First Nat. Bank of Newton v. Federal Reserve Bank of Chicago

• Decision Date: 23 June 1930
• Docket Number: 40307
• Citation: 231 N.W. 453,210 Iowa 521
• Parties: FIRST NATIONAL BANK OF NEWTON, Appellee, v. FEDERAL RESERVE BANK OF CHICAGO, Appellant
• Court: Iowa Supreme Court

231 N.W. 453

210 Iowa 521

FIRST NATIONAL BANK OF NEWTON, Appellee, v. FEDERAL RESERVE BANK OF CHICAGO, Appellant

No. 40307

Supreme Court of Iowa, Des Moines

June 23, 1930

Appeal from Jasper District Court.--FRANK BECHLY, Judge.

The plaintiff brought an action at law against the defendant. The issues were made up. The case was assigned for trial without the knowledge of the defendant, and the defendant did not appear for trial. Judgment was taken against the defendant. The defendant filed an application to vacate the judgment and later, an amendment thereto. The plaintiff filed a motion to strike the amendment. The court overruled the motion to strike and the application to vacate the judgment. Both parties appeal.--Reversed on defendant's appeal; affirmed on plaintiff's appeal.

Reversed on defendant's appeal; affirmed on plaintiff's appeal.

Mayer Meyer, Austrian & Platt and Strock, Sloan & Herrick, for appellant.

Korf & Korf, for appellee.

GRIMM J. MORLING, C. J., and EVANS, STEVENS, FAVILLE, DE GRAFF ALBERT, and KINDIG, JJ., concur.

OPINION

GRIMM, J.

In October, 1928, the plaintiff filed its petition at law in the district court of Jasper County, Iowa, against the defendant, Federal Reserve Bank of Chicago, seeking to recover from the defendant the sum of $ 3,400. Briefly stated, plaintiff's cause of action, as disclosed by the petition, was that plaintiff received for collection from the treasurer of Jasper County, Iowa, a certain order or warrant drawn to plaintiff's order by said treasurer on the Newburg Savings Bank of Newburg, Iowa, in the sum of $ 3,400; that plaintiff sent said warrant to the defendant, Federal Reserve Bank, for clearance, and with instructions to collect same; that defendant sent said warrant to its correspondent, Merchants National Bank of Grinnell, Iowa, for collection, and the last named bank collected said warrant from the Newburg bank, but the proceeds thereof were retained and converted by said Grinnell bank, which closed its doors; and it is charged that the proceeds were retained by the defendant, Federal Reserve Bank. The petition further alleges that defendant was negligent in selecting the Grinnell bank as a collection agent, improperly instructed said collection agent, applied the collection proceeds on said agent's overdraft and indebtedness, and thereby converted the proceeds of said warrant.

In December, 1928, the defendant filed its sworn answer, in six divisions. The answer contained a virtual general denial. It also pleaded the pertinent provisions of the Federal Reserve Act, the Federal Reserve Board Regulations, and the Seventh Federal Reserve District Regulations, alleging a complete defense, and defendant's non-liability for its agent's acceptance of drafts or failure to remit collection proceeds. The answer further set out that plaintiff had elected to pursue another remedy, and had sued the defunct Merchants National Bank of Grinnell and the receiver thereof on the same cause of action involved here, and that only after being defeated thereon in the United States District Court for the Southern District of Iowa did plaintiff commence this suit. This answer showed as attorneys for the defendant, Charles L. Powell, of Chicago, Illinois, and G. C. Rinehart, of Des Moines, Iowa.

On December 24, 1928, defendant's counsel, Mr. Powell, wrote plaintiff's attorney, stating that he (Powell) planned a vacation trip, and would like assurance that nothing would be done in this case until his (Powell's) return. He stated that Mr. Rinehart was leaving the Federal Reserve Bank the first of the year (January, 1929), and if it were necessary to have local counsel, he (Powell) would appreciate it if plaintiff's attorney would write him to that effect. Mr. Powell also said that, on returning from his vacation, he would be prepared to go on with this suit, at the convenience of plaintiff's attorney. On December 28, 1928, plaintiff's attorney wrote Mr. Powell at Chicago, saying, among other things:

"We will stand by our agreement that nothing is to be done in this matter until your return from your trip. As soon as you return, won't you write us, and we will then arrange a time mutually satisfactory to both parties for trial."

On February 20, 1929, Powell wrote plaintiff's attorney at Newton the following:

"This is to advise you that I have returned to my office from my vacation, and I am now in position to take up with you the above case at such time as you may desire to put it on for hearing."

On February 22d, plaintiff's attorney wrote Powell as follows:

"I acknowledge receipt