Exchange Nat Bank of Pittsburgh, Pa v. Third Nat Bank of the City of New York

• Decision Date: 24 November 1884
• Citation: 28 L.Ed. 722,5 S.Ct. 141,112 U.S. 276
• Parties: EXCHANGE NAT. BANK OF PITTSBURGH, PA., v. THIRD NAT. BANK OF THE CITY OF NEW YORK. 1
• Court: U.S. Supreme Court

112 U.S. 276

5 S.Ct. 141

28 L.Ed. 722

EXCHANGE NAT. BANK OF PITTSBURGH, PA., v. THIRD NAT. BANK OF THE CITY OF NEW YORK.¹

November 24, 1884.

John R. Emery and Thos. N. McCarter, for plaintiff in error.

A. Q. Keasbey, for defendant in error.

The Exchange National Bank of Pittsburgh, Pennsylvania, brought this suit against the Third National Bank of the city of New York, in the circuit court of the United States for the district of New Jersey, to recover damages for the alleged negligence of the defendant in regard to 11 drafts or bills of exchange indorsed by the plaintiff to the defendant for collection. The suit was tried before the court without a jury. It made a special finding of facts and rendered a judgment for the defendant, to review which the plaintiff has brought this writ of error.

The facts found are these, in substance: The drafts were drawn by Rogers & Burchfield, at Pittsburgh, to the order of J. D. Baldwin, and by him indorsed, on 'Walter M. Conger, Sec'y Newark Tea Tray Co., Newark, N. J.,' and were discounted before acceptance, by the plaintiff, at Pittsburgh, for the drawers. They bore different dates, from June 8, 1875, to September 20, 1875, and were in all other respects similar except as to the sums payable, and in the following form:

'$1,042.75.

PITTSBURGH, June 8, 1875.

'Four months after date, pay to the order of J. D. Baldwin ten hundred and forty-two 75-100 dollars, for account rendered, value received, and charge to account of

ROGERS & BURCHFIELD.

'To Walter M. Conger, Seo'y Newark Tea Tray Co., Newark, N. J.'

They were transmitted for collection at different times before maturity by the plaintiff to the defendant in letters describing them by their numbers and amounts, and by the words 'Newark Tea Tray Co.' They were sent by the defendant to its correspondent, the First National Bank of Newark, inclosed in letters describing them generally in the same way, except that, in two of the letters, they were described as drawn on 'W. M. Conger, Sec'y.' The drafts were received by the defendant in New York within a day or two of the time of discounting them. They were presented by the First National Bank of Newark to Conger for acceptance, who, except in one instance, accepted them by writing on the face these words: 'Accepted, payable at the Newark National Banking Co. WALTER M. CONGER.' When the acceptances were taken, the time of payment was so far distant that there was sufficient time to communicate to the plaintiff the form of the acceptance, and for the plaintiff thereafter to give further instructions as to the form of acceptance. The Newark bank held the drafts for payment, but the plaintiff was not advised of the form of acceptance until, on the thirteenth and nineteenth of October, two of them were returned to it by the defendant. At that time the drawers and indorsers were insolvent, but the drawers were in good credit when the drafts were discounted by the plaintiff. The drafts were duly protested for non-payment, but none of them were paid. The Newark Tea Tray Company is a New Jersey corporation doing business in that state, and Walter M. Conger is its secretary. The drafts were represented to the plaintiff by Burchfield, one of the drawers, who offered them for discount, to be 'the paper of the Newark Tea Tray Company' drawn against shipments of iron by Rogers & Burchfield to that company, and were discounted as such by the plaintiff. He also represented that Walter M. Conger was the person who examined the shipments of iron and 'accepted the drafts,' and that they were drawn in this form for the convenience and accomodation of the company. On drafts of Rogers & Burchfield on the 'Newark Tea Tray Co.,' dated May 4, 1874, May 20, 1874, and June 30, 1874, discounted by the plaintiff, and transmitted for acceptance to the defendant, and by it sent to the same Newark bank, that bank took acceptances from Walter M. Conger individually, without notice to the plaintiff; and Conger, during the time drafts sent by the plaintiff to the defendant, addressed to the 'Newark Tea Tray Co.' and to 'Walter M. Conger, Sec'y Newark Tea Tray Co., Newark, N. J.,' were in the hands of the Newark bank to procure acceptance, informed the cashier of the Newark bank that he would not accept these drafts in his official capacity as secretary.

[Argument of Counsel from pages 278-280 intentionally omitted]

BLATCHFORD, J.

