Daly v. Butchers' & Drovers Bank of St. Louis

• Decision Date: 31 March 1874
• Citation: 56 Mo. 94
• Parties: JOHN J. DALY, Appellant, v. THE BUTCHERS' AND DROVERS BANK OF ST. LOUIS, Respondents.
• Court: Missouri Supreme Court

56 Mo. 94

JOHN J. DALY, Appellant,

v.THE BUTCHERS' AND DROVERS BANK OF ST. LOUIS, Respondents.

Supreme Court of Missouri.

March Term, 1874.

Appeal from St. Louis Circuit Court.

M. Kinealy, for Appellant.

Defendant received the drafts for collection, not merely for transmission. (Bank of Washington vs. Triplett, 1 Pet., 25.

It will be presumed that the bank undertook the collection for a sufficient consideration and they will not be permitted to rebut it. Gerhardt vs. Boatmen's Saving Ins., 38 Mo., 60; citing and approving Allen vs. Merchants' Bank, 22 Wend., 215; Morse Banking, 323, 2 para.

The defendant was a contractor for the collection of the drafts, and not the agent of plaintiff, and is therefore liable for the loss occasioned by the default and negligence of the Vicksburg Bank. (See Reeves vs. State Bank of Ohio, 8 Ohio, [N. S.], 465; Young vs. Noble, 2 Disney, [Ohio,] 485; Commercial Bank of Penn. vs. Union Bank of N. Y., 1 Kern. N. Y., 203; Commercial Bank vs. Union Bank, 19 Barb., 391; Montgomery Co. Bank vs. Albany City Bank, 8 Barb., 396.)

But even if the court should refuse to abide by the doctrine of Gerhardt vs. Boatmen's Saving Ins., and hold defendant the agent of plaintiffs instead of a contractor, we would be entitled to a reversal in this case because the indorsement of defendant on the back of the drafts was an order of appropriation of the proceeds, to their own use, and they thereby constituted the Vicksburg Bank their own agent, and became liable for its negligence and default. (See Tabor vs. Perrott, 2 Gallis., 565; see also Young vs. Noble, supra.)

Moreover, the plaintiff being a depositor (customer) of defendant, even on the general doctrine of agency applied to banks, the defendant is liable in this case. (Mackersy vs. Ramsay, 9 Cl. & F., 844-846.)

A. J. P. Garesche, for Respondent.

I. The bank having used due diligence by inquiry, and exercised a sound discretion in the choice of its foreign correspondent, cannot be held liable. The nature of its agency implied its power to appoint a sub-agent. For no one can seriously suppose that it was the duty of the bank that it should send one of its own officers to Mississippi to make these several collections. (Ætna Ins. Co. vs. Alton City Bank, 25 Ill., 246; Dorchester M. B'k. vs. N. E. B'k., 1 Cush. [Mass.,] 177; East Haddam B'k. vs. Scovill, 12 Conn., 314. (These decisions conform with the general law of principal and agent.) Sto. Ag., § 201.)

II. And the rule is reasonable. 1st. Because the contract, as contended for by plaintiff, that a bank should answer for the fidelity and solvency of a foreign corporation or person, would be beyond its corporate powers. 2nd. Because it is of very great advantage to the business community that a bank may be authorized to receive such paper for transmission and collection, without other responsibility than that of an honest discretion. Gerhardt vs. Boatmen's Sav. Inst. 38 Mo., 60, is not adverse. The court there says: “If the subject of the controversy were a foreign bill of exchange, it might present an entirely different aspect.” See also to same effect Allen vs. Merchants' Bank, 22 Wend., 224.

In this State it is the rule, that in a case like the present, from the nature of the transaction, the bank has a right to employ a sub-agent. And if so, then the general law of agency applies, that the agent is not responsible if he exercise care and a sound discretion,--both of which conditions are conceded to exist, by the agreed state of facts.VORIES, Judge, delivered the opinion of the court.

The defendant in this case was a banking corporation authorized and created by the laws of this State, and as such was engaged in receiving deposits of money and securities, buying and selling exchange, and collecting drafts, bills and notes.

The petition alleges that the plaintiff, on the 19th day of October, 1867, was the owner of five different drafts drawn on different persons and firms in the States of Arkansas and Mississippi, for sums amounting to about $150 each, (each of which was particularly described in the petition), and all of which were drawn by P. Flanigan & Co., payable to their own order and by them indorsed.

