Gilman v. First Nat. Bank

(dissenting.) The action was to recover money paid by mistake by the plaintiffs to the defendant upon a draft presented to them for payment. Although the amount involved is not large, the principle is important, as determining the rights and duties of drawers, indorsers, and drawees upon a foreign bill of exchange; and as the facts are not disputed, and may be briefly stated, it will serve the purposes of clearness to set them forth. In January, 1891, a Mrs. Coekran, of Cadiz, Ohio, had deposited with the First FTational Bank of Cadiz, for collection, a bond of the township of Augusta, Kan. That bank sent the bond for collection to its correspondent, the Farmers’ State Bank of Augusta. The Farmers’ Bank collected the amount, and on January 23d its cashier drew a sight-draft on the plaintiffs, their FTpw York correspondents, in favor of the Cadiz bank, for $638.60. It did not appear whether or not the balance of the Augusta bank with the plaintiffs was then good for this amount or not. There were subsequent drafts upon them —presented, however, before this—which reduced the balance; but, on the other hand, deposits may have been made in the mean time. This draft the cashier of the Augusta bank forgot to mail to the Cadiz bank, being just then about to abscond. He did abscond, and his bank failed. Hearing of this, the Cadiz bank telegraphed to Augusta for news of the bond, with the result that the draft in question was found and mailed to the Cadiz bank, as it was advised by wire. Thereupon, on February 6th, before receiving the draft itself, *497the Cadiz bank wrote to the plaintiffs, asking them to hold an amount to> cover the draft; but, before receiving the reply, they paid the amount of the draft to their customer. When received, they mailed the draft to their Yew York correspondent, the defendant. The plaintiffs, after the payment to the-depositor by the Cadiz bank, replied that the account of the Farmers’ Bank was not good for the amount of the draft. Thereupon the Cadiz bank telegraphed the plaintiffs to apply any amount in their hands on the draft, and to» the defendant to accept partial payment thereof. This draft, however, having been presented with some 30 others by the defendant to the plaintiffs, tile-plaintiffs’ cashier, having overlooked the fact that there were not sufficient, funds in hand for the purpose, paid the draft in full. On the next day the-mistake was discovered, and demand was made upon the defendant for the return of the amount of the overdraft, which was refused.

There can be no question upon the evidence but that the payment of the draft was not a voluntary payment, but was made by the plaintiffs under a. mistake. Unless, therefore, there is some other ground or principle that would; prevent a recovery, the plaintiffs were entitled, as against the defendant, who» was the mere agent of the Cadiz bank, and against the Cadiz bank itself, to recover the money thus paid by mistake. The ground upon which the complaint was dismissed was that the plaintiffs sue upon the bill of exchange», which they failed to protest on the day when the demand was made, and that, by reason of that failure to protest the defendant has lost its claim against. the drawer. We shall confine our attention to a determination as to whether-this ruling was correct; for, though some question is made as to the strength, of the plaintiffs’ case upon the theory of the payment of the money by mistake, had this latter ground been relied upon, it might, under permission to» be obtained from the court, have been strengthened by other testimony. In-, other words, we think that this nonsuit must be sustained, if at all, upon the-ground upon which it was asked and granted, unless there was some other ground upon which it would have been impossible for the plaintiffs, if their attention had been called to it, to obviate it by further proof. We have been referred to no such other ground, and, as stated, it remains but to consider whether the ground relied upon for the nonsuit, viz., the failure to protest the bill on the day the demand was made, will prevent a recovery. As the; plaintiffs were the drawers of the bill of exchange, there was not, under the law governing commercial paper, any obligation upon them to protest the paper at all; and their failure to protest is therefore no bar to their recovery. It may, however, be insisted, inasmuch as the defendant, for the purpose of charging the drawer, would undoubtedly have been required to protest the paper, that the payment of the money, and the situation in which the defendant was thus placed by the possession which the plaintiffs had of the draft, prevented it from discharging its duty to protest the draft. This presents the-question upon which we think the rights of the parties depend. And, at the? outset, we do not agree with the claim of appellants that the fact that there were not funds sufficient in their hands to pay the draft in full would have-relieved the defendant from the obligation of protesting it in order to hold the drawer. It is only in cases where there are, to the knowledge of the drawer, no funds, or where subsequent to the drawing of the draft the funds are taken out, or it is clear that the drawer has no reasonable expectation that the draft will be accepted, that presentation and protest may be necessary. The reason for this is that the act of the drawer is a fraud. The rule is stated in Chitty on Bills (page 444) as follows: “If at any time between the drawing of the bill and its presentment and dishonor the drawee has some effects of the drawer in his hands, though insufficient to pay the demand, he-will nevertheless, in general, be entitled to notice of the dishonor, and the., loches of the holder will discharge him from liability. ”

