Davison v. Allen

• Decision Date: 28 March 1929
• Docket Number: 5049
• Citation: 276 P. 43,47 Idaho 405
• Parties: W. M. DAVISON, Respondent, v. C. E. ALLEN, Appellant
• Court: Idaho Supreme Court

276 P. 43

47 Idaho 405

W. M. DAVISON, Respondent, v. C. E. ALLEN, Appellant

No. 5049

Supreme Court of Idaho

March 28, 1929

BANKS AND BANKING-"PAYMENT" OF CHECK.

1. Where maker of check neglected to sign NAME, any failure of drawee bank to act more promptly in securing signature, after check was received by it, was waived by maker when he signed it knowing that until then it was not complete, had not been properly presented, collected, or paid, or remittance made to payee.

2. Bank, while sustaining to depositor relation of debtor to creditor as to deposit because funds on deposit are bank's funds and not depositor's, nevertheless is charged with duty to him to extent that it is under obligation to pay out on his orders or checks his funds deposited therein.

3. Where check was received by drawee bank as collecting agent or holder under Laws 1921, chap, 165, sec. 1; Laws 1925 chap. 133, sec. 93, and as drawee, and retained without charging it to depositor's account, there was no payment under C. S., secs. 5928, 5986, and maker, having received full consideration, was liable to payee for amount thereof after bank failed, notwithstanding that he had more than sufficient funds in bank to pay check.

4. In action against maker of check after failure of drawee bank which received and retained check without charging it to depositor's account, question of payment held to be question of fact.

5. Drawee owes duty to drawer, not to payee, to pay drawer's check.

APPEAL from the District Court of the Seventh Judicial District, for Canyon County. Hon. Ed. L. Bryan, Judge.

Action on a check. Judgment for the plaintiff. Affirmed.

Judgment affirmed. Costs awarded to respondent.

Walter Griffiths, for Appellant.

The relationship between the sending bank and the collecting bank, of commercial paper, or items for collection, is that of principal and agent. The act of plaintiff, in sending the check, or item, through the Parma Bank directly to the Wilder Bank for collection and remittance, constituted the Wilder Bank the agent of the plaintiff. And any loss occasioned by the negligent act, or failure to act, of the Wilder Bank must be sustained by plaintiff. (Anderson v. Rogers, 53 Kan. 542, 36 P. 1067, 27 L. R. A. 248; Pelt v Marlar, 95 Ark. 111, 128 S.W. 554; Bank of Poplar Bluff v. Millspaugh, 313 Mo. 412, 47 A. L. R. 754, 281 S.W. 733; Federal Reserve Bank of St. Louis v. Millspaugh, 314 Mo. 1, 282 S.W. 706; Federal Reserve Bank of St. Louis v. Quigley (Mo. App.), 284 S.W. 164; Federal Reserve Bank v. Peters, 139 Va. 45, 42 A. L. R. 742, 123 S.E. 379.) The act of payment was made complete when the check was signed by defendant and handed to and received by the bank of Wilder, in compliance with the written directions of plaintiff through his agents. No further fact or act on the part of any party was required. No entry was required upon the books of the bank of Wilder to make the act and fact of payment complete. (7 C. J., p. 608, secs. 264, 265, p. 611, sec. 268, note 19, p. 627, sec. 302, note 82; In re Ruskay, 5 F. (2d.) 143; American Nat. Bank v. Miller, 185 F. 338; Carpenter v. National Shawmut Bank, 187 F. 1, 109 C. C. A. 55; Murfreesboro First Nat. Bank v. Nashville First Nat. Bank, 127 Tenn. 205, 154 S.W. 965; Baldwin's Bank of Penn Yan v. Smith, 215 N.Y. 76, Ann. Cas. 1917A, 500, 109 N.E. 138, L. R. A. 1918F, 1089; 155 A.D. 881, 139 N.Y.S. 115; Globe Furniture Co. v. School Dist. No. 22 of Stafford County, 6 Kan. App. 889, 50 P. 978; Peaslee-Gaulbert Co. v. Dixon, 172 N.C. 411, 90 S.E. 423.)

Rice and Bicknell and Ernest Anderson, for Respondent.

When a note or check is sent to a drawee bank for collection, the mere sending thereof to the bank and receipt of the same for collection does not amount to payment. There must be some act of payment, an act equivalent to the actual appropriating of the drawer's funds to the payment of the note or check to constitute payment. (Shapleigh Hardware Co. v. Crews, 124 Okla. 247, 255 P. 696; Baldwin's Bank of Penn Yan v. Smith, 215 N.Y. 76, Ann. Cas. 1917A, 500, 109 N.E. 138, L. R. A. 1918F, 1089; Murfreesboro First Nat. Bank v. Nashville First Nat. Bank, 127 Tenn. 205, 154 S.W. 965; Hunt v. Security State Bank, 91 Ore. 362, 179 P. 248.)

