Bank v. Nat'l Tube-Works Co.

• Decision Date: 09 May 1890
• Citation: 24 N.E. 779,151 Mass. 413
• Parties: FREEMAN'S NAT. BANK v. NATIONAL TUBE-WORKS CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

151 Mass. 413

24 N.E. 779

FREEMAN'S NAT. BANK

v.NATIONAL TUBE-WORKS CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 9, 1890.

Report from supreme judicial court, Suffolk county; CHARLES ALLEN, Judge.

Action upon an indorsement of drafts indorsed by defendant to the People's Bank, and indorsed for collection by it to the Penn National Bank, and by the Penn National Bank to the plaintiff “for account of Penn Bank.”

W.G. Russell and J. Fox, for plaintiff.

Hutchins & Wheeler, for defendant.

KNOWLTON, J.

The indorsement from the defendant to the People's Bank although in terms unrestricted, was without consideration, and merely for the purpose of collection. The People's Bank became the agent of the defendant; and the defendant, as owner of the drafts, can avail itself of all that its agent did for its protection. The subsequent indorsements through which the drafts came to the plaintiff were both restrictive, giving notice that the ownership had not passed beyond the People's Bank. They purported to be made only for the purpose of collection on account of the owner, and they merely passed the legal title so far as to enable the indorsees to demand, receive, and sue for the money to be paid. Bank v. Smith, 132 Mass. 227. It is well settled that upon such an indorsement the owner may control his negotiable paper until it is paid, and may intercept the proceeds of it in the hands of an intermediate agent. Manufacturers' Nat. Bank v. Continental Bank, 148 Mass. 553, 20 N.E.Rep. 193, and cases there cited. The indorsement of the Penn National Bank, taken in connection with the former indorsement of the People's Bank, did not by the words, “for account of Penn Bank,” imply that the Penn Bank was the owner. It was a request to pay “for account of” the Penn Bank, as agent of the People's Bank. An unbroken succession of such indorsements would indicate that each indorser was acting by direction of the next preceding indorser, who was himself an agent of the owner, who had before indorsed, and for whom the collection was to be made. Nothing was shown in the course of business of either of the banks necessarily to conflict with the implication to be derived from the form of the indorsements. The letter of the People's Bank in which the drafts were sent to the Penn Bank was, simply, “We inclose for collection and credit” the drafts, describing them. The Penn Bank, in its reply, said, “We enter for collection” the drafts described, “to be used when paid.” “The drafts, when received by the Freeman's Bank, were entered upon its collection book, but have never been entered upon its account current, or upon any other book of account, to the credit of the Penn Bank.” It has so long been held by the courts that an indorsement of this kind is restrictive, protecting the rights of the owner, that officers of banks must be presumed to have well understood the law, and when they have honored overdrafts drawn by other banks, which had...