On November 28, 1941, plaintiff desired to make a remittance in the sum of 37,000 Philippine pesos to Roosevelt Steamship Agency, Inc., at Manila. It asked for defendant's rates for drafts on Manila, and after learning them, it requested defendant to issue drafts in first and second of exchange to Roosevelt Steamship Agency, Inc., for Philippine pesos. Plaintiff informed defendant that it intended to send the first of exchange by air mail and the second of exchange by ordinary mail. It paid defendant fifty cents for transmittal by air mail by defendant of an advice to its Manila agency of the draft. Plaintiff paid defendant $18,437.10 and received the following instrument:
"No. 40/35 Agency of
THE CHARTERED BANK OF INDIA, AUSTRALIA AND CHINA New York
28th November 1941
Philippine
Exchange for Pesos 37,000. * * *
On Demand Pay this First of Exchange (Second being unpaid) to the order of * * * Roosevelt Steamship Agency, Inc. * * * the sum of Philippine Pesos Thirty seven thousand * * * not over Thirty seven thousand Pesos Value received.
For THE CHARTERED BANK OF INDIA, AUSTRALIA AND CHINA.
(Name illegible) Agent. (Name illegible) Sub Account.
To
THE CHARTERED BANK OF INDIA, AUSTRALIA CHINA, Manila"
The instrument was mailed to Roosevelt Steamship Agency, Inc., in Manila. It was returned to the plaintiff because of the *Page 264 outbreak of hostilities between the United States and Japan and the seizure of the Philippine Islands by Japan. Likewise the advice which defendant had sent to its Manila agency was returned to it. Thereupon plaintiff returned the documents to defendant and demanded repayment of the $18,437.10. Defendant refused payment and this action was commenced.
The complaint alleges five causes of action. The first four are based upon an election by plaintiff to rescind the transaction. The fifth is for money had and received.
Defendant has based its refusal to pay on the ground that the transaction by which plaintiff obtained the documents is an executed transaction and plaintiff may not rescind it. On motion for summary judgment Special Term held that the contract was an executed one and could not be rescinded. The Appellate Division reversed on the grounds that the instrument was not a bill of exchange but a promissory note, since the drawer and the drawee were the same person; that the defendant had not changed its position; that no third party had any claim against defendant; that war had made impossible the performance of defendant's obligation; that there was a complete failure of consideration; that unless compelled to make restitution defendant would be unjustly enriched.
Defendant refused payment on the theory that the transaction was completely executed when plaintiff paid the money and defendant gave it the document; that the transaction may be likened to one wherein a person buys a bond or note or share of stock. The purchaser in such instance, however, has received an instrument or certificate which is the equivalent of money and which he can use to obtain money. That is the type of transaction referred to in Gravenhorst v. Zimmerman (236 N.Y. 22, 31) where this court said: "One who secures a draft obtains a written order by the drawer upon the drawee which by commercial usage and even by statutory enactment in some jurisdictions has come to be recognized as the symbol and equivalent of money and which enables the one who has obtained it without further action bythe drawer to secure from the drawee the moneys which it represents. In consideration of the money paid by him he has actually obtained an instrument for the payment of money and which is regarded as its equivalent, and it is perfectly natural to speak of such a transaction *Page 265 as resulting in the executed purchase of a draft." (Emphasis supplied.)
In that case, however, the drawer and drawee were twodifferent persons while here drawer and drawee were the same and thus further action by the drawer-drawee was necessary. In the instant case, in addition, the plaintiff purchased an instrument for the payment of money to a third party. It was not the equivalent of money as to plaintiff. It never was a negotiable instrument. There never was an "issue" (see Negotiable Instruments Law, § 2), inasmuch as the transfer was not "* * * to a person who takes it as a holder." There never was a holder under Negotiable Instruments Law, section 2, inasmuch as the purchaser was not "* * * the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof." There never was negotiation. (Negotiable Instruments Law, § 60.) It was a non-negotiable instrument which was to become negotiable when delivered to the payee.
