Bank of Hatch v. Mossman

25 N.M. 547 | N.M. | 1919

Lead Opinion

OPINION OF THE COURT

RAYNOLDS, J.

(after stating the facts as above). As shown by the evidence and the findings of fact, the note in question was guaranteed by the First State Bank to the appellant, and it was also indorsed by the appellant to the First State Bank. It appears that the trial court attached some importance to these transactions, but the appellant urges upon us that the answer sets up no such defense; the sole defense-being that the Bank of Hatch sent the note in question to the First State Bank, that the First State Bank acted as agent for appellant, and that the appellee paid the note to appellant’s agent. We think this position well taken. It nowhere appears that the appellee relied on the indorsement of the appellant to the First State Bank, nor that he knew of the fact that the First State Bank had guaranteed his loan to the appellant. His defense was that he had paid the note to appellant’s agent. Appellant alleged that the First State Bank was the agent of appellee and not the agent of appellant. The case therefore turns upon the question of agency. If the First State Bank was the agent of appellee, he is liable because his payment to the First State Bank was not payment to the appellant. On the other hand, if the First State Bank was the agent of the appellant, the note has been paid by payment to its agent.

[1] It is a well-settled principle of law that the bank receiving paper for collection is generally the agent of the one from whom it receives it.

“The collecting’ bank Is the agent of the owner or sender of the paper.” 5 Cyc. 500; 7 C. J. § 245.
“A bank receiving paper for collection is generally the agent of the party from whom it receives it * * * But in no sense is it the agent or trustee for the maker of the paper it holds for collection, or for the party who is indebted thereon. If the debtor simply pays into the bank the amount due, and takes up his paper, he is thereby fully acquitted and absolved. He is not responsible for the subsequent fate of the sum, and is not bound to inquire whether it comes to the hands of the person entitled to it, or is lost, wasted, or embezzled in the bank. * * * The whole business is completed, so far as he is concerned, by his payment and the contemporaneous surrender, cancellation, or destruction of the evidence of his debt.” Morse on Banks and Banking, vol. 1 (5th Ed.) par. 214, and caseá cited.
"Where a bank sent a note to a correspondent for collection, and the latter, which had the maker’s money on deposit, with instructions to pay it on the note, charged the amount to the maker, and credited it to the sender of the note in the regular course of business, it constitutes a payment, though the bank failed the next day, and returned the note without indorsing anything thereon, or accounting for the collection.” Michie on Banks and Banking, vol. 2, p. 1414, and cases cited.
“As a general • proposition, possession of the instrument is sufficient evidence of authority to collect so far as the maker or acceptor is concerned.” 3 R. C. L. “Bills and Notes,” p. 427.
“Payment to the person lawfully in possession of the bill or note discharges the note.” 8 C. J. “Bills and Notes,” par. 785.

The appellant contends that the' general rules above quoted do not apply to this case, and that the court should have found that the First State Bank was the agent of appellee; that the fact of sending the note to the First State Bank did not make the First State Bank appellant’s agent, because the First State Bank was the agent of the appellee to make the loan and receive the payment; and that' the note was sent to the First State Bank at appellee’s request, or at the request of appellee’s agent.

“If the borrower or payor leaves money in the bank to pay his obligation, or is a depositor, or specifically directs the bank to pay the note, the bank also becomes his agent and is responsible to him for the safe-keeping and .proper application of the proceeds.” 5 Cyc. 501; 7 C. J. 606.

[2] The evidence on the question of agency in this case is conflicting. Smith testified that Mossman asked him as president of the First State Bank to send to the Bank of Hatch for the note and mortgage and release. Mossman denied asking Smith to send for the papers, and states that Smith without his request, upon drawing of the draft by Mossman, said: ‘ ‘ I will attend to it. I will send up there and have the papers sent down.” When asked the question, “Understood you to say you made nó request about the matter at all?” answered: “Well, I didn’t request it; he told me that” — referring to the previous statements by Smith. Mossman also denied that he authorized Smith .to borrow the money from the Bank of Hatch, and it appears that no check was ever drawn by Mossman on the First State Bank with which he did business in payment of the note in question.

