Court Opinion

ID: 4931368
Source: CourtListenerOpinion
Date Created: 2021-09-24 01:08:13.877709+00
Date Added: 2024-06-11T08:14:29.521615
License: Public Domain

The opinion of a majority of the Court was drawn by
Appleton, C. J.
The note in suit is payable to B. D., Peck or order, and by him indorsed. The fact that, after his individual indorsement, is to be found on the note an indorsement by him, as Treasurer, in no way affects the right of the plaintiffs to recover. The bank may have failed to obtain the security of the State by such indorsement, but that affords no defence to the makers of the note, or prevents the title thereto vesting in the plaintiffs.
" The moneys of the State” are entrusted to its Treasurer for safe keeping, but, though he misapply them, they none *551the less belong to the State. It is a misapplication of the funds of the State by him, not an-appropriation of his own.
By R. S., 1857, c. 2, § 26, the Treasurer is required-to give bond to the State.
By § 27, "the condition of the bond shall be for the faith- ■ ful discharge of all the duties of his office, the fidelity of all persons by him intrusted with any of the concerns thereof, and that during his continuance in office he will not engage in trade or commerce, or as a broker, agent or factor for any merchant or trader,” &c.
By § 28, "the Treasurer shall not in any way receive for Ms own itse any interest, gratuity or benefit by reason of any money belonging to the State, or of any -loan -.obtained for the State, &c. He shall not loan, use in his own business or for his own benefit any such money, or permit any other person to. do it, unless authorized by law, upon pain of forfeiting a sum equal to the-amount so used or loaned,to be recovered by indictment.”
By § 30, "no greater amount of 'the money of the State’ than twenty thousand dollars shall be on deposit in a bank unless it is necessary for the payment of bonds of the State and interest, becoming payable at such bank.”
By § 31, the Treasurer is required to make monthly ex-, hibits, showing the places or-banks in which "the moneys of the State” have been kept and deposited during the past month, &c.
It is apparent from these provisions that "the moneys of the State” intrusted to its Treasurer, while under his care and supervision, ever remain its moneys. The bond required is not so much for " the moneys” as for the faithful discharge of his duties in- reference thereto. For the one it would be entirely inadequate, while for the other it might be amply sufficient.
The statute authorized Peck, as State Treasurer, to make a deposit with the plaintiff bank. His deposit with the bank, the case finds, was made of "cash and checks purporting to be official,” and of the discount of notes signed by *552Peck and other individuals. It was headed thus, — "Dr. B. D. Peck, State Treasurer, in account with Mechanics’ Bank. Cr.”
The moneys thus deposited and passed to the credit of the State Treasurer belong to the State, and are a part of its funds or they are not. If they are not the funds of the State, they would, on his death, descend to the heirs of the Treasurer, if solvent. If insolvent, they would be divided among his various creditors, of whom the State would be one, and would be thus entitled to a fractional share, greater or lesser, according to the insolvency of the estate. If not the moneys of the State, the. funds in the different banks might have been trusteed as the funds of Peck in suits against him, — a view of the law which might have been gratifying to his creditors. But such is not the law. The consequences would be too monstrous to allow one for a moment to assent to such a proposition. Moneys of the State thus deposited remain its property and cannot rightfully be appropriated save to its use.
But it is urged that the proceeds of notes discounted for Peck, and passed by his direction to the credit of the State, are not to be regarded as its funds. But such is not the law. Peck was a defaulter. The money belonging to him and arising from notes discounted at his request was by his order passed to the credit of the State. It remains to its credit. No mistake is pretended. He is estopped to deny that the funds thus credited' belong to the State. They should remain there until withdrawn in the due course of business, or until the final adjustment of his account. The bank has received these funds as the money of the State, and is bound by such reception so to recognize it. They have been understandingly appropriated to the credit of the State. They are mingled with its other moneys. Who is authorized without the consent of the State to separate and withdraw it? The State forbids it. Is this Court to sanction and approve the robbery of its treasury ?
Nor is the conclusion different if the discounts obtained *553by Peck and passed to the credit of the State are to be regarded merely as prima facie its money. This presumption is not rebutted, but the reverse. Peck was a defaulter. He procured the loan to enable him, by replacing thus far the amount misappropriated, to conceal, if possible, his defalcations. The money loaned was his. He directed it to be credited to the State. If Peck ordered this appropriation of his funds and the bank assented thereto, it cannot be changed against and contrary to the will of the State. The funds in controversy belong then to the State.
The payment to the plaintiff with the fuuds of the State-was illegal and against the express commands of the statute. As the bank received them with a full knowledge of all the facts, the State might have maintained an action to recover back the money thus wrongfully and fraudulently misapplied in payment of the individual indebtedness of its Treasurer. Such being the law, the bank lost no rights by voluntarily doing what, by law, it would have been compelled to do. Scranton, Ex., v. Bank of Rochester, 24 N. Y., 424.
