Phenix Insurance Company agt. Church.

discharge of a prior debt upon the transfer of a note of a third person by the debtor to the creditor is a parting with value by the former was held in Bank of St. Albans agt. Gilliland (23 Wend., 311), and Bank of Sandusky agt. Scoville (24 id., 115). If these cases are in any respect inconsistent with prior or subsequent decisions of the court, the inconsistency is to be found in the conclusion that the prior debts were extinguished by the transactions in these cases, which it may be thought was reached upon evidence which, if the dealings had been between individuals, would not, according to some of the other cases, have been sufficient to establish an extinguishment. But it may well be that, by common understanding and usage, when a note is discounted by a bank to take a prior note held by the bank against the party procuring the discount, and the avails are credited to him, the transaction is to be regarded as an extinguishment of the prior note, although it may not be actually surrendered (Slaymaker agt. Gundackers, Exr., 10 S. & R., 75; Bank of U. S. agt. Daniel, 12 Peters' R., 34; Note to Cumber agt. Wave, 1 Smith's Leading Cases, 458). While, therefore, we do not feel at liberty to disturb the rule established by Youngs agt. Lee, and the subsequent cases, it is quite manifest that the reason upon which they proceed is rather technical than substantial. There seems to be but little ground for holding that the surrender by a creditor of a past due note of a debtor, especially when his remedy upon the original debt remains, is a parting with value within the principle of Coddington agt. Bay, and we are not disposed to carry the rule established upon this subject further than has already been done. If we adhere to the reason of the rule in Coddington agt. Bay, which, as stated by WOODWORTH, J., is, "that the innocent holder having incurred loss by giving credit to the paper, and having paid a fair equivalent, is entitled to protection," Youngs agt. Lee, and kindred cases, should not be extended. In this case it is claimed that the surrender of the check of Brown, Pape & Co. was the

same as the surrender of the debtor's note of the cases cited.

Phenix Insurance Company agt. Church.

We are of opinion that the cases are distinguishable. The check was not given to represent the debt. It was not taken or intended as a security for the debt. It was a false token taken by Founce in place of money. Brown, Pape & Co., by drawing and delivering the check, represented to Founce that they had funds in the bank upon which it was drawn, out of which, on presentation, it would be paid. They had no funds. The representation was false, and the bank refused to pay the check on presentation. It was not a payment of the debt to Founce any more than the turning out to him of worthless bank bills on a broken bank would be payment, and returning the check to the drawers was a surrender of nothing of value. It is true that an action on the check against the drawers might have been maintained by Founce; but they were at all times liable to him for the debt. It is said that the check operated as an acknowledgment of the debt, and that Founce having given it up would be compelled, if now obliged to seek his remedy against Brown, Pape & Co., to bring his action on the account, in maintaining which he would, or might, meet with difficulties which he would not encounter if he had retained the check. We are of opinion that this is quite too slight a circumstance upon which to found a judg ment that Founce was a holder for value of the note in suit. There is no legal presumption that it would be more difficult to prove a claim upon an account than upon a check; certainly no such presumption can arise upon the circumstances of this case.

Our conclusion is, that this action cannot be maintained. It is conceded that Brown, Pape & Co. were not holders for value of the note, according to the laws of this state. Founce did not become such holder on the transfer of the note to him. The plaintiff stands in no better position, having simply succeeded to his rights.

The point is suggested, on the brief of counsel, that the note having been transferred to the plaintiff in Massachusetts, the transaction is governed by the law of that state, which it

Phenix Insurance Company agt. Church.

it is said is different from the law of New York upon the point we have considered. It is sufficient to say that the point was not raised on the trial, and no proof was given as to the law of Massachusetts upon the question before us.

We cannot take judicial notice that the law of another state differs from our own (McBride agt. The Farmers' Bank, 26 N. Y., 450; Levanworth agt. Brockway, 2 Hill, 201.)

The order of the general term of the court of common pleas, reversing the order of the general term of the marine court, should be reversed and the order of that court affirmed. All concur.

NOTE.-The court holds that if a note instead of a check had been surrendered, the plaintiffs, under the adjudged cases, would have become bona fide holders of the note in suit, and as such entitled to recover. It may be difficult to recognize the practical distinction between a demand note and a sight draft or check drawn by and delivered to the same persons upon the same identical consideration.

