
    The Tradesmen’s National Bank, Plaintiff, v. Bank of Commerce, Indianapolis, Defendant, Impleaded with W. C. De Pauw Company.
    
      Bills cmd notes — what indorsement by a bank and, rediscount of a note is not an accommodation indorsement — estoppel.
    
    In an action brought to recover upon a promissory note for $10,000, it appeared that the defendant, the Bank of Commerce, Indianapolis, was a foreign corporation, of' which, as well as of several other banking corporations, N. T. De Pauw was the president. By several of these banks, including the defendant, accounts were placed with the plaintiff, a domestic corporation, De Pauw individually, however, having no such account.
    In June, 1892, the plaintiff loaned the sum of §30,000 upon notes indorsed by De Pauw, and when, oñ November 7, 1892, De Pauw wrote to the plaintiff to secure a further loan for one of his corporations, the plaintiff declined to make the loan, but finally agreed to take further paper, provided it was first negotiated to another, bank and then rediscounted by the plaintiff. Such a note for §20,000 was subsequently sent by the cashier of the defendant bank to the cashier of the plaintiff for rediscount; this note was made by W. O. De Pauw Co., and ran four months.
    On the 28th day of November, 1892, the proceeds of its discount were credited by the plaintiff to the defendant bank in general account, and the defendant bank upon its part credited the amount of the note to the maker; the maker ■ had checked out its amount before the plaintiff had notified the defendant bank that the plaintiff had credited it with the amount of the rediscount.
    On March 27, 1898, the §20,000 note became due and was charged by the plaintiff to the defendant bank in its account.
    On the 7th of April, 1893, a note for §10,000, made and indorsed in the same way as the §20,000 note, was received, discounted and its proceeds credited by the plaintiff to the defendant bank in its account'. This note was not paid at maturity, and remained unpaid until October 3, 1893, on which day the plaintiff received the note in question, dated September 28, 1893, which was discounted and its proceeds credited in the same way. The action,was brought upon this latter note, which was not paid at maturity, and the question at issue was whether the defendant bank was merely an accommodation indorser.
    
      Held, that, assuming that the first note for §10,000 was a renewal of the note for §20,000 credited by the plaintiff to the defendant bank on the 28th day of FTovember, 1892, the discount of the §20,000 note was a direct transaction between the plaintiff and the defendant bank, as the defendant bank received the money, used it in the ordinary course of its business and drew against this credit in the same manner as against the other credits contained in the account then existing between it and the plaintiff, the defendant bank having used its own money to pay the checks of the maker of the note, inasmuch as these were paid before the defendant bank had received any credit from the plaintiff upon the rediscount of the §20,000 note;
    That as the defendant bank had received the proceeds of that note and had used them, it could not now be allowed to say that its cashier had no authority to apply for the rediscount.
    Motion by the defendant, the Bank of Commerce, Indianapolis, for a new trial on a case containing exceptions, ordered to be heard at the General Term in the first instance upon the verdict of a jury' rendered by direction of the court after a trial at the New York Circuit.
    
      William Allen Butler and John Notmiam,, for the motion.
    
      A. Blwmenstiel, opposed.
   Van Brunt, P. J.:

The plaintiff in this action is a hanking corporation incorporated under the laws of the State of New York. The defendant, the Bank of Commerce, Indianapolis, is a corporation organized and incorporated under the laws of the State of Indiana and doing a banking business at Indianapolis, in said State. In November, 1891, and down to and including the time when the transactions referred to in the complaint in this action took place, one N. T. De Panw of New Albany, Indiana, was extensively engaged in business in Indianapolis. He was president of the W. C. De Pauw Company, a plate glass manufacturing corporation, and also of the New Albany Bank, at New Albany; of the Merchants’ Bank of the same place, and of the defendant, the Bank of Gommerce, Indianapolis. At the solicitation of one Bogan C. Murray, who was vice-president of the plaintiff, De Pauw caused bank accounts of the banks of which he was president to be placed with the plaintiff, and the defendant bank kept a running account with the plaintiff, down to and including the time when the transactions mentioned in the complaint in this action took place, against which the Bank of Commerce drew its checks and deposited in the 'ordinary way.

