
    Rochester Printing Company, Appl’t, v. Leslie C. Loomis and Wilbur C. Woodworth, Resp’ts.
    
      (Supreme Court, General Term, Fifth Department,
    
    
      Filed June 25, 1887.)
    
    1. Banks and banking—Bills, notes and 'drafts—When-one is a bona FIDE HOLDER—WHEN SUBJECT TO EQUITIES.
    The defendants who did business with one Moore, a private banker, delivered to him the draft in question about quarter of four o’clock on the afternoon of December 19. At four o’clock the same afternoon, Moore’s banking office closed, and the next day he made a general assignment. The amount of the draft, less charges for exchange, was by Moore placed to the credit of the defendants in their account with the banker. And the same evening it was mailed by him to the City Bank of Rochester. Before it reached there the latter bank had finally closed its doors and ceased to do business. The draft, however, was placed to the credit of Moore on its books, as of date of December 19, against whom there, in his account, remained a balance of 04,000 after such credit. At the time Moore received said draft he was, and had been for a considerable time utterly insolvent. The plaintiff having a balance to its credit cf $3,000 in the City Bank, was paid by it the morning after its failure such balance in securities, amongst which was this draft. Held, That neither the City Bank nor the plaintiff was a bona fide holder of the draft. That each had received it on account of a precedent debt, and that it was subject to any defense which the defendants could have made to it in the hands of Moore.
    3. Same—Relation between bankers and customers—Implied rep re" SENTATIONS
    The relation between a banker and his customers is in some degree confidential, and the relation that he assumes, in view of the nature of his business, is in practical effect a representation on his part that he is' able to pay the drafts of his customers upon him for an amount equal to their deposits
    3. Same—When representations may be considered fraudulent.
    If the banker is in an irretrievable condition of insolvency, so that he knows or has reason to suppose that he cannot meet the engagements he assumes when he takes the funds of his customers deposited to be placed to their credit, the transaction may involve an implied representation or concealment which characterizes it as fraudulent on the part of the banker.
    4. Same—Representation as to ability to pay.
    The situation represented by the banker is that of ability, founded upon capital under his control, to meet his engagements, and if he has not, his customers are deceived and misled by the appearance he gives to his invitation for patronage
    5. Same—Mere expectations not sufficient to make representations ON.
    Good faith toward his customers requires something more for its support than mere expectation that funds will be supplied to enable him to meet his obligations to his 'depositors. The expectation must be founded upon some right of property or in some legal duty furnishing in a • reasonable degree the right to suppose that his wants will be supplied or that his demands for that purpose can be in some manner enforced. The mere promise of another to carry him is not sufficient. Haight, J., dissenting.
    6. Same—Practice—Right to sue for over-draft of account.
    At the time the draft was deposited with Moore a check was cashed which took inore than the balance of defendant’s deposit, if the draft was not included in it. Held, that the plaintiff was not entitled to recover the amount of such over-draft. That Moore’s assignee was the only one entitled to recover said amount.
    7. Same—Practice—Defense.
    A receiver was appointed of the property of the City Bank. Held, that whatever might be the right to said, draft as between the receiver and the plaintiff that question was not available to the defendant.
    ,8. Same—Credibility of witness—When for jury.
    The defendant called Moore as a witness. Held, that his relation to the transaction involved was such that his credibility was properly a question for the jury notwithstanding the fact that he became a witness at the instance of the defendants. That the jury was not bound to take his testimony, when uncontradicted by other evidence, as true.
    8. Same—Evidence— Admissibility of assignee’s schedules.
    The assignee of Moore made an inventory or schedule because the assignor failed to do so.. And having resigned, another person was substituted as such assignee, who also made a schedule of the assigned property. There was evidence tending to verify the schedules as correct. Held, that the evidence was properly admitted as tending to show Moore’s financial condition. Haight, J., dissenting.
    
      Appeal from judgment entered upon verdict for the defendant at Monroe circuit, and from order denying motion on case and exceptions for a new trial.
    
      John Van Voorhis, for app’lt; W. H. Adams, forresp’ts.
   Bradley, J.