The note was payable at the Bank of Hatch, and the Bank of Hatch notified Mossman before the note was due that it was payable there and not at Las Cruces.

The case seems to turn upon the particular facts, and the general propositions of law are not of great assistance to the court. It appears undisputed that the loan was procured from the First State Bank by the appellee, and that the appellee did not know to whom the note was due until he signed it. He dealt with the First State Bank in procuring the loan, and for that purpose the First State Bank was probably his agent. As to the payment the facts are disputed. Appellee made no direct request of appellant to send the note to the First State Bank. He acquiesced, however, in the First State Bank’s sending for it, and also notified the Bank of Hatch that he would go to Las Cruces and “fix it up.” He gave no check on his account with the First State Bank, nor did he demand the canceled note and release when he gave the draft on November 25th, or when the draft was paid. The note and release were sent to him by mail and received by him on December 9th, the day after the First State Bank ceased to do business. Although these facts seem to indicate that the appellee invited or acquiesced in the note being sent to his banker for payment, and thereby made the bank his agent, we are of the opinion that the trial court coreetly held on the conflicting evidence that the First State Bank in the collection of the note was the agent of the appellant. This conclusion is sustained by substantial evidence and is strengthened by the undisputed facts that the First State Bank was the representative of the appellant at Las Cruces, and that appellant had stated in its letter of December 7th that the money when collected was to be kept in the First State Bank, “until we need it, which we hope will be, several days. ’ ’

As we find no error in the decision and conclusion of the lower court, it is therefore affirmed, and it is so ordered.

Parker, C. J., and Roberts, J;, concur.



Rehearing

On Motion for Rehearing.

RAYNOLDS, J.

It is urged by the appellant in its motion for rehearing that, the First State Bank being insolvent, the relation of agency between appellant and said bank could not arise; that the First State Bank had no right to collect the note in question. The principle invoked here is often applied when the remitting bank seeks to collect from the receiver of an insolvent collecting bank. It is universally held that the remitting bank is entitled to the entire fund so collected, and does not have to share pro rata with the other creditors of the insolvent bank. But this principle has no application here.

[3,4] It is true the First State Bank had no right to act as agent for the appellant bank after its insolvency. In fact, it had no right to.continue in business'; but it did so, and the appellant sent to it the note in question for collection, which the appellee, Mossman, paid to the First State Bank. -The fact that it was insolvent did not destroy the agency as far as third parties were concerned, nor has the fact that the appellant could collect the entire sum from the receiver of said bank any bearing on the question of the payment by the appellee. It was the failure of the First State Bank to -remit what it had collected to the appellant which caused appellant’s loss. Appellee has paid once, and it was through the fault of appellant’s agent that the appellant did not receive the payment. The well-known principle applies that, when one of two innocent parties must suffer, the one who made the condition possible should bear the loss. It was the sending of a note to an insolvent bank to collect that caused appellant’s loss.

In Baldwin’s Bank v. Smith, 215 N. Y. 76, at page 82, 109 N. E. 138, at page 141 (L. R. A. 1918F, 1089, Ann. Cas. 1917A. 500), a case similar to the present one, the court said:

"If we lay refinements aside, the truth is that the actual default of the Watkins Bank was in not remitting- the proeeeds of the note to its principal, a cogent reason for adhering to the view that the note was paid. It is not conclusive on the question of payment that the plaintiff might not have been entitled to assert that the assets in the hands of the assignee or receiver of the Watkins Bank were impressed with a trust in its favor, because there might be a transfer of credits so as to constitute payment without actually setting aside a distinct fund which could be impressed with a trust. See People v. Merchants’, etc., Bank, 78 N. Y. 269, 34 Am. Rep. 532. That point is not involved and need not be decided. If, however, we assume that the note was not paid, the failure to secure .payment was due' to the neglect of the plaintiff’s agent, and the loss resulting therefrom should fall on the one responsible for the fault.”

See, also, Smith v. Essex County Bank, 22 Barb. (N. Y.) 627.

The motion for rehearing will therefore be denied, and it is so ordered.

Parker, C. J., and Roberts, J., concur.