Court Opinion

ID: 3625906
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:06:30.635548+00
Date Added: 2024-06-11T14:07:38.163576
License: Public Domain

The appellants, Howes and Suydam, seek to set off the sum of $2,500, credited to Monteath upon the books of the Hollister Bank upon the 29th of August, 1857, and still standing to his credit on the 21st of September thereafter, when it was assigned by him to the appellants.
As Howes and Suydam never advanced anything upon the faith of this credit, nor gave, so far as appears, any notice to the plaintiff of its assignment, their rights in respect to it are precisely the same as those of Monteath himself. To entitle themselves to the set-off, they must show that Monteath at the time of the trial, or at least at the time of his assignment to them, could have set off the sum claimed, in a suit upon this draft; or that he could have maintained an action against the bank for its recovery. In examining the case as between the Hollister Bank and Monteath, it will be well to lay out of view, in the first instance, the transfer of the draft to the Corn Exchange Bank, and the claim of the latter upon it.
The credit upon its books is prima facie evidence that the Hollister Bank owed Monteath the sum credited; but it is not conclusive. When it is shown that in justice and law he was not entitled to the credit, his prima facie claim is overthrown. By the discount of the draft and the entry upon the books, on the 29th of August, a valid claim was created in favor of Monteath, which would have remained unimpaired, if he had not interfered with the payment of the draft. The failure of the bank might have afforded some apology for, if not a justification *Page 87 
of, this interference by Monteath, if he had also voluntarily relinquished the credit he had obtained. But to stop the payment of the draft, and at the same time seek to retain the credit arising out of it, was a palpable breach of good faith, for which there is no justification.
The interference by Monteath clearly authorized the bank to recede from its contract with him. It still had the proceeds of the draft in its hands. The contract remained in substance executory. The money had never been paid over. There was therefore no difficulty in restoring both parties to their original position: and this is the criterion by which the right to rescind in such a case must be tested. The bank was not bound to rescind. It was at its option to surrender the draft and cancel the credit, or to retain the draft as a valid claim against Monteath. The question then arises, whether this right continued up to the time of the trial, or whether it had been lost by delay.
The right to rescind is no doubt one which may be lost by delay; but this can only be where something has been done by the other party to create an equity, which can be set up in opposition to the right: as where the party whose right it is to rescind, having had a reasonable time to elect, the other party has incurred some obligation or expense upon the faith of the continued existence of the contract. There is nothing of this kind here on the part of Monteath; and we are considering the case now as between him and the bank, irrespective of the assignment to the appellants, or the transfer of the draft to the Corn Exchange Bank.
Had the trial then been between the plaintiff and Monteath alone, the former, if there had been no previous transfer of the draft, might still have elected upon the trial to rescind the contract and cancel the credit. In doing so, however, he should have produced and surrendered the draft; and the question arises, whether the neglect to do this at the trial was a fatal omission.
The draft, which appeared upon the trial to be in the possession of the plaintiff, was effectually annulled and destroyed, *Page 88 
by his election to cancel the credit given for its proceeds. It could never afterwards be set up by anybody as a valid instrument; still the defendants were entitled to its surrender, and if it appears that they had put themselves upon that ground, or in any way specifically raised the point, it may be that the omission could not afterwards be cured. But nothing of this kind appears in the case; and as the surrender of the draft upon the argument at general term would be equally effectual to protect the defendants as if done at the trial, and as no possible benefit could result to the defendants from the granting of a new trial, so far as this point is concerned, the judgment ought not in my opinion to be reversed for this reason.
Unless therefore the case is changed, either by the fact that the draft was at one time held by the Corn Exchange Bank, or by the assignment by Monteath to the appellants, the judgment below is clearly right. I do not see that the former circumstance could affect the right of the plaintiff to rescind, as between him and Monteath. Suppose the Hollister Bank had actually transferred the draft for value, previous to its presentment, might it not, on discovering the fact of the interference by Monteath with its payment, re-purchase the draft, and then on surrendering it cancel the credit upon its books? The interest of Monteath could be in no manner affected by the previous transfer of the draft. All that he could require would be that the other party should fully restore him to his original condition; and it would be sufficient if the bank was able to do this at the time of its election to rescind. A transfer of the draft by the bank after knowledge of the interference by Monteath, would no doubt have prevented any subsequent rescision, because it would have amounted to an election to treat the contract as subsisting; and such an election once made could not be revoked. But a transfer prior to any such knowledge, could have no such effect.
It may still be said, that as the plaintiff was not in a condition on the 21st of September, when the assignment was made, to surrender the draft, Monteath had at that time a valid claim *Page 89 
to the proceeds, and that this claim having been then transferred to the appellants, their rights cannot be affected by anything subsequent. But the answer to this is that the appellants having parted with nothing, upon the faith of the credit upon the books of the bank, took the claim with all its infirmities. They obtained the rights of Monteath and nothing more. If they had given notice to the plaintiff of the assignment he would perhaps have been compelled to make his election to rescind before commencing his suit against the appellants, and putting them to the expense of a defence, which but for the set-off might not have been made. But as no such notice is shown, the appellants must abide by the rules which govern the case as between the plaintiff and their assignor. The judgment of the Superior Court should be affirmed.
All the judges concurring,
Judgment affirmed.