20 Ind. App. 101 | Ind. Ct. App. | 1897
Lead Opinion
The question for determination in this cause is this: Did the appellant in accepting for collection, in the ordinary course of business, the draft delivered to it by appellee, guarantee the solvency of the intermediate banks through which the said draft passed before it was finally presented to the drawee, and paid?
It appears from the record that on the 10th day of July, 1893, appellee delivered to appellant, who was engaged in the general banking business at Columbus, Indiana, a draft for collection. This draft was drawn upon the Baker Iron Works of Los Angeles, California, was for the sum of $414.25, and was made payable to the order of appellee. At the time of the delivery of the draft to appellant, appellee indorsed it as follows: “Pay to W. G. Irwin, or order, for collection. Reeves Pulley Co.” Appellant, not having a correspondent in Los Angeles, transmitted the draft to its regular correspondent at Indianapolis, Indiana, the Indianapolis National Bank, for collection, indorsing the said draft as follows: “Pay E. E. Rexford, Cas., or order, for collection, and credit Irwin’s Bank of Columbus, Indiana. W. G. Irwin, Cashier.” Upon receipt of the draft from appellant, the Indianapolis National Bank transmitted it for collection to its correspondent at Los Angeles, California, by the following indorsement: “Pay State Loan & Trust Company or order, for collection, for the Indianapolis National Bank, Indianapolis, Indiana. E. E. Rexford, Cashier.” The State Loan & Trust Company presented the draft to the drawee and received
Appellant answered in three paragraphs. The first paragraph of answer is as follows: “Answer. First paragraph: For answer to plaintiff’s complaint in the above entitled cause, defendant says: That for a longtime prior to and on the 10th day of July, 1893, he
“That defendant had no correspondent bank at Los Angeles, California, the place where the drawee resided and where collection was to be made; and defendant’s most convenient correspondent bank, which in turn had a correspondent bank at Los Angeles, California, was the Indianapolis National Bank, at Indianapolis, Indiana; that accordingly and in order to save expense to plaintiff, as aforesaid, defendant transmitted said draft to said Indianapolis National Bank, to be by it transmitted to its correspondent bank at Los Angeles, California, and to facilitate collection thereof, defendant indorsed said draft as follows: ‘Pay-E. E. Rexford, Cas., or order, for collection, and credit Irwin’s Bank, Columbus, Indiana. W. G. Irwin, cashier.’ That said Indianapolis National Bank, in turn, at once transmitted said draft to its correspondent bank, the State Loan and Trust Company, a bank doing a general banking business at Los Angeles, California, and to facilitate collection thereof indorsed said draft as follows: ‘Pay State Loan and Trust Company, or order, for collection for the Indianapolis National Bank, Indianapolis, Indiana. E. E. Rexford, cashier.’ That said draft was paid to said State Loan and Trust Company on the 19th day of July, 1893, and credited on said day by said bank to said Indianapolis National Bank; that, at the time of said entry and credit upon the books of said State Loan and Trust Company, the said Indianapolis National Bank was its debtor to an amount in excess of the sum so credited; that said Indianapolis National Bank failed and went into the hands of a receiver as insolvent on the 24th day of July, 1893, and notice of said collection and credit, as afore
Appellant’s second paragraph of answer differs from the first in this: That in addition to the facts averred in the first paragraph, it avers that appellant “undertook, for the accommodation of its said customers, and not otherwise, to collect by,transmitting for collection, and not otherwise,” and that appellant delivered said draft to appellant “for collection in the manner aforesaid and not otherwise.” The third paragraph of appellant’s answer is substantially the same as the first, except that it is therein alleged that appellant’s custom and course of dealing in undertaking to transmit for collection said draft in the manner in which the same was done, and without charge, to its regular customers, was and is the custom of banks generally, but does not charge appellee with knowledge of the custom.
The lower court sustained a demurrer to each paragraph of appellant’s answer. Appellant excepted to the ruling of the court, and has assigned such ruling to this court as error. Appellant refused further to answer the complaint, and upon such refusal the court assessed appellee’s damages at $459.10, and rendered judgment in appellee’s favor for said amount.
