Case Name: George W. Thatcher, Respondent, v. The Bank of the State of New York, Appellants
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1851-06-27
Citations: 5 Sandf. 121
Docket Number: 
Parties: George W. Thatcher, Respondent, v. The Bank of the State of New York, Appellants.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 7
Pages: 121–134

Head Matter:
George W. Thatcher, Respondent, v. The Bank of the State of New York, Appellants.
When funds are deposited with a bank to be applied to the payment of an accepted bill payable at the bank, the presumption of law is, that the funds belonged to the acceptor, as it was his duty to provide them.
Henee, unless this presumption is contradicted by proof, the acceptor is the only person who can maintain an action against the bank, for its neglect in not applying the funds deposited to the payment of the bill.
A bank is not liable for the neglect of an officer, unless it appears that the officer acted as the agent of the bank in the particular transaction, which is the subject of complaint.
To make it the duty of a bank to apply moneys deposited to the payment of a bill or note of the depositor, the assent of the bank to receive the deposit, must be shown.
It is only in relation to its own dealers or customers that this assent of the bank can be implied.
A bank is not bound to receive on deposit the funds of every man who offers them for that purpose. It has a right to select its dealers, and the cashier is the proper officer to make the selection.
Hence, the bank is not liable for the proper application of a deposit made by a stranger, unless the assent of the cashier to receive the money as that of a dealer, is proved. Even when a bank is bound to receive a deposit, to render the bank liable for its application, it must be made with its proper officer.
When there is a receiving as well as a paying teller, the former alone has any authority from the bank, by virtue of his office, to receive deposits.
A paying teller, on receiving the funds of a stranger upon a promise to apply them in the payment of a bill or note, acts as the agent of the party, not of the bank, and consequently the bank is not liable for any breach or neglect of his assumed duty.
Held, upon these grounds, that the plaintiff was not entitled to recover. Judgment in his favor at special term was accordingly reversed, and a new trial ordered.
(Before Sandford, Doer, and Campbell, J.J.)
(June 12.
June 27.)
This was an appeal from a judgment rendered against the defendants at special term.
The complaint charged that the plaintiff on the 6th May, 1850, at St. Louis in Missouri, drew a bill of exchange dated on that day, on one Daniel Thatcher, of Bridgeport in Connecticut. That the bill was for $2,500, payable 90 days after date, to the order of Messrs. Waterman & Ryan, at the Bank of the State of New York, in the City of New York. That it was accepted by Thatcher, was endorsed by the payees Waterman & Ryan to the Perpetual Insurance Company of St. Louis, and by that company to the American Exchange Bank in the City of New York, and while in the possession of that bank became due on the 5th October, 1850. The complaint then averred that funds were left by the plaintiff or. his agents with the paying teller of the Bank of the State of New York, at the office of that bank, and in the usual manner of transacting such business in the banks of New York, sufficient for, and for the purpose of being applied to the payment of the above draft, and that these funds were accepted by the bank, through its paying teller, for the purpose of paying the draft on the day that it fell due, and before it was presented for payment. It then averred that the draft was duly presented for payment, and that in consequence of the neglect of the bank to make such payment it was duly protested, and that by reason of the premises the plaintiff had sustained damage to the amount of $276 90, for which sum, with interest, he prayed judgment.
The answer of the defendants put at issue all the material averments in the complant, and contained also the following allegations:—
These defendants further deny that the said Daniel Thatcher, the acceptor of said bill, kept any account with these defendants, or had any money to his credit with them, on the said 5th day of October, 1850, which these defendants ought to or could apply to the payment of the said bill of exchange.
