Bank of Metropolis v. First Nat. Bank

• Decision Date: 08 February 1884
• Citation: 19 F. 301
• Parties: BANK 0F THE METROPOLIS v. FIRST NAT. BANK OF JERSEY CITY.
• Court: U.S. District Court — Southern District of New York

19 F. 301

BANK 0F THE METROPOLIS v. FIRST NAT. BANK OF JERSEY CITY.

United States Circuit Court, S.D. New York.

February 8, 1884

Francis Schell, for plaintiff.

Marsh Wilson & Wallis, for defendant.

WALLACE J.

The plaintiff sues to recover the amount of certain checks of which it was the holder and owner, and which came to the defendant's hands and were collected by its sub-agent under the following circumstances: The plaintiff sent the checks to the Mechanics' National Bank of Newark, for collection, with the qualified indorsement, 'For collection; pay to the order of O. L. Baldwin, cashier, ' Baldwin being the cashier of that bank. The Mechanics' National Bank of Newark sent the checks for collection to the defendant, pursuant to an existing arrangement between them by which each sent to the other commercial paper for collection, it being understood that the proceeds were not to be specifically returned, but were to be credited to the sending bank by the receiving bank, and enter into the general account between them, consisting of such collections and other items of account, and offset any indebtedness of the sending bank to the receiving bank. After the defendant received the checks in question, the Mechanics' National Bank of Newark became insolvent, and suspended payment, being indebted to the defendant under the state of the accounts between them in a considerable sum.

Upon these facts it is clear that the relations between the defendant and the Newark bank in respect to paper received by the former from the latter for collection were those of debtor and creditor, and not merely of agent and principal (Morse, Banks, 52;) and the defendant, having received the paper with the right to appropriate its proceeds upon general account as a credit to offset or apply upon any indebtedness existing or to accrue from the Newark bank growing out of the transactions between the two banks, was a holder of value. Since the decision in Swift v. Tyson, 16 Pet. 1, it has been the recognized doctrine of the federal courts that one who acquires negotiable paper in payment or as security for a pre-existing indebtedness is a holder for value (Nat. Bank of the Republic v. Brooklyn City, etc., R Co. 14 Blatchf. 242; affirmed, 102 U.S. 14;) and if the defendant had been justified in assuming that such paper was the property of the Newark bank, it would have been entitled to a lien upon it for a balance of account, no matter who was the real owner of the paper. Bank of Metropolis v. New England Bank, 1 How. 234. But the checks bore the indorsement of the plaintiff in a restricted form, signifying that the plaintiff had never parted with its title to them. In the terse statement of GIBSON, C.J., 'a negotiable bill or note is a courier without luggage; a memorandum to control it, though indorsed upon it, would be incorporated with it, and destroy it. ' Overton v. Tyler, 3 Pa.St. 348. The indorsement by plaintiff 'for collection'...