Court Opinion

ID: 5409576
Source: CourtListenerOpinion
Date Created: 2022-01-08 16:06:57.108827+00
Date Added: 2024-06-11T08:30:42.772476
License: Public Domain

Greenbaum, J.
(dissenting). This action was brought by the plaintiff as the receiver of the Federal Bank, to recover the amount of a promissory note disetiunted by said bank for the defendant.
Liability upon the note is conceded and the appeal arises out of the counterclaim interposed by the defendant.
The admitted facts with respect to the counterclaim are, that "the defendant was on the 12th day of April, 1904, a depositor of the Federal Bank in an amount exceeding $600; that on said day he drew a check to the order of a third person for the sum of $600 and had it duly certified by the bank in his own behalf; that after certification he delivered the check to the payee therein named; that between the time that the check was certified and its presentation for payment on April 14, 1904, the bank suspended payment because of its insolvency; that on the same day the check was returned unpaid to the payee, who thereupon surrendered it to the defendant upon the receipt of cash for the amount thereof.
Zo claim is made that the payee had not' exercised due diligence in depositing said check. The respondent, however, insists that the certification of the check operated as a withdrawal from defendant’s account as depositor of the amount of the check and that defendant’s subsequent acquisition of the check gave him no better rights thereunder than any assignee, a stranger to the bank, might have.
There is no doubt that if the amount of the certified check is to be considered as a part of the deposit of defendant with the bank, the counterclaim would properly lie.
It is equally well settled that a claim against an insolvent corporation acquired after insolvency cannot be set up as an offset by the asignee of the claim against his own indebtedness.
Did the certification of the check operate as a withdrawal, to the extent of the amount thereof, from the defendant’s account with the bank as depositor and as a discharge of defendant’s obligation thereunder to the payee?
The delivery of “An ordinary, uncertified check upon a general account is neither a legal nor an equitable assignment *640of any part of the sum standing to the credit of the depositor, and confers no right upon the payee that he can enforce against the bank.” Such a check “ is simply an order which may be countermanded and payment forbidden by the drawer at any time before it is actually cashed.” O’Connor v. Mechanics’ Bank, 124 N. Y. 324, 331, citing Florence Mining Co. v. Brown, 124 U. S. 385, 391; Neg. Inst. Law, § 325.
Did the certification of the check procured by the maker operate to change the foregoing rule?
Section 325 of the Regotiable Instruments Law reads as follows: “A check of itself does not operate as an assignment of any part of the. funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check.”
Section 324 of the same act declares: “ Where the holder of a check procures it to be accepted or certified the drawer and all indorsers are discharged from liability thereon.”
Reading the two sections together it seems reasonably clear that only in the case where the certification is procured by the holder of the check does the check operate as an assignment of a part of the funds to the credit of the drawer and a discharge of the drawer and indorsers from liability thereon.
But where the maker procures the certification of the check before delivery, the rule is different. Wlhile no case has been found in this State directly pointing out the distinction to be observed between the case of a certification of a check upon the request of its payee or subsequent holder and of the maker, there are abundant authorities in other States declaring that the delivery by the maker of a certified check does not constitute payment any more than an uncertified check. Minot v. Russ, 156 Mass. 458, happily illustrates the two cases of a check certified for the payee and for the maker respectively and cites numerous cases in support of the proposition just stated. The following excerpt from the case on page 460 is pertinent: “ So far as the question has been considered, it has been decided that the certification of a bank check is not, in all respects, like the making of a certificate of deposit, or the acceptance of *641a bill of ■ exchange, but that it is a thing sui generis, and that the effect of it depends upon the person who, in his ■own behalf, or for his own benefit, induces the bank to certify the check. The weight of authority is, that if the drawer in his own behalf, or for his own benefit, gets his •check certified, and then delivers it to the payee, the drawer is not discharged; but that if the payee or holder, in his •own behalf or for his own benefit, gets it certified instead of getting it paid, then the drawer is discharged.” Citing numerous authorities.
The distinction pointed out is entirely consistent with the -decision of our State and our Negotiable Instruments Law.
It seems to be conceded that under the circumstances here ■appearing the defendant was not discharged from his obligation toward the payee or holder of the check in due course ■and that he “ acquired a right of action against the bank •for damages for failure to honor the acceptance,” but it is ■argued that no right of action was created until after the failure, because the refusal of the bank to honor the check took place after the failure.
I fail to .see how that circumstance defeats the offset or •counterclaim. It may as well be said that a depositor having funds with the defunct bank may not offset the amount ■thereof withheld, against the claim of the bank, because the -right of action existing under the counterclaim due to the refusal of the bank to repay the depositor the amount standing to his credit arose after the failure.
In the case of a depositor the bank agrees with him to honor his drafts or checks to the extent of his deposits and "to repay any balance to his credit upon demand.
la the case of a bank certifying a check of its depositor it has in effect entered into an agreement with him that the amount thereof is to be charged to the account of the •drawer in the bank certification account, to be made applicable to the payment of that check. First National Bank v. Leach, 52 N. Y. 350.
The failure of the bank to carry out its agreement makes ■the depositor liable to the holder of the cheek, and creates' a right of action in favor of the depositor against the bank *642arising out of au,.agreement made'before its insolvency just as in the case of the ordinary depositor, the right of action arises by the failure of the bank to observe its agreement made before insolvency.
Indeed, it may also be said that the failure of the bank to honor the check certified for its depositor resulted in leaving the account of the depositor as it was before the certification, and, therefore, subject to the ordinary rights of offset in favor of the depositor.
It follows, therefore, that the delivery to a third party of the check for $600, which the defendant himself procured to be certified,- did not operate as a discharge of defendants liability thereon, and'that the counterclaim was good in law and should have been allowed. As, upon the conceded facts, the offset interposed exceeds the amount of- plaintiff’s claim, the judgment should be reversed and judgment rendered in favor of defendant, with costs below and in this court to the appellant.
Judgment afihrmed1 with costs.