Farmers' State Bank of Des Lacs v. Union Nat. Bank of Minot

• Decision Date: 01 July 1919
• Citation: 42 N.D. 449,173 N.W. 789
• Parties: FARMERS' STATE BANK OF DES LACS v. UNION NAT. BANK OF MINOT.
• Court: North Dakota Supreme Court

42 N.D. 449

173 N.W. 789

FARMERS' STATE BANK OF DES LACS

v.UNION NAT. BANK OF MINOT.

Supreme Court of North Dakota.

July 1, 1919.

Syllabus by the Court.

The liability of a bank receiving commercial paper for collection depends upon the terms of the contract. Where there is no special agreement, the law implies the terms of the contract, but where the parties at the outset of the transaction make a special agreement, the rights and liabilities of the parties are governed by the terms fixed by the parties in such special agreement.

Where defendant bank had been acting as plaintiff's correspondent for a long time, with the understanding that it should not be liable for the negligence of its subagents, and on receipt of the item in controversy the defendant, in accordance with its uniform prior practice, acknowledged receiving the check for collection, and incorporated in the body of the receipt a statement that “for collection of all items outside of the city” it would observe due diligence in endeavoring to select responsible agents, but would “not be liable in case of their failure or negligence,” nor for employing a circuitous route, it was not liable for the failure to collect the check due to negligence of a subagent.

Appeal from District Court, Ward County; Leighton, Judge.

Action by the Farmers' State Bank of Des Lacs, a domestic corporation, against the Union National Bank of Minot, a national banking corporation. From an adverse judgment and an order denying a new trial plaintiff appeals. Affirmed.McGee & Goss, of Minot, for appellant.

John E. Greene, of Minot, for respondent.

CHRISTIANSON, C. J.

The controversy before us involves the liability of the defendant upon a check which it received from the plaintiff for collection in the ordinary course of banking business. The material facts are not in dispute. It appears that on or about September 8, 1913, the Blaisdell-Bird Company received a check from C. R. Verry, for the sum of $324.35, drawn on the Farmers' & Merchants' Bank of Park River. On September 11, 1913, the Blaisdell-Bird Company delivered the check to the plaintiff bank for deposit, and its checking account in said bank was duly credited with the amount of the check. The plaintiff bank in due course forwarded the check to its correspondent, the defendant bank. It was received by the defendant on September 13, 1913. And the defendant promptly forwarded it in due course to its correspondent, First National Bank of Fargo. The First National Bank of Fargo sent it to the City National Bank of Duluth. The City National Bank of Duluth sent it to the Northwestern National Bank of Minneapolis. The evidence shows that the Farmers' & Merchants' Bank of Park River on September 18, 1913, received a remittance letter from the Northwestern National Bank of Minneapolis, which purported to accompany the check in controversy. The Farmers' & Merchants' Bank of Park River claimed, and the testimony of its cashier tended to show, that the check was not inclosed with the remittance letter, and that that bank has never received the check. The account of Verry became exhausted by checks presented against it on September 18, 1913; but the cashier of the Farmers' & Merchants' Bank of Park River testified that if the check in controversy had been inclosed with the remittance letter it would have been paid. The trial court found:

“That said check was never paid or returned to the plaintiff or the defendant, and was lost while in the possession of either the Farmers' & Merchants' Bank of Park River, on which it was drawn, or while in the possession of the Northwestern National Bank of Minneapolis.”

That finding is in accord with the evidence.

The evidence shows, and the trial court found, that the defendant had been plaintiff's correspondent for many years prior to September 13, 1913, and still remained such correspondent at the time of the trial. The undisputed evidence also shows that it was the uniform custom of the defendant bank to acknowledge the receipt of checks and other items, received by it for collection from the plaintiff and other correspondent banks, by means of a written receipt, which contained the following provision:

“All items (except checks on us) are credited subject to payment. For the collection of all items outside of the city we will observe due diligence in endeavoring to select responsible agents, but will not be liable in case of their failure or negligence, nor for the loss of items in the mail, nor for employing a circuitous route of collection, nor for sending direct to the bank upon which item is drawn.”

Upon receipt of the check in controversy the defendant bank, in accordance with its uniform custom and practice, acknowledged receipt thereof by means of a receipt containing the provision hereinabove set forth. The evidence clearly shows that the defendant bank in forwarding the check to the First National Bank of Fargo followed the usual custom, and did exactly what the plaintiff might reasonably have expected it to do. In fact the vice president of the plaintiff bank in his testimony expressly admitted that the defendant bank had not violated any custom or usage of banking in so forwarding the check.

The Blaisdell-Bird Company brought suit against the plaintiff, and recovered judgment. The plaintiff thereupon brought this action. The case was tried to the court without a jury,...