Elgin v. Gross-Kelly & Co.

20 N.M. 450

• Court: New Mexico Supreme Court
• Decided: July 8, 1915
• Docket: No. 1738
• Status: Published

Opinion

OPINION OP THE COURT.

HANNA, J.

(after stating the facts as above.) — The first assignment of error presented by the brief and argument of appellant is that the court erred in its conclusions of law and its judgment in holding that the appellee was entitled to recover from Gross-Kelly &'Co. the amount of the check which had been given by M’. B. Atkinson & Sons, and paid by the bank upon which it was drawn without notice of the death of a member of said firm, after the cheek was given and before it was presented and paid. We are, therefore, concerned solely with the question of whether or not the death of M. B. Atkinson is to be considered a revocation of the authority of the bank to pay the cheek, and, such being the ease, whether or not the administrator of the partnership estate of M. B. Atkinson & Sons can be permitted to recover from Gross-Kelly & Go. the amount paid them by the bank upon presentation of the check concerning which, as we understand the record, there is no contention as to a full and adequate consideration therefor. As pointed out by appellant, the action is in the nature of an action for money had and received, which is essentially an equitable action, the right to which exists whenever one has money in his hands belonging to another which in equity and good conscience he ought to pay over to that other.

[1] Generally speaking, it may be said that the right to recover in a ease of this character depends upon the theory that money has been paid to the defendant or the person from whom recovery is sought, where either there was no obligation to pay the same or where the party to whom it was paid had no right either to receive or to retain. it, and, while the form of the action is one essentially of contract, the reasons which permit of the recovery are purely equitable in their nature. This principle of law is briefly set out in volume 15, A. & E. Ency. of Law (2d Ed.) p. 1103, in the following language, which we approve and adopt, and which is supported by authorities from almost every state in the Union:

“Where money has been paid under a mistake as to a material fact, to one not entitled thereto, and who cannot in good conscience receive and retain it, the law raises an implied promise on his part to refund it, and an action will lie to recover it back.”

See, also, 27 Cyc. 8-19.

Applying this principle to the facts of the present case, it is contended by appellant that the action will not lie; there being no fraud or deceit in the transaction, and no contention that the amount was not due and owing to Gross-Kelly & Co. by the firm of M. B. Atkinson & Sons. It is the contention of appellee that the death of the drawer of the check revokes the check or authority of the bank to pay the same, and authorities are cited in support of this contention.

[2, 3] Appellee contends that the greatest weight of authority is to the effect that a check does not operate as am assignment of the fund, but is a mere request to pay, and vests the payee with no interest in the deposit or right against the bank until the bank has accepted the cheek. Appellee refers us to section 189 of our Negotiable Instruments Act, in support of this contention, and as absolutely settling the question in this jurisdiction. Section 189 is as follows:

“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 tire bank is not liable to the holder, unless and until it accepts or certifies the check.” Section 189, c. 83, Laws of 1907.

They contend further in this respect that, except in those jurisdictions where the execution and delivery of a check operates as an assignment- pro tanto of the deposit, it necessarily follows, as a matter of course, that upon the death of the depositor the bank is indebted to his estate to the amount of the deposit then on its books, and cannot, therefore, change its relations or its liability to the estate, with the exception that it will be protected where it pays a check without notice of the death of the depositor.

The case of Tate v. Hilbert, 2 Ves. Jr. 118, 30 Eng. Report Rep. 548, is cited in support of this contention, and it is to be found that this case has been largely relied upon by other American authorities, but; as we believe, the rule announced in said case has been misapplied.

Appellee, in the case under consideration, contends that the English case of Tate v. Hilbert held that, where a bank pays a check after the death of a depositor and maker of the check and with notice of his death, it is liable to the administrator in the amount so paid, upon the ground that the death of the maker or drawer of the check terminated the right of the bank to pay out the money and to that extent revoked the check. In commenting upon this English case the District Court of Appeals of the Third Judicial District of California quoted from Daniel on Negotiable Instruments with approval as follows:

“The English case above referred to does not determine, as has been supposed, that where a check is given for value, tire authority of the banker to pay it is revoked. The death of the drawer of an ordinary bill of exchange does not revoke it, and we can discern no principle in law which allows the death • of the drawer to affect the rights of a checkholder who has given value for it.” Nassano v. Tuolumne County Bank et al., 20 Cal. App. 603, 130 Pac. 29.

