213 N.W. 963 | N.D. | 1927
The plaintiff, Berg, brought this action against the Federal Reserve Bank of Minneapolis to recover $540.25 with interest from October 8, 1923, alleged to be the amount of a check drawn by the plaintiff, Berg, upon the Security State Bank of Hanks and payable to the order of the State Bank of Stady. The case was tried to the court, without a jury, and resulted in a judgment in favor of the plaintiff for the amount demanded and the defendant has appealed.
The material and undisputed facts are as follows: On October 30, 1923, the plaintiff, Berg, had on deposit, subject to check, in the Security State Bank of Hanks the sum of $1,024.25. On that day he went to the State Bank of Stady, in this state, and purchased from *408 that Bank a draft in the sum of $540.25, drawn by the said State Bank of Stady on the Midland National Bank of Minneapolis and payable to the order of E.E. Engberg, county treasurer of Divide county in this state. Plaintiff paid the State Bank of Stady for said draft by giving to it his check, dated on that day, drawn on the Security State Bank of Hanks, in the sum of $540.25. The plaintiff, Berg, thereupon transmitted the draft to Engberg, the payee named therein, and the Stady Bank placed upon the check it had received from Berg, its general and unrestricted endorsement and transmitted the same to the Midland National Bank of Minneapolis. The Midland National Bank is one of the member banks of the defendant. On November 2, 1923, the Midland National Bank endorsed the check and delivered the same to the defendant for collection. On the same day the defendant sent the check, and certain other items on the Security State Bank of Hanks, by mail direct to the Hanks Bank for payment and remittance. On November 7th the defendant received, from the Security State Bank of Hanks, its draft drawn on the First National Bank of Minneapolis for $995.32, which said draft included the amount of the check in suit. This draft was presented by the defendant for payment on the same day but payment was refused and the draft protested for nonpayment. The Security State Bank of Hanks was closed on November 6, 1923. The Stady Bank refused to pay the draft which it had issued to Engberg for the check in suit and such draft was protested for nonpayment.
It is contended by the appellant that it was authorized to send the check direct to the Security State Bank of Hanks and to accept the draft of that bank in payment by virtue of Regulation J (8) 1920, and defendant's check clearing and collection circular No. 286, issued on the authority of said regulation. A considerable portion of the argument of both parties is devoted to the question of the liability of a bank which undertakes the collection of commercial paper at a distance. In short, it is contended by the appellant that the so-called "New York" rule is applicable to the transaction in suit and that, hence, plaintiff had no contract with the defendant concerning the check or its collection; that defendant has violated no duty which it owed the plaintiff and, consequently, there is no cause of action. On the other hand, the respondent contends that while regulation J (8) 1920 authorized the *409
defendant bank to send checks for collection direct to the drawee, it did not authorize it to accept a draft in payment. Federal Reserve Bank v. Malloy,
The State Bank of Stady did not receive the check in suit for collection. The check was received and accepted in payment of the draft which the Stady bank issued and delivered to the plaintiff. The check was the property of the State Bank of Stady and not the property of the plaintiff. From the time of the delivery of the check by the plaintiff to the bank "it became the owner of the check; it could have torn it up or thrown it in the fire or made any other use or disposition of it which it chose and no right of defendant would have been infringed." Burton v. United States,
The rights of the plaintiff in this case are only those which arise out of his contract with the State Bank of Stady. "If those rights were affected by the act or omission of the defendant, they were affected only because the contract so stipulated. The defendant's duties arose out of its contract with the initial bank or out of its relations with that bank as owner of the paper." Douglas v. Federal Reserve Bank,
A check is payable in money. If, however, the holder of the check is willing to accept anything else in payment, and the drawee bank is willing to give it, the drawer of the check is not concerned. His contract is fulfilled when the check is paid. 5 R.C.L. pp. 498, 499. As is said in Morse's authoritative work on Banks and Banking:
"The legal obligation of the bank is to pay the customer's checks in such paper or coin, and in such quantities of paper or coin of any specific denomination, as the law of the land makes legal tender in the case of any ordinary debt. . . . No other species of tender than that authorized by the laws of the land can relieve the bank from liability to the drawer.