It may be argued, however, that plaintiff merely bought credit. In Legniti v. Mechanics Metals Nat. Bank (230 N.Y. 415,419) this court said: "It has long been an established custom among banks and financial institutions to sell credit usually represented by draft or check. Thus a bank having a credit with a correspondent in a foreign country will sell its draft or check, drawn upon such correspondent, to a purchaser who desires to make a foreign payment. The draft is not the credit but representsthe credit, or in other words, it is a notification to thecorrespondent or foreign representative to pay the money asdirected. The draft is a direction to pay. It is not, itself,money or credit. It is simply used as such.
* * * * * * *
"The thing sold is the same in the case of the cable or wireless transaction as in the case of the draft or check. It is the credit of the bank or seller. The means of establishing or transmitting the credit is simply an incident of the transaction. In the one case, it is a formal paper drawn up and signed by the seller directing his foreign correspondent to make payment of the amount and to the person therein stated. In the other case, it is a similar direction transmitted by cable or wireless."
If that be so, that which was sold was the credit of the defendant. It is to be noted that the draft here was drawn by defendant's *Page 266 agent in charge of its New York agency upon its Manila agency. The draft was drawn by defendant upon itself and was at plaintiff's option, (if we assume it to be a negotiable instrument) under Negotiable Instruments Law, section 214, in reality a promissory note. What happened was that defendant delivered to plaintiff a written promise to pay pesos in Manila to a third person, a Philippine corporation. Defendant had something more to do after the delivery of the document to plaintiff: it still had to make payment in Manila to that third person. Defendant had made a contract, promissory and executory. The agent of defendant delineated it in his affidavit: "The defendant assumed no obligation except the obligation to honor the draft upon due presentation at its Manila office, in accordance with the usual principles governing negotiable instruments."
However, even if we were to consider the instrument here a promissory note there is still the question whether the delivery of it to the plaintiff-purchaser was to be considered a completed transaction in ordinary business transactions. When a formal note is delivered to a purchaser who is a payee, he may use the instrument as money. If the bank defaults, he may sue upon it for payment. Such a payee when he obtains the note has something which he can use as money or something which he can sue upon if payment is not made when due. Clearly there is there a completed transaction. That is not the case with a purchaser of a note sold by a bank to one not the payee named therein. That is not a completed sale of negotiable paper as between such purchaser and the bank until it has been delivered to the payee in accordance with the expressed intention of the purchaser and the bank.
Whether we consider the instrument a non-negotiable instrument, a bill of exchange or a promissory note what are the rights of the plaintiff who is not the payee named in the instrument but who has possession of the instrument, has paid value for it but who is unable by reason of a state of war existing, to deliver it to the payee named, as intended by purchaser and seller, and which could not be presented, even if delivered, in accordance with its terms, for the same reason? Add to that that there are no intervening rights of third parties, that there has been no change of position by defendant, as conceded by it, and that the drawer and drawee are one. *Page 267
The plaintiff is a remitter. (See Beutel "Rights of Remitters and Other Owners not within the Tenor of Negotiable Instruments," 12 Minn. L.R. 584.) The position of remitter existed in the law merchant and it was generally considered that the remitter had a remedy against the drawer when payment was not made as originally intended. The cases have given the remitter a remedy against the principal obligor, but the theory upon which that has been done is not entirely clear. In older cases, action was permitted in the name of the nominal payee for the benefit of the remitter. InUtica Bank v. Ganson (10 Wend. 315, 316) an action was brought in assumpsit in the name of the bank for the benefit of one Chad Brown. Evidence was offered that a note had been made payable to the bank; that the bank had refused to discount it; that it was given to Brown in payment of a debt. It was held that the evidence was admissible, since the holder was entitled to show that the note came into his possession fairly and for a valuable consideration.
In Sutherland State Bank v. Dial (103 Neb. 136) the bank loaned money to defendants. Defendants gave the bank a note payable to Welpton Investment Co., but the note was never delivered. It was held, in a suit in equity, that the petition set forth valid reasons why the suit was brought in the name of the plaintiff; that no one else had any real interest in the note; that plaintiff was entitled to recover. The lower court was directed to ascertain the amount due and render judgment accordingly. The action there would seem to have been one on the note for the amount due thereon.