The defendants, on information and belief, say, that on or about the said 5th day of October, 1850, some person or persons, to these defendants unknown, left with the party who performs the duties of paying teller of these defendants, a certified check for $2,500, and requested him to pay an acceptance of Daniel Thatcher for that amount, payable at the Bank of the State of New York, on the 5th day of October, 1850. These defendants further answering, on information and belief, admit that the said party took the said check, but they deny that in receiving said check, he acted in behalf of these defendants, and that it was any part of his business and duties, as paying teller, to receive such check and pay such acceptance, and they deny that in receiving such check, he acted as their servant or agent, but on the contrary they aver, that he undertook in that behalf to become the agent and servant of the party or parties handing said check; and they deny all liability for the nonfeasance, misfeasance, or malfeasance of such person in that behalf, and these defendants utterly deny all liability for the nonpayment of any negotiable or other paper made payable at their banking house, unless the money to meet the same is deposited with them, and they deny that the mere receipt of money by a party performing the duties of paying teller, and a promise by him to a specific appropriation of it, forms any consideration for any contract on the part of these defendants, and they also deny that the receipt of the said check, and the promise to pay the said acceptance, were within the duties of the officer of this institution known as the paying teller, or' that it is in the usual course of business, to deposit moneys with said teller, but on the contrary they aver, that the proper receiving officer of the Bank is the receiving teller, and they aver that no money was deposited with him to pay the said acceptance.
These defendants, on information and belief, deny that the said acceptance was duly presented on the 5th day of October, 1850, for payment at their banking house, and payment of the same refused, or that the said acceptance was duly protested for non-payment. And these defendants further answering, say, that as to the damages of the said plaintiff, these defendants have no knowledge, information, or belief, or information sufficient to form a belief, in order to enable them to admit or deny the same. These defendants deny the right of the plaintiff to recover any sum of money, or the sum mentioned in the complaint of said plaintiff, by reason of the facts stated therein, or from any other cause.
To this answer the plaintiff replied as follows :—
The plaintiff, for reply to the answer of the defendants, The Bank of the State of New York, in this cause, says, that he denies the allegation in the said answer, which denies that the said Daniel Thatcher, the acceptor of said bill, kept any account with the said defendants, or had any money to his credit with them, on the said 5th day of October, 1850, which the said defendants ought to, or could apply to the payment of the said bill of exchange. And the plaintiff, further, for reply, says, that he denies that the said paying teller undertook to become the agent or servant of the party or parties handing said check.
And the plaintiff further, for reply, says, that he insists that the receipt of money by a party performing the duties of paying teller at a bank, and the receipt of such money by him, in the bank, during bank hours, for the purpose of paying a bill of exchange or note made payable at such bank, is within the ordinary scope of the business of such bank, and of such paying teller in such bank, and such receipt renders it obligatory upon such bank to pay such bill or note, when presented for payment.
And the plaintiff, further for reply, says, that the receipt of said check .as stated in the defendants' answer, and the promise to pay the said acceptance, were within the duties of the officer of the said- defendants’ bank, known as the paying teller, and that it is in the usual course of business to deposit moneys with said teller to pay acceptances made payable at said bank, and that it is always understood to be, and is in fact, the transaction of the bank, unless some express agreement is entered into to the contrary.
The issues thus joined were tried before Chief Justice Oakley, at a Special Term, on the 26th day of May, 1851.
The plaintiff’s counsel, to maintain the action, called—
Henry P. George, who testified as follows : I received the bill mentioned in the pleading, from Mr. Rodgers, the notary of the American Exchange Bank, and presented it to a person for payment, at the desk of the paying teller of the bank of the State of New York, on the 5th of October, 1850, after 3 o’clock,, the usual time of the presentment of bills and notes by notaries. He said there were no funds to pay it. The bill was protested for non-payment on that day. I deposited notices of protest for non-payment, in the post-office, on the 6th of October, enclosed, directed to S. A. Ranlett, Secretary, St. Louis.
On cross-examination, the witness testified, that he was the clerk of Mr. Rodgers, and not a notary public. That he did not present the bill to the paying teller of the bank of the State of New York. We always present them from a quarter to half past three o’clock, P. M.
The plaintiff’s counsel then called—
Laurisson Riggs, who testified : that Ranlett was the secretary of the St. Louis Perpetual Insurance Company, and he knew the signature on the bill to be his; that company kept an account with the American Exchange Bank. Dealing in bills of exchange, is a branch of its business ; the bill is endorsed in the usual manner.
