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the transferee such title as the transferror had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferror; and section 112 (page 734) provides that the acceptor, by accepting the instrument, engages that he will pay it according to the tenor of his acceptance, and admits the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument. The payee of a check given to discharge an indebtedness due her transferred it without indorsement for consideration, and the transferee presented it at the bank, which certified it. Held, that the bank was liable, though it did not know who was the owner of the check when the certification was made.

McLaughlin, J., dissenting.

Appeal from Trial Term, New York County.

Action by Max Meuer against the Phoenix National Bank. From a judgment in favor of plaintiff, and from an order denying a new trial (86 N. Y. Supp. 701), defendant appeals. Affirmed.

Argued before VAN BRUNT, P. J., and HATCH, MCLAUGHLIN, O'BRIEN, and INGRAHAM, JJ.

Forsyth Wickes, for appellant.
Joel M. Marx, for respondent.

INGRAHAM, J. This action is brought to recover the amount of a check drawn by one Arthur Johns upon and certified by the defendant. Mr. Johns, who was an attorney at law, had collected for one Edla Muir a sum of money, and on December 12, 1901, drew his check upon the defendant, with whom he had an account, to the order of Edla Muir, for $1,303.65, and sent that check to the payee, who was at that time sick in a hotel in this city. The plaintiff, who was the brother-in-law of Mrs. Muir, and who had been in the habit of making advances to her in the absence of her husband, Dr. Muir, who was in Europe, and having loaned her $900 in addition to other sums of money represented by promissory notes, called upon her in the afternoon of Saturday, December 28, 1901. He was accompanied by his son-in-law, and found her confined to her bed. When the plaintiff went into the room, Mrs. Muir asked him whether he had any money, to which he replied in the affirmative. She then asked him to advance her four or five hundred dollars, to which the plaintiff replied: "You promised- You owe me $900, and you promised me, when you would get a check, you will give that check from your lawyers." In reply she said, "Yes; I got it," and sent her maid to the hotel office for the check, and gave it to the plaintiff, and he paid her $400, receiving the check in payment of the $900 that Mrs. Muir owed him and the $400 he then advanced. This testimony was corroborated by the plaintiff's son-in-law, who was present, and also by Mrs. Muir's maid, who got the check from the safe in the hotel office, and who was present at a part of the interview. There was also evidence tending to show that a sum of money amounting to about $400 was found after Mrs. Muir's death in her apartment. On the following day (Sunday) Mrs. Muir died. After her death Mr. Johns, the drawer of the check, having ascertained that the check was in the plaintiff's possession wrote to the bank stopping payment. That note was dated Monday, December 30th, and the evidence is that it was received by the bank on the morning of that day. Mrs. Muir left a will

appointing her husband her executor. Upon Dr. Muir's returning to this country, his wife's will was probated, when he was requested by the plaintiff to indorse this check; but, acting upon the advice of Johns, his attorney, he refused to indorse it, and thus the matter rested. The plaintiff, thus being the owner and holder of the check for value, about the 15th of January, 1902, sent it by his son to the defendant bank for certification. Upon presentation to the paying teller of the bank he certified it and returned it to the plaintiff's son, who returned it to the plaintiff. No questions were asked at the time the check was certified, the messenger simply handing the check to the paying teller, and the paying teller certifying it and returning it to the messenger without comment. Subsequently a demand was made upon the bank for the payment of the check, and the bank refused to pay upon the ground that it was not indorsed by the payee, but stated to the person presenting it that, if it was indorsed by the executor of the payee, the bank would pay the check. The executor of the payee having refused to indorse the check upon the ground that he was advised not to by his attorney, the drawer of the check, this action was commenced. None of these facts were seriously disputed.

The court below left it to the jury to say whether or not the plaintiff became a bona fide holder of the check for value, charging the jury: "That is the first thing for you to consider in this case, because, if you reach the conclusion that the plaintiff in this case is not a bona fide holder for value of this instrument, you need go no further. The underpinning of his structure has been knocked out, and it must fall to destruction, unless he satisfies you, by a fair preponderance of credible evidence, because the burden is upon him in the first instance, that he is the bona fide holder for value."