The negligence alleged consists in not obtaining acceptance of the drafts by the Tea Tray Company, or having them protested for non-acceptance by that company, or giving notice to the plaintiff of such non-acceptance, and in failing to give notice to the plaintiff that the company would not accept the drafts, or that Conger would not accept them in his official capacity. The decision of the circuit court proceeded on the ground that, at most, the defendant erred in judgment as to the import of the address on the drafts; that it had no information to qualify or explain such import; that for it to regard the drafts as addressed to Conger in his individual capacity was not a culpable error, because it followed decisions to that effect made by courts of the highest standing in New Jersey and New York and elsewhere; that it exercised intelligent and cautious judgment on the information it had; and that the plaintiff knew who was the intended drawee, as understood between it and the drawers, and ought to have advised the defendant, but failed to do so. 4 Fed. Rep. 20.

The only question presented by the record is that of the sufficiency of the facts found to support the judgment. It is contended by the defendant that its liability, in taking at New York for collection these drafts on a drawee at Newark, extended merely to the exercise of due care in the selection of a competent agent at Newark, and to the transmission of the drafts to such agent, with proper instructions; and that the Newark bank was not its agent, but the agent of the plaintiff, so that the defendant is not liable for the default of the Newark bank, due care having been used in selecting that bank. Such would be the result of the rule established in Massachusetts, (Fabens v. Mercantile Bank, 23 Pick. 330; Dorchester Bank v. New England Bank, 1 Cush. 177;) in Maryland, (Jackson v. Union Bank, 6 Harr. & J. 146;) in Connecticut, (Lawrence v. Stonington Bank, 6 Conn. 521; East Haddam Bank v. Scovill, 12 Conn. 303;) in Missouri, (Daly v. Butchers' & Drovers' Bank, 56 Mo. 94;) in Illinois, (AEtna Ins. Co. v. Alton City Bank, 25 Ill. 243;) in Tennessee, (Bank of Louisville v. First Nat. Bank, 8 Baxt. 101;) in Iowa, (Guelich v. National State Bank, 56 Iowa, 434; S. C. 9 N. W. Rep. 328;) and in Wisconsin, (Stacy v. Dane County Bank, 12 Wis. 629.) The authorities which support this rule rest on the proposition that since what is to be done by a bank employed to collect a draft payable at another place cannot be done by any of its ordinary officers or servants, but must be intrusted to a subagent, the risk of the neglect of the subagent is upon the party employing the bank, on the view that he has impliedly authorized the employment of the subagent; and that the incidental benefit which the bank may receive from collecting the draft, in the absence of an express or implied agreement for compensation, is not a sufficient consideration from which to legally infer a contract to warrant against loss from the negligence of the subagent.

The contrary doctrine, that a bank, receiving a draft or bill of exchange in one state for collection in another state from a drawee residing there, is liable for neglect of duty occurring in its collection, whether arising from the default of its own officers, or from that of its correspondent in the other state, or an agent employed by such correspondent, in the absence of any express or implied contract varying such liability, is established by decisions in New York, (Allen v. Merchants' Bank, 22 Wend. 215; Bank of Orleans v. Smith, 3 Hill, 560; Montgomery County Bank v. Albany City Bank, 7 N. Y. 459; Commercial Bank v. Union Bank, 11 N. Y. 203, 212; Ayrault v. Pacific Bank, 47 N. Y. 570;) in New Jersey, (Titus v. Mechanics' Nat. Bank, 6 Vroom, 588;) in Pennsylvania, (Wingate v. Mechanics' Bank, 10 Pa. St. 104;) in Ohio, (Reeves v. State Bank, 8 Ohio St. 465;) and in Indiana, (Tyson v. State Bank, 6 Blackf. 225.) It has been so held in the second circuit, in Kent v. Dawson Bank, 13 Blatchf. C. C. 237, and the same view is supported by Taber v. Perrot, 2 Gall. 565, and by the English cases of Van Wart v. Woolley, 5 Barn. & C. 439, and Mackersy v. Ramsays, 9 Clark & F. 818. In the latter case, bankers in Edinburgh were employed to obtain payment of a bill drawn on Calcutta. They transmitted it to their correspondent in London, who forwarded it to a house in Calcutta, to whom it was paid; but that house having failed, the bankers in Edinburgh, being sued, were by the house of lords held liable for the money, on the ground that, they being agents to obtain payment of the bill, and payment having been made, their principal could not be called on to suffer any loss occasioned by the conduct of their subagents, between whom and himself no privity existed.

The question under consideration was not presented in Bank of Washington v. Triplett, 1 Pet. 25; for, although the defendant bank in that case was held to have contracted directly with the holder of the bill to collect it, the negligence alleged was the negligence of its own officers in the place where the bank was situated. In Hoover v. Wise, 91 U. S. 308, a claim against a debtor in Nebraska was placed by the creditor in the hands of a collecting agency in New York, with instructions to collect the debt, and with no other instructions. The agency transmitted the claim to an attorney at law in Nebraska. The attorney received the amount of the debt from the debtor in Nebraska, in fraud of the bankrupt law, and paid it over to the agency,...