Plaintiff's counsel then called—
Theodore W. Pihclcney, who testified: that in October, 1850, he was the Note Teller of the American Exchange Bank. The bill of exchange was given by him to Mr. Cole, the runner, about half-past one o’clock; I made a mark (identifying it) which indicates that it had been given to the runner and returned not good. I held it until 3 P. M., and then gave it to the notary, (I rarely ever give notes or bills to the notary before three o'clock.) It is customary to leave funds with the paying teller, when the note is payable at a bank, and the party keeps no account there.
The plaintiff further called—
Daniel Cole, who testified: that he was the runner of the American Exchange Bank, on the 5th of October, 1850 ; that he received the bill on that day, and if he presented it, presented it before three o’clock, but cannot say that he presented it. He always presents them to the paying teller. He had a great many bills always to present.
The plaintiff’s counsel further called—
Ralph H. Post, who testified, that on the 5th of October, 1850, he was in the employ of E.- D. Morgan & Co. as clerk, and attended to their banking business ; that he had been so employed for about four years. Between ten and half-past ten o'clock, he handed to the paying teller of the bank of the State of New York, a certified check of E. D. Morgan & Co., for $2,500, (admitted by the counsel for the defendants to be the same as cash,) and asked him to pay with it an acceptance of Daniel Thatcher’s, due on that day, which witness expected would be, in that day. He made me no answer. I have before left checks at that bank, to take up paper accepted by D. Thatcher, and have always left them with the paying toller. Witness has been in the habit of leaving checks and funds with other paying tellers, to take up paper, and never knew an instance of a protest in such cases. Witness has always been in the habit of leaving a check at the place where notes are payable, with the first or paying teller; no teller ever refused to take the funds.
On cross-examination, the witness testified, that he afterwards went to the paying teller, to receive the check.
Defendants admitted that plaintiff had paid 10 per cent, damages on the bill, and that such were the proper damages by the Missouri statute.
The plaintiff’s counsel then rested.
The defendants’ counsel then called—
Reuben. Withers, who testified, that he is the cashier of the defendants’ bank ; that the duties of the paying teller were to pay checks, bills and notes, payable at the bank, of parties who have accounts there ; to receive the exchanges, and settle the accounts with other banks ; Daniel Thatcher kept no account with the bank.
On cross-examination, the witness testified, that the paying teller and all the clerks of the bank give bonds for the faithful performance of their duties ; that the paying teller had not, to his knowledge, except in a few instances, received money to pay notes, bills of exchange, &c., when the parties keep no account; when the money is left to pay bills or notes, payable there, of parties keeping no account there, it is the custom to leave the same with the paying teller.
The counsel for defendants then called—
Luther B. Whitmore, who testified that he was the paying teller of the defendants’ bank ; that the runner of the American Exchange Bank did not present the bill to him, to his knowledge, that he did not recollect the fact.
On cross-examination, he testified :
That he was rarely in the bank after half-past three o’clock ; that he has been paying teller since October 1st, 1850, and had never been paying teller in any other bank; that a certified check of the amount of $2,500 was left with him, but remembers nothing positive about the circumstances ; has given bonds for the faithful performance of his duties; that he has received moneys for parties who do not keep an account with the bank, as a favor to them, to pay notes payable at the bank ; he has refused to take moneys to pay notes ; he does not recollect any thing in regard to this case ; there is no rule about it; some persons pressing him very hard, he takes their money ; of those who keep their accounts with the bank, he knows whether they have funds there or not. He certifies notes and bills, made payable at the bank by persons who have accounts, if they have the money there. He certifies the notes or bills without any new order ; some parties pay their paper payable at the bank by checks ; others do not.
On re-examination, the witness testified, that when parties not keeping an account with the bank, leave money or a certified check with him, to pay paper made payable at the bank, he puts the funds in the drawer, and they are not' mixed with the funds of the bank.
The certificate of the notary of the protest of the bill for non payment and of the service of the notice of protest for nonpayment, were here offered in evidence and objected to by defendants’ counsel, on the ground that it appears in evidence that the presentment of the bill for payment, and the service of the notice of protest for non-payment were made by the clerk of the notary, and not by the notary ; the said certificates are in the usual form, and may be referred to as a part of this case.
The counsel for the defence rested ; and the testimony being closed, moved the court for a dismissal of the complaint.
1st. Because the paying teller was, by the receipt of the money from E. D. Morgan & Co., for the purpose of paying the acceptance of Daniel Thatcher, their agent and not the agent of the defendants, and that it was not in his power to bind the. bank, out of the sphere of his peculiar occupation.
2d. Because the bill of exchange was not protested by a notary public, and that no damages were due upon, such bill which, the drawer was bound to pay. That in paying such damages he paid in his own wrong, and was not' entitled to recover therefor.
But the Judge overruled the objection, refused to dismiss the complaint, and directed the jury to find a verdict for the plaintiff for $250 and interest; to which ruling, refusal, and direction, the counsel for the defendants excepted.
The jury found a verdict for the plaintiff for $258 75, and the judge directed judgment thereon, with liberty to the defendants to appeal, without security.
A. W. Clason, for the bank.
Even were it possible to admit that the bank is liable at all, the plaintiff has no right to maintain this action. No privity is shown to exist between him and the bank. It is not proved that the moneys -deposited belonged to him, and, in the absence of such proof, the presumption is, that they belonged to the acceptor. But'we do not wish the decision of the court to be placed upon this narrow ground. Our position is, that the bank is not chargeable with a neglect of duty, in not paying the draft of the plaintiff, for the conclusive reason, that no such duty is shown to have been imposed or assumed. The alleged deposit was made with the paying teller, who, as the servant of the bank, has a certain sphere of action, within the limits of which alone can he bind his employers, and, certainly, the receipt of checks from non-dealers is not within those.limits. The very name of his office imports its duties. He is to pay out the funds of the bank to those who show a title to receive them ; but, as the agent of the bank, he has no right either to receive or to pay out the funds of a third person, between whom and the bank no privity, or relation whatever, is shown to exist. The moneys received by him from a third person were kept separately, and never became the funds of the bank, and that receipt by him was neither an act of duty to the bank nor to a customer, but simply an act of personal favor to an individual and a stranger. Thus,- his receipt of the check, of $2,500, from E. D. Morgan and Co., was an act of favor to them; and in thus receiving it, and promising to apply it to the payment of the draft of the plaintiff, he acted as their agent, and, in no sense, as the agent of the bank'. In the course of his argument, the counsel referred to the Onondaga Co. Bank v. Bates, 3 Hill, 53 ; and, -v. Lydig, 7 Hill, 91.
E. Terry, for plaintiff—contra—insisted
that the Chief Justice upon the trial had properly directed the jury to find a verdict for the plaintiff, since the damages which he claimed were, in judgment of law, sustained by him in consequence of the negligence of the bank. When a bill or note is payable at a bank, it is the duty of the maker or acceptor to leave with the bank sufficient funds for meeting it; and, if he does so, he is discharged from all liability. Consequently when such funds are received by an officer of a bank upon an understanding to apply them to the payment of the bill or note, the transaction is, in judgment of law, a transaction of the bank. It is the bank that receives the money and assumes the duty. When a bank does not wish a paying teller to take such funds, it is its duty to prohibit him from receiving them, and to give notice of the prohibition to the public; otherwise the public has a right to believe that his acts are sanctioned by the bank, and the law will, therefore, imply that this sanction is given. The counsel cited The Bank of Vergennes v. Warren, 7 Hill, 91: Commercial Bank of Buffalo v. Kortright, 22 Wend. 348; Lovett v. Steam Saw Mill, 6 Paige, 54; Story on Bills, § 356, note 12, p. 453.
Affirmed in the Court of Appeals, December, 1852.

Opinion:
By the Court.
Sandford, J.
The action is founded wholly upon the neglect of the bank to pay the bill of exchange drawn by the plaintiff, and it was incumbent on him to establish, that the bank had assumed, or become liable to perform, such a duty in his behalf.
The complaint alleges that the plaintiff, or his agents, left funds with the paying teller for the purpose of paying the bill; but there is no proof of that statement. It does not appear, who furnished the funds, and inasmuch as it was presumptively the acceptor's duty to provide them, we certainly are not at liberty, in the absence of proof, to infer, that they were furnished by the drawer. As the case stands, the money was delivered to the teller in behalf of the acceptor, and if the bank assumed any duty in the premises, it was to him, and he alone was entitled to an action for its neglect. There was no' privity whatever between the bank and the drawer, the bank owed no duty to him, and if he can maintain this suit for damages, so can each of the endorsers to the extent of their damages and disbursements, growing out of the protest of the bill. The proper course, on the plaintiff's case as proved, was for the acceptor to pay the protested bill, and then bring his action against the bank.
Assuming, however, that the drawer left the money and can maintain a* suit, how does the case stand ? Was the paying teller the agent of the bank, or of the drawer of the bill, in receiving the money in question ? It appears that in this bank there were a cashier, a paying teller, and a receiving teller. Now we know and may assume (as was done I Hill, 94) .that the cashier is the principal executive officer of the bank. A bank is not bound to receive on deposit, or to keep, the funds, of every man who offers money for that purpose. It may select its dealers- and refuse such as it pleases. For the purposes of this selection, the cashier appears to be the proper officer. The bank pays for its dealers who have funds to their credit, such bills and notes, accepted or drawn by them, as are payable at the-bank. The latter circumstance is deemed an order of the depo sitor for the payment of the bill or note out of his funds deposited. But it is only in respect of its dealers, persons keeping an account with the bank, that this course of business exists or can exist.
A person may, no doubt, become a dealer, by a deposit mad'e> on the day his draft or note falls due, though never before in the bank, but his deposit must be made with the proper officer of the institution and with the requisite assent to his becoming such dealer.
In this instance, there is, in the first place, no- pretence that the cashier, or any officer of the bank except the paying teller, ever assented in any manner to the plaintiff's making, a dteposi't, or becoming a- dealer with the bank. The first step toward establishing a duty of the bank toward the plaintiff is therefore wanting.
Let us suppose this difficulty obviated, the next step is to show» a deposit properly made, that is, that the money was left with an agent of the bank authorized to receive it. The person who» left the money knew that the agent who received it was the paying teller, and not the receiving teller of the bank, and it cannot be said he was ignorant of the fact that there were two such officers. Indeed, there was no such idea advanced at the trial. Now the very names of these two agents indicate to> every one the proper and widely different functions of each. The one is to pay out the money of the bank ; the other is to receive moneys for the bank. Dealers always pay their money to the receiving teller. When they draw money from the bank,, or their notes or bills are presented made payable at the bank, the paying teller pays the amount to them, or to the holders of such notes or bills.
But we are not left to the inference derived from the names of these agents. The answer states that the proper receiving-officer of the bank is the receiving teller, and, that it was not within the duties of the paying teller to receive the money left in this instance, or to assume to pay the plaintiff's bill with it, and that it is not in the usual course of business to deposit moneys with the paying teller. The reply does not traverse the allegation as to the receiving teller being the proper receiving officer of the bank, but it alleges that the receiving of money by the paying teller, in the hank, during bank hours, is within the ordinary scope of the business of the paying teller and of the bank, and that his receipt and promise in the instance before us, were within his duties and bound the bank.
The proof entirely failed to make out these allegations. It was shown that in several instances, these same parties had left funds with the paying teller in the same way that these were left, but there was no proof that it was his proper function to receive them, or that it was in the usual course of business, for him to receive funds in behalf of the bank. On the contrary, both the cashier and paying teller clearly prove, that it is no part of his duty or business to receive moneys for the bank ; and the teller testifies that when he does receive money for parties who do not keep an account in the bank, in order to pay notes they have drawn payable there, it is as a favor to such parties; he sometimes refuses, sometimes when pressed very hard he takes it for them, and he then keeps it separate from the money of the bank.
It is true the cashier appears to have known in a few instances, that the paying teller thus received money to pay notes and bills, and did not forbid it; but we cannot infer from this an assent of the bank that he should, in their behalf, receive money for that purpose. His duties as their agent were clearly defined, and the cashier's knowledge that he occasionally, while in the bank, acted for others, does not show that the bank adopted those acts.
So far from the proof showing that, in this transaction, the paying teller' was the agent of the bank, it clearly shows that he was the agent of the party who left the money. The bank had nothing to do with the affair, nor was it intended that it should have. The drawer, it seems, was in the habit of drawing bills payable at this bank, but he kept no account or money there, and his sole object in this operation appears to have been to give a sort of currency to his bills because, payable at a New York bank. If he had opened an account with the defendants' bank, and kept funds there, the bank would have had the usual benefit of its dealings with depositors, and his bills would have been paid, of course, on presentment. The paying teller, and his substitute in his temporary absence, know as to those who keep accounts in the bank, and pay accordingly. But the drawer and acceptor chose to run the risk of meeting the bill at the proper moment, at the counter of this bank ; and their transaction was simply for their agent to come to the bank on the day the bill fell due, and wait there in front of the paying teller's desk until the holder of the bill came in and presented it. The money would then be handed by their agent to the holder, and the latter would take it away. The bank derived, and could derive, no possible benefit from such a transaction ; it was never intended that it should ; and the bank was as ignorant of its occurrence, as if it had been done outside of its building, instead of in its office. To avoid the trouble of waiting with the money at the bank counter for the bill to be brought in for payment, these parties resorted to the expedient of asking the paying teller to take the money they had brought, and when the bill came in, to hand it to the holder. He sometimes assented as a favor to them. There was no intention or expectation that the money should go into the hands of the bank, or be mingled with its funds. It was handed to the paying teller, because from his position' in the bank, the bill would necessarily be presented to him for payment, and if he would take the money and retain it till the bill came in, it would save the time and attendance of the agent of the drawer and acceptor. The same expedient has been adopted in reference to bills payable at another bank, as shown by the evidence, and it may be general in this city ; but it cannot alter the relation of the parties in the transaction. The paying teller, in such cases, becomes the agent of the parties who leave the money with him, and the bank is not responsible for his conduct in regard to it.
The case of the Manhattan Company v. Lydig (4 John. R. 377), was like this in principle. There the party, instead of delivering his money to the receiving teller of the bank, handed it, from time to time, to the bank's book-keeper to deposit it for him. The book-keeper kept part of the money, but by false entries in the dealer's pass-book and in the books of the bank, concealed the abstraction from both. Sometimes in a pressure of business,, this book-keeper assisted the receiving teller, and sometimes supplied his place in his absence, but none of the money in controversy was delivered to him on those occasions. The Supreme Court decided that the book-keeper, in receiving these moneys, was the agent of the party, and not of the bank, and that the bank was not liable for that portion which did not come to the hands of the receiving teller, or of the person temporarily supplying his place in the bank, or which did not otherwise come into the coffers of the bank.
On the case made at the trial, the plaintiff was not entitled to recover.
The judgment at special term is therefore reversed, and a new trial ordered, with costs to abide the event.
Duer, J.
I assent to every position contained in the opinion just delivered, but we are not to be understood, as saying, that a bank, in a case like the present, may not be rendered liable, by proper evidence of such a general usage, as is alleg-ed, both in the complaint and in the reply. The case, however, clearly shows, that no evidence of such a usage was given upon the trial, that could, with any propriety, be submitted to a jury. Without further evidence, the plaintiff, upon the next trial, must be non-suited.