City of Douglas, Ariz. v. Federal Reserve Bank of Dallas

• Decision Date: 28 July 1924
• Docket Number: 847.
• Citation: 300 F. 573
• Parties: CITY OF DOUGLAS, ARIZ., v. FEDERAL RESERVE BANK OF DALLAS.
• Court: U.S. District Court — Western District of Texas

300 F. 573

CITY OF DOUGLAS, ARIZ., v. FEDERAL RESERVE BANK OF DALLAS.

No. 847.

United States District Court, W.D. Texas, El Paso Division.

July 28, 1924

Knapp Boyle & Pickett, of Douglas, Ariz., and Whitaker & Peticolas of El Paso, Tex., for plaintiff.

E. B Stroud, Jr., of Dallas, Tex., and Turney, Burges, Culwell Holliday & Pollard, of El Paso, Tex., for defendant.

SMITH District Judge.

This is an action at law, brought by the city of Douglas, Ariz., a municipal corporation, against the Federal Reserve Bank of Dallas, to recover $5,000 alleged to be the amount of a check drawn by the county treasurer of Cochise county, Ariz., to the order of said city, upon the Central Bank of Willcox, Ariz. The check was drawn on December 22, 1920, and was delivered to the city of Douglas on December 24, 1920, at which times, and at all times up to December 31, 1920, the treasurer of Cochise county had on deposit in the Central Bank of Willcox sufficient funds to meet said check.

On December 24, 1920, the check was properly indorsed by the city of Douglas and deposited with the First National Bank of Douglas, Ariz., for collection and credit. The full amount of the check was by said bank entered as a credit in a pass or deposit book and delivered to the city of Douglas, on which passbook there was a printed indorsement as follows: 'All out of town items credited subject to final payment.

' There was no other contract or agreement made between the city of Douglas and the said First National Bank of Douglas than such as arose impliedly from the acceptance by said bank of said check for collection, and there was no statute of the state of Arizona upon the subject which entered into or changed or modified said contract in any respect.

The First National Bank of Douglas was a member of the Federal Reserve banking system created by Congress. Said bank immediately transmitted said check by mail to the El Paso Branch of the Federal Reserve Bank of Dallas for collection. It was received by said Branch Bank on December 27, 1920, and was by it forwarded direct to the Central Bank of Willcox for payment, reaching said drawee bank on December 30, 1920. Thereupon the Central Bank of Willcox charged the county treasurer of Cochise county with the amount of the check, and in payment therefor issued and mailed to said El Paso Branch Bank, instead of cash, its cashier's check, drawn on the Central Bank of Phoenix, Ariz., for the sum of $6,426.17, which included some small items other than said $5,000 check.

Upon receipt of said cashier's check the El Paso Branch Bank forwarded same to the Branch Bank at Los Angeles of the Federal Reserve Bank of San Francisco for collection. On January 5, 1921, said Los Angeles Branch Bank forwarded said cashier's check direct to the Central Bank of Phoenix, drawee, for payment, reaching said bank on January 8, 1921, and was on said date protested for nonpayment because of the want of sufficient funds of the Central Bank of Willcox with the Central Bank of Phoenix to cover the check. On January 10, 1921, both of these last-named banks, being insolvent, closed their doors and ceased to do business. Thereupon the El Paso Branch Bank charged the First National Bank of Douglas with the amount of said $5,000 original check, and in turn the First National Bank charged it to the account of the city of Douglas and credited the amount thereof to the defendant.

It is charged by the city of Douglas, the plaintiff herein, that the El Paso Branch of the Federal Reserve Bank of Dallas defendant herein, was negligent in sending the check direct to the drawee, the Central Bank of Willcox, and in accepting its cashier's check in payment thereof, instead of cash. In view of the conclusion I have reached, it is necessary that I consider and discuss but one question, and that is: Can this action be maintained by the plaintiff, the city of Douglas, against the Federal Reserve Bank of Dallas? Stating the question in another form: Is the First National Bank of Douglas, with which the check was deposited by the city of Douglas for collection, alone responsible to the city, or is the Federal Reserve Bank of Dallas, to which the check was forwarded for...