In. Tyson v. State Bank, supra, the negligence of the bank in not presenting the bill to the drawee for acceptance or payment was the breach for which the bank was held liable. The court deciding the case, speaking by Sullivan, J., said: “The State Bank, through its branch at Lafayette, agreed with the plaintiff, for a valuable consideration, to collect the bill described in the declaration. The plaintiff confided its interests to the prudence and fidelity of the bank. The defendant made no effort, as we learn from the declaration, to collect the bill. It was not presented to the drawee for acceptance or payment, consequently there was neither protest nor notice of its dishonor. For such negligence, the defendant is responsible to the plaintiff for the damages he has sustained.” The cases cited by the court in support of the opinion quoted from are all cited as to this point only.
In American Express Co. v. Haire, supra, Perkins,
In the case of First Nat’l Bank v. First Nat’l Bank, supra, the question involved in this appeal is not touched upon, but it is held in that case that the owner of a draft deposited for collection could recover the proceeds in the hands of the intermediate bank or subagent, and that “no objection can be successfully made on the ground of want of. privity.” The court, in sustaining its position, cites Morse on Banks and Banking, an authority confessedly against the position taken by appellee in this cause. The case of Chapman v. McCrea, supra, is almost identical with the case of Tyson v. State Bank, supra. In Chapman v.
The question presented by this appeal has not been decided by the Supreme Court of this State, but it has held, applying the doctrine to the case at bar, that there is no want of privity between appellee and the State Loan and Trust Company. First Nat’l Bank v. First Nat’l Bank, supra.
The authorities which hold that the transmitting bank (appellant) is not- liable for the default of its correspondents, do so upon the ground that a collecting bank is an agent for transmission to a subagent to collect, and when this is properly done, and the sub-
“It is a general principle that an agent’s authority is construed to embrace all the means usual and necessary for its proper execution. Accordingly, when the agent can show that the instructions of his principal could not have been properly executed without the employment of deputies, he will be warranted in delegating so much of his authority as the character of his agency demands.” 1 Am. and Eng. Ency. of Law (2nd ed.) 980; Evans on Agency (Ewell’s ed.) 44; Mechem on Agency, section 194; Story on Agency, section 201-214; Dun v. City Nat’l Bank, 58 Fed. 174; Wright on Agency, 55-56.
There is no conflict of the authorities as to the law of agency as above set forth. What, then, is its application to the case at bar? Under the indorsement and delivery of the draft by appellee to appellant, did appellant become the agent of appellee for the collection of the draft? Was it necessary for the proper execution of this agency, if one was so created, that the agent should employ subagents? Was appellant charged with knowledge of the necessity of the employment of subagents wrhen he created the agency? Mechem, in his work on Agency, section 514, says: “The same conflict of authority exists as to the liability of a bank which receives, in the ordinary manner, a note or bill payable at a distant place, and sends it to its correspondent there for collection. It is well
As wre have shown, the author of the above quotation is in error so far as the statement concerning the position of the courts of Indiana is concerned, as is also recognized and stated in 3 Am. and Eng. Ency. of Law (2nd. ed), page 811, where it is said: “It is stated in several leading cases upon this subject * * * that the courts of Indiana have adopted the view that the forwarding bank is liable for the default if its correspondent. And in the cases of Tyson v. State Bank, 6 Blackf. 225, 38 Am. Dec. 139, and Amer
Upon the question of the agency of the forwarding bank, the court of appeals of New York, speaking by Mr. Justice Peckham, said: “The indorsement upon each piece of paper was for collection simply, and by virtue of that indorsement no title passed to the firm, but, on the contrary, it became simply the agent of the plaintiff to present the paper, demand payment thereof and remit it.” National Butchers & Drovers' Bank v. Hubbell, 117 N. Y. 384.
In the case of Dun v. City Nat’l Bank, 58 Fed. 174, the court said: “It appears from the agreement that the services demanded by the principal — the obtaining of information — cannot be rendered by the agent, but must be mainly rendered by subagents. In such cases the agent will not be liable for the negligence or misconduct of his subagent, provided there was no negligence or misconduct in his selection. * * * When the business intrusted to an agent is to be performed at a distance, or requires or justifies the delegation of an agent’s authority to a subagent who is not his own servant, the original agent is not liable for the errors or misconduct of the subageht if he has used due care in his selection.” To the same effect see Barnard v. Coffin, 141 Mass. 37. Applying these principles to the case at bar leads to the proper solution of the .question presented herein.
