136 Va. 276 | Va. | 1923
delivered the opinion of the court.
The plaintiff in'error sued the defendant in error to recover the proceeds of a draft, with bill of lading attached, which had been collected by the defendant bank, as agent of the plaintiff bank. A jury being waived, the case was submitted to the judge of the trial court, and there was a judgment for the defendant.
The controlling facts, . as we construe them, are these: The Rocky Mount Grocery and Milling Company, of Rocky Mount, Virginia, hereafter called the milling company, on October 30, 1919, entered into a contract for the purchase of twelve carloads of corn with the Franke Grain Company, of Milwaukee, which was succeeded by the Franke-LaBudde Grain Company, hereafter referred to as the grain company. Pursuant thereto the grain company, having previously shipped ten cars, shipped a carload of corn to the milling company at Rocky Mount, May 28, 1920. Simultaneously with this shipment, the grain company drew on the milling company for $1,670.00, payable on demand. To the draft was attached the bill of lading for the car of corn, which was consigned by the grain company to its own order at Rocky Mount, Va. This ■draft was discounted by the plaintiff bank for the grain ■company, and on the same day was mailed by the plaintiff to the defendant, with instructions to deliver the attached bill of lading to the milling company upon payment of the draft, and to remit the proceeds thereof to the Fourth Street Bank of Philadelphia for the credit of .the plaintiff bank. On June 14th and June 30th tracer
The notice alleges that the plaintiff purchased and ■discounted the draft from the drawer in good faith, without notice, for valuable consideration, and thereby became the holder thereof in due course and entitled upon ■payment to the proceeds thereof.
The circumstance most relied upon by the defendant .grows out of these facts: The draft was drawn on a ■printed form in favor of the First National Bank of Milwaukee, that name being printed in this blank. There
If the plaintiff bank was the innocent holder for-value of the draft and bill of lading, without notice of any failure of consideration or breach of contract by the-grain company, then the judgment of the trial court is. erroneous.
Under the circumstances here appearing, it is perfectly apparent that the failure to make the draft payable to the plaintiff bank is a mere inadvertent clerical, error, because the bank to which it was made payable had been out of existence for nearly twelve months—that is, since June 30, 1919, the effective date of the consolidation. It was to the plaintiff bank that the draft, was delivered by the drawer, and this bank discounted it. It was from the plaintiff bank that the drawer re-, ceived cash credit for the amount of the draft, to whom, the draft as well as the bill of lading was delivered, having been endorsed by the grain company. If attention-had been drawn to this clerical error, the plaintiff bankr would have had the right to avoid it, for Code, section. 5605 (Negotiable Instruments Law), provides expressly,, “Where the name of a payee or endorsee is wrongly designated or misspelled, he may endorse the instrument as therein described, adding, if he think fit, his proper-signature.” In this case, however, under the evidences and understanding of the parties, it would not have been.
Under the circumstances of this case, this draft may well be construed to be payable to bearer, because Code ■section 5571 provides, among other things, that such an .instrument is payable to bearer “when it is payable to the order of a fictitious or non-existent person and such fact was known to the person making it so payable.” Now the uncontradicted fact here is that the First National Bank of Milwaukee had ceased to exist by that name, and it is proved that the grain company, constantly doing business with the consolidated bank, the plaintiff, knew of sfiph consolidation and change of name; and that the nomihal payee of its draft was a nonexistent corporation. If thus payable to bearer, no endorsement was necessary. On the other hand, if it ■could be fairly contended that the nominal payee of the ■draft still existed as a corporation for any purpose, then under the consolidation agreement all of its property .rights became vested in the plaintiff bank (with certain •exceptions which it is unnecessary to consider) upon the •effective date of this agreement. If this draft could, in any view, be held to be nominally the property of the First National Bank of Milwaukee, then by operation ■of the act of Congress and the agreement of consolidation made pursuant thereto, the plaintiff bank was its .legal successor thereto in title. So that, in either event, this plaintiff was the legal holder of the draft.
That a draft discounted under such circumstances ■and credited as cash to the drawer by a bank (subject to check), in good faith and without notice, vests the discounting bank with title and all of the rights of an Innocent holder thereof for value, is settled in this State hy the carefully, considered case of Fourth National
The defendant then was the agent of the plaintiff bank, and under a high duty to protect and respect its rights as the holder of the draft in due course. While the letter of the defendant dated July 15th states that the bill of lading was delivered to the milling company July 7th, and the reply thereto of the plaintiff assumes that this is the date upon which the draft was paid, it otherwise appears in the record that the draft was paid July 2nd. There is no explanation whatever of the failure of the defendant to remit the proceeds during the period which elapsed between the date of this payment and July 8th, when the funds were attached, except the statement of the attorney for the defendant in his brief, that "It was entirely proper for the collecting bank to hold the money a few days, giving the parties a chance to settle without legal proceedings." We cannot agree that this is a sufficient explanation of such a delay, because the express instructions contained in the letter enclosing the draft were to protest it if not paid on presentment. It is not unfair to say that certainly with bankers it is a matter of common knowledge that there would have been no urgent reason for protesting the draft unless the plaintiff bank owned it and desired to hold the grain company to its responsibility as drawer. Instead of notifying its principal of the attachment proceeding promptly, it appears that although this attachnient was levied on July 8th, five days after remittance of the funds should have been made, no notice thereof was given the plaintiff until July 15th, and then only in. response to a telegraphic inquiry. The failure to reply to the various letters heretofore referred to, confirms the contention that the defendant was grossly negligent. On August 31st, the plaintiff wrote requesting the de
The defendant might have declined to accept the .agency, but having accepted it assumed the obligations thereby imposed.
Among these obligations was the duty to remit the ■proceeds of the draft promptly, pursuant to the customs of the business, and in accordance with the instructions of its principal, from whom its authority to -collect it was derived. In this it failed, for it held these funds for six days in violation of the rights of its principal and without justification or excuse.
Another obligation was the duty to inform its principal frankly and promptly of the adverse claim of the milling company and of its assertion, by levy of the attachment, which sought to divert the fund from its principal, for whom it had been collected, and to return it to the milling company from which it had been so col
Another duty, when it answered the attachment, was-to disclose its agency to the court, as well as the fact that its principal, who was not'a party to that litigation, also claimed the fund which was so held by it as-agent. In this also it failed.
The request of its principal to employ an attorney to present its claim was a reasonable one. It imposed neither hardship nor expense. It should have been, complied with, and the failure either to comply or to notify the principal of its refusal to do so adds to this catalogue of derelictions. Considered separately or collectively they conclusively show that the defendant has neglected its obvious duties as the plaintiff’s agent. This-course of action has resulted in the loss of the fund to the plaintiff which otherwise would not have occurred. If either of these duties had been performed, the fund would not have been diverted. If the plaintiff had been, afforded the opportunity to intervene in the attachment, and its right at least to this opportunity is manifest, it could have shown the ownership which it here establishes, and hence would have there recovered.
We deem it unnecessary for us here to consider either the rights of the grain company, the debtor, or the milling company, the purchaser of the corn. It is likewise unnecessary for us to consider any other possible right or remedy which might have been available either to the plaintiff or to the defendant. We have, therefore, confined our discussion to the precise right here asserted by this plaintiff against this defendant.
The case has some novel features, but the sound principles upon which our conclusions are based are well illustrated by First National Bank of Cincinnati v.
There are many other interesting questions discussed in the very able briefs which are filed in the ease, but a consideration of these questions cannot change the result. No valid defense has been interposed. We will, therefore, reverse the judgment of the trial court, and enter the judgment here for the plaintiff which, in our view, should have been entered in the court below.
Reversed.