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App. Div.] First Department, March, 1910.

dise." He was a" warehouseman * * * or other depository of property." He gave a receipt for some purpose, and its peculiar wording, " to be delivered only on return of this receipt properly endorsed," must be construed to mean what is said. Ordinarily, as between dealer and manufacturer, no such instrument as this passes. It was to identify and secure this particular machine in specie, and this was so well understood that it was indorsed and delivered over to Manny as a muniment of title and as security for repayment of his loan. It seems to me that the transaction comes fairly within the general purport of the law to secure third persons advancing money or making payments upon the faith of warehouse receipts in their supposed collateral. The plaintiff advanced his money and upon the faith of this receipt extended time of payment, and it was by reason of the defendant's carelessness and disregard of the statute and of the obligations that he had himself taken when he gave the receipt that the damage has accrued. I am in favor of an affirmance.

Judgment reversed, new trial granted, costs to appellant to abide event.

Fanny Forschirm, Respondent, v. Mechanics And Traders' Bank Of The City Of New York, Appellant.

First Department, March 11, 1910.

Banks — suspension of payment caused by action of State authorities — depositor not entitled to interest — acceptance of principal bars claim to interest — principal and agent — authority of clerk to bind bank.

A depositor in a bank having an account not drawing interest is not entitled to interest during the period when the bank, though solvent, was compelled to suspend payment while its assets were held by receivers during an action by the People brought at the instance of the State Superintendent of Banks.

As the depositor had no contract or statutory right to interest she was entitled to interest only by way of damages for a wrongful detention of the debt, and as the bank was compelled to suspend payment by the State authorities, it was not chargeable with a default.

Interest for the wrongful detention of a debt is but an incident to the principal debt, and cannot be made the basis of an independent claim. Acceptance of First Department, March, 1910. [Vol. 137.

the principal sum under protest will not save the right to recover interest, unless there be a special agreement to that effect.

Evidence examined, and lield, that a clerk of the defendant bank had no authority to bind it to pay interest and that the plaintiff's assignor did not rely upon such promise in accepting the principal.

The extinguishment of a claim to interest by an acceptance of the priucipal docs not rest upon the doctrine of waiver, so as to involve an element of intent.

Clarke and Dowlino, J.J., dissented, with opinion.

Appeal by the defendant, the Mechanics and Traders' Bank of the City of New York, from an order of the Appellate Term of the Supreme Court, entered in the office of the clerk of the county of New York on the 29th day of June, 1909, affirming a judgment of the City Court of the city of New York in favor of the plaintiff, entered on the 5th day of January, 1909, and also (as stated in the notice of appeal) from the judgment of affirmance of the City Court entered in said City Court on the 8th day of July, 1909.

F. Sidney Williams [Frank R. Greene with him on the brief], Edward M. Grout and Paul Grout, attorneys, for the appellant.

Joseph Gans, for the respondent. Miller, J.:

The stipulation made at the suggestion of the court at the opening of the case is somewhat ambiguous, as oral stipulations made in the course of the trial are apt to be; but I think the fair inference from it is that the bank closed its doors and suspended payment because the Bank Superintendent "stepped in." In any event, it is plain that the defendant did not intend, and was not understood, to stipulate that the action of the bank was voluntary. The answer distinctly alleged that the defendant's inability to pay was due to no fault of its own. but solely to the acts of the Superintendent of Banks, which it was powerless to prevent. By referring to and annexing a copy of the order appointing temporary receivers the answer did not admit the truth of the recitals in said order, especially in view of the positive averment referred to. But the course of the trial frees this question from doubt. The court at the outset ruled "that no demand is necessary where temporary receivers were appointed." The defendant sought to show that it closed its doors because of an order of the Banking Department, but the eviApp. Div.] First Department, March, 1910.

dence was ruled out by the court on the distinct ground that it was immaterial. So for the purposes of this appeal we must start with the assumption that the defendant was solvent, able to pay its depositors in full, and that it was compelled to suspend payment by the Superintendent of Banks, who caused the Attorney-General to institute an action for the dissolution of the corporation, in which temporary receivers were appointed, but which was voluntarily discontinued by the Attorney-General on the 17th of August, 1908, when the temporary receivers were discharged and the entire amount of the plaintiffs assignors' deposit was returned to and accepted by them.