The action is upon a draft drawn by the defendants in their firm name of Loomis & Woodworth, upon E. S. Tatem, of Philadelphia, of date December 19, 1882, for $983.63, which it is alleged was at its date by them delivered to William C. Moore, by him endorsed and delivered to Barnard, cashier or order, ánd by the latter endorsed and transferred to the plaintiff', and that it was protested for non-acceptance. The defense alleged is that the draft was obtained by Moore from the defendants by means of false and fraudulent representations and concealment by him respecting his financial condition; and that the plaintiff is not a bona fide owner or holder for value, and the allegations of transfer to and title of the plaintiff are put in issue. Moore had being doing business as a private banker at Victor, N. Y., for about twelve years. The defendants did business with him as such. They made deposits and drew checks upon his bank. This draft was delivered to him about 3:45 o’clock p. m. of December 19, 1882, and at four o’clock the same day his banking, office was closed and Moore’s banking ceased He left Victor, and on the next day made a general assignment for the benefit of his creditors. And the drawee of the draft was by the defendants advised not to accept or pay it. The amount of the draft, less charges for exchange, etc., was by Moore placed to the credit of the defendants in their account with the banker, and it was the same evening mailed by him to the City Bank of Rochester, and before it reached there the latter bank had finally closed its doors and ceased to do business. The draft, however, was placed to the credit of Moore on its books as of date December nineteen, against whom there in his account remained a balance of $4,000 after such credit. At the time Moore received this draft he was and had been for considerable time utterly insolvent, and as the jury were permitted to find, hopelessly so to his knowledge. His liabilities to depositors were $30,000, and altogether, his-liabilities amount to about $100,000, while his assets, as they finally turned out, were about ten per cent of that sum. He was authorized to suppose his condition was better than that, but not that he was solvent. He had been dependent largely upon the City Bank of Rochester for currency to support his banking business, with the president of which bank he had an understanding for aid in that respect; and when that bank failed he was unable to-proceed longer with his banking business. The plaintiff having a balance to its credit of 83,000 in the City Bank, was paid by it the morning after its failure such balance in securities, amongst which was this draft.

The City Bank parted with nothing in consideration of the draft, but merely credited it in Moore’s account It was not nor was the plaintiff a bona fide holder of the draft. By each it was received on account of a precedent debt, and it was subject to any defense which the defendant could have made to it m the hands of Moore. It appears that a receiver was appointed of the property of the City Bank. And it is contended by the defendant’s counsel that as the transfer of the draft by the bank to the plaintiff was in violation of the statute (1 R. S., 591, §§ 8, 9), the latter took no title. But whatever may be the right to it and its proceeds as between the receiver and the plaintiff, that question is not available to the defendant. National Bank v. Whitney, 103 U. S., 99. The trial court submitted to the jury the single question of fact whether or not Moore acted in good faith in the transaction of receiving the draft from the defendants, and held that if he did not the plaintiff was not entitled to recover. In other words, whether it was an honest transaction on the part of Moore in view of his financial condition and his understanding of it, for him to take the drafts from the defendants and assume the responsibility to them which he did by placing its amount to their credit on the books kept by him as a banker. The plaintiff’s counsel took exception to the charge as so made and to the refusal of the court to submit several propositions to the jury as requested, amongst which were the request to charge that to establish the defense the defendant must show that Moore made false representations to them with intent to deceive the defendants, and by that means procured the draft; also, that the answer of the defendants could not be sustained unless the jury should find that they were m fact deceived; also, that representations made to the world were not sufficient; that they must be to the defendants. The court had charged on that subject substantially that a banker, by proclaiming himself as such, and ready to receive deposits of his customers, holds himself out as a man of sufficient means to meet the obligations he in that manner assumes. And if his condition was such, and he knew it, when he received a deposit in the course of business with his customers, that he was likely to be incapable of meeting the-demand for it, he was bound to disclose that situation before he received the deposit; that men assuming that relation cannot be permitted to take the money of their customers when they know that they are unable to repay and likely to be compelled to suspend f that mere insolvency does not necessarily render the receipt of money by a banker fraudulent; but insolvency which is hopeless and irremediable, and renders him liable to shut his doors at any moment, makes it improper for him to continue the business of taking deposits without notice of his situation to customers; that the fact to be found is whether this deposit was received by Moore in good faith under circumstances which rendered it honest on his part to receive it, or whether it 'was dishonest and fraudulent towards his customers, the defendants, to receive it; that if a man is doing banking business fraudulently all the time, it is not necessary that he should entertain a particular fraudulent intent in each particular instance in which he receives deposits; that if this transaction was fraudulent on the part of Moore, the defense is established. And that if it was honest on his part, the plaintiff is entitled to recover. The charge as made covered the ground and stated fairly, we think, the proposition of fact which was for the consideration of the jury and to be determined by them to reach a result.

