Court Opinion

ID: 6736874
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:19:09.166792+00
Date Added: 2024-06-11T16:01:48.895791
License: Public Domain

Beuoe, J.
(dissenting). On a maturer consideration, I am satisfied that this court erred in its former opinion, and that the judgment in this case should be affirmed. I am quite satisfied that the People’s-*559State Bank, of Lakota, was tbe agent of tbe respondent, Scbafer, for tbe delivery of tbe deed and tbe receiving and transmission of tbe money. I am led to tbis belief principally by tbe fact that before tbe transaction could be culminated there must bave been a delivery of tbe deed. Before tbe delivery was authorized in any way, however, payment was required to be made, and there was no une authorized to make tbe delivery except tbe People’s Bank. It cannot possibly, indeed, be contended that tbe sending by Scbafer of tbe deed to tbe bank amounted in itself to a delivery to tbe defendant Olson. I am equally well satisfied, however, that tbe People’s Bank bad no authority, either express or implied, .to collect tbe payment in anything else but money; and that its principal, Scbafer, was not bound even as against tbe defendant Olson, by tbe acceptance of tbe check in tbis case. It is elementary that an agent who is authorized merely to collect a demand or to receive payment of a debt cannot bind bis principal by any arrangement short of an actual collection and receipt of tbe money; nor has be any authority to accept in payment of bis principal’s claim an indebtedness against himself. 22 Am. & Eng. Enc. Law, 552; 5 Cyc. 505; National Bank v. Johnson, 6 N. D. 180, 186, 69 N. W. 49; State Bank v. Byrne, 97 Mich. 178, 21 L.R.A. 753, 37 Am. St. Rep. 332, 56 N. W. 355; Ward v. Smith, 7 Wall. 451, 19 L. ed. 209; Pitkin v. Harris, 69 Mich. 133, 37 N. W. 61; Hurley v. Watson, 68 Mich. 531, 36 N. W. 726; Plano Mfg. Co. v. Doyle, 17 N. D. 386, 17 L.R.A.(N.S.) 606, 116 N. W. 529; Union School Furniture Co. v. Mason, 3 S. D. 147, 52 N. W. 67; McCarver v. Nealey, 1 G. Greene, 360. I can see no difference between a case where tbe collecting agent is a bank and a case where tbe collecting agent is an individual. In such a transaction tbe bank is not, strictly speaking, acting as a bank, but as a real estate or collecting agent. Tbe payer or vendee must be presumed to bave bad tbis elementary knowledge of tbe law, as well as tbe collecting agent or bank itself; and if be chose to make bis payment not in cash, but by a substitution of credits which I believe tbe presentation and acceptance of tbe check merely amounted to, be did so at bis own risk. Tbe case of State Bank v. Byrne, 97 Mich. 178, 21 L.B..A. 753, 37 Am. St. Bep. 332, 56 N. W. 355, is entirely in point, and to me expresses the correct view of tbe law. In that case tbe plaintiff sent, for collection, a demand draft on defendant, to a bank *560with which it had an account. When drafts on defendant were sent to such bank for collection, he was accustomed to write his acceptance thereon and pass them back to the bank, where they were treated by defendant and the bank as checks. Defendant, according to such custom, wrote his acceptance on the draft in suit, passed it back to the bank, and charged himself with it in his pass book, but the bank failed and never paid plaintiff. It was held that the transaction between the defendant and the bank did not constitute a payment, in so far as the plaintiff was concerned. The court, in passing upon the question, said: “The most that can be claimed for this transaction is that the defendant, by accepting and delivering the demand draft, directed the Milford Bank to pay the same and charge the amount to his account, and that the bank promised to do so. As between them, it was perhaps understood that defendant had paid this draft, but it was in law no more than an attempted substitution of the bank for himself as debtor. TIad the acceptance been a check, and the check drawn upon another bank or private person, the effect would have been in law the same. The law requires payment in money; and, as already shown, nothing else answers the purpose, except by agreement with the creditor, or his agent, duly authorized, to accept something else. As between defendant and his bank, it was clearly the latter’s duty to honor his check (or acceptance, which under their custom was practically a check) by payment of the draft; but the creditor was no party to that transaction. The bank was plaintiff’s agent to collect the money, not to make an arrangement by which it should assume the debt. A debtor who seeks to pay a debt through his debtor, thereby securing his own claim, acts at his peril, and is not exonerated from his obligation until his debtor performs his part by satisfying the creditor. There are a few authorities which, at first blush, might be supposed to justify a different conclusion. Morse on Banks & Banking, § 247 is authority for the following: ‘By custom, banks receive their own certificates of deposit as payment, and such custom will be judicially noticed by the courts, and will justify a collecting bank in receiving its own certificate of deposit in payment of paper that it holds for collection; and the debtor is discharged, even though the bank fails before remitting. And especially will this be so where the owner of the paper directed the hank to remit by draft, for he is presumed to have intended a draft on the collecting *561bank.’ The case of British & A. Mortg. Co. v. Tibballs, 63 Iowa, 468, 19 N. W. 319, is the authority cited for this. It bases the decision upon the usage of banks, which it says courts will take judicial notice of. This was a certificate of deposit. If there is any usage by which certificates of deposit are so used, it is plain that such certificates are but the promise of the bank to pay; and, were it the certificate of deposit or certified check of another bank, it would be the mere substitution of one obligation for another, and it is difficult to see any difference between such a case and one where the certificate of deposit or certified check is that of the collecting bank. This holding is not supported by citations. Mr. Justice Reed dissents in an able opinion, adhering to the common-law rule. Another case, that of Welge v. Batty, 11 Ill. App. 461, is relied upon. Here the debtor drew a check on the collecting bank, having at the time a deposit sufficiently large to cover it. The check was received and draft delivered, and the amount was charged against the debtor on his bank account. A draft was sent by the collecting bank, but, before it got around, the bank failed. This was held to be a payment, the court saying that it would have been an idle ceremony for the debtor to draw his money out of the bank and pay it back again to the bank. Here, again, the court cites no authority to support its decision. The great weight of authority is against these cases. The payment by check, certificate, or what not is not for the convenience of the creditor, and he has no concern with the fact that it is the custom of the bank to take checks in payment. The fact that a debtor has a credit at a bank is not conclusive evidence that the bank has money with which to honor his checks. As in this case, the bank may be insolvent when it receives the checks, and there is no good reason apparent for permitting the depositor of an insolvent bank to pay his debt with worthless paper, thereby making his creditor a loser. No custom should be allowed to justify such a transaction, unless it be in a case where the creditor is connected with and a party to the custom. Many eases can be found where checks are received and operate as payment, but they are usually in suits between the credit- or and the collecting bank, where a different question is involved. Hpon the undisputed facts of this case the plaintiff was entitled to the verdict which the court properly directed.”
The opinion in the above case expresses what to me appears to be *562tbe sounder public policy and the real state of the law. Nor do I believe that the mere fact that the letter of instructions to the People’s Bank contained the words, “make remittance in New York or Chicago Exchange to me,” makes any difference in the rule. It may possibly be, as suggested by Mr. Morse in § 247 of his work on Banking, that the creditor may be presumed to have intended a draft of the collecting bank. A draft of the collecting bank, however, necessarily presiip-poses an account of that bank with a correspondent, or money with which to make such draft good. Even though the People’s Bank had been totally insolvent at the time of the transaction in question, it, if it had been paid the money in cash, could have purchased such a draft either through another bank which had such a deposit, or have such deposited the money collected in the correspondent bank so as to make its own draft good. I am, in short, of the opinion that in this case the People’s Bank was not acting strictly as a bank, but as a collecting agent.
Another reason why I am of the opinion that the judgment of the district court should be affirmed is that the plea of the defendant in this case is a plea of payment, and the burden of proof is upon the defendant to substantiate that plea. Lokken v. Miller, 9 N. D. 512, 84 N. W. 368. The plea can only be good in any consideration of the authorities, provided that he had a deposit in the bank sufficient to cover the check, and that there were in the bank funds sufficient to cover that deposit so that the acceptance of the check might operate as an equitable assignment. 5 Cyc. 505, note 74. The cases, indeed, which hold that the acceptance of a check is sufficient generally do so on the theory that it would be but an idle ceremony to require payment of the money represented by the check over the counter, and a repayment of the identical money to the bank. This, however, presupposes the existence of his money in the bank, and it would seem to me that the burden is upon the defendant to prove such fact. He has seen fit to violate the common rule of cash payment. If there is an exception to the rule he must put himself clearly within it. This he has failed to do.