The case of Tate v. Hilbert, supra, as we read it, simply held that tire giving of a check on a bank payable to the bearer was not a valid donatio mortis causa or an appointment or disposition in the nature of it. In that case the deceased person had given a niece a certain check as a gift, which, however, was not presented before the death of the maker, the niece bringing her action' against defendant as executor of the estate of the deceased. The Lord Chancellor in his opinion, among other things, said:

“There is no doubt that in this case the transaction is fair. If it fails, it is a case of mistake upon the part of the person meaning to give, and also a mistake or delicacy upon the part of a person to whom the gift was made; as, if she had paid this away either for valuable consideration or in discharging a debt of her own, it would have been good, or, even if she had received it immediately after the death of the testator, and before the bank was apprized of it, I am inclined to think no court would have taken it from her.”

[This quotation from the English case is pointed out for the sole purpose of showing that that case is not authority for the contention of appellee that the death of the maker of the check is an absolute and unqualified revocation thereof, and that appellee has misapprehended the interpretation of the case.

In commenting upon the same case Mir. Daniel, in his work on Negotiable Instruments (volume 2, § 1618b), says:

“Whether Death of Drawer Bevokes Check.— The death of a drawer of a check, as is stated by many authorities, operates as a revocation of the authority of the bank or banker upon whom it is drawn to pay it; and, though it is conceded that if the bank or banker pay the check before notice of the death, the payment is valid, otherwise, it has been considered, it is not. This view has been generally based upon the decision in the English case of Tate v. Hilbert, where it was held that the gift of a common check on a banker payable to bearer was' not a valid donatio mortis causa, or an appointment or disposition in the nature of it. It is quite true that authority to an agent is revoked, as a general rule, by the death of the principal; but this doctrine is qualified by the equally well settled principle that, if the authority be coupled with an interest in the thing vested in the agent, the death of the principal operates no revocation. Now, where a check is given to the payee for a valuable consideration (and the check imports value), the authority to the payee to collect the amount from the bank is coupled with a vested interest in the cheek. He can sue the drawer upon the check if it be dishonored. The drawing of the check without funds to meet it is a fraud, and the English case above referred to does not determine, as has been supposed, that when a check is given for value the authority of the banker to pay it is revoked. The death of the drawer of an ordinary bill of exchange does not revoke it, and we can discern no principle of law which allows the death of the drawer to affect the right of a cheek-holder who has given value for it. The idea that the death of the drawer of a check given to the payee for value operates a revocation is, as it seems to us, a total misconception-of the law. For a check is a negotiable instrument as often, if not more frequently, given for value than any other species of commercial paper. The drawer is deemed the principal debtor; and it is anomalous to hold that his death in any wise lessens his obligations or the right of the bank to pay it, when given for value.”

The one ease cited by appellant which in any real sense of the word is analogous -in point of fact to the ease now under consideration is that of McMurray, Administrator, v. Ennis (City Ct. Brook.), 10 N. Y. Supp. 698, in which case it was held that an administrator of a solvent estate cannot recover moneys obtained from the bank after deceased’s death upon a cheek given by him a few days before death in payment of debts, though the holder knew of his death and failed to inform the bank thereof. This case is so nearly in point and the reasoning thereof makes so strong an appeal to our roincls that we deem it wise to ■quote at length from this opinion:

"The trial court, at the request of both parties, and without objection or exception of either, found that Lawrence Ennis, a few days before his death, delivered, for valuable consideration, checks for $1,200 drawn by him to the order of the defendant Teresa Ennis, which checks she had cashed at the bank a few days after his death, without disclosing his death. This is an action by his administratrix to recover from defendant such sum for money had and received by her to' plaintiff’s use. Judgment was rendered in favor of plaintiff, from which defendant appeals. There is no. controverted question of fact raised by either party, and there is no intimation ■that the estate of Ennis is insolvent. This appeal presents to us a single question of law, viz.: If ■a debtor, a few days before his death, delivers, in payment of his. indebtedness, his own check to the order of his creditor, who a few days after such death, receives from the bank the money on the same without informing the bank of the death, can the administratrix of such dead debtor recover the sum so received by the creditor, when the estate is not shown to be insolvent? Strange to say, an apparently thorough research fails to disclose either an English or American authority adjudicating this point. This would indicate either that such a case seldom occurs, or, if it frequently occurs in actual practice, tire business mind, at least, has acquiesced in the regularity and justice thereof. When we consider the universal use of the bank check to transfer money from debtor to creditor in this country and England, in the transaction of the immense volume of commercial, mercantile, and other business, requiring millions of checks in each year, the conviction is irresistible that it daily occurs that at the death of debtors, their checks to order of creditors are uncollected in the hands of creditors, or in the mail for them, or on deposit with banks or bankers, or in the mail after such deposit, for collection. The well-known diligence and alertness of creditors engaged in every branch of business renders it certain that in daily practice checks of deceased debtors in the possession of creditors are paid by the banks until such banks are actually informed of death of the drawers. Any other rule would do much to clog the wheels of business, and bank checks would fall' into disuse; for banks would not pay them unless they had actual information that the drawers were alive, and creditors in cash transactions-would not receive payment by cheek. What we deem to be the existing practice should be unheld in the interest of the business public, creditors, banks, and debtors, unless to do so would violate-some established rule of law. The doctrine evolved from such a practice antagonizes no express adjudication on the exact point. Respondent suggests that it i« hostile to the principle of proportionate equality of creditors in the assets, of a dead debtor. The answer to that objection is-that the infringement of such right is not involved in this case, for there is not the slightest intimation in the evidence that the Ennis estate is insolvent. Then, again, the doctrine, so far as it applies to the cause at bar, is in perfect harmony with the equally well established rule that creditors of the solvent estate of a deceased debt- or are entitled to be paid in full. Defendant has not exceeded her right in that respect. Resnondent laid some stress on the rule that death revokes the authority of an agent, but he overlooked the modification or exception thereto. A creditor receiving from a debtor a check in payment of his claim, it is an authority coupled with an interest, viz., to receive the money from the bank,. if it will pay the same, and retain the money as his own. Such an authority death never revokes. Respondent, chiefly rests his right to recovery on the theory that death vests all the personal property of the intestate instanter in his administratrix. This is only partially true. It is not vested absolutely in her to do with as she pleases, but rather in trust to pay the debts due the creditors in full, if sufficient. The most that can be said in this case is that such trust has executed itself, so far as defendant is concerned, by virtue of the particular circumstances surrounding the transaction, without the active intervention of the administratrix. The contention of appellant does not, in our opinion, invade, harmfully at least, any of the established principles of our law.

“The action for money had and received to the use of another is in its nature a purely equita-. ble action, and can never be maintained unless, according to a natural justice and equity, the plaintiff is entitled to the money as against the defendant. It admits of any defense which shows the plaintiff ought not, in good conscience, to recover. ‘In one word, the gist of this kind of action is that the defendant, upon the circumstances of the case, is obliged, by the ties of natural justice and equity, to refund the money.’ Moses v. Macferlan, 2 Burrows, 1010, 1012; Bank v. Raymond, 3 Wend. [N. Y.] 69, 74; Eddy v. Smith, 13 Wend. [N. Y.] 489. ‘Whether the defendant could sue at law. in his own name, to recover the money, or whether, having fairly got it, this action for money had and received to the plaintiff’s use can be maintained, are very different questions. This is an equitable action, which may be defended upon the same equitable principles as those upon which it is maintained. As a general rule, the question is: To which party ex aequo et bono does the money belong ?’’

Upon the same subject of the effect of the death of the drawer upon a bill of exchange we find Mr. Daniel, in his work on Negotiable Instruments (volume 1, § 498a), using the following language:

“The- death of the drawer is no revocation of a bill if it has been delivered to the payee, and the drawee may accept and pay it. ‘The death of the drawer/ says Parsons, ‘is no objection whatever to an ordinary acceptance by the drawer, whether with or without knowledge, for the death i>s no revocation of the bill if it has passed into the hands of the holder for value/ ”

See, also, Cutts v. Perkins, 12 Mass. 206; Morse on Banks and Banking, § 400.

By appellee, as we have seen, it is contended that under the Negotiable Instruments Act (chapter 83, Laws of 1907) a check of itself does not operate as an assignment of any part of the funds to the credit of the drawer, and that therefore it follows, as a matter of course, that upon the death of the depositor the bank is indebted to his estate to the amount of the deposit then on its books, and cannot therefore change its relation or its liability to the estate, with the exception that it will be protected where it pays without notice of the death of the depositor. This contention arises by virtue of some confusion as to section 189 of the Negotiable Instruments Act, which, while providing that a cheek of itself does not operate as an assignment of any part of the funds to the credit of the drawer, is clearly designed for the protection of the bank, rather than a provision affecting the relation between the maker of the check and the payee. This is borne out by the fact that the latter portion of the section provides that the bank is not liable to the holder unless and until it accepts or certifies the check. We find this conclusion supported by Mr. Daniel in his work on Negotiable Instruments (section 1643), where he says:

“The provision of the statute [referring to negotiable instruments, statute] 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 is a declaration of the rule that, as against a drawee bank, a check is not an assignment of the fund. But as against the drawer the giving of a check for value on an ordinary bank deposit should be considered an assignment of the fund pin tanto.5’

See, also, Raesser, Adm'r, etc., v. National Exchange Bank, 112 Wis. 591, 88 N. W. 618, 56 L. R. A. 174, 88 Am. St. Rep. 979. In this case the Supreme Court of Wisconsin held that, where a bank check works an assignment pro tanto of a fund on deposit, the death of the depositor will not revoke the authority of the bank to pay a check which has been given for a valuable consideration, under circumstances which make it irrevocable as to the assignee. We believe that this statement of the law is controlling in the case under consideration, because we consider that the check given by the firm of M. B. Atkinson & Sons was an assignment pro tanto as between the maker and payee, and that section 189 of the Negotiable Instruments Act must necessarily be held to be a provision enacted for the purpose of protecting banks against loss which might be occasioned by the double payment of checks on deposit, and that its only intent and purpose is undoubted]]' to protect banks only when they are acting in good faith, and not attempting to assist particular persons in the collection of their debts to the exclusion of others who are equally entitled to protection.

In the case of Hove v. Stanhope State Bank, 138 Iowa, 39, 115 N. W. 476, the Supreme Court of Iowa, in passing upon the same section on the Negotiable Instruments Code so held. See, also, section 1638, Daniel on Negotiable Instruments.

[4] We agree that this is a case to be governed by the principlpes of equity, and we cannot see that any element of mistake, fraud, or deceit is present, nor does it appear that the estate of M B. Atkinson & Sons is or was insolvent, although it is contended by appellee that such is the ease, as shown by a former case brought to this court concerning the said estate and reported as the case of Dow v. Simpson, 17 N. M. 357, 132 Pac. 568. But, even though this contention be true, we cannot take judicial notice of that fact, which is not plead in the case before us. Oliver v. Enriquez, 16 N. M. 322, 117 Pac. 844, Ann. Cas. 1913A, 140. As was stated in the case of Banks v. Burnham, 61 Mo. 76:

“In the absence of evidence to that effect, the Supreme Court cannot take judicial notice that a case before the court had connection with one formerly decided by it.’’

See, also, Daniel v. Bellamy, 91 N. C. 78.

Therefore, not finding in the case under consideration those principles of equity which would make it against equity and good conscience for the appellant to retain the proceeds of the check given in good faith and for valuable consideration, we conclude that the district court was in error in rendering the judgment against appellant for such refund, which makes it necessary to reverse the judgment of the trial court to the extent such judgment is based upon the said check for $2,300.

The only remaining question for our consideration was based upon the alleged error in the trial court in'the matter of its conclusion and judgment concerning the mortgage of the property of the surviving partners to secure the debt of Gross-Kelly & Co. As indicated, the .surviving partners undertook to mortgage certain assets and personal property of the partnership estate, which mortgage was subsequently foreclosed by Gross-Kelly & Co.,' and the property sold which was the aggregate value of $793.50, which amount, with accrued interest thereupon, the trial court decreed that the appellant should account to the administrator for. Appellant, while admitting that this ruling of tire trial court is based upon the recent decision of this court in the case of Dow v. Simpson, nevertheless contends that the ruling in that case was erroneous and should be now departed from. A lengthy and able argument is made in support of this contention, but we feel constrained to adhere to the rule laid down in Dow v. Simpson. That case was ably presented to this court, in the first instance, and was reargued in a rehearing granted by the court, and while the question decided is not without its difficulties, and the argument of counsel against the rule is not without the sanction of reason, nevertheless we cannot feel that the rule should be departed from, and therefore, as admitted, the case being controlling upon this second cause of action, we are under the necessit}' of holding that the judgment of the trial court as to this cause of action was not erroneous, and, so far as the said judgment pertains to said cause of action, the same is necessarily affirmed.

For the reasons stated, the judgment is reversed, and the cause remanded, with instructions to enter a judgment in favor of appellee, Willie Elgin, as administrator dé bonis non of the estate of M. B. Atkinson & Sons, in the sum of $909.36, with interest from the 17th day of April, 1914; and it is so' ordered.

Boberts, O. J., and Parker, J., concur.