“When a draft, payable at a distant place, is left with a bank for collection, it must be presumed that it is intended to be transmitted to a subagent at the place where it is payable, and not that the bank is to employ its own officers to proceed there for the purpose of
In 1 Morse on Banks and Banking,- page 487, it is said: “The parties to a contract are presumed to contract in reference to well established usage, in this particular as in others. The very question is whether the contract to collect can be fairly construed to be, by the understanding of the parties, an agreement that the first bank shall personally or by its servants do the collecting in the distant city, or whether, considering that the usage of trade is universal and well established to send the paper to some correspondent bank entirely independent of the first, and not its servant any more than a lawyer is the servant of his client, and considering that no compensation is taken by the first bank at all commensurate with such a risk as that of loss by negligence of subagents, is it not fairer to construe the contract intended to be simply one of transmission; and if so, then the question arises: Is there good reason on any other ground for extending the liability of the first bank beyond the consequences of its own lack of due care and that of its servants?”
The case of Guelich v. National State Bank, 56 Iowa 434, 9 N. W. 328, is strongly in point. In the last mentioned case the court said: “The course of business of defendant, and all other banks, is, in such cases, to. make collections through correspondents. They do not undertake themselves to collect the bills, but to indorse them to other banks at the place where payment is to be made. The holder of the paper, having full notice of the course of business, must be held to assent thereto. He, therefore, authorizes the bank with whom he deals to do the work of collecting through another bank. * * * The bank receiving
The case of Allen v. Merchants’ Bank, 22 Wendell 215, 34 Am. Dec. 289, firmly established the doctrine, contended for by appellee, in the State of New York. The decision was by an almost evenly divided court, fourteen members being upon one side and ten upon the other. Mr. Freeman has this to say of the decision, in a note following the principal case: “The preponderance of authority is against the doctrine of the principal case, and in favor of the rule that the liability of a bank taking a note or bill for collection, which is payable at a distance, extends merely to the selection of a suitable and competent agent at the place of payment, and to the transmission of the paper to such agent with proper instructions, and that the correspondent bank is the agent, not of the transmitting bank, but of the holder, so that the transmitting bank is not liable for the defaults of the correspondent, where due care has been used in making the selection of such correspondent.
The rule adopted in the case of Allen v. Merchants’ Bank, supra, was adopted by the supreme court of the United States in the case of Hoover v. Wise, 91 U. S. 308, with Justices Miller, Clifford and Bradley dissenting. The same rule was adopted by divided courts in the states of New Jersey and Ohio, and while Michigan has adopted the same rule, an eminent member of the bar of that State, in his valuable work on
We do not believe it necessary to further quote from the decisions sustaining appellant’s contention in this cause. The following cases will be found in point and will, serve to show the wide range of the authority for the position taken in this opinion.
We thus conclude that the acceptance of the draft to collect only binds the bank to the exercise of reasonable skill and ordinary diligence in making the collection and in the selection of its correspondents. Merchants, etc., Bank v. Stafford National Bank, 44 Conn. 565; Fabens v. Mercantile Bank, 23 Pick. (Mass.) 330; Third Nat’l Bank v. Vicksburgh Bank, 61 Miss. 112; Guelich v. National St. Bank, 56 Iowa 434; Bank of Louisville v. First Nat'l Bank, 8 Baxt. 101; Fifth Nat'l Bank v. Ashworth, 123 Pa. St. 212, 16 Atl. 596; Hum v. Union Bank, 4 Rob. (La.) 109; Wilson & Co. v. Smith, 3 How. (U. S.) 763; Lawrence v. Stonington Bank, 6 Conn. 521; Warren Bank v. Suffolk Bank, 10 Cush. (Mass.) 582; Planters’, etc., Bank v. First Nat’l Bank, 75 N. C. 534; Daly v. Butchers’, etc., Bank, 56 Mo. 94; Aetna Ins. Co. v. Alton City Bank, 25 Ill. 221; Drovers’ Nat’l Bank v. Anglo-American Packing, etc., Co., 117 Ill. 100, 7 N. E. 601; Stacy v. Dane County Bank, 12 Wis. 629; Citizens Bank v. Howell, 8 Md. 530; Merchants’ Nat’l Bank v. Goodman, 109 Pa. St. 422, 2 Atl. 687; Hyde v. Planters’ Bank, 8 Rob. (La.) 416; German Nat’l Bank v. Burns, 12 Colo. 539, 21 Pac. 714; Bank of Lindsborg v. Ober, 31 Kan. 599, 3 Pac. 324; Waterloo Milling Co. v. Kuenster, 158 Ill. 259, 43 N. E. 906; Farmers’ Bank v. Newland, 97 Ky. 464, 31 S. W. 38; First Nat’l Bank v. Sprague, 34 Neb. 318, 51 N. W. 846; Bank of Washington v. Trip
We must conclude, therefore, that when appellee placed the draft in appellant’s hands for collection, appellant became the agent of appellee for the collection and transmission of the draft, with implied authority to do whatever was reasonably necessary to accomplish the work; that appellant having exercised reasonable care in the selection of subagents necessarily employed to do the work, and seasonably transmitted the draft through such subagents to the place of payment, his whole duty has been performed.
