Merchants' National Bank v. Procter & Gamble

It is apparent that the principal object in the establishment of the Clearing-house is to facilitate exchanges between its members. It is no longer necessary there should be a settlement by each bank with every other at their respective counters. It is a mere rendezvous of bankers’ clerks, the manager a disinterested party whose salary is paid by each bank in proportion to its capital. The debit and credit balances on the books of the Clearinghouse are not balances owing to or due from it. There is a manifest intention to make the Clearing-house totally irresponsible; and whether that intention can be effected in a proper case, the court is not now to consider.

The plaintiff-, who was the holder of the check drawn by the defendants, had until the next day to present it for payment to Homans & Co. This we hold to be the law, according to the text-books and a very great number of decisions of the highest courts in this country and in England. . .

If the plaintiff had not passed the check through the Clearing-house, but presented it at the counter of Homans & Co., o-n the 26th of August, 1869, the day after its date, and had demanded payment, and it had been refused, and the defendants were notified thereof, it is admitted the defendants would be liable.

Was not this, in fact, done? The defendants claim:’

1. That there was presentment and demand on the 25th of August to Homans & Co., at the Clearing-house, and that the check was either paid or dishonored. If paid, that is an end of the defendants’ liability. If not paid it was dishonored, and defendants should have been notified, and the parties failing in that, defendants are discharged of damáges.

2. That it was partly paid on the 25th of August, and a novation and postponement of the balance occurred, from which it is argued defendants are discharged.

3. That the drawers are not bound, because there was not a good demand on Homans. & Co. on the 26th of August; that the demand .was for too much.

*9The first proposition made by the defendants assumes that what was done at the Clearing-house was a payment of this check so as to discharge the drawers. This proposition also involves one of the same questions that is presented in the second proposition. We think that it can not be said that the check was paid on the 25th of August, though it was delivered to Homans & Co., by them treated as canceled, and charged up to the defendants’ account on their books. But we think a reference to the articles of association of the Clearing-house plainly shows that the manager’s warrants were not intended to be regarded as payment; for the Clearing-house, as such, had no balances anywhere in which it had any interest and upon which it could draw. The association was, in no event, to be responsible, and the articles provide for this case. Under the very circumstance happening, the manager’s warrant was returned, and the check sued on obtained according to the articles of association. It was clearly not intended to change the rights and obligations of the respective members of the association. On the contrary, it was intended that they should be in the same position, and no better or worse than on the old system, where settlements were made at the counter of the banks. Its warrants are not negotiable, and in this and other respects already mentioned, the warrants have not the characteristics of ordinary bank cheeks. They can not be regarded as payment until actually paid. Even taking an ordinary bank check is not always regarded as payment of a bill of exchange until actually paid. (Byles on Bills, 17.) And the delivery of a check to Homans & Co., and its cancellation and charge to defendants’ accounts, does not vary the rights o'f the parties. In all the cases referred to, the principle that the delivery of the check discharges the drawer, goes upon the fact that thereby the holder would be disabled from producing it when he calls upon the drawer. But here the holder obtained the check, and demanded payment and protested it. And the cancellation by Homans & Co. could make no difference, nor add to the *10effect of its previous delivery, nor yet its previous debit to defendants’ account. Homans & -Co. did these things in their own wrong, and it was not in the power of the plaintiff to prevent them.

The check of a third person, received on the surrender of a note, without an express agreement that it shall be received in payment, is not payment, if the check is dishonored, and the fact that the check sued on was delivered up, charged, and canceled, is not conclusive that it was received absolutely and paid.

There must be proof that it was intended that the manager’s warrant should be payment, or that it was so agreed by the parties, or that the laches of the creditor has been an injury to the debtor, none of which conditions appear in this case. Merrick v. Bowry, 4 O. S. 60.

We do not think, as this Clearing-house is constituted, that what was done there on the 25th of August can be said to be a presentment and dishonor of the check sued on. There is no evidence to sustain such a hypothesis. On the contrary, the check was received by Homans & Co., and charged up against the defendants on their books. We have seen that this transaction d;d not constitute a payment, nor yet a novation. And that there was'not any laches to the loss of the defendants.

It is said, however, secondly, this check was partly paid on the 25th, by the surrender to plaintiff of the check for $581, held by Homans & Co. upon them that day, and that thus the transaction amounted to a novation, so that defendants were diseb arged. But this check was substantially returned to the Clearing-house on the 26th, and the whole transaction stood as it did before the checks were exchanged, the plaintiff receiving back $547, its proportion of the surplus left after making good the manager’s dishonored warrant on Homans & Co. Besides, we do not think we ought to give any such effect as that claimed to the operations of the Clearing-house.

There was not the substitution of any new security, for *11these warrants of the Clearing-house wrere not checks legally, and of themselves amounted to nothing unless paid.

It is said, thirdly, that the check sued on ought to have been credited with the $581, the amount of the check held by Homans & Co., and a demand made on Homans & Co. for the difference only, and that, therefore, the presentment and demand are not good. But this claim for $581 was substantially surrendered to the Clearing-house. Homans & Co. made no such objection at the time, and it is incumbent on the defendants to prove that the smaller amount would have been paid, and they were not misled. Besides, the plaintiff took the check sued on in the usual course of business, to be collected for the depositor. If it were not paid, and the plaintiff' performed its duty, though credited to the depositor on the books of the plaintiff, the plaintiff would have returned it to the depositor. The plaintiff was the mere agent for collection, and when it presented that check to Homans & Co., the alleged offset was not in the same right. It would noj; have been equitable to have required the plaintiff' to credit the check which Homans & Co. had held against it. It is evident that defendants, on the 26th of August, so regarded it, as they offered to pay the whole amount, and were only prevented by the fact that the plaintiff had not yet got possession of it from the Clearing-house. The presentment and demand on the 26th were not only duly made, but were in time; and as the parties consent to credit the smaller check, the amount may be credited.

The Clearing-house is not only convenient, but useful, ánd its operations are approved by experience, and have been recognized by the courts in England, and perhaps in this country.

The defendants must be held liable, and judgment may be taken, less the credit agreed upon.

Judgment for the plaintiffs.

*12The counsel for the defendant in this ease made application to the Supreme Court for leave to file a petition in error, which, on consideration, was refused.