The jury having found a verdict for the plaintiff, they must have found that the plaintiff was the owner of the check. Being the owner of the check, he presented it to the bank, who certified it without making inquiry as to who it was that presented it for certification; and the question is whether the bank is liable upon this certification to the holder of the check, at whose request it was certified. If the bank is liable to the plaintiff for the amount of the check, the other questions presented need not be considered. It must be borne in mind that the bank does not dispute its obligations to pay to the drawer of the check the sum of money represented by it. He had on deposit the amount of the check to his credit. When the bank certified his check, it appropriated so much of the amount that the drawer had on deposit for the payment of this check, and, so far as appears, has that amount now in its possession. Neither does the drawer of this check dispute the fact that he owed to the drawee the amount of money represented by it.

The questions that are usually presented when a bank disputes the certification of a check relate to the equities between the drawer and the drawee of the check, or between the drawer of the check and the bank, and of course in such case it would be necessary, in order to shut out these equities, to show that the holder of the check parted with value upon the faith of the certification; but, if by this certification there was an agreement to appropriate a part of the money then on deposit in the bank in payment of the check, I can see no reason why the right to that money does not vest in the plaintiff, irrespective of any question

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of estoppel which would be presented by reason of his having parted with a consideration based upon the certification of the check by the bank. That the title to this check could pass by delivery without indorsement is settled beyond dispute, and while, by the transfer of the check, its negotiability was destroyed, so that the transferee received simply the title that the transferror had, which was subject to any equities that existed between the drawer of the check and the payee, still the title to the check passed by the transfer; and, upon the undisputed evidence here, Mrs. Muir had a good title to this check, and there are no equities which interfere with the plaintiff's right to recover. It is also well settled that the certification of a check is equivalent to the acceptance of a bill of exchange. As stated in Am. & Eng. Enc. of Law, vol. 5 (2d Ed.) p. 155:

"When a check is presented by the holder and certified, the certification constitutes a new contract between the holder and the bank. The drawer is released, and the bank assumes his place. It is as if the funds had been paid out to the holder, and redeposited to his credit."

And this rule is now a part of the Negotiable Instrument Law (chapter 612, p. 719, Laws 1897, as amended by chapter 336, p. 973, Laws 1898. Section 323 (page 756) provides that, "where a check is certified by the bank on which it is drawn, the certification is equivalent to an acceptance." Section 324 (page 756) provides that, "where the holder of a check procures it to be accepted or certified, the drawer and all indorsers are discharged from liability thereon." Section 325 provides that "a check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check." Section 79 (page 731) provides that, "where the holder of an instrument payable to his order transfers it for value without endorsing it, the transfer vests in the transferee such title as the transferer had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferer"; and section 112 (page 734) provides that "the acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits: The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument."

By these provisions it seems to me that the solution of the question presented is free from doubt. The defendant had to the credit of the drawer of the check the amount represented by the check. The drawer of the check owed to the payee the amount represented by it, and in discharge of that obligation sent to the payee the check in question. The payee of the check, for a valuable consideration, delivered it to the plaintiff, who, under section 79 of the negotiable instrument law, thereby became vested with the title of the transferror of the check. By presenting this check to the bank for certification, and its certification by the bank, a new contract was made between the bank and the holder, by which there was substituted the obligation of the bank for that of the drawer of the check, and thereby the drawer became released from liability; and, as the payee of this check transferred it to the plaintiff, the plaintiff had a good title to the check, and the right to enforce it, when the bank, by its certification, accepted the check, and made a .

contract with the holder promising to pay it. By the certificates the bank voluntarily assumed the obligation of the drawer, and agreed to pay the check to the plaintiff. The check and certification operated as an assignment of the funds to the credit of the drawer with the bank, and the bank became liable to the holder. Neg. Inst. Law, § 325. These rules are elementary, and in view of the express provisions of the negotiable instrument law, to which attention has been called, it is not necessary to refer to the authorities to support them.