In the opinion of this court neither paragraph of the complaint states a cause of action against appellant; that the lower court erred in overruling the demurrer to each paragraph of the complaint, that the decision of the lower court is not only against the great weight of authority in this country upon the direct point at issue, but that it is contrary to the commonly accepted mercantile usages and customs,and violates the settled laws as applied to agents. Judgment reversed, with instructions to the lower court to sustain the demurrer to both paragraphs of appellee’s complaint.
Rehearing
On Petition fob Reheabing.
Appellee has filed a petition for a rehearing in this cause, in which it is urged that certain material allegations of the second paragraph of complaint have been ignored by the court. It is claimed by counsel for appellee that the averments of the second paragraph of complaint, viz: that appellant and appellee entered into an agreement by the terms of which appellee, who was a large depositor with appellant, should charge appellant nothing in the way of
Agents are not presumed to do their work without consideration. If, for a consideration, the appellant had guaranteed the solvency of the subagent employed by him in making appellee’s collections, or guaranteed appellee from loss from any reason growing out of the misconduct of subagents employed by appellant in making collections for appellee, an entirely different case would be presented. We see no reason to change the decision of the court. Petition for a rehearing overruled.
Dissenting Opinion
Dissenting Opinion.
Believing that the opinion adopted by the majority of the court is contrary to the doctrine laid down by the Supreme Court, that it is opposed to
The question presented by this appeal is, whether a bank in this State, receiving a draft for collection on a drawee at some distant point and undertaking its collection through a number of correspondent banks, is liable to the payee of the draft for the default of any of such correspondents. Are the correspondent banks the agents of the home bank or the agents of the owner of the paper?
The first paragraph of the appellant’s answer avers that on the 10th day of July, 1893, he was engaged in the banking business under the name of “Irwin’s Bank, Columbus, Indiana,” and as was its custom and course of dealing with its regular customers, undertook, for the accommodation of such customers, to transmit for collection to banks at other places, drafts and other evidences of indebtedness without other cost than the expense paid the bank making such collection when sent to a point where appellant or its correspondent bank had no correspondent bank, and when appellant had no correspondent bank atthepoint or place where collection was to be made, appellant would, unless otherwise directed, send the same to its most convenient correspondent bank, which in turn, had a correspondent bank at the point or place of collection; that appellee knew appellant’s method of making collections, and on said day, without any other agreement than that implied by such knowledge, appellee delivered to appellant the draft sued on, and indorsed thereon: “Pay to W. G. Irwin, Cas., or order, for collection. Reeves Pulley Co.;” that appellant had no correspondent bank in California where the collection Avas to be made, and that appel
The second paragraph differs from the first only in averring that said bank “undertook, for the accommodation of its said customers, and not otherwise, to col
The third paragraph is the same in substance as the first, except it avers defendant’s custom and course of dealing in undertaking “to transmit for collection” in the manner and without charge to its regular customers as alleged to be “the custom of banks generally,” but omits the direct averment as to plaintiff’s acquaintance with the custom. Demurrers to these paragraphs of answer were sustained and these rulings are the only errors assigned.
It is argued by appellant’s counsel that the doctrine of the first bank’s liability is opposed by the analogies of the law; that the compensation is so manifestly inadequate as to refute an implied assumption of so great a liability; and that by the usages of trade, the usual dealings between parties, and the exigencies of the case, the employment of a subagent to make the collection was authorized by the appellee. In Pollard v. Rowland, 2 Blackf. 22, Rowland, an attorney, without the knowledge of his client, who had given him for collection a note ón a party residing in a county in which Rowland did not practice law, and forty miles distant from Rowland’s, employed another attorney to make the collection, the latter being in default, the first attorney was held liable. See, also, Abbott v. Smith, 4 Ind. 452.
It is evident, from the nature of each of the successive indorsements, that the title to the draft, or to its proceeds, never passed out of the Reeves Pulley Company. The California bank by virtue of the indorsements never acquired any right to the proceeds of the draft. In Sweeny v. Easton, 1 Wal. 166, in speaking of an indorsement similar to these in the
In the case at bar the draft was not delivered to appellant to be held in trust for some specific purpose and then returned to appellee. Nor was it delivered to appellant to be by him simply transmitted to the one who was to pay it in California, but the purpose of the delivery and the undertaking by appellant was not only to send the draft to the payer but to return to appellee its proceeds. When appellee delivered and appellant accepted the draft with the indorsement, “Pay to W. G. Irwin, Cashier, or order, for collection. Reeves Pulley Co.,” it cannot be said that appellee delivered the draft and appellant accepted it for transmission only. This would be giving to the transaction between the parties an entirely different meaning from that conveyed by the language which they themselves used. It must be concluded that if appellant had intended to undertake only the transmission of the draft it would have been so expressed in the indorsement. From the nature of the transaction between the parties, it is not to be presumed that,
In a note to the case of Allen v. Merchants’ Bank, 22 Wend. 215, 34 Am. Dec. 289, it is said: “Some, however, have seemed to suppose that banks do not undertake such collections, as they do other branches of their business, solely from motives of profit, but as an accommodation of their customers; and that as they have no ownership or interest in the paper collected, the pay is in a measure gratuitous unless extra commissions are charged. From this notion has no doubt sprung the disposition of some courts to hold banks to a less stringent accountability with respect to paper taken for collection than would be enforced against agents for hire generally in the management of the business of their principles. Such a notion, however, is entirely fallacious, as shown in the principal case. Banks are not in this, any more than in any other part of their business, charity institutions. They undertake collections, not from motives of benevolence, but because from long experience they have found it directly or indirectly profitable to do so. If they should find it unprofitable they would cease to perform the service, however advantageous it might be to the world at large. The benefit derived from the use of the money collected for the time that it may be left in
There is a great conflict of authority on the question as to how far the first bank is to be held liable for the default of a correspondent bank. In the able briefs of counsel for appellant and appellee these cases are collected. There is a direct conflict, and text-writers are as far from agreeing on the question as the courts of the different states. Many of the states follow the courts of Massachusetts, which deny the liability of the bank, while an equally formidable array follow the New York and United States supreme courts, and affirm the bank’s liability. The courts of several States follow the Massachusetts rule that the first bank is not liable. These authorities rest on the proposition that as the collection of a draft at a distant point cannot be made by the bank itself through any of its officers, but must be entrusted to a subagent, the holder of the draft impliedly authorizes the bank to employ a subagent, and that the risk of the subagent’s neglect is then upon the holder of the draft; and further that the consideration, in the absence of an express or implied agreement for compensation, is inadequate from which to infer a contract to guarantee against loss. Counsel for appellant rely upon the case of Bank of Washington v. Triplett, 1 Pet. 25, as declaring the rule that the bank with which the note or draft is deposited for collection has no further duty
In Exchange National Bank v. Third National Bank, 112 U. S. 276, the Pittsburg bank discounted, before acceptance, certain drafts and sent them to the New York bank for collection. The New York bank sent them to its correspondent, the First National Bank of Newark, N. J., for acceptance and collection. The drafts were drawn on “Walter M. Conger, Sec’y Newark Tea Tray Co., Newark, N. J.” The drafts were presented by the Newark bank to Conger for acceptance, who, except in one instance, accepted them by writing on the face: “Accepted, payable at the Newark National Banking Co., Walter M. Conger.” There was sufficient time before the time of payment to notify the Pittsburg bank the form of the acceptance and for said bank thereafter to give further instructions as to the form of acceptance. The Newark bank held the drafts for payment, but the Pittsburg bank was not notified of the form of the acceptance until two of the drafts were returned to it by the New York bank. At
In Mackersy v. Ramsay, 9 Cl. & Fin. 818, a bank in Edinburgh was employed to obtain payment of a bill drawn on Calcutta. The Edinburgh bank transmitted the bill to its correspondent in London who forwarded it to a house in Calcutta to whom the bill was paid, but that house having failed the Edinburgh bank was sued and was held liable on the ground that it was an agent to obtain payment of the bill and as payment had been made the bank’s principal could not be called on to suffer any loss occasioned by the bank’s subagents, between whom and the principal no privity existed. Van Wart v. Woolley, 3 Barn. & Cr. 439.
In Titus v. Mechanics’ National Bank, 35 N. J. L. 588, the court said: “A dealer who deposits a draft on distant city, in a bank in his own town, has no choice of their agent or correspondent. It is the business of a bank to provide proper agents or correspondents for this service, when they adopt it, as most banks do, as part of their regular business. If fhey have no such correspondent, they should refuse to take paper for collection, and then the holder could choose whether he would leave it for transmission. He would then be led to inquire abo'ut the agent to whom it would be transmitted. The English and New York rule is much better adapted to the convenient dispatch of business. It is no hardship on the bank; it can always look to its correspondent bank to which transmission is made, for indemnification from its neglect.” The following authorities sustain the doctrine that the correspondent bank is the agent of the home bank and not the agent of the owner of the paper. Davey v. Jones, 42 N. J. L. 28, 36 Am. Rep. 505; Allen v. Merchants Nat’l Bank, 22 Wend. 215, 34 Am. Dec. 289; Ayrault
The liability of a collection agency, to whom had been delivered a bill for collection, for the default of an attorney to whom the agency had sent the bill for collection, was established by a divided court in the case of Hoover v. Wise, 91 U. S. 308; but the liability of a bank for the default of a correspondent bank was established by a unanimous court in the case of Exchange National Bank v. Third National Bank, 112 U. S. 276. The United States Circuit and District Courts have approved the same doctrine. National Exchange Bank v. Beal, 50 Fed. 355. In the case of Dunn v.
Whether there is or is not a want of privity between appellee and the California bank does not affect appellee’s rights as against appellant. The authorities seem to be agreed upon the proposition that an indorsement for collection simply does not pass title to the paper so indorsed, and those states which hold the first bank liable follow this doctrine. In the case of the National, etc., Bank v. Hubbell, 117 N. Y. 384, the court said: “The endorsement upon each piece of paper was for collection simply, and by virtue of that endorsement no title passed to the firm, but, on the contrary, it became simply the agent of the plaintiff to present the paper, demand payment thereof and remit to it. Under such circumstances the title to the paper remained in the party sending it.” And as stated above the doctrine of the first bank’s liability has long been established in New York. And. in First National Bank v. First National Bank, 76 Ind. 561, it was held that the indorsement of a check for collection did not vest the title to it in the indorsee nor give it any right to the proceeds, and in that case the following doctrine in Sweeny v. Easter, 1 Wal. 166, is approved: “The words Tor collection’ evidently
Although the Massachusetts court has strenuously denied the liability of the first bank, yet that court holds that if an agent undertakes to do the work of his principal and employs a subagent to assist him, on his own account, he is answerable to the principal for the wrong-doing of the subagent, although the principal has knowledge of the fact of the employment of the subagent. Barnard v. Coffin, 141 Mass. 37, 6 N. E. 364. See, also, Morgan v. Tener, 83 Pa. St. 305; Bradstreet v. Everson, 72 Pa. St. 124; Sweet v. Southworth, 125 Mass. 417; Dyas v. Hanson, 14 Mo. App. 363. And the authorities which approve the Massachusetts doctrine give no good reasons why a bank should be excepted from the well established principle of law that every person is liable for the acts of such agents as- he has selected, to transact such business as he has undertaken to transact for others.
Not only do we believe that the doctrine laid down in Exchange National Bank v. Third National Bank, supra, and in that of the great commercial center, New York, the better doctrine, and that a rule laid down by the highest court in the land upon a question that most frequently arises between persons residing in different states, should govern; but that a different doctrine cannot be declared in our own State without disregarding the adjudications of our own Supreme Court. In Tyson v. State Bank, 6 Blackf. 225, 38 Am. Dec. 139, a bill was left with a branch of the State Bank of Indiana for collection. The branch bank failed to present the bill either for acceptance or pay
In approving the doctrine laid down in Smede v. Bank, 20 Johns. 372, the court, in Tyson v. State Bank, supra, said: “The court remarked that the custom of receiving notes for collection was not founded on mere courtesy, but with a view to the interests of the institution and was the source from whence profit may and did arise.”
It is argued by appellant that Tyson v. State Bank, supra, although frequently cited in support of the doctrine of the first bank’s liability, does not, in fact, so hold. But this question has been decided adversely to appellant’s contention in American Express Co. v. Haire, 21 Ind. 4. In that case the court said: “In Hoard v. Garner, 3 Sandf. 179, the New York doctrine is stated thus, by Judge Sanford: ‘The principle established by Allen v. Merchants’ Bank, 22 Wend. 215, was, that the implied contract of the banker was an undertaking to do the thing itself, and was not the delegation of an agent or authority to procure the thing to be done; that the contract looked mainly to the thing to be done, and his undertaking was for the due use of all proper means for its performance; that it was not a contract only for the immediate services of the agent and his acting faithfully as the represent
Rehearing
On Petition for Rehearing.
In the original opinion of the majority of the court, it is stated at the outset that the question presented for determination is, “Did the appellant, in accepting for collection, in the ordinary course of business, the draft delivered to it by appellee, guarantee the solvency of the intermediate banks through which the said draft passed before it was finally presented to the drawee and paid?” The complaint is in two paragraphs, and the judgment of the trial court is reversed, writh instructions to sustain the demurrer to each paragraph of the complaint.
In addition to the facts set out in the original opinion, and upon which it is said the complaint is predicated, the second paragraph contains these averments: “That on said day (July 10, 1893) and for a long time prior thereto, plaintiff had been and then was, a customer of said Irwin’s Bank, doing a large amount of business with said bank, including loans, discounts, collections and deposits; that plaintiff for a long time prior to said day was in the habit of carrying large sums of money on deposit in said bank, on which plaintiff was allowed and received no interest; that in consideration of the premises the defendant had, prior to said 10th day of July, 1893, agreed with the plaintiff to make collections of all such claims as might be deposited by plaintiff in said bank for collection, without other charge therefor than the actual cost and expense incurred by said bank in the collection thereof; that, plaintiff’s said contract still being in force and unrevoked, on said 10th day of July, 1893, deposited with defendant’s said bank for collection their draft,” etc. I think these averments in the complaint make a case different from that stated in the opinion. Here is an express contract between the parties. In the presence of such a contract, the commonly accepted mercantile usages and customs must give way. The above allegation clearly makes the second paragraph of complaint good. Where a contract is expressed as here, there is no room to reason out by inference what the agreement was. The parties themselves have spoken. Their agreement is expressed in terms. The consideration is agreed upon. In view of such facts, a court cannot take the conduct of the parties, and say that they did not mean what they said.
Courts denying the liability of the first bank recognize the effect of an express contract. Thus, in Pennsylvania, if a bank receives a reward for collecting, beyond the expense and mere nominal charge for service in forwarding, and employs a Virginia bank to collect the note, the Pennsylvania bank will be responsible for any negligence of the Virginia bank.
The author of Morse on Banks and Banking (3rd ed.), section 269, who so strenuously denies the first bank’s liability, recognizes this distinction, and says: “If there is an express contract upon the matter of the first bank’s responsibility, of course the question will be governed by it, and if the character of the contract and the consideration is such as to indicate such an interest, the first bank will be held liable, even in those states where upon the ordinary contract it is not held.” For the reasons above stated I think the second paragraph of complaint is good, and that the petition for a rehearing should be granted.