The relation between a banker and his customers is in some degree confidential, and he, it must be assumed, understands that they make him deposits upon the faith and reliance that he is financially able to pay their drafts upon him for an amount equal to their deposits, and the relation that he assumes in view of the nature of his business as such banker is in practical effect a representation on his part that he is able to do so. And if he is in an irretrievable condition of insolvency, so that he knows or has reason to suppose that he cannot meet the engagements he assumes when he takes the funds of his customers deposited to be placed to their credit, the transaction may involve an implied representation or concealment, which characterizes it as fraudulent on the part of the banker. Anonymous, 67 N. Y., 598; Cragie v. Hadley, 99 id., 131.

The defendants had been customers of Moore in his relation as banker for several months. And their defense did not necessarily depend upon representations expressly made by him to them in respect to his financial condition and ability, but might be implied from the relation he assumed banker, by means of which invitation was extended alike to them and others to open an account and deposit their moneys with him. It is true that deception was necessary to fraud, and unless the defendants were deceived they had no defense; but there is no evidence that they had any knowledge or information when they made this deposit that Moore was insolvent or was not responsible for all the obligations he assumed. And, therefore, in view of the charge as made the court was not required to further charge specifically that they must have been in fact deceived to constitute a defense. It may have been otherwise, if the jury had been permitted to find that the defendants had any notice of the financial embarrassment of Moore at the time the deposit in question was made with him. There seems to have been no error in the refusal to charge those propositions as requested. The court was also requested to charge the jury that if they believed the testimony of Moore that he intended and expected to go on in the business at the time he took the draft, no matter how poor grounds he had for that expectation, if he did so intend honestly, the defense could not be maintained; also, that if his failure was caused by the failure of the City Bank, and he did not know until 7.30 o’clock p. m. of December 19 that he would be obliged to fail, and had no intention of failing up to that time, the defense cannot be sustained; also, that if he honestly believed that Upton was able to and would carry him, although Moore was insolvent and knew it, if he relied upon that belief, he was guilty of no fraud in taking the draft. And to the refusals to charge those propositions respectively exceptions were taken.

Moore had testified that he neard of the failure of the City Bank between 7 and 8 o’clock in the evening, and up to that time he had no intention of making an assignment; that Upton (who was president of the City Bank) was carrying him, and agreed to carry and help him through. The expectation and intention of Moore, founded wholly upon the promise of Upton, resting it in no legal obligation to perform it, may have been a matter properly for the consideration of the jury on the question submitted to them, but it was not necessarily sufficient to reheve Moore from the imputation of inexcusable deception of his customers. It may be that if the City Bank had not failed he would have obtained from it a supply to carry him along, and its failure may, in that view, have caused him to suspend business, and that he believed that he would through Upton be thus relieved.

These circumstances were not wholly excluded from the consideration of the jury. But the court did charge in that respect that a man cannot honestly carry on banking business upon a mere promise of another to carry him without some security for the performance of the promise.

It will be observed that no legal duty had been assumed by Upton to provide Moore with currency to do his business. Good faith towards his customers required something more for its support than mere expectation that funds would be supplied to enable him to meet his obligations to his depositors. The expectation must be founded upon some right of property or in some legal duty furnishing in a reasonable degree the right to suppose that his wants would be supplied or that his demands for that purpose could be in some manner enforced.

If A, without capital, should open a banking office and announce to the public by appearances that he is a banker and proceed to receive the people’s money on deposit which he cannot and does not repay, it can hardly in the legal sense or necessarily be regarded as an honest enterprise on his part merely because B had given him-assurance unsupported by any liability that he would furnish him money as lie should, from time to time, need it.

The situation represented by the banker is that of ability founded upon capital under his control to meet his engagements, and if he has not, his customers are deceived and misled by the appearance he gives to his invitation for patronage. And this deception he has no right to produce whatever may be his hopes founded, neither on capital of his own or upon any personal obligation of another which he has not any power to command or enforce. At all events, whatever may be his hope or expectation under such circumstances he would not necessarily be relieved from the charge of fraud in obtaining moneys which he has failed and is unable to repay.

The request to charge called for more instruction to the jury than the court was required to give them.