The state of the law, as I understand it, is merely this, — a collecting ’ agent has no implied authority to receive anything in payment but cash. Some courts make an exception in the case of banks, but this does not seem to be the case where there is no proof of the solvency *563of tbe bank, or that the money conld actually have been forthcoming with which to meet the check if a payment over the counter had been demanded. In other words, the defendant in such cases must show that the payment of the money over the counter would have been a mere idle ceremony, and this he cannot do without showing the existence of the money in the bank at the time of the presentation of the cheek. In the leading case of British & A. Mortg. Co. v. Tibballs, 63 Iowa, 468, 470, 19 N. W. 319, 320, which is cited by Mr. Justice Bisk in his opinion on the first hearing and is generally cited as authority for the proposition that a bank may receive its own checks in lieu of cash, the evidence is clear and positive that at the time of the transaction not only was the bank paying in cash all certificates of deposit presented to it, but “the bank had on that day over $8,000 cash on hand with which to transact its current business,” and that at the time and after the transaction Massey saw displayed upon its cash table from four to eight hundred dollars. The evidence also showed that a few moments prior to the transaction, a deposit of four hundred dollars in cash had been made. Massey’s certificate only called for $540. It was therefore perfectly clear that the payment of the amount over the counter and a repayment of it would only have been an idle ceremony. This fact the debtor in that case proved, and nothing was left to surmise or to conjecture. Even in that case, however, there was a strong dissenting opinion.
The only evidence in the ease at bar upon the subject of the solvency of the bank, or that it had any funds with which to meet the cheek if a payment over the counter had been demanded, is to the effect that Baird & Company had a credit or deposit in said bank of over $8,000, and “that the bank ceased to do business and was closed by the examiner some eight days after” the transaction. There is no evidence whatever as to what amount in cash it had in its vaults at the time of the transaction, or as to whether it had any at all. Nor is there any evidence as to whether, during those eight days, it paid out any money at all. The sight draft called for $4,197.20. The bank might well, by receiving driblets as deposits and paying out driblets, have kept its doors open during such eight days, without at any time having on hand enough money with which to meet the check in question. We realize fully that insolvency at a certain date does not, in itself, raise *564tbe presumption of insolvency at a prior date. We do not, however, believe that the mere fact that the doors of a bank are open, and that it is transacting business, raises any presumption that it has on hand the sum of $4,000 with which to meet a check, or, at any rate, that the presumption is that a demand for the payment of the money over the counter would be a mere idle ceremony. The general rule, in short, is that payment must be made in cash. The defendant seeks to come within an alleged exception to the rule, and he has failed in his proof.
I am not aware of ¶ 9, of § 7317, of the Revised Codes of North Dakota, which provides that “all other presumptions are satisfactory if uncontradicted. They are denominational, disputable presumptions, and may be contradicted by other evidence. The following are of that kind: (9) That an obligation delivered up- to the debtor has been paid.” There is in the case, however, no proof that the draft was ever delivered to Baird, though there is proof that the deed was delivered. Even if the delivery of the deed alone was sufficient to bring the case within the section of the statute mentioned, still the ultimate burden of proof has not been shifted. The burden was upon the defendant in the first place to prove payment. He raises a disputable presumption of payment by obtaining possession of the deed. This presumption, however, is met by proof that the payment was made, not in cash, but by a check, — a payment which was conditional merely, and would only be operative, provided that there was money in the bank to meet the check, so that the payment of the same over the counter would merely have been an idle ceremony, or that the agreement of the parties was that a check might be received. In other words, plaintiff has rebutted the presumption of payment by showing a conditional payment, and the burden is now shifted upon the defendant to prove that these conditions have been complied with.
I am now of the opinion that the judgment of the District Court should be affirmed.