Court Opinion

ID: 6576653
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:34:56.026526+00
Date Added: 2024-06-11T15:57:07.516467
License: Public Domain

Pierpoint, J.
This action is brought upon a bill of exchange drawn by the defendant on Ira Cochrane, payable to his own order, indorsed by him and accepted by Cochrane, and in that form discounted by the Danby Bank, for the benefit of Cochrane. Before this paper became due the cashier of the bank transferred it to the plaintiff, in payment of his deposit account with said bank, and the plaintiff took this bill in lieu of the specie, which he would have received if he had not accepted the bill.
It is insisted on the part of the defendant, that the court erred in charging the jury that this bill of exchange was not payable to the bank, within the provisions of section 82 chapter 84 of the Compiled Statutes.
The language of this section is that “ all the bills and notes of such bank shall be deemed to be payable at such bank, and shall at all times be received by said bank, on all judgments-, executions or demands, made payable to, or the property of, such bank.”
To bring this paper within the provisions of the statute, it must appear that it was either made payable to, or was the property of, the bank. In passing upon this question, we will treat the plaintiff as the bona Jide holder and owner of this paper, and as standing in the same position as though he had, at the time he took the bill of exchange, no otherjconnection with the bank than as the purchaser of this paper.
Was this paper, either on its face or by reason of anything that had been done with it, or on the faith of it, so made payable to the bank as to come within the provisions of the statute? The paper on its face was payable to the defendant’s order. .When the defendant indorsed the paper in blank, that did not make the paper payable to the bank, but only placed it in that condition that it would, by operation of law, become payable to any person who should see fit to advance his money upon it, and become the holder. When the bank advanced the money and took this paper, it became payable to the bank, not because it was indorsed to the bank in terms, but because, being indorsed in blank, it thus *651became payable to tbe holder, and tbis peculiarity of its condition remains. It is still payable to tbe holder, and to the bank only as tbe bolder, and while it continues to be tbe bolder.
When tbe bank transferred tbis paper to the plaintiff in good faith, as we are now supposing, what became its condition in bis bands ? and were tbe rights and liabilities of tbe parties to it changed by its having passed through the bands of tbe bank ? While tbe paper was in tbe bands of the bank it was by virtue of tbe statute payable in the bills- of tbe bank, and if sued by tbe bank, it would by tbe general law be subject to offset, or to any other defence that might exist as between tbis defendant and the bank, but this -is solely because tbe bank is tbe owner and bolder of the paper. Upon tbe transfer of tbe paper to the plaintiff, tbe right to pay it in tbe bills of tbe bank is terminated. That right attached to tbe paper by virtue of the statute, only while tbe bank was tbe owner of it. Tbe plaintiff bolds tbe paper in tbis case as he would have held it if it bad been transferred to him in tbe first instance ; be may fill up tbe defendant’s indorsement directly to himself, and bold the paper as though the defendant bad so indorsed it to him.
We think that all tbe legislature intended was to put it in tbe power of tbe parties in making their paper, to subject it to tbis right as to its payment, by making it payable to tbe bank. Tbe words “made payable to,” when used in connection with tbis class of paper, are universally understood to refer to tbe person in whose favor tbe paper is drawn, upon its face, and we think tbe legislature must have so understood it. To'put any other construction upon it, would attach a clog to negotiable paper that would naturally impede its circulation, a result that legislatures and courts have for many years sought to avoid. Uo person, on having a paper like tbe one before us presented to him, could tell whether or not it bad passed through some bank, and thereby acquired a latent property or condition that rendered it comparatively valueless.
It is insisted that public policy requires that tbe court should place a liberal construction upon tbis section of tbe statute, in favor of restraining tbe transfer of paper of this character by our banks. We do not so regard it. One of tbe first objects of *652legislation on the subject of banks, in this State, was the safety of the bill holders, and to this end the most important thing (after the actual solvency of the bank) is, that the banks should keep-up their redemptions at tlieii' counter and in market. If they fail to do this, their bills are at once at a discount, and the bill holders suffer, whether the bank is solvent or not. It is a fact of general notoriety that the most efficient means that our banks can avail themselves of to keep up their redemptions in market, are derived through their dealings in drafts and bills of exchange. It is upon these mainly that they rely to furnish themselves with funds in market with which to redeem their bills. Such being- the case, it can easily be conceived that in the constant fluctuations in the money market, and in the periods of panic, that so frequently occur in the business world, banks that are perfectly solvent may find it necessary to anticipate the money on this class of paper, in order to keep up their redemptions, and protect the bill holders ; for it is upon the hill holder in such cases that the injury falls. And it is for these reasons, doubtless, that in many of the restrictions upon the operations of banks, that are found in our statutes, exceptions are made in favor of this class of paper.
But it is claimed that the position that the plaintiff occupied as a director of this bank, was such that he could not take this bill in payment of, or as a security for, his debt against the bank.
It is not claimed that the plaintiff in accepting this bill, or the cashier in transferring it to him, acted with any fraudulent intent.
The testimony went to show that this bill was taken in lieu of specie, and that the object of the plaintiff and the cashier was to avoid reducing the specie of the bank, and thus embarassing it, and that they both then believed that their troubles would be but temporary. It was, in short, only anticipating-the money on this draft, to pay the debt that the bank owed the plaintiff. If the cashier had paid the plaintiff his deposit in specie, no objection could have been taken to it. We think it equally competent for the cashier to pay in the manner he did, if the plaintiff was willing to accept it. And to do So could not operate to the prejudice of the bank or its creditors, or to the injury of the defendant. Its effect may be to prevent the defendant from cancelling the debt by paying a mere fraction of it, but it can not be said to do *653him an injury, so long as he is not required to pay any more than he honestly can upon it. The fact that the plaintiff was a director of the bank, we think can make no difference with his right to receive this bill in payment of his debt. And even if this should be regarded as a breach of his duty to the bank, that is a matter of which this defendant can not avail himself, so long as the stockholders do not complain of it.
The ruling of the court, as to the effect of this bill having been taken as collateral security for his debt, is one that, if erroneous, this defendant could not object to, as its effect would be merely to reduce the amount of damages.
The judgment of the county court is affirmed.