"But this obligation of the bank, at strict law, may of course be waived and dispensed with by the express or implied consent of the holder of the check. He is perfectly at liberty to accept any representatives of value which the bank may offer to him. If he does so accept, that is to say, if, at the time when such representatives are offered to him, he does not object to receive them on the ground that they are not what at law he has a right to demand, then this acceptance operates as a complete waiver of the holder's right to refuse anything save legal tender, and the banker is discharged by this payment, both as towards the drawer and the holder of the check. Even if the holder assents to take the promissory note of the banker, it will discharge the check absolutely and without regard to the fact of whether or not it is *411 paid at maturity. Payments are usually offered either in whole or in part in the bank bills or notes, either of the bank on which the check is drawn, or of other banks, which circulate as currency in the community. The holder may refuse these, when offered to him, if he wishes; but if he takes them, in the absence of fraud on the part of the bank he assumes as his own the risk of their value. The waiver was perfected by the very act of acceptance, and cannot be afterward undone. E converso, if it should happen that the funds are at a premium, the profit also is that of the receiver. In short, the money or representatives of value, on the moment when they have been paid over the counter and have been fairly received and accepted without objection by the payee, become the property of the payee, for good or for ill." 2 Morse, Banks Bkg. 5th ed. § 247, pp. 45, 46.
The presenting of a check for payment implies that the holder desires and is ready and willing to accept payment. Simpson v. Pacific Mut. L. Ins. Co.
The plaintiff cites and relies upon the decision of this court in Pickett v. Thomas J. Baird Invest. Co.
The ground on which liability is predicated in favor of the owner of a check against a collecting bank for transmitting the check direct to the drawee bank, or for accepting from such bank a draft in payment of the check, is that the collecting bank was negligent, and breached the obligations which it owed to the owner of the check, in so doing, and that, consequently, the owner of the check is entitled to be compensated by it for the injury which he sustained by reason of such breach of duty. Of course, if the owner of the check sustains no injury, *413 he is entitled to no compensation. Thus, if the collecting bank transmits a check direct to the drawee bank and accepts a draft in payment and the draft is subsequently paid so the owner receives his money, he has no cause of action, even though the collecting bank was negligent in the method it adopted in making the collection. And, clearly, the drawer of a check who is discharged from liability thereon has no cause of action against a collecting bank which accepts the draft of the payee bank in payment thereof. In such case there has been no breach of any duty owing to him, nor has he sustained any injury.
The fact that the State Bank of Stady stopped payment on the draft which it had issued and delivered to the plaintiff, obviously, cannot affect the rights of the parties to this action. That draft belonged to the plaintiff and clothed him with the same rights as though, instead of paying therefor by check, he had paid the State Bank of Stady in actual cash at the time the draft was issued. Whether the defendant, Federal Reserve Bank, was authorized to accept a draft from the Security State Bank of Hanks in payment of the check, and whether such acceptance renders either the Federal Reserve Bank or the Midland National Bank liable to the State Bank of Stady (the owner of the check), for the loss resulting from the acceptance of such draft, is a question not involved in this case and one upon which we express no opinion.
It follows from what has been said that there was and is no such relationship between the plaintiff and the defendant as would entitle the plaintiff to recover for any negligence on the part of the defendant in the collection of the check.
The judgment appealed from is reversed and the action is dismissed.
BIRDZELL, Ch. J., and NUESSLE, BURKE, and BURR, JJ., concur.
Note: The questions (1) whether the New York rule, or the Massachusetts rule, governs in cases where a bank accepts commercial paper for collection at a distance; (2) whether the collecting bank may transmit such paper direct to the drawee bank; and (3) whether the collecting bank may accept in payment of such paper the exchange or draft of the drawee bank, have been set at rest in this state by House Bill No. 249, chapter 92, Laws of North Dakota for 1927, which reads: *414
"The Bank of North Dakota, or any national bank doing business in this state, or any state banking association as defined in § 519A12, Supplement to the 1913 Compiled Laws, which shall cash, receive for application on an obligation, or for collection or deposit and credit, any check, note, or other negotiable instrument drawn upon or payable at any other bank, savings bank, trust company, or other financial institution located in another city or town, or which should be presented for acceptance or payment in another city or town, whether within or without this state, may, at its option, forward such instrument for presentment or collection directly to the bank on which it is drawn, or at which it is made payable, or may forward it through the Federal Reserve Bank, or other recognized banking agencies, and in payment of such collection such bank or other agency may accept the exchange or draft of the collecting or payor bank. Such method of collection shall, in the absence of a special agreement to the contrary, be deemed to be agreed to by the parties and the forwarding bank and successive agencies shall not be liable to the owner or depositor until actual final payment is received by the collection of such exchange or draft, and until such final collection the depositor, indorser, guarantor, or surety of any check, draft, or other instrument so received, deposited, cashed or credited, shall be liable to the bank to the extent of any money paid out or credit given by it on account of such instrument.
"Provided, however, the bank and every other agency through whose hands such instrument or the proceeds thereof shall pass shall be charged with ordinary business care, and shall be liable for any lack thereof, or for any default or negligence on its part resulting in loss, but not for the default, negligence or lack of care of any other agencies, and the owner or depositor of such instrument shall have a cause of action directly against such bank, or other agencies, for his damage or loss on account of its default or lack of ordinary care." *415