*498Assuming, however, that the obligation rested upon the defendant of pro"testing the draft, it remains to be determined whether the mistake prevented the defendant from discharging this duty, which, if it did, by relieving the •drawer, would prevent the plaintiffs from recovering the overdraft from the ■defendant. We shall consider, therefore, the motion for a nonsuit, as though •made upon the ground that the plaintiffs, by their delay in discovering the 'mistake, had made it impossible for the defendant to protest the draft, and •that the defendant would therefore become answerable in damages to the Cadiz bank if it had returned the money. The answer to this claim is that the situation was in no way changed by the failure of the plaintiffs to discover their mistake until the morning of the day following the presentment of the draft. If the defendant had then acceded to the demands of the plaintiffs, and a-eturned the payment as made by mistake, it could have protested the draft, and ¡notified the drawer, equally as well as on the day before. "We assume that the principle will not be disputed that the protest of a bill can always be made on ¡the business day next succeeding that of presentment. Smith v. Poillon, 87 N. Y. 590; Bank v. Vail, 21 N. Y. 485; Burkhalter v. Bank, 42 N. Y. 538. Under the authority of these cases, as the draft was only received by the deifendant on the 10th, they could, on returning, on the 11th, the payment made by mistake on the 10th, again have presented the draft for payment, and, on its being refused, immediately protested it, and given notice to the •drawer, and it would thereby have been duly charged. Where, as here, therefore, the mistake was discovered in time to enable the defendant to correct íhe same, and discharge its duty to its principal, by protesting the draft, as against the drawer, it should not be allowed to take advantage of the fact that the draft, by being paid, was in the possession of the plaintiffs, because such possession could have been recovered by the repayment of the money when demand was made therefor. In our view, upon the facts, the discharge of the drawer from liability because of the non-protest of the bill is not chargeable to the plaintiffs, but is directly the result of what must be considered the indefensible position assumed by the defendant’s principal, the Cadiz bank, who, with full knowledge of all the facts, that there was not money sufficient to pay the same, had instructed the defendant to receive partial payment, and when, through a mistake, it had obtained possession of the whole amount, insisted on returning the same, illegally and unjustly, as against the plaintiffs. "This circumstance alone, that the Cadiz bank had requested the plaintiffs to make, and the defendant to accept, partial payment, would absolve the defendant from the obligation of protesting. Such a request was inconsistent with the right to require protest of the draft, and must be considered as an express waiver of it. The Cadiz bank knew' that in the regular course of business the draft would be protested, and notwithstanding this they telegraphed to the plaintiffs and defendant to make and accept partial payment, after which it would, of course, be impossible to protest the draft, for the reason that the mercantile law knows no such thing as protest after partial payment of commercial paper, or the protest of partially-paid negotiable paper. The defendant owed a duty simply to the Cadiz bank, and to no one else; and the Cadiz bank had the right to instruct the defendant, as its agent, to pursue a course which, while it might release the drawer, who at the time was known to have failed, would at the same time secure the partial payment of the draft. Under these circumstances, it would be impossible, it seems to us, for the Cadiz bank to maintain an action for damages against the defendant, if it had returned the money which it had received by mistake.

Our conclusion, therefore, is that the ground upon which the nonsuit was placed, viz., the failure of the defendant to protest the draft,—there being no such duty upon the plaintiffs as drawees,—is untenable, and that the other theory upon which it is sought to justify the nonsuit, viz., that the re*499lease of the drawer was due to the mistake of the plaintiffs, thus barring a recovery, is not supported by the facts in the case, or by the authorities bearing upon the subject. We think, therefore, that the exceptions should be sustained, and a new trial ordered, with costs to the plaintiffs, to abide the event.

This is an appeal from a judgment entered on the dismissal of the complaint at circuit. The action was brought to recover back a sum of money which the plaintiffs claim was paid by mistake on a draft or bill of exchange presented to them by the defendant, and paid, on the 10th day of February, 1891. There is no dispute as to the facts, which are, in brief, that a Mrs. Cockran, living at Cadiz, in Ohio, deposited for collection with a bank located and doing business at that place a bond of a Kansas township. That bond was sent by the Ohio bank to a Kansas bank, which collected its amount on the 23d January, 1891. The plaintiffs were the New *496York correspondents of the Kansas bank, and, on the day last named, that bank, by its cashier, drew a sight draft on the plaintiffs, which was, after some delay, received by the Cadiz bank, and was forwarded by that bank to the defendant for collection. Meantime, and on the 6th of February, the Cadiz bank notified the plaintiffs of the existence of the draft, and requested them to hold moneys of the Kansas bank sufficient to meet it. On the 9th February the plaintiffs telegraphed the Cadiz bank that the drawer had not sufficient funds to meet the draft. On the same day the Cadiz bank, in reply to the telegram last referred to, requested (by telegraph) the plaintiffs to apply to the draft what funds they had of the Kansas bank. There is nothing in the case to show the exact state of the account between the drawing bank and the plaintiffs, but there were several transactions had between them intermediate the 23d January and the 10th February. On the last-named day, as appears from the letter and telegrams above referred to, the plaintiffs, with •full knowledge of the fact that there was not enough money in their hands to the credit of the account to which the draft was to be charged, paid it in full to the defendant. The next day the plaintiffs made reclamation, not of the whole amount paid, but only of the amount of the deficiency in the account of the Kansas bank. There is nothing in the testimony to establish mistake of the plaintiffs. The only witness who testified on that subject is Burn-ham, the plaintiffs’ cashier, and he says he did not know what the balance on hand was to pay the draft until after the payment was actually made. His principals did, however. In the absence of any other testimony, it is quite clear this draft was paid in the usual course of business, and, notwithstanding the plaintiffs knew it was not good, in full, on the day preceding its payment. We do not think a ease of mistake was made out, such as would entitle the plaintiffs to recover, and more especially as it is clear that by reason of the payment a protest of the paper was prevented. It was a foreign bill. Bank v. Varnum, 49 N. Y. 276. The act of payment, of course, prevented the protest; and, before an action could be maintained against the drawer on the draft, protest was necessary. 2 Daniel, Keg. Inst. § 926. We think the complaint was properly dismissed, and that the judgment should be affirmed, with costs.

Van Brunt, P. J., concurs.