Fifth Nat. Bank v. Armstrong

• Decision Date: 04 October 1889
• Citation: 40 F. 46
• Parties: FIFTH NAT. BANK v. ARMSTRONG, (FARMERS' NAT. BANK et al., Interpleaders.)
• Court: U.S. District Court — Eastern District of Missouri

40 F. 46

FIFTH NAT. BANK v. ARMSTRONG, (FARMERS' NAT. BANK et al., Interpleaders.)

United States Circuit Court, E.D. Missouri, Eastern Division.

October 4, 1889

[Copyrighted Material Omitted]

William B. Burnet and Wm. G. Hammond, for the Fidelity National Bank.

J. M McGillivray and A. T. Holcomb, for the Farmers' National Bank.

Jno. D Stevenson, for the Augusta National Bank.

THAYER J.,

(after stating facts as above.) The indorsement by which the Fidelity Bank acquired the possession of the drafts in controversy was clearly a restrictive indorsement. It was an indorsement that destroyed the negotiability of the drafts, except for purposes of collection, and gave notice to all parties through whose hands they passed that they were the property of the Portsmouth and Staunton banks, respectively. By virtue of the indorsements alone, the Fidelity Bank did not acquire title to the drafts, but was merely constituted an agent for their collection. Thus far there is no room for serious controversy. First National Bank v. Reno County Bank, 3 Fed.Rep. 261, 262; Balbach v. Frelinghuysen, 15 F. 675; White v. Bank, 102 U.S. 661; Hoffman v. Bank, 46 N.J.Law, 604; Blaine v. Bourne, 11 R.I. 119; Bank v. Bank, 76 Ind. 561; Sweeney v. Easter, 1 Wall. 173; Levi v. Bank, 5 Dill. 107; 1 Daniel, Neg.Inst. §§ 336, 337.

The contention is, however, that the practice shown of crediting sight drafts, when received for collection, as cash, and the allowance of interest on daily balances into which such credits had entered, alters the case, and that, because of that method of dealing, the drafts became the property of the Fidelity Bank as soon as a credit was given therefor upon its books, and that from that time forward the Fidelity Bank became the debtor of the Portsmouth and Staunton banks, respectively, for the sums severally credited. When checks or sight drafts are indorsed generally by the payee, and deposited with a bank, and credit is given therefor to the depositor, with his consent, as for so much cash, with the understanding, express or implied, that such credit may be drawn upon, the prevailing opinion seems to be that the relation of debtor and creditor is forthwith created between the bank and the depositor, and that the bank becomes at once the owner of the paper, and not merely an agent for its collection. An indorsement in blank, or to the order of the receiving bank, is entirely consistent with that view of the transaction. Bank v. Loyd, 90 N.Y. 534, and cases cited; Railway Co. v. Johnston, 27 F. 243; Hoffman v. Bank, 46 N.J.Law, 605.

But if paper is indorsed, 'For collection for account of the depositor,' and then deposited, and credit given, a different case is presented. The mere fact that paper thus indorsed is credited by a bank to the depositor as cash, and the privilege accorded to him of drawing against the credit, may not, as it seems, be sufficient to vest the bank with title to such paper. In some cases it appears to be held that such credits are merely provisional, that is, subject to revocation, until the paper is actually collected by the receiving bank, or until the credit has been drawn against by the depositor, and that up to such time the title to the paper is in the depositor, and the bank is a mere agent of the depositor, for collection. Bank v. Bank, (Mass.) 20 N.E. 193; Levi v. Bank, 5 Dill. 107-111; Balbach v. Frelinghuysen, 15 F. 683; 1 Morse, Bank. §§ 583, 586.

In the opinion of the court, the true...