The petition also charges that, on said 19th day of October, 1867, plaintiff deposited said drafts with the defendants for collection, and that defendant agreed and undertook to collect at the current rate of exchange; that the aggregate amount of said drafts was seven hundred and thirty-two dollars and nineteen cents; that the defendant refused to account to plaintiffs for the drafts, although a reasonable time had elapsed since their delivery to defendant for collection or return, and that defendant had refused to pay plaintiff the amount of said drafts or to return the same; that defendant has collected the amount of the drafts and has thereby become liable to pay the amount thereof to plaintiff, for which judgment is prayed.

The defendant in its answer denies that it agreed to collect the drafts named in the petition, or that it refused to account to plaintiff therefor, or that it has ever refused to return the same, or that it has ever collected the amount thereof. But the defendant states that said drafts were deposited with it with the understanding that defendant would send them to Vicksburg for collection; that pursuant to said agreement defendant did send the drafts to the Vicksburg National Bank, at Vicksburg, Mississippi, for collection; that said bank has not as yet collected the same or accounted to defendant therefor. The case was tried before the court, a jury having been waived.

The case was submitted on the following agreed state of facts, to-wit: “That the plaintiff was a depositor at the defendant's bank; that the plaintiff deposited the drafts named in the petition with defendant; that said drafts were payable with current rate of exchange, and that said drafts were sent by the defendant to the National Bank at Vicksburg, Mississippi; that the National Bank was ordered by defendant to collect and remit; that said bank did collect the following sums, to-wit: Draft on T. F. Mann, for $144.57, on November 2, 1867; Rosenberry & Co., for 149.76, October 22, 1867; L. Morrow, for 128.36, November 5, 1867; that the National Bank at Vicksburg kept the money and failed to remit, and became insolvent; that the Butchers' and Drovers' Bank at St. Louis never received the money collected on said drafts at St. Louis; that the Butchers' and Drovers' Bank has never returned to plaintiff any of the other drafts, nor has said bank ever paid any part of said drafts to him, though the same have been demanded; that the cashier of the Butchers' and Drovers' Bank at St. Louis was P. S. Langton, and that the cashier of the National Bank at Vicksburg was Alex. H. Arthur, and that upon the back of each of said drafts in question the defendant made the following indorsement: “Pay to Alex. H. Arthur, Esq., cashier, or order, for collection for account of Butchers' and Drovers' Bank of St. Louis, P. S. Langton, cashier.” It is further admitted that the defendant made inquiries as to the solvency of the National Bank, and became satisfied that it was perfectly safe and sound, and so believed to be at the time the drafts were sent for collection.

Upon this admitted state of facts the Circuit Court, at special term, found for the defendant and rendered a judgment in its favor. The plaintiff then filed a motion for a new trial on the ground that the judgment was not sustained by the law growing out of the facts in the case. This motion being overruled by the court, the plaintiff excepted and appealed to the general term of said court, where the judgment rendered at special term was affirmed, from which last judgment plaintiff appealed to this court.

There is no difficulty in reference to the facts in this case; all of the material facts stand admitted. The question is as to the law growing out of the facts admitted. The plaintiff being the owner of certain drafts drawn on certain persons in the States of Mississippi and Arkansas, and being a customer of the defendant (a bank in St. Louis, Mo.), deposited these drafts with the defendant for collection. The defendant forwarded the drafts to the National Bank at Vicksburg, in the State of Mississippi, for collection. The drafts were indorsed by the cashier of defendant to the cashier of the National bank at Vicksburg, for collection for account of Butchers' and Drovers' Bank of St. Louis. The Vicksburg bank collected part of the drafts and shortly afterwards failed and became insolvent without ever paying or otherwise accounting to defendant for the money collected or the drafts uncollected. There is no pretense that the defendant had not used due diligence in selecting the Vicksburg bank as a collecting agent, it being solvent at the time the drafts were forwarded. After the Vicksburg bank became insolvent, the plaintiff demanded the money collected by the Vicksburg bank and the drafts uncollected, of the defendant. The defendant failed to pay the money or deliver the drafts, and the plaintiff commenced this action to recover the amount thereof.

The question is, is the defendant liable for the amount of these drafts in this action, or, in other words, was the Vicksburg bank the agent of the plaintiff for the collection of these drafts, or was it the agent of the defendant? This has for a long time been a vexed question in the commercial world, the...