would seem, however, that this court should take judicial notice of the fact that checks and drafts are usual and ordinary means of transacting business and transferring money in all business transactions; that, where an agent is given authority to collect money, the authority granted implies that he shall do so in the usual and ordinary way and, where a check is given by the debtor, not post dated and payable at a bank in the same city, the giving of such check payable to the agent constitutes payment from the time that such check is cashed in due course.
" Power to employ all the usual and necessary means to execute the authority with effect is an incident of every contract of agency." (Lawson Cont. [2d ed.] 227, § 184.)
Such a check, of course, would not constitute payment if not in fact honored on presentation in the ordinary course of business. The agent could not accept such a check in absolute payment and satisfaction. He can, however, receive a check which he has reason to believe will be honored upon presentation as a convenient and customary way of obtaining the money which he is authorized to collect. Such a payment offers no greater temptation to the agent than the payment of the money would offer. If the check is paid by the bank, then the agent has received what he was authorized to receive, and, if not paid when presented, the creditor has lost nothing. The reason for the rule which does not permit a payment to an agent by note, mortgage, etc., does not apply when payment is made by a check which is actually cashed by the bank upon which it was drawn. The cases where checks were made payable to the principal and wrongfully indorsed and collected by the agent have no application, as in those cases they were not paid in due course.
There are several decisions in this State which sustain this position. (Hunter v. Wetsell, 84 N. Y. 549; Cohen v. O'Connor, 5 Daly, 28; affd., on opinion below, 56 N. Y. 613; Thomas Roberts Stevenson Co. v. Fox, 19 Misc. Rep. 177; Mores v. Society for the Protection of D. R. C. Children, 19 Wkly. Dig. 247; Prochowick v. Boyd, 15 N. Y. St. Repr. 809; affd., 119 N. Y. 641. See, also, Griffin v. Erskine, 131 Iowa, 444.)
Payment on the checks in question was made in due course. Section 148 of the Negotiable Instruments Law (Consol. Laws, chap. 38; Laws of 1909, chap. 43) reads as follows: " Payment is made in due course when it is made at or after the maturity of the instrument to the holder thereof in good faith, and without notice that his title is defective." (See notes to this section in Crawford's Ann. Neg. Inst. Law [4th ed.], pp. 162, 163; Glennan v. Rochester Trust & Safe Deposit Co., 152 App. Div. 316; affd., 209 N. Y. 12.)
The two checks in question, when cashed by the bank upon which they were drawn, constituted payments upon the mortgage and should have been allowed as such by the Special Term. ¡
The judgment and order should be reversed, with costs.
íi
All concurred, Kruse, P. J., in result upon the ground that the checks, having been paid, were equivalent to cash and effective as payments upon the bond and mortgage, though misappropriated by the agent who received the same, and the proceeds wrongfully converted to his own use, except Lambert and De Angelis, JJ., who dissented in a memorandum by Lambert, J.