As against Peck, whether the note was for his accommodation or not, the bank is entitled to recover the full amount. The payment became unavoidable to the bank, as the State recalled the money thus illegally paid. The bank has received no benelit therefrom. The indorsement on the note in suit, of the amount of the check given by Peck, was erased by him. It cannot be doubted that the claim of the bank against them z-emains unaffected by what has been done. No part of his indebtedness has been discharged.
The proof shows that the officers of the bank had no knowledge that the note in suit was given for the accommodation of Peck. They might well regard the defendants as principals. Indeed, as to the bank, they must be deemed principals, and as having no defence in law or in equity. No payment has been made by them, or for, and on their account, which has enured to the advantage of the plaintiffs. Their indebtedness is not to be discharged because the indorser of the note, in which they are principals, attempted *554with other people’s money to make a payment, which he had no right to make and which the payee could not legally retain, and, being unable to retain, surrendered to the lawful owner. These facts would not establish the plea of payment in whole or in part. If all the facts, upon which the defendants rely, were duly pleaded, they would constitute no bar to the maintenance of this action, to the whole ex- ' tent claimed by the plaintiffs.
If there had been no indorsement upon the note in suit of the money of the State, wrongfully paid by Peck and received by the bank, there would hardly have been the pretence oí a defence. But an' indorsement is at best but evidence of payment and is open to explanation. It is not conclusive. The evidence entirely negatives any presumption of a valid payment.
As Peck could not defend against the note, so neither could these defendants, if they were to be regarded as his sureties. The alleged payment was an illegal one on the part of Peck. If the transaction was fraudulent on his part and on that of the bank, it was so as against the State alone and not as against these defendants, whether they be principals or sureties. It was for their benefit that the State should not intervene. If the State should interfere, they would lose nothing which belonged to them. Assuredly, they had no claim to the money of the State. If the bank had surrendered security, or in any way injuriously affected their condition, the case would be different. The bank could not do otherwise than it did. It simply paid over to the true owner, what did not belong to it.
The wrong attempted, was the injury of the State. But these defendants cannot invoke, by way of defence, a fraud on third parties, which did not in the slightest degree injure them, but which, if consummated, would have been beneficial to them to the extent of its consummation. The bank has received nothing the law authorizes it to retain. Peck has made no valid payment. These defendants have paid .nothing. The attempt of Peck to pay with the money of *555the State proved unsuccessful. If Peck and the officers of the bank attempted to misapply the funds of the State to the payment of the note in suit, and to the consequent benefit of these defendants, if the State should not interfere, they are not to be released from any legal liability, by reason of the failure of such attempt, unless their condition has thereby been made worse. This is neither alleged nor proved.
It is essential to a payment, that the title to the money or other property transferred for that purpose, pass to and vest in the creditor without the right of reclamation by the owner, if other than the person making such payment. "When the obligation is to give anything, the payment consists in an absolute transfer of the property. It follows, that it is essential to the validity of a payment, that it be made by a person who is able to make such transfer. Whence it also follows that the payment cannot be valid unless made by the proprietor of the thing, or with his consent; for otherwise, the person who makes the payment cannot transfer the property to his creditor; Nemo plus juris in alium transferre potest quam ipse habet.” 1 Evans’ Pothier, p. 3, c. 1, art. 1.
Though a payment, where no title to the thing passes to the creditor, would not be valid, iLseems the creditor, while retaining possession, cannot claim any other payment; he must suffer an eviction, or offer to restore what he has received to the debtor. 1 Evans’ Pothier, p. 3, c. 1, art. 1.
When the payment is with the money of a third person, and the creditor receives the same in good faith, and there is no right of reclamation, such payment would be valid. But, if the circumstances are such that the creditor cannot legally retain the money and, upon demand, he restores it to the owner, the debt cannot be regarded as paid. The person making the payment should in all cases be able to transfer a good title to that with which he makes his payment, whether it be money or specific articles.
Whether the defendants are principals, as the bank insists they are, or sureties, as they claim to be, the result is *556the same. In neither event can they set that np as a payment, which, being made with the money of the State and without right, the payor had no right to make nor the payee, knowing all the facts, to retain, and which was not retained. They have sustained no loss. They have no right to insist upon.a misapplication of the funds of the State, whether the result of fraud, of ignorance of the law, or of mistake, however much it might relieve them. Their debt remains unpaid. Their liability continues unchanged.

Defendants defaulted for the whole amount of the note in suit.

Kent, Walton, Dickerson and Danforth, JJ., concurred.