City Bank v. Weiss

• Decision Date: 08 February 1887
• Citation: 3 S.W. 299
• Court: Texas Supreme Court
• Parties: CITY BANK OF SHERMAN <I>v.</I> WEISS.

3 S.W. 299

CITY BANK OF SHERMAN

v. WEISS.

Supreme Court of Texas.

February 8, 1887.

Appeal from Jefferson county.

Hal W. Greer and Brown & Gunter, for appellant. O'Brien & John, for appellee.

GAINES, J.

On December 17, 1885, appellant remitted to the City Bank of Houston for collection a draft drawn by one Kent on the Texas Tram & Lumber Company for $222.58, having first indorsed it as follows: "For collection, and credit for account of the City Bank of Sherman. C. C. JONES, Cashier." On the eighteenth day of the same month the City Bank of Houston indorsed the draft as follows, and sent it to appellee: "Pay V. Weiss, or order, for collection, for account of City Bank of Houston. B. F. WEEMS, Cashier." On the last-named day appellant remitted another draft for $201.60, drawn by the same drawer upon the same drawee, which also reached appellee through the same channel, with like indorsements upon it. The City Bank of Houston failed. Appellee collected the money upon both drafts, — upon the first before, and upon the second after, he was apprised of the failure. The Houston bank was indebted to both appellant and appellee; and appellee credited the proceeds of the collections to the account of the latter bank, and refused to pay appellant. Appellant brought suit, and the cause was submitted to a jury, who returned a verdict for appellee. The court rendered judgment accordingly, and overruled appellant's motion for a new trial.

The assignments of error relied upon in the brief all relate to the action of the court in giving and refusing instructions. It is complained that the general charge was misleading, in this: that it made the liability of the appellee to depend upon the question whether he was the agent of appellant in collecting the draft or the agent of the City Bank of Houston, and did not instruct the jury as to the legal effect of the restrictive indorsements upon the drafts. It is also assigned that the court erred in refusing charges asked by appellant to the effect that these indorsements were notice to appellee of appellant's ownership of the paper, and that, if the former collected them, he was responsible to appellant for the amount so collected.

When one places negotiable paper with a bank for collection, and that bank sends it to another for the same purpose, whether the second bank is to be deemed the agent of the owner, or merely the agent of the second bank, is a vexed question. Important legal consequences flow from its determination, and upon it the authorities are conflicting. If the second bank be held agent of the owner, then it would be responsible to him for any negligence which resulted in a loss of the debt. So, also, if the collecting bank failed after recovering the money, being in good credit at the time the paper was transmitted for collection, the bank which had sent it would not be liable to the owner for the amount collected. But if, as many authorities hold, the second indorsee is to be considered merely the agent of his immediate indorser, and not of the first indorser, these consequences do not follow; and, in case of negligence or default, the first indorsee is liable to the owner of the bill, and not the second.

These principles are well illustrated by the authorities which have been cited by counsel for appellee. In Allen v. Merchants' Bank of New York, 22 Wend. 215, the defendant bank had received the draft for collection, and had transmitted to a bank in Philadelphia, through whose negligence it had been lost. Defendant was held liable for the loss. In the case of Montgomery Co. Bank v. Albany City Bank, 7 N. Y. 459, the decision was to the same effect; and it was also there held that the bank to which the bill had been sent in the second instance was not liable to the owner for its own default. Virtually the same doctrine was held in Reeves v. State Bank of Ohio, 8 Ohio St. 466. In Kent v. Dawson Bank, 13 Blatchf. 237, a draft was sent for collection to the defendant bank upon a party in Washington, North Carolina. Defendant sent it to bankers in that place then in good standing, who collected it, and, becoming insolvent, failed to pay over the money. The defendant was held responsible. In Pennsylvania the same principle was applied to a company of mercantile agents, and they...