In June, 1892, the plaintiff loaned $20,000 to the New Albany Woolen Mills Company, in which De Pauw was interested, on its note, with the individual indorsement of De Pauw, and subsequently it loaned $10,000 on like security. On the Jth of November, 1892, De Pauw wrote to the plaintiff stating, “ 1 will want to use about $20,000 for one of our factories about the 20th of this month. If agreeable I will send you the paper. I do not think we will want to use any more this year,” etc.

On the 11th of November, 1892, the cashier of the plaintiff wrote to De Pauw as follows: Referring to your favor of the Jth instant to Mr. Murray, officially, I beg to inform you that he is out of town at present and is not expected to return for several days. Tour application, however, for $20,000 was placed before our board this morning, and they are unwilling to increase your line. The activity in the money market continues. Inasmuch as you already have $30,000, our folks concluded that your present line was as large as your balances warrant.”

■ On the fourteenth of November De Pauw seems to have answered this letter, and on the sixteenth Mr. Granniss, the president of the plaintiff, wrote Mr. De Pauw as follows : “ Our cashier has handed me your favor of the 14th inst., and we also note your favor of same date to our Mr. Murray, who is now west. I have taken pains to look over his letter to yon of April 12th to which you call our attention, and it refreshes my mind as to the circumstances connected therewith. Mr. Murray was extremely anxious to bring with him some of his old friends to this bank, and we will endeavor to afford all the accommodation possible consistent with our banking rules. We have already discounted to the extent of $30,000 directly to you, which really is as much as we can consistently do, bearing in mind the fact that you have no direct account with us. Cannot you arrange to send new paper through one of the banks in which you are interested and let us re-discount for them ? This will commend itself to our board as more correct banking and at the same time you will obtain the' desired accommodation.”

On the 19th of November, 1892, De Pauw wrote to the assistant cashier of the defendant bank at Indianapolis as follows: I hand you herewith note of the W. C. De Pauw Co., for six months, $20,000, payable to the Bank of Commerce.

“ Please kindly forward this with your indorsement to the Tradesmen’s National Bank of New York. I have arranged with them to ■take it as a re-discount from the Bank of Commerce, so that you can safely check on it immediately.

“We will not check for any .part of the proceeds of this until Wednesday, so that I presume you will not get it before Friday.”

On the 21st of November, 1892, the assistant cashier of the defendant bank addressed the following letter to the cashier of the plaintiff: “ Please find inclosed W. C. De Pauw Co. note at 6 mos., from Nov. 23, ’92, for $20,000.00.

“ Mr. N. T. De Pauw instructs me to send this to you for re-discount, he having made an agreement with you to that effect.”

Objection having been made by the plaintiff to a note at six months, the cashier of the defendant bank on the 25th of November, 1892, wrote to the cashier of the plaintiff as follows: “ Your favor of Nov. 23rd, 1892, returning W. C. De Pauw Co.’s note for 20 M. is at hand.

“ I have wired them of the change you request, and will forward their note properly drawn as soon as reed!

“ This will probably cause our account to be over with you for a day or two, but will fix it as soon as possible.”

And on the 26th of November, 1892, the cashier of the defend- • ant bank wrote to the cashier of the plaintiff as follows: “ Enclosed find W. C. De Pauw Co. note for $20,000, time four mos., in correction of note at six mos. Please credit us with the same and oblige.”

On the twenty-eighth of November the proceeds of the discount of the note were credited to the defendant bank in general account, and were drawn upon, on divers days subsequent thereto and in various amounts. The defendant bank, upon forwarding the first note to the plaintiff, credited the amount to the W. C. De Pauw Co., and charged it to the plaintiff upon its books. The W. O. De Pauw Company checked this amount out of the defendant bank before the defendant bank received advice of the credit from the plaintiff. On the 27th of March, 1893, the due day of said $20,000 note, it was charged in the account of the defendant bank by the plaintiff; and on the 7th of April, 1893, a note for $10,000, made and indorsed in the same way as the $20,000 note, was received by the plaintiff and discounted, and the net proceeds of that note credited to the defendant bank in its account with the plaintiff. When this $10,000 note became due on the 3d of July, 1893, it was not paid at maturity, and remained unpaid and in the possession of the plaintiff until the 3d of. October, 1893. On that day the plaintiff received another note of $10,000, dated the twenty-eighth of September, which was discounted in the same way as the previous note, and the proceeds credited. This renewal note not having been paid at maturity, this action was brought to recover upon the same.

