National Bank of Newburgh v. Smith

Where, after the maturity of a promissory note held by a bank, and due protest and notice thereof, the maker makes a general deposit in the bank of an amount sufficient to pay the note, this does not of itself, as between the bank and an indorser, operate as a payment. In the absence of any express agreement or directions, it is optional with the bank whether or not to apply the money in payment; it is under no legal obligation so to do.

Appeal from judgment of the G-eneral Term of the Supreme Court in the second judicial department affirming a judgment in favor of plaintiff, entered upon a decision of the court on trial without a jury. This action was upon a promissory note made by one Thomas George, indorsed hy defendant and discounted by plaintiff. The note was for $500; it fell due February 17, 1874; was not paid; was duly protested, and notice served on defendant. When the note fell due, George had ten dollars and forty-three cents on deposit in the plaintiff’s bank. He deposited $500 March 2, 1874, which was credited to him; no directions were given as to the application thereof. The note was not charged to his account, it being the practice not to so charge unless an account is good for the note at the time it falls due. On March 4, 1874, another note made hy George, payable at plaintiff’s bank, and falling due on that day, was presented for payment, was paid by plaintiff, and charged up in George’s account. An indorser of a promissory note holds,' as to the maker, the relation of a surety. (Byles on Bills, 190; 3 Kent’s Com., 112 ; Wood v. Jeff. Co. Bit., 9 Cow., 206 ; Snyder v. Westfall, 4 Hill, 216; Griffith v. Reed, 21 Wend., 304; Nat. Bk. of Fishkill v. Speight, 47 N. Y., 668.) Plaintiff was hound to apply towards the payment of the note in suit all available means under its control. (Gary v. Cannon, 3 Ire. Eq., 64; Pratt v. Adams, 7 Paige, 615 ; Clark v. Ely, 2 Sandf. Ch., 166 ; Wright v. Austin,, 56 Barb., 13; Edson v. Dillage, 17 N. Y., 158; King v. Baldwin, 2 J. Ch., 554; Hays v. Ward, 4 id., 123 ; Wright v. Austin, 56. Barb., 13; Ætna Nat. Bk. v. Fourth Nat. Bk., 46 N. Y., 82, 88; King v. Johnson, 17 J. R., 384; Baker v. Stackpole, 9 Cow., 436; 47 N. Y., 668; 2 Pet., 543; Coml. Bk. of Albany v. Hughes, 17 Wend., 94; U. S. Bk. v. Smith, 11 Wheat., 171; Pars. on Bills, 436.) The deposit of March second was not a payment of the note in suit. (Kingston Bk. v. Gay, 19 Barb., 459.) It was not, without an actual demand of payment, a legal set-off against the note in suit. (Downer v. Phoenix Bk., 6 Hill, 297; Payne v. Gardner, 29 N. Y., 146.) It was optional with the bant whether to apply this deposit to the payment of the note in suit. (Marsh v. Oneida Central Bk., 34 Barb., 298.) Defendant’s liability became fixed by the protest, and could not be discharged by any dealings between the maker and plaintiff which did not deprive defendant of any remedy against the maker on the note. (Beardsley v. Warner, 6 Wend., 610; Pitts v. Congdon, 2 Comst., 352; Hurd v. Little, 12 Mass., 503; Pring v. Clarkson, 1 B. & C., 14; Ross v. Jones, U. S. S. C., Sept. 10, 1875.)