The holder of either may sue upon the original cause of action, upon surrendering the demand note or sight draft upon the trial. The court, however, draws a marked distinction between the two cases. It holds that while a note is given as a representative of the debt, a bank check is given in lieu of money; that the giving of a check amounts in law to a representation that there are funds on deposit to meet it, and that if this representation is untrue, the check is a false token and in no sense payment.

This may be true; but is the innocent holder bound so to regard it? May he not elect to treat it as a payment of the debt in the same manner as he might have treated the debtor's demand note under like circumstances? Could he not sue upon it, and use it like a note as evidence of the debt?

The court says that the rule laid down in previous cases depends upon a technical rather than a substantial basis, and that it should not be extended; but is not the distinction adopted fully as technical as the rule itself? If the rule is unsound or unjust it ought to be overthrown, and one more consonant with justice declared.

Instead of overruling the technicality it is by this case divided and refined. [ED.

Paine agt. Barnum et al.

SUPREME COURT.

WILLIAM S. PAINE, as receiver, agt. PETER C. BARNUM et al.

Savings banks-personal liability of trustees for alleged breaches of duty with respect to loans and disposition of the moneys of the bank — Legal representative of a deceased trustee proper party - Parties to whom the loans are charged to have been made need not be joined as defendants — Complaint-Demurrer.

Where a loan is made by a savings bank to three persons of $20,000, $15,000 and $15,000, respectively, upon a promissory note by each for the amount he received, with collateral security of promissory notes of a foreign corporation, which notes are secured by trust deeds of such corporation upon unimproved vacant lots without the state, not worth over $10,000; and where one of the trustees of the bank at the time of the loan was a large stockholder in said corporation, and the loans were intended to be and were in fact loans to the corporation; snch facts being known to the trustees of the bank, or could with reasonable diligence have been learned by them; and where the loans were intended to be to said trustee, and were made because of his interest in the corporation, and the loans were in fact loans upon the security of the lots :

Held, that, under the laws of this state affecting savings banks, such transaction is unauthorized and illegal, and a demurrer to the complaint alleging these facts, in an action to hold the trustees personally liable, will not be sustained.

Held, further, that the persons to whom the loans are charged to have been made are not necessary parties defendant.

Held, also, that the legal personal representatives of a deceased trustee are properly joined with the surviving trustee.

Special Term, August, 1880.

THIS is an action brought by the plaintiff as receiver of the Bond Street Savings Bank, a bank incorporated under the laws of New York, against the surviving trustees of the bank, with whom is joined the legal personal representatives of John R. Willetts, deceased, who was, in his lifetime, a trustee with the other defendants.

Paine agt. Barnum et al.

The trustees are sought to be held personally liable for alleged breaches of duty, with respect to loans and disposition of the moneys of the bank, which are claimed to have been unauthorized and illegal under the law and charter of the bank.

The plaintiff also alleges in his complaint that the loans were acts of gross negligence, and that the makers thereof were wanting in that care and diligence which a man of ordi nary prudence uses in and about his own affairs, and which the trustees of savings banks are bound to use in the affairs of their trust, and which is required of them by law.

The defendants, the executors, &c., of Robert R. Willetts, and Sinclair Toucey, demur to the complaint, upon the ground that the complaint does not state facts sufficient to constitute a cause of action.

The executors of Willetts also demur upon the ground that there is a defect of parties defendant in the omission of the persons as defendants to whom the loans are charged to have been made, and also for that several causes of action have been improperly united in the complaint, viz.: a several cause of action arising out of the alleged acts, loans and investments complained of against the executors of Robert R. Willetts, deceased, and a joint cause of action against all the defendants sued as trustees, and not as representatives of trustees.

Wilson M. Powell, for defendants Willetts. Arthur G. Sedgwick and E. Randolph Robinson, of counsel.

Elihu Root, of counsel for defendant Toucey, for demurrer.

Barlow & Olney, for plaintiff, and Francis C. Barlow, of counsel, opposed.

VAN VORST, J.-The complaint alleges that the savings bank, on the 20th day of October, 1870, loaned on call to Emery Child $20,000, to Leverett W. Murray $15,000 and