Upon the trial the court directed a verdict for the plaintiff, to which the defendant bank excepted; and the court ordered the exceptions to be heard, in the first instance, at the General Term.

Neither party asked to go to the jury, and the questions presented are, therefore, only questions of law. There does not seem to be any dispute as to the rule of law which is applicable in cases of this description. It is conceded upon the part of the plaintiff that if the indorsement of the defendant bank is to be considered as an accommodation indorsement, no recovery can be had. The question, therefore, is as to whether the defendant bank was an accommodation indorser. It seems to be assumed by the counsel on both sides that the note' in question is to be treated as a renewal of the $20,000 note, which was the first transaction of this kind had between the defendant bank and the plaintiff.

Upon an examination of" the accounts, however, it might be somewhat difficult to see that the note in suit has any connection with the $20,000 note. That note seems to have fallen due on the 27th of March, 1893, and to have been charged by the plaintiff to the defendant bank upon that day; and it was not until the 7th day of April, 1893, that the note falling due upon the 3d of July, 1893, for $10,000 was discounted by the plaintiff and placed to the credit of the defendant bank. The note in suit was undoubtedly a renewal of this note. But, assuming that the first $10,000 note was a renewal of the $20,000 note given in November, 1892, it is diffieult.to see upon what basis it can be held that the discount of that note was not a transaction between the plaintiff and the defendant bank. It appears from the correspondence that although De Pauw was in the habit of having notes of his corporations with his individual indorsement discounted by the plaintiff bank, he had no account with such bank. The defendant bank had such an account, and in the transaction in question the proceeds of the discount of the notes were credited by the plaintiff in its account with' the defendant bank; and this specific money does not seem to have been checked out by the defendant bank, but checks in various amounts in the ordinary course of business were drawn against its account, none of such checks apparently having any special reference to the amount of this discount.

It, is true that the evidence shows that the defendant bank placed the amount of this note to the credit of De Pauw and his companies, the and that it was checked out of the Bank of Commerce at Indianapolis prior to the time when it was actually credited in the account of the defendant bank with the plaintiff. It appears from this that the whole transaction was between the defendant bank and the plaintiff; that the defendant bank got the money and used it in the ordinary' course of its business, and drew against this credit precisely as against the other credits contained in this accountand that there was no ' difference in the treatment of this credit and in that of any others which are contained in the account.

This case is clearly distinguishable from the case of Fox v. Rural Home Company (90 Hun, 365). In that case, at the time of the discount, the plaintiff drew his cheek for the proper amount to the order of the corporation, the indorser of the note, which was depos-' ited to the credit of its bank account, and on the same day that company, by its cashier, drew two checks payable to the order of the cor- . poration for whose accommodation the discounted note was indorsed, amounting to the precise sum of the discount. It wás held that the burden was upon the holder of the note to show that the corporation had power to indorse for accommodation, and also that the cashier had power to; make the indorsement in question or similar indorsements ; and that the fact that the cashier of the corporation, without authority, deposited to the defendant’s credit the check given by . the plaintiff for the note, and then transferred the proceeds of the discount to another company by the checks of the corporation, was of no more significance than if he had given the money to such corporation or had indorsed the check over to it.

The proof in the case at bar is entirely barren of evidence going to show that the proceeds of the discount were paid over by the defendant bank as such, to the W. C. De Pauw Company. The proceeds of the discount went to the credit of the defendant bank in its account with the plaintiff and were drawn against generally in the conduct of its business; and it appears that in its payment of the De Pauw checks upon it, it used its own money, as such checks were paid prior to the time when the defendant bank received any credit upon the discount of the $20,000 note.

Under these circumstances it cannot be said that the defendant bank has not received the proceeds of the discount; and having received .such proceeds it cannot now be allowed to say, after having Used such proceeds, that its cashier had no authority to apply for the ré-discount.

The court having upon the evidence in question determined that this was not an accommodation indorsement, and there being no request to go to the jury upon this point (and, indeed, it is doubtful if the jury under the facts appearing would have been allowed to find that it was an accommodation indorsement) the exceptions must be- overruled, and the motion for new trial denied, and judgment ordered for the plaintiff upon the verdict, with costs.

Barrett, Rumsey, O’Brien and Ingraham, JJ., concurred.

Exceptions overruled and motion for new trial denied, and judgment ordered for the plaintiff on the verdict, with costs.  