Plaintiff, as receiver of an insolvent bank, sues to recover the amount of a promissory note made by defendant, and held by the bank on the date of its failure. Defendant’s liability on the ■ note is conceded, the only question involved in the appeal being as to the right to set off as against the claim upon the note, the claim of defendant against the bank arising upon the following facts which are agreed to. On April 12, 1904, the defendant was a depositor with the Federal Bank of New York (of which plaintiff is receiver),vand had to his credit on said date at least the sum of $600; that defendant executed and presented to the said Federal Bank for certification a check, bearing said date, to the order of Schmeidler and Bachrach for the sum of $600, which said check was thereupon duly certified by the said bank, and said check was thereupon delivered to the payees; that thereafter and on the 14th day of April, 1904, the said Federal Bank had become and was insolvent, and the superintendent of the banking department of the State of New York thereupon took charge of its assets; the payment of its obligations, and its business generally were thereupon stopped and suspended and continued so during all the time hereinafter mentioned; that the said payees duly indorsed said check and presented the same for payment, which payment was refused for the foregoing reasons; that after said suspension, and on the same day, the payees duly returned said certified check to the defendant, who delivered to them his check therefor, and the defendant became and still is the owner and holder of said check. No question is made as to the right of defendant to set off against his indebtedness upon the note, any sum due to him by the Federal Bank at the moment of its failure, but it is apparently well settled that he can not set off the claim asserted in the answer if it was acquired by him after the act of insolvency. Scott v. *636Armstrong, 146 U. S. 499, 511. The question involved, therefore, in the present case is whether or not the defendant was, when the bank failed on April fourteenth, a creditor to the amount of the check which he had previously caused to be certified and, after certification, had delivered to the payees named therein. It becomes necessary, therefore, to determine the relation which existed at the moment of the bank’s failure, between it and Schmeidler and Bachraeh, who were the holders and owners of the check. Unquestionably the bank then owed to some one the amount represented by the check. If it owed it to the then holders of the check it did not at the same time owe it to the defendant, for it could not owe the same money to two different claimants. Section 321 of the Negotiable Instruments Law provides that “ A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this act applicable to a bill of exchange payable on demand apply to a check.” Section 323 provides that “ Where a check is certified by the bank on which it is drawn the certification is equivalent to an acceptance,” and 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.” The effect of acceptance, to which by section 323 certification is made equivalent, is declared by section 112 to be that the acceptor engages that he will pay it according to the tenor of his acceptance. Section 60 provides that “An instrument is negoti tied when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof,” and section 90 provides that “ The holder of a negotiable instrument may sue thereon in his own- name and payment to him in due course discharges the instrument” There can be no doubt, under the facts as agreed upon, that defendant had transferred the check to Schmeidler and Bachraeh in such manner as to constitute them the holders thereof, and it consequently follows that up to the time of the failure they, and they alone, could have sued the bauk upon the check. As was recently said by the Appellate. Division in *637this department “ 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 (Meuer v. Phenix Nat. Bank, 94 App. Div. 331, 335), and such is the clear implication to be drawn from section 325, Negotiable Instruments Law. In Willets v. Phenix Bank, 2 Duer, 121, it was said: “ it is the duty of the officer certifying the check to cause it to be immediately charged, as paid, in the account of the drawer, and when this is done, the sum thus charged will remain as a deposit in the bank to the credit of the checle, and be forever withdrawn.from the control of the maker, except as a holder of the check.” And in First Nat. Bank v. Leach, 52 N. Y. 350, it is said: “ The theory of the law is, that where a check is certified to be good by a bank, the amount thereof is then charged to the account of the drawer in the bank certificate account. * * It follows, that after a check is certified, the drawer of the check cannot draw out the funds then in the bank necessary to meet the certified check. That money is no longer his.” The result of these statutory provisions and judicial decisions is that the presentation of the check for certification, and its certification by the bank, operated to set aside or assign from the general credit of the defendant, to the credit of the check, the amount represented thereby; that by the certification the bank undertook to pay the check according to the terms of its acceptance, that is, to whoever being the holder and indorsee thereof, might present it for payment; that this obligation of the bank attached to the check and followed it into the hands of each successive holder in due course; that by its delivery . to Sehmeidler and Bachrach, to whose order it was drawn, the bank became indebted to them for the amount represented by it, and was no longer indebted to defendant. It follows that at the time of the failure the payees named in the check, being then the holders, were the creditors of the bank for the amount of the check, and that the defendant was not. We understand it to be conceded that this would have been the situation of the parties if the check had been delivered to the payees uncertified, and they had caused it to be certified, but it is urged that the fact that the defendant himself caused *638the check to he certified before he gave it to the payees calls for the application of a different rule. It is undoubtedly true that a different rule is to be applied, as between the drawer and the payee of a check, when the drawer himself, before delivery, causes the check to be certified, from that which obtains when the payee, after delivery to him, obtains the certification. In the latter case the drawer is discharged from the indebtedness for which the check was given (Neg. Inst. Law, § 32é), and the holder can look only to the bank, while in the former case the drawer is not discharged of his indebtedness, but the holder may, in case the bank fails to abide by its obligation, have recourse to his debtor upon the original indebtedness. This rule, however, applies only to the relation between the drawer and the payee, and has nothing to do with the character or extent of the obligation assumed by the bank by the act of certification. It may be that after the failure of the bank, Schmeidler and Bachrach, the payees named in the check, had the right to recover the amount of their debt from the defendant, and that upon paying it the defendant was entitled to receive back his check. So much must be conceded as it may also be that defendant thereby acquired a right of action against the bank either for the amount of the check, as the holder thereof, or for damages for the failure to honor the acceptance. Such right or claim, however, was one acquired after the failure, and not one existing at the time of the failure, for until the refusal to pay the check occurred, no right of action against the bank, by reason of the check, could devolve upon defendant. Our conclusion is that up to the moment of the bank’s failure the only creditors of the bank, upon the check, were the payees named therein who then held it, and that whatever right the defendant acquired by the redelivery of the check to him was a claim which arose after the failure and which consequently cannot be set off against the sum he then owed the bank.
The judgment was therefore right and must be affirmed, with costs.
Levestbitt, J.,' concurs.