"Before interest can be allowed in any case it must be by virtue of some contract express or implied, or by virtue of some statute, or on account of the default of the party liable to pay, and then it is allowed as damages for the default." (Per Earl, J., in Matter of Trustees, etc., 137 N. Y. 95,98.) The case in 4 Metcalf, cited by Mr. Justice Clarke, arose between the creditors of a decedent and his widow and heirs on the final settlement of his estate. No doubt the equitable doctrine announced by Chief Justice Shaw in that case would be applicable upon the settlement of a decedent's or insolvent's estate as between different classes of claimants, who had unduly been kept out of their money. But it is certain that it would not be applied in this State as between the parties to a contract for the payment of money on demand without interest, for such in effect was the contract in this case. It may be said that it is inequitable for the depositor to be kept out of his money without interest, but the answer to that is that that was not due to any act of the defendant. To be sure, through no fault of its own, the defendant could not have paid, even if a demand had been made, but that is not a reason for penalizing it. If permitted to, it could and would have paid upon demand; and in my view it would be inequitable to subject it to damages for a wrong which it has not committed, to compel it to pay interest on a non-interest bearing debt, due only on demand, in the absence of a demand or of some act of its own excusing a demand. Instead of undertaking to apply general principles of equity and natural justice, upon which we might differ in a case like this, the case should be reduced to the precise legal ground upon which interest is recoverable, if at all, t. e., by way of damages for a wrongful detention of the debt.

First Department, March, 1910. [Vol. 187.

The case of People v. Merchants' Trust Co. (116 App. Div. 41; affd., 187 N. Y. 293) is not in point. There the question arose upon the final distribution by receivers, appointed in an action to dissolve a corporation, which went to final judgment, adjudging that the defendant was insolvent. Moreover, the action was practically the voluntary act of the defendant which admitted its insolvency. In such a case, of course, it is unnecessary to make a futile demand, the demand being excused by the act of the debtor.

While no case precisely like this is called to our attention, the case of Sickles v. Ilerold (14:9 N. Y. 332) seems to me exactly apposite. It was there decided that insolvency was not to be inferred from the mere appointment of a temporary receiver; that in the absence of proof or an admission of insolvency, a deposit did not become due so as to draw interest until, a demand; but that the interposition of an answer, containing a counterclaim, demanding the amount of the deposit, in an action brought by the temporary receiver on a promissory note, was equivalent to a demand, and that the depositor was, therefore, entitled to interest, not from the time of the appointment of temporary receivers, but from the date of the interposition of the counterclaim. Thus, it will be perceived, that the precise question involved here was decided in that case.

Moreover, even if interest was recoverable, any claim for it was extinguished by the acceptance of the principal. It is settled law that interest recoverable only by way of damages for the wrongful detention of a debt is but an incident to the principal debt and cannot be the basis of an independent claim. (Cutter v. Mayor, etc., 92 N. Y. 1G6.) Acceptance of the principal sum under protest would not save the right to recover interest, but a special agreement, reserving the right to recover interest, would do so. (Grote v. City of New York, 190 N". Y. 235.) There is no evidence whatever in this case of a special agreement. When the temporary receivers were discharged, the Metropolitan Bank of the City of New York succeeded to the business of the defendant's branch at Broadway and Prince street, where the plaintiff's assignors had their deposit, and evidently took over the accounts of depositors. One of the plaintiff's assignors made a demand at that place and was tendered a check for the amount of the deposit by a clerk of the Metropolitan Bank, who had theretofore been in the employ of the defendant App. Div.J First Department, March, 1910.

and of the temporary receivers. The former says that lie demanded interest and that the clerk said to him, " Yon will get the interest later." Manifestly, the clerk did not have actual authority to bind the defendant by an agreement to pay interest, and plainly he did not have apparent authority to do so, for upon the witness' own statement he did not rely upon that statement of the clerk, but upon the latter's advice called up the cashier of the defendant and had a telephone conversation with him. Ho did not testify what that conversation was, but a letter, written by the plaintiff's assignors, plainly shows that no promise to pay interest was made by the cashier. Said assignor finally accepted the check from the Metropolitan Bank clerk, upon being told that he did not have to sign a release, evidently thinking that he could recover interest if he did not give a release.

To be sure, both sides moved for a direction of a verdict; but the facts being undisputed, the question was one of law. The extinguishment of the right to claim interest by the acceptance of the principal does not rest upon the doctrine of waiver, which involves the element of intent. The intent of the plaintiff's assignors in accepting the principal is immaterial. The determination of the Appellate Term and the judgment and order of the City Court should be reversed and a new trial granted, with costs to the appellant to abide the event.

Mclaughlin and Scott, JJ., concurred; Clarke and Dowling, JJ., dissented.

Clarke, J. (dissenting):

This is an action on an assigned claim to recover interest on a deposit by plaintiffs assignor in the defendant bank.

On the 30th day of January, 1908, the firm of I. Wasserman & Co. had on deposit in the Mechanics and Traders' Bank $9,878.17. That account was a running check account with the privilege to the depositor to draw all or any part thereof at any time, either in person or by checks and was non-interest bearing. It was stipulated on the record that on the 30th day of January, 1908, or shortly prior to that time, the Banking Department stepped in, deeming that the depositors' interests were unsafe, and on that day the bank suspended payment; that temporary receivers were appointed of all

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