Summary
In O'Connor v. Mechanics' Bank, 124 N.Y. 324, it was decided that an ordinary uncertified check upon a general bank account is neither a legal nor an equitable assignment of any part of the sum standing to the credit of the depositor, and confers no right upon the payee which he can enforce against the bank; and further, that 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.
Summary of this case from Donohoe-Kelly Banking Co. v. Southern Pacific Co.Opinion
Argued January 30, 1891
Decided February 24, 1891
Edwin R. Leavitt for plaintiff.
William C. Beecher for defendant.
This is not a creditor's bill to establish a lien, or to remove an obstacle to the collection of a debt, but a strict action at law to recover a definite sum of money from the defendant. It does not involve the right of the plaintiff to proceed against the executors, or to collect the debt that he represents out of any interest which the judgment debtor may have in his father's estate. In order to recover in this action the plaintiff was bound to show that when the third-party order was served upon the defendant, it had in its possession or under its control certain personal property then belonging to the judgment debtor, or that it then owed him a debt exceeding ten dollars in amount. (Code Civ. Pro. §§ 2441, 2468 and 2469; McCorkle, as Recr., v. Herrman, 117 N.Y. 297.) The real question, therefore, is whether the bank was owing the judgment debtor anything, or had any of his property in its possession or under its control? The deposit by the executors with the defendant of money received by them from the sale of the personalty, the apportionment thereof among the lagatees and the mailing of the check, form the basis upon which the plaintiff rests his claim that the bank either owed a debt to the judgment debtor or was possessed of some property belonging to him. As the legal title to the personal property before it was sold was in the executors, so the legal title to the proceeds of the sale was in them. When they deposited the proceeds in the bank, however, the title to the money passed to the defendant, which impliedly promised to pay the debt thereby created by honoring the checks of the depositor as they were presented. Thenceforward the relation of the bank and the executors was that of debtor and creditor only. In a legal sense the executors had no money in the bank, but simply a debt against the bank for the amount of the deposit. ( Ætna National Bank v. Fourth National Bank, 46 N.Y. 82, 86; Viets v. Union National Bank, 101 id. 563, 573; Lynch v. First National Bank, 107 id. 179, 184.) Therefore, unless this debt, which the executors held against the defendant, was in some way transferred, wholly or in part, to Herbert F. Beecher, there can be no recovery by the plaintiff who has simply the title of the judgment debtor. There was no transfer of the debt unless the apportionment and distribution by the executors and the giving of the check by them effected a change of title thereto. The apportionment and distribution was apparently a mere agreement by the executors among themselves, subject to revocation or change at any time before actual performance. No assignment was made either in writing or even by oral agreement, as was the fact in the case of Risley v. Phenix Bank ( 83 N.Y. 318). The mere determination of the executors to apportion and distribute among the legatees certain funds on hand, accompanied by no act of performance, transferred no title or interest therein to anyone, and had no effect upon the debt against the bank which had no notice that a distribution was intended or that any special fund was set apart for that purpose. No act either of apportionment or of distribution was shown, except the giving of the check, and that did not operate as a transfer to the holder of any right as against the bank. An ordinary, uncertified check upon a general account is neither a legal nor an equitable assignment of 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. ( Attorney-General v. Continental Life Ins. Co., 71 N.Y. 325; Duncan v. Berlin, 60 id. 151; Ætna National Bank v. Fourth National Bank, supra; Chapman v. White, 6 N.Y. 412; Carr v. National Security Bank, 107 Mass. 45, 48.)
Such a check, as was said by the Supreme Court of the United States in a recent case, "is simply an order which may be countermanded and payment forbidden by the drawer at any time before it is actually cashed." ( Florence Mining Co. v. Brown, 124 U.S. 385, 391.)
The rule is otherwise when the check or order is drawn upon a particular fund which is specified, but that has no application to this case, because the check in question was in the ordinary form and was drawn upon no particular or specified fund. There was no transfer, therefore, by the executors to the judgment debtor of any part of their claim against the bank, and the plaintiff had no title upon which to found this action unless it was derived from some source other than the executors. Even if the judgment debtor, after the delivery of the check to him, could have compelled the executors to pay it, still he could not have compelled the bank to pay it, because there was no contract between him and the bank, and no assignment of any interest in the contract between the executors and the bank. The holder of an ordinary check, unaccepted and uncertified, cannot compel payment from the bank upon which it is drawn, even if the account of the drawer is sufficient to meet it when presented. Under such circumstances the right of action belongs to the drawer or creditor of the bank and not to the holder who is merely a stranger. ( Viets v. Union National Bank, 101 N.Y. 563, 572; Ætna National Bank v. Fourth National Bank, supra; Winter v. Drury, 5 N.Y. 525.)
The courts below proceeded to judgment upon the theory that the moneys were deposited by the executors as the property of the estate, and upon the apportionment between the legatees became impressed with a trust in favor of the judgment debtor. In support of this position certain cases were relied upon which hold that a bank dealing with the agent of a disclosed principal, who not only owned the moneys deposited, but held the check of the agent therefor, could not refuse to pay such check. ( Van Alen v. American National Bank, 52 N.Y. 1; Baker v. New York National Exchange Bank, 100 id. 31; Viets v. Union National Bank, 101 id. 563.) The principle underlying these authorities, as stated in the case first cited (p. 4), is "that so long as money or property belonging to the principal, or the proceeds thereof, may be traced and distinguished in the hands of the agent, or his representatives, or assignees, the principal is entitled to recover it unless it has been transferred for value without notice." In other words, when the debt created by a deposit belongs to the principal, instead of the agent who made it in his own name, the bank, upon notice of the facts, must recognize the actual rather than the nominal depositor. This principle is frequently applied by courts of equity to prevent a misappropriation of trust funds, but it does not apply to the case in hand, because no attempt at misappropriation is claimed, and because this is an action at law where the judgment debtor was not the principal and the executors were not his agents in the sense required to change the relation between the depositor and depositary.
As was said in Fletcher v. Sharpe ( 108 Ind. 276), "When deposits are received, unless they are special deposits, they belong to the bank as a part of its general funds, and the relation of debtor and creditor arises between the bank and the depositor. This is equally so whether the deposit is of trust money, or funds which are impressed with no trust, provided the act of depositing is no misappropriation of the fund."
There had been no accounting by the executors when the receiver was appointed, and it was not yet time for them to account, as less than a year had passed since the will was admitted to probate. All the property of the testator, by force of the will, vested in the executors in trust for the benefit of the legatees. While the judgment debtor had a general claim to one-fourth of the net residuary estate, he had no title to any specific part, nor to the proceeds of any specific part, and his claim could not be enforced until after the time for an accounting had arrived. Prior to a judicial determination that all the debts of a testator have been paid, made after proper notice, all payments to legatees are at the peril of the executors, for the assets of an estate are held by them primarily for the benefit of creditors. The apportionment and distribution made by the trustees, as already appears, conferred no right upon the legatees, except as checks were given in performance and the checks conferred no right that was capable of enforcement against the bank.
Without considering any of the other points urged upon us, we think that the plaintiff, according to the record now presented, had no title to the debt against the defendant, created by the deposits of the executors. It follows that the judgment should be reversed and a new trial granted, with costs to abide the event.
All concur.
Judgment reversed.