It appeared that at the time of the delivery of the draft to Moore, the check of the defendants for $365, was also presented for payment, and paid by him, and. that the defendant’s balance in their account there, exclusive of the draft, was then $180.56 less than the amount of the check.

The court was requested to charge that if Moore paid on the defendant’s check on the strength of the draft, any sum of money at the time of its discount by him, the defense could not be sustained, because it does not appear that the money was returned or its return offered. Also, that Moore was the owner of the draft to the extent of the money he paid the defendants, and that it was good at least for that amount in the hands of any person to whom it passed. And to the refusal to charge those propositions respectively the defendant’s counsel excepted.

If the action had been brought by Moore, it may be seen that the defendants should have refunded to him or offered to pay this excess received from him of the amount of their balance, because the defense is founded upon rescission of the transaction in respect to the draft for fraud. Baird v. Mayor, 96 N. Y., 567; Gould v. Cayuga County National Bank, 99 id., 333.

But the right to restoration was that of Moore only, and passed to his assignee in the event that the delivery of the draft and credit given for its amount are repudiated and did not pass by the transfer made by Moore of the draft.

The defense, if effectual, goes to the draft entire,, and, as the plaintiff is not entitled in any event to the amount advanced by Moore, it is not in a position to assert the failure to return or offer to restore that amount as essential to the defense. So far as appears by the record, the right to that is in Moore’s assignee if recovery upon the draft is defeated. The defense can be supported upon the ground only that the transfer of it to Moore was rendered wholly void by fraud. And, therefore, no right of action for any amount exists upon it. If this view is correct, those exceptions were not weE taken.

The contention that because the defendants caUed Moore as a witness, they cannot assert the incredibility of his testimony, and that so far as it is uncontradicted by other evidence, it must be taken as true, and the exceptions founded upon those propositions are not supported. His relation to the transaction involved is such that his credibility was properly a question for the jury notwithstanding the fact that he became a witness at the instance of the defendants. Becker v. Koch, 104 N. Y., 394; 5 N. Y. State Rep., 688.

There was no evidence to permit the conclusion that the City Bank was a bona fide holder of the draft, and there was no error in the refusal to submit that question to the jury. It was sent by Moore to apply on his account there, and was credited to him accordingly by way of application upon an existing balance against him at the bank. There is no opportunity furnished by the evidence to say that the City Bank parted with any money or assumed any obligation upon the faith of this draft. Nor would the jury have been justified in finding that the plaintiff was a bona fide holder of it. As did the bank, the plaintiff received it on account of a precedent debt, and parted with no security it then had. Phœnix Ins. Co. v. Church, 81 N. Y.. 218; Noel v. Murray, 13 id., 167.

The assignee of Moore made an inventory or schedule because the assignor failed to do so. Laws of 1877, chap. 466, § 1, subd. 5, as amended by Laws of 1878, chap. 318. And having resigned, another person was substituted as such assignee, who also made a schedule of the assigned property. Objections and exceptions were taken to the reception of these schedules in evidence. At the time they were offered and received their admissibility was somewhat questionable, but we think with what then appeared the evidence subsequently introduced sufficiently tended to verify the schedules as correct, and in that view the question presented at the time they were introduced was one of order of proof. When the question of the competency of these schedules was before us in People v. Moore (37 Hun, 84), some of the evidence here, quite material, as bearing upon the correctness of those schedules was wanting, and the remarks there made upon the question are not necessarily applicable here. This evidence was introduced as bearing upon the financial condition of Moore. And he testified that the books from which it appears the schedules were taken and made were his, and accurately kept by him in his banking business, and that they correctly showed the accounts and the state of them up to one o’clock of December 19, 1882.

We have examined all the numerous exceptions not specifically referred to, and think there was no error upon the trial to the prejudice of the plaintiff. And that the verdict is fairly supported by the evidence.

The judgment and order should be affirmed.

Smith, P. J., concurs.

Haight, J.,

dissents upon the grounds that it was error to charge as matter of law that “a man cannot honestly carry on the business of banking upon a mere promise of another to carry him.” Schufeldt v. Schintzler, 21 Hun, 462, 465.

And the schedules were improperly admitted as evidence against the plaintiff. Tyler v. Brock, 68 N. Y., 418; Turner v. See, 57 id., 667; People v. Moore, 37 Hun, 84, 95.  