The argument of the defendant is based upon three cases in the Court of Appeals of this state, neither of which, as I view it, presents the precise question here, although it is substantially determined in the first case referred to. The first case is Freund v. Importers' & Traders' Nat. Bank, 76 N. Y. 352. In that case the plaintiffs, on December 1, 1869, drew their check upon the defendant bank, payable to M. Oppenheimer & Sons, or order, for the sum of $738.88, and delivered it to the payees, for their accommodation, and without any restriction as to the manner of its use. On the same day the payees transferred it by delivery, and without indorsement, to N. Blun & Sons, to whom they were indebted for goods sold, and Blun & Sons procured it to be certified by the proper officer of the defendant on that day. After certification, the plaintiffs notified the defendant not to pay the check. The defendant, after that, paid the check to Blun & Sons, having first received from them a bond of indemnity. The plaintiffs then brought an action against the bank to recover the alleged balance of deposit represented by this check. The Court of Appeals held that the payee could transfer by inindorsement, or in any other mode known to the law for transferring such rights, as by an independent written instrument, or by parol with manual delivery, and, as between the assignor and assignee, the transaction is then complete and effectual, without notice to the debtor; that, although a negotiable instrument was not indorsed or otherwise transferred according to its terms, it was still a chose in action, transferable by delivery or other mode of assignment, and the transferee took at least an equitable title in it; that since the adoption of the Code of Procedure it matters not whether the assignee gets the legal as well as the equitable title, as, if he gets the whole interest, he may maintain an action in his own name; that if Blun & Sons were then the holders and owners of the check, with such right that they could enforce it against the makers, the certification of it by the defendant had all the legal effect which the same certification would have had, had it been indorsed by the payees; that the legal effect is the same as if the defendant had paid the money upon it, with the proper indorsement upon it of the payees; that by the certification of a negotiable check, properly negotiated, the depositary of the fund checked upon becomes liable to the owner of the certified paper, and is bound to have in readiness the money to meet it, from the fund drawn upon; that when the check is not negotiable, or has not been indorsed, but has by assignment come into the hands of a lawful owner, who has a right to enforce it against the maker, the effect is the same; that, when a debtor has notice of the assignment of the chose in action, he may not make valid payment after that to the assignor; that he has the right to promise to pay to the assignee. And it was held that the bank was liable upon the certification, although the

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check was an accommodation check, given to the payee without consideration; and that the payment by the bank to the holder of the check after such certification was a payment which bound the drawer.

The second case is Lynch v. First Nat. Bank of Jersey City, 107 N. Y. 179, 13 N. E. 775, I Am. St. Rep. 803. It there appeared that one Wilder purchased of the plaintiff a diamond of the value of $500, and delivered to the plaintiff in payment therefor a check signed by himself upon the defendant to his own order, which was certified by the bank upon which it was drawn and payable through the American Exchange National Bank in New York. The check, however, was not indorsed by Wilder, and the bank refused to pay it. The check, when certified, was in the possession of the drawer, and was certified by the bank at his request. The chief judge of the Court of Appeals, in delivering the opinion of the court, said: "It therefore seems to us that the only question in this case is whether the bank could be made liable to pay to third persons Wilder's funds by any transfer of this check, except one evidenced by the indorsement of his name thereon;" that the acceptance of the check was made by the bank when, through its agent, it indorsed thereon a certificate of genuineness and directed its payment by the American Exchange Bank; that that operated as a promise to pay it upon presentation at the American Exchange Bank, bearing Wilder's indorsement; that "the obligation of the bank, as shown thereby, amounts to a representation that the drawer has funds in the bank with which to pay the check, and that it will retain and pay them to the holder through its agency in New York upon presentation there bearing the proper indorsement"; and that, as no contract was made with the plaintiff, the only contract being with Wilder to pay to the holder of the check when he had directed such payment by indorsement, the plaintiff could not maintain an action against the bank upon the indorsement. In referring to Freund v. Importers' & Traders' Nat. Bank, supra, the court said:

"It was held in Freund v. Importers' & Traders' Bank, supra, that a certification by the bank of a check in the hands of a holder who had purchased it for value from the payee, but which had not been indorsed by him, rendered the bank liable to such holder for the amount thereof. By accepting the check the bank took, as it had the right to do, the risk of the title which the holder claimed to have acquired from the payee. In such case the bank enters into contract with the holder by which it accepts the check and promises to pay it to the holder, notwithstanding it lacks the indorsement provided for; and it was accordingly held that it was liable on such acceptance upon the same principles that control the liabilities of other acceptors of commercial paper. In the case at bar the certification of the bank was made at the request of the drawer, and was subject to the condition imposed by him, plainly written in the check, that it should not thereafter be payable, except by his indorsement."

The third case is G. N. Bank v. Bingham, 118 N. Y. 349, 23 N. E. 180, 7 L. R. A. 595, 16 Am. St. Rep. 765. It there appeared that one Brown had an account with the plaintiff bank, and applied to the cashier of the bank to cash a certain draft drawn by him for $17,000, upon certain representations which were false; that Brown was a bankrupt and had no funds in the bank, except such as resulted from the credit given him upon the faith of the draft; that the cashier of the bank, relying upon such representations, cashed the draft, and placed the pro