In Garthwaite v. Bank of Tulare (134 Cal. 237) one Lovejoy purchased from defendant a check upon a San Francisco bank payable to the order of one Smith. Smith did not receive the check, but some one else presented it and was paid. Thereafter Lovejoy assigned his claim to plaintiff. It was held that the demand which had been made by Smith upon the San Francisco bank (after it had paid the fraudulent payee) was made as agent of the purchaser (Lovejoy) and the refusal to pay was dishonor. The liability of the defendant to Lovejoy was fixed in the amount originally paid by him for the check. The action there seems to have been for money had and received by defendant or for a rescission; it does not appear to be upon the note. *Page 268
In Gellert v. Bank of California Nat. Assn. (107 Or. 162) Jennie Posner, intending to make gifts to Flora Levor and E.W. Posner, bought from defendant two drafts drawn on a New York bank naming the donees as payees. The drafts were retained by Jennie Posner and were found in her possession upon her death eight days later. The action was brought by the executrix of Jennie Posner for the amount received by the bank from Jennie Posner. Plaintiff was permitted to recover. The court said (p. 171): "The paper issued by the drawer bank is sometimes called a banker's check; by business men it is usually termed a draft; but in the strict nomenclature of the negotiable instruments law it is a check, and considered as such is a species of the genus bill of exchange. * * * It must be remembered that on the facts recited by the record the drafts have not yet been presented to the drawee and that they can never be presented to the drawee by the payee. And since the estate of the decedent is the owner of the drafts the plaintiff as the legal representative of the estate is assuredly entitled to receive the moneys represented by the drafts either from the drawer or from the drawee.
* * * * * * *
"The one party to whom the plaintiff can look for a return of the moneys paid for the drafts is the defendant bank. The drafts were purchased for the sole purpose of giving moneys to the payees. The instruments have not yet been delivered to the payees, nor has the drawee accepted them. No liability whatsover has thus far been incurred by the drawee. The purpose for which the drafts were purchased cannot be accomplished until and unless delivery is made to the payees. But the purchaser of the drafts died after they were issued and before delivery to the payees, and so the death of the purchaser, occurring after the issuance of the drafts, has made it forever impossible legally to accomplish the purpose for which they were purchased; and, whether the purchase of the drafts created the relation of principal and agent for the transmission of money or amounted to a contract for the sale of credit, under a well-established rule money paid for a purpose which cannot be legally accomplished because of a subsequently intervening obstacle may be recovered." That also does not seem to have been an action on the instrument, but one to recover what the *Page 269 purchaser had paid, since the transaction could not be completed because of a supervening impossibility. The only difference between that case and the instant one is that there the purpose could never be accomplished, while here it may be accomplished at some indefinite time after the war.
In Chafee, "Progress of the Law — Bills and Notes," (33 Harv. L.R. 255, 263-4) it is said: "Yet a plaintiff who paid value for a negotiable note, payable to a third party, to whom the plaintiff expected to negotiate it but failed, was allowed to recover from the maker on the note. An action in money had andreceived was the only proper remedy." (Emphasis supplied.)
In Beutel, "Rights of Remitters and Other Owners not within the Tenor of Negotiable Instruments," (supra) page 590, it was pointed out: "These cases might be supported, on some ground of rights arising from the transactions between the parties. As has already been pointed out, the remitter is a party to the negotiations from which the instrument arises, he has furnished the consideration for the contract, and it was contemplated that the proceeds of the instrument when discounted by the payee would be used for his benefit. In the cases where the failure of the payee to accept the instrument is the cause of the remitter's loss and creates the necessity of his action against the principal obligor, the situation is clearly analogous to failure of consideration found in ordinary contractual dealing; and one might expect the remedy to lie in quasi-contract under the category of failure of consideration. The recovery, on this theory, would be measured by the benefit received by the principal obligor and surety."
Plaintiff having delivered money to defendant which could not be used as plaintiff and defendant intended, the former should be permitted to recover. If not so permitted to do, defendant has been unjustly enriched by what may be termed a windfall resulting from the war. The remedy is an action for money had and received in which equitable principles are applied. The plaintiff has brought such an action and has had judgment.
The judgment should be affirmed, with costs.
LOUGHRAN, RIPPEY, LEWIS, DESMOND and THACHER, JJ., concur with LEHMAN, Ch. J.; CONWAY, J., dissents in opinion.
*Page 270Judgment accordingly.