| Tenn. | Mar 23, 1893
The plaintiff in error was defendant below in a suit brought by Walker before a Justice of the Peace for $140, the price of a mule. He obtained judgment before the Justice, and on appeal in the Circuit Court, for the amount claimed; and Howard & Co. appealed in error.
The facts were agreed upon, and are as follows:
Howard & Co. authorized W.~ T. Boyd to buy mules for them in October, 1891, and to pay for such mules by drafts drawn on them. On October 5, 1891, Boyd bought a mule for them from Walker, and gave him a draft on Howard & Co. for its price, $140. Walker indorsed the draft, and deposited it in the First 'National Bank of Centerville, Tennessee, on same day, and this bank immediately forwarded it to its regular correspondent at Columbia, the Columbia Banking Company, indorsed “ for collection.” The Columbia Banking Company received the draft on the seventh, and on the eighth of October presented the draft to Mr. Howard, of the firm of Howard & Co., who directed that it be taken to the Bank of Columbia for payment. On the thirteenth Of October the Columbia Banking Company presented the draft to the Bank of Columbia, where directed, and where Howard & Co. had funds more than
The Columbia Banking Company never remitted to the Bank of Centerville, and that bank never received any thing, on the draft or othei-wise, through this collection. Both the Bank of Columbia and the Columbia Bauking Company failed on the seventeenth of October. They were both insolvent from the fifth to the seventeenth, but their offieers did not know it until October 17, and there is no pretense of bad faith in their transactions with each other. They were according to the usual daily course of business between them.
When the settlement of the thirteenth of October referred to took place, in which the draft now in
When the Columbia Banking Company and the Bank of Columbia suspended business on the seventeenth, the former was indebted to the latter several thousand dollars.
Upon these facts, with some others not material to he stated, the Circuit Judge held the draft had not been paid; that the transaction in' which it was settled was not a collection, and was not binding on plaintiff; and that Howard & Co. were still liable to him for the original debt.
In this we hold there was manifest error.
The collection was, according to bank custom, as effectual as though the money had been handed over the counter by. each bank to the other in satisfaction of this as of the several other checks involved. It makes no difference, and makes it none the less a payment, that the indorsement by the Centerville bank was restrictive “ for collection.” It was expected that such draft would be collected in the usual way, and it is agreed that it was done according to custom of these and all banks in daily transactions with each other, in which checks are not paid alternately back and forth, but settlement made upon the basis indicated. This is the general custom, and is a reasonable one, and parties dealing with the banks adopting are bound
The references on the subject in the foregoing cases cited, establish conclusively the binding effect of reasonable customs of banks in general collections, as in other dealings, and cover, in principle, the case before us; but the exact question has been decided, and it is treated as settled.
In his work on “ Commercial Paper,” Mr. Randolph says: “If the holder of a bill directs that it be paid to a certain banker, procuring credit with such banker will amount to a payment of the bill. So, if the amount of a note is credited to a bank holding it for collection (according to the custom of dealings between ' the banks), it will be a payment, although the bank making the note and giving the credit failed on the day it was so credited.” Vol. III., Secs. Í395, 1456. See also Bank v. Bank, 11 N. Y., 213, 214; Briggs v. Bank, 89 N.Y., 182" court="NY" date_filed="1882-05-30" href="https://app.midpage.ai/document/briggs-v--cent-natl-bk-of-city-of-ny-3629793?utm_source=webapp" opinion_id="3629793">89 N. Y., 182; Bank v. McClung, 7 Lea, 492.
The doctrine has been extended, and collecting banks have been recognized as authorized to receive their own certificates of deposit in payment, and the debtor is discharged, even though the bank fails before remitting. 1 Morse on Banks, Sec. 305.
These principles are not in contravention of that which permits an agent to receive only money in payment of his principal’s debt. If the principal
These business transactions are understood to be, and are in effect, the payment of money by one and its receipt by the other bank. It is impracticable, if not impossible, to go through the vain and empty formality of paying cash back and forth by. each bank to every other on every separate check involved in the multiplicity of the transactions in which they are used. The banks must resort to a method of balancing accounts and settling on basis of results, and no man sending a check or draft for collection has any reason to expect that his collection will be made otherwise than all are made in this way. It is a money settlement, and the receipt of.money in payment in the actual business sense that the law requires, under the reasonable custom adopted by banks as a necessity, and recognized as such throughout the world. It is the recognition and adoption of this
The judgment is, therefore, reversed, and judgment entered here for defendant.