GIVENS, J. Budge, C. J., and Wm. E. Lee and Varian, JJ., concur.

OPINION

GIVENS, J.

November 11, 1926, appellant, living in Wilder, purchased at Wilder from respondent, living in Caldwell, certain hogs and gave at Wilder in part payment thereof, a check in favor of respondent on the First National Bank of Wilder. Appellant failed to sign this check which omission was at the time overlooked by both parties. Respondent thereafter deposited the check with the Parma National Bank at Parma which bank discovered the lack of the signature and sent the check direct to the Wilder Bank which was proper (1921 Sess. Laws, 361, chap. 165, sec. 1; 1925 Sess. Laws, 231, chap. 133, sec. 93), with, after describing the check, etc., this advice on the collection sheet:

"Gentlemen: Enclosed find for collection and remittance as below. . . . Do not hold for convenience of party. Deliver documents only on payment. Report by no. or return this letter. . . . Please procure Mr. Allen's signature--when paid remit to First Nat. Bk. of Idaho, Boise, for our credit."

There was uncontradicted testimony that the collection sent on November 12th should have reached Wilder on the 13th. On the morning of the 16th Mr. Allen received notice from the Wilder Bank to come in and sign the check which he did on that morning and handed the check back to the bank. The Wilder Bank did not charge appellant's account nor credit respondent; in fact, did nothing further with the check except to keep the check in its possession until the 19th.

The Wilder Bank failed to open for business on the 18th. On that day the cashier of the Parma Bank went to the Wilder Bank and demanded payment of the check which was refused. The check was returned to him and he then demanded payment of appellant which appellant declined to make. The respondent later paid the amount of the check to the Parma Bank but never received payment of the check in question from the Wilder Bank or appellant; hence this action by respondent to recover the amount of the check from appellant resulting in a judgment in favor of respondent from which this appeal was taken. Appellant at all times between the 11th and the 18th had more than sufficient funds in the Wilder Bank to pay the check.

The Wilder Bank was to do four things: 1st, to procure Mr. Allen's signature to the check; 2d, to present it for payment to itself (Federal Reserve Bank v. Peters, 139 Va. 45, 42 A. L. R. 742, 123 S.E. 379, at 382); 3d, to collect it, which involved as the opposite but concomitant and simultaneous act, payment by itself as debtor of appellant to itself as collection agent for respondent; and 4th, to remit to respondent. Such dual and instantaneous change of duty is recognized and is, of course, apparent from a contemplation of the transaction where the rights of the parties are kept clearly in mind. (City National Bank v. Citizens' Bank, 172 Ark. 624, 290 S.W. 48, at 51; In re Schanke & Co., 201 Iowa 678, 207 N.W. 756, at 760; Exchange Bank v. Sutton Bank, 78 Md. 577, 28 A. 563, 23 L. R. A. 173; First National Bank v. First National Bank, 127 Tenn. 205, 154 S.W. 965, at 967.)

The Wilder Bank fully performed its duty in the first respect and any failure to act more promptly in securing appellant's signature was waived by him since he signed on the 16th and, of course, knew at that time that until then the check was not complete, had not been properly presented, collected, paid or remittance made to respondent. (Lipten v. Columbia Trust Co., 194 A.D. 384, 185 N.Y.S. 198, at 202.) In effect, on that day, he gave a valid check to respondent which was then presented. (Phillips v. Cunningham, 148 Tenn. 164, 253 S.W. 354.) So whether respondent should have done other than he did in having the check sent to the Wilder Bank to procure appellant's signature is of no moment. The Wilder Bank, while sustaining to appellant the relation of debtor to creditor as to his deposit, because his funds on deposit were the bank's funds and not appellant's, nevertheless was charged with a duty to him to the extent that it was under obligation to pay out, on his orders or checks, his funds deposited in the bank. (Erb v. Banco di Napoli, 243 N.Y. 45, 50 A. L. R. 1009, 152 N.E. 460; Guthrie National Bank v. Gill, 6 Okla. 560, 54 P. 434.)

C. S., sec. 5928, provides as follows:

"The drawer by drawing the instrument admits the existence of the payee and his then capacity to endorse, and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder." (Italics ours.)

In Blackwelder v. Fergus Motor Co., 80 Mont. 374, 260 P. 734, the court said:

"When a customer of a bank issues a check thereon, and delivers it to his creditor, rather than withdrawing the amount and paying the creditor, the check is not given as payment of the amount due, but with the implied promise that he will pay the amount if the bank does not do so. (Peninsula National Bank v. Hans Pederson Construction Co., 91 Wash. 621 158 P. 246; First Nat. Bank v. First Nat. Bank, 127 Tenn. 205, 154 S.W. 965; Usher v. Tucker Co., 217 Mass. 441, 105 N.E. 360, L. R. A. 1916F, 826.)

"It is said that the maker of a check guarantees that the bank...