No. 10201 | N.D. Ohio | Dec 27, 1919
The defendant demurs to the plaintiff’s petition on the ground that a cause of action is not stated. The petition in substance alleges that on the 14th day of March, 1918, plaintiff delivered to the Wisconsin National Bank at Milwaukee, Wis., for collection, four drafts, payable on demand, aggregating $12,533.45, drawn by plaintiff on the Horton Milling Company of Ashtabula, Ohio, payable to the order of the Wisconsin National Bank, with bills of lading attached, for four cars of No. 3 white corn, sold by the plaintiff to the said Horton Milling Company; that the Wisconsin National Bank duly forwarded these drafts to the defendant at Ashtabula, Ohio, for collection; that the defendant carelessly and negligently held them until about May 6, 1918, without making any demand for payment or acceptance, and without making any report or giving any notice of its failure to act; that as a result of this conduct the four cars of corn were permitted to lie on the side tracks of the railroad carrier until the corn had become heated and damaged, and was no longer of the grade and quality originally sold and shipped; and that the Horton Milling Company refused on May 6, 1918, to accept the corn or to pay the drafts. Plaintiff seeks to recover damages based on this negligent conduct of the defendant.
Upon this demurrer plaintiff contends that the law of Wisconsin is to govern, and that this law is what is known as the Massachusetts rule, applicable to the liability of a bank accepting commercial paper for collection. On the other hand, the defendant contends that the case is governed by the law of Ohio, which is the same as that known as the New York rule. No statute of Wisconsin is cited or claimed to be in force creating any special rule different from the general law of commercial paper. The law of Wisconsin invoked by plaintiff results from the decisions of its Supreme Court. See Stacy v. Dane County Bank, 12 Wis. 629" court="Wis." date_filed="1860-06-15" href="https://app.midpage.ai/document/stacy-v-dane-county-bank-6598271?utm_source=webapp" opinion_id="6598271">12 Wis. 629; Blakeslee v. Hewett, 76 Wis. 341" court="Wis." date_filed="1890-03-18" href="https://app.midpage.ai/document/blakeslee-v-hewett-8183331?utm_source=webapp" opinion_id="8183331">76 Wis. 341, 44 N. W. 1105.
The argument before me turns chiefly on whether or not there is any conflict in the decisions of the Surpeme Court of Wisconsin and of Ohio, and, if so, which line of decisions shall be followed — the plaintiff contending that, inasmuch as its contract was made in Wisconsin with the Wisconsin National Bank of Milwaukee, and was to be partly performed there, that the law of that state should control;" and the defendant contending that, inasmuch as Ohio was the place
Swift v. Tyson, supra, involved the question of whether or not one who acquired negotiable paper for a pre-existing debt in due course beforp maturity and without notice of any defense thereto was to be regarded as a holder for value. The cause of action arose in New York, by the decisions of which one taking a note for a pre-existing debt was not regarded as a holder for value. It was held that this was ■ a question, not of local law, but of general commercial law, and was to be decided upon an examination of all the authorities and due consideration of the principles underlying the general commercial law of the land. The result was that the United States Supreme Court held in that case that one taking negotiable paper for a pre-existing debt was a holder in due course. Mr. Justice Story, delivering the opinion, says that the laws of the state, which were made by the original Judiciary Act the rule of decision in the United States court, mean state laws, strictly local; that is to say, positive statutes of the state and the construction thereof adopted by the local tribunals, and decisions relating to rights or titles to things having a permanent locality, such as the rights and titles to real estate and other matters immovable and intraterritorial in their nature and character.
In B. & O. Railroad v. Baugh, supra, this and all the intervening cases were fully reviewed, and the law reiterated to the sam.e effect. It was therein held that the rule of fellow servancy in negligence cases was not a question of local law, but of general jurisprudence,- and that the Ohio vice principal rule would not be followed and applied in the United States courts, even when the injury was sustained and the cause of action arose in Ohio after the pronouncement by its Supreme Court of that rule. It results that, if the United States Supreme Court has declared a rule applicable to tire present controversy, it must control, and hence it is immaterial to inquire whether the so-called New York or Massachusetts rule is the true rule, or which has been adopted in Ohio.
The contrary doctrine is that a bank receiving commercial paper and performing these duties is merely obliged to exercise due care in the selection of competent agents and in the transmission of such paper with proper instructions. The result of this doctrine is that the receiving bank is impliedly authorized to select subagents, who thereby become agents of the owner of the paper, and is not liable for the neglect or default of its subagents. On the other hand, under the correct doctrine as established by the decisions above cited, the receiving bank contracts to make collection, and is, in effect, an independent contractor, which may avail itself of such agencies as are necessary or proper in the performance of its contract, but remains itself liable to the owner for due performance by its agents or representatives thus employed, and they do not become subagents of the owner; nor is the receiving bank exonerated from liability to the owner, no matter what degree of care or diligence it exercises in selecting its agents.
The case of Bank of Washington v. Triplett, 1 Pet. 25" court="SCOTUS" date_filed="1828-01-29" href="https://app.midpage.ai/document/president-and-directors-of-the-bank-of-washington-v-triplett--neale-85561?utm_source=webapp" opinion_id="85561">1 Pet. 25, 7 L. Ed. 37, sometimes cited as holding the contrary, is distinguished, on the ground that the bank, upon the facts, was held to have contracted directly with the holder of the bill to collect it, and that the forwarding bank was the holder’s agent merely to transmit the bill for collection. This is also the doctrine in Ohio. See Reeves v. State Bank, 8 Ohio St. 466. This case has been followed once, and the law therein stated has been approved twice in later cases. There is nothing to the contrary in Hilsinger v. Trickett, 86 Ohio St. 286, 99 N. E. 305, Ann. Cas. 1913D, 421, as contended on behalf of plaintiff. In this case, Judge Spear, delivering the opinion, says that it is unnecessary to consider the proposition stated in Reeves v. State Bank, supra, because neither the bank taking the paper for collection nor the bank to which it was forwarded was shown to be guilty of any neglect of duty, and, further, no loss to the owner had resulted from the alleged negligence.
The legal principles upon which these decisions rest are fundamental. The receiving bank, being in effect an independent contractor, has control of the means and agencies necessary and proper to perform its contract. The principal assumes no responsibility for the acts or conduct of the agents selected by an independent contractor. There is no privity of contract between the principal and the agents of the independent contractor. If the principal sustained to them such privity as would permit him to maintain an action against them, then he would become in law responsible for their acts and conduct. They might sue him for compensation, and he might be sued by strangers for their acts. He would be bound by their admissions while acting within the apparent scope of their authority. Notice to them would be notice to him. These principles are too important to be unsettled, out of consideration for the inconvenience which plaintiff may suffer'as a .result of what must be regarded as erroneous decisions of the Supreme Court of Wisconsin.
This opinion might end here, but, to avoid possible future misunderstanding, a word should be added with reference to those cases which hold that the owner of a negotiable paper may, under some circumstances, maintain an action against a bank to which the paper has been sent by a receiving bank to recover money collected thereon in an action for money had and received. In Reeves v. State Bank, supra, this right was denied. Judge Sutliff dissented, solely on the ground that no privity of contract was necessary to support an action by the real owner for money had and received against one who had no superior right to retain it. Other cases hold that, before remittance to the receiving bank, the latter’s agency may be revoked, and that an action for money had and received may be maintained against
The demurrer will be sustained. An exception may be noted. Leave to amend, if desired, will be given.