
    Jacob Ouderkirk, Resp’t, v. Central National Bank of Troy, App’lt.
    
      (Supreme Court, General Term, Third Department,
    
    
      Filed March16, 1889.)
    
    1. Principal and agent—When third party not chargeable with: KNOWLEDGE OF DIRECTIONS GIVEN TO AGENT.
    The plaintiff gave certain bonds to the defendant as collateral security to a note of his discounted by it. Subsequently the note was paid. The-cashier did not give plaintiff the bonds, but gave him a receipt therefor. Subsequently the plaintiff demanded the bonds, and upon them being not forthcoming, brought this action against the bank for wrongful conversion. The bank deny the conversion, allege that it has not got the bonds, and never authorized the cashier to receive them, and that the cashier converted them, jGeld, that the plaintiff is not chargeable with knowledge of any directions given by the bank to its cashier, and that the bonds must be considered as deposited with the bank, and not with him.
    3 Bailment—Deposit—Liability of depository confined to gross negligence.
    If a creditor holding a pledge assent, after payment of the debt, to hold, the pledge for the benefit of the debtor, it becomes a deposit, and as such, deposit is entirely gratuitous, and no benefit accrues to the depositary, he is liable only for gross negligence.
    3. Same—When bailee liable for negligence—Charge to jury.
    The jury were charged on the trial “ that the plaintiff was entitled to recover, unless the defendant could show that the loss was not caused by any act or negligence on the part of the defendant; that the defendant was not only liable in case of gross negligence, but was liable when the loss was occasioned by any neglect on its part. Held, that as the holding by the bank was not gratuitous, but for use as collateral for future loans, and as it also had the right to collect the coupons and make returns to the plaintiff, and collect the sums payable for isterest, and was of benefit to-it, the charge was proper.
    
      The plaintiff being the owner of the bonds in question, gave them to the bank in 1884, as collateral security to a note of his, discounted by it. This note after having been renewed, was finally paid. Subsequently, the plaintiff had another note discounted by the bank, and these bonds remained as collateral to that note, which was finally paid, -January 26, 1887. On that day, the plaintiff was ill and his son-in-law, Mr. Face, went to the bank for the note. The cashier gave him the note, and there was attached, what looked like bonds. These, the cashier did not give him. -But he did give Mr. Face a paper as follows:
    “ Troy, N. Y., January 26, 1887.
    This certifies that Mr. Jacob Ouderkirk, has had deposited in this bank, as collateral security, to any and all loans made to him direct, $1,600 par value, U. S. four per cent -coupon bonds; that all said loans thereon having been paid and cancelled, said bonds are left for future like use or safe keeping, subject to the order of said Ouderkirk, coupons to he collected when due, and returns made to him as hereto-for©.
    A. W. WICKES.”
    Subsequently, in February, 1888, the plaintiff demanded the bonds, and the bank did not deliver them, alleging that they were not then in its possession.
    The complaint alleges the receipt of tile bonds- by the bank, and its wrongful detention. The answer denies the conversion; alleges that the bank has not the bonds; that it never authorized the cashier to receive them, and that the ■cashier converted them.
    The jury rendered a verdict for the plaintiff, and defendant appeals.
    
      Oren Campbell, for app’lt; Nelson Davenport, for resp’t.
   Learned, P. J.

—The bonds were certainly in the custody of the bank as pledgee in the first instance, and so continued till the last note was paid. ' If, by the giving of the ■receipt of January 26, 1887, the bank became a gratuitous bailee, still it had authority so to act. Pattison v. Syracuse National Bank, 80 N. Y., 82. And the plaintiff was not chargeable with knowledge of any directions given by the bank to its cashier in that respect. The bonds must be considered to have been deposited with the bank, not with the cashier individually.

Mr. Face, the agent of the plaintiff, saw what purported to be the bonds attached to the note at the time when the note was delivered to him and the receipt was given. Therefore there is no reason to think that the bonds were not then in the possession of the bank. If they had been converted or lost previously to that time another question might have arisen. But the receipt, not being disproved, must be held to show that the bank then had the bonds.

If a creditor, holding a pledge, assent, after payment of the debt, to hold the pledge for the benefit of the debtor, it becomes a deposit. Story on Bailments, § 55.

That has reference, of course, to a gratuitous holding, from which the holder is to derive no benefit. In the present case we must judge from the receipt what was the nature of the holding by the bank. It was to be not only for safe keeping, but for like use, that is for use as a collateral to loans which might be made in the future.” The bank also was to have the right to collect the coupons and make returns as heretofore. This collecting of coupons, payable in another place, was a regular part of banking business. It was a slight benefit to the bank giving it funds in New York. And it is plain that the arrangement was somewhat' different from the ordinary care of keeping in a bank vault, a locked box, to the contents of which the bank has no rightful access.

Deposit, as it is accurately called, is entirely gratuitous. And because there is no benefit whatever to the depositary, the general rule is that he is liable only for gross negligence. Dig. XIII., 6, 5, 2. But here, to say nothing of the anticipated profit, in making a loan on this collateral, there was the distinct benefit of collecting the coupons and making returns to the plaintiff. The bank was employed by plaintiff to collect from time to time the sums payable for interest, and for that purpose it had the custody of the bonds,- with the right to receive payment of such interest and to surrender the interest coupons, and thus it was plaintiff’s agent.

It seems to us that this is a contract quite different from a deposit, strictly so called. For instance, in the case of Foster v. Essex Bank (17 Mass., 479), a case which has some analogy with the present, Foster left a cask of gold coin for safe keeping. The court say it would have been a breach of trust to open the cask or inspect its contents. When the bank, in fear of danger, removed its own specie to another town, it did not feel authorized to remove this, without the owner’s consent. It is evident that in the present case the bank had other authority and right in respect to these bonds, and other duties also. And without entering on the disputed point, whether a mandate must be gratuitous, we might probably say that, as something was to be done by the bank, it was a mandatory rather than a depositary. It was, to a certain extent, an agent of the plaintiff, that is in collecting the coupons.

In Pattison v. Syracuse National Bank (ut supra) it is said that as “ the plaintiff’s securities were received on deposit by the bank, it was bound to return them or show some sufficient cause for not doing so.” In that case the bank claimed that they were stolen by some person other than employees of the bank, and the question was whether the theft was suffered' through the gross negligence of the bank.

In the present case the defendant, to show cause for not returning the bonds, proved that such bonds were kept in a steel safe in the vault, which safe had a lock, of which only the president and clerks had the combination. The defendant proved that the president did not take the bonds, nor did the cashier or bookkeepers. The cashier was not called. The president spoke of the cashier’s defalcation as occurring-about December 20, 1887. No direct proof of such defalcation was given. The president testified that if the cashier was away, this safe was not opened, It is also shown that up to the date last mentioned, the cashier was a man of good reputation,

The court charged that the plaintiff was entitled to recover, unless the defendant could show that the loss was not caused by any act of neglect on the part of the defendant; that the defendant was not only liable in case of gross neglect, but was liable where the loss was occasioned by any neglect on its part. To this part of the charge the plaintiff excepted. The question then is whether, on the facts of this, case, the defendant was liable only for gross negligence, or more accurately whether the defendant might excuse itself for not returning the bonds by showing that they were lost, without gross negligence.

In another part of the charge the judge said that the defendant had undertaken to show that it did all which it reasonably could, to protect these securities. And this must, be considered as explanatory of the meaning of the judge, in the words any neglect.”

If this had been a case of merely gratuitous bailment, then probably the exception would have been well .taken. But under the circumstances of this case, we think the charge was not erroneous, as above explained.

Whether the bank would be liable for a willful taking of the bonds by the cashier in question is not distinctly presented. The facts of the case are consistent with the careless surrender of the bonds by the cashier to some person other than plaintiff. It is even possible, under the proof, that the bonds were sold by the cashier, and the avails received by the. bank. For no proof is given by defendant as to the time, when, or the manner in which the bonds passed from its possession. The examinations occasionally made by the directors and by the United States officials did not include such deposits as that of the plaintiff.

We are of opinion that the judgment and order should be affirmed, with costs.

Landon and Ingalls, JJ., concur.  