Case Name: The National Citizen's Bank of New York agt. George Howard
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1886-04
Citations: 1 How. Pr. (n.s.) 511
Docket Number: 
Parties: The National Citizen’s Bank of New York agt. George Howard.
Judges: 
Reporter: Howard's Practice Reports
Volume: 1
Pages: 511–515

Head Matter:
NEW YORK SUPERIOR COURT.
The National Citizen’s Bank of New York agt. George Howard.
Checks a/nd hills — Bona fide holder — What must he shown to constitute — Agency — W,--en post-office not the agent of the p&i'son to whom, negotiable paper ■ is sent.
Upon a deposit being made by a depositor in a bank, in the ordinary course • of business, of money, or drafts or checks received and credited as money, the title to the money or drafts or checks is immediately vested in and. becomes the property of the bank.
It is a fraud upon a depositor for a bank or banker to permit a depositor, in reliance upon the supposed solvency of the bank, to make deposits after 1 it has become irretrievably insolvent, and such insolvency was known to ■ the bank or its agent, and upon the discovery of the fraud the depositor may rescind the contract and reclaim the check or draft deposited, unless such check or draft has come into the possession of a bona fide holder for ■ value.
A person claiming to be a hona fide holder of a negotiable instrument must show under what circumstances the instrument came into his possession,, and to establish his title to the instrument he must show the consideration he paid for it.
Where the defendant, late on the seventh of November, deposited the check in suit wiili hi. ito Co., bankers at Mlt. Vernon, and after business hours said check was deposited by M. & Co. in the post-office, to be sent to- plaintiff for payment of cheek of M. & Co., paid that day by plaintiff, on M. & Co.'s promise to make a deposit before the bank opened on the following morning.
Held, that plaintiff had no right to the check or its proceeds as against the defendant.
The mere fact that M. & Co. had promised to make good or pay any indebtedness of his to plaintiff, and that the plaintiff relied on such promise, would not be sufficient to constitute the plaintiff a bona fide holder for value.
The post-office was used as a messenger of ML & Co. to make the deposit, and not as the agent of the bank in receiving it.
Special Term,
April, 1886.
H P. Allen and John L. Hill, for plaintiff.
Charles C. Bigelow and Michael H. Qardozo, for defendant.

Opinion:
Ingraham, J.
The case of Cragie agt. Hadley (90 N. Y., 133), disposes of two of tbe questions involved in this case. They are, first, that upon a deposit being made by a depositor in a bank, in the ordinary course of business, of money, or drafts or checks received and credited as money, the title to the money or drafts or checks is immediately vested in and becomes the property of the bank; and, second, that it is a fraud upon . a depositor for a bank or banker to permit a depositor, in reliance upon the supposed solvency of the bank, to make dejrosits after it has become irretrievably insolvent, and such insolvency was known to the bank or its agent, and that upon the discovery of the fraud the depositor may rescind the contract and reclaim the check or draft deposited, unless such check or draft has come into the possession of a bona fide holder for value.
Applying these rules, I think the title to the check in suit passed by the deposit to Masterton & Go., subject, however, to the right of the defendant to relaim it on discovery of the fraud practiced on him, unless it had come into the possession of a bona fide holder for value.
It appears by the evidence that on the seventh of November .Masterton & Co. was indebted in an amount exceeding in the aggregate $100,000, witb assets wbicb bare realized. $26,000 or $27,000; tbat as early as tbe 4tb of November, 1885, Masterton spoke of making an assignment, and on tbe sixth of November be asked judge Gifford to become tbe assignee. Tbe deposit was made late in tbe day of tbe seventh of November, and in tbe evening of tbat day tbe assignment was made.
The acceptance of tbe deposit under such circumstances constitutes such a fraud as entitled tbe depositor to reclaim tbe deposit on tbe discovery of tbe fraud (Cragie agt. Hadley, supra; Anonymous, 67 N. Y., 598).
Tbe only question remaining is whether tbe evidence established tbat plaintiff became a bona fide bolder of tbe check for value.
A person claiming to be a bona fide bolder of a negotiable instrument must show under what circumstances tbe instrument came into bis possession, and to establish bis title to tbe instrument be must show tbe consideration wbicb be paid for it (First National Bank agt. Green, 43 N. Y., 301; Ocean National Bank agt. Carl, 55 id., 440).
And in McBride agt. The Farmers' Bunk (26 N. Y., 457), it was held "tbat before tbe bolder of tbe note can acquire a better title to it than tbe person from whom be received it, be must pay a present valuable consideration therefor, and tbat receiving it in payment of or as security for an antecedent debt it is not such a consideration. Tbat because such a party bad omitted to collect tbe balance due him by reason of expectation or promise of payment, be did not part witb or pay any valuable consideration for tbe note, and if be fails to collect tbe note be is in no worse situation legally than be was before receiving it."
Tbe plaintiff in this case, to sustain bis claim to tbe check in question, must, therefore, show that be paid for tbe check in suit a present valuable consideration, or lost some right on tbe faith of tbe check itself. The mere fact that Masterton & Co. had promised to make good or pay an indebtedness of bis to plaintiff, and that the plaintiff relied on such promise, would not be sufficient to constitute the plaintiff, under the authorities cited above, a bona fide holder for value.
The fact i in this case show that the check in controversy was deposited by Masterton & Co. in the post-office of Mt. Yer-non after the close of business hours on the 7th of November; that prior to that time the plaintiffs had paid all the checks drawn by Masterton & Co. on it, which constituted the claim of the bank against them, and that the time had expired within which they could have returned the checks paid by them through the clearing house. Such checks had been paid relying on the promise of Masterton & Co. t@ make a deposit before the bank opened on the following morning, and not on the credit of any particular check. Plaintiff had no knowledge of the existence of this check in suit, or in fact that Masterson & Co. had any check on the 7th of November with which they could carry out their promise. It cannot be said under any circumstances that any title to the check passed' to the bank until it was deposited in the post-office at Mt. Yernon. If Masterton & Co. had not deposited the check, plaintiff could not have recovered it from the assignee; and as it was not deposited until after the bank closed, plaintiff would be in exactly the same condition, if he fails to recover in this action, as he would have been if the check had not been sent to the plaintiff at all. It can make no difference, therefore, whether the post-office is to be considered the agent of the plaintiff or Masterton & Co.
There is a marked distinction, however, between this case and the cases cited by the plaintiff, holding that the post-office was the agent of the person to whom a paper had been sent. As it appears here, the post-office was used as a messenger of Masterton & Co. to make the deposit, and not as the agent of the bank in receiving it, it could hardly be claimed under the circumstances in this case that if the check had been lost in the course of its transmission from Mt. Yernon to New York that the plaintiff would suffer, and yet that would be the result if the deposit in the mail was a delivery to the plaintiff.
The state of the account between plaintiff and Masterton & Co., at the close of business on the 7th of November, was an indebtedness of Masterton & Co. to the plaintiff which Master-ton & Co. had promised to pay by a deposit before the opening of the bank on the 8th, and the delivery by Masterton & Co. of the check in payment of such an indebtedness and in pursuance of such promise did not make the plaintiff a bona fide holder for value of the check delivered to them.
It follows, therefore, that the plaintiff had no right to the check or its proceeds against the defendant, and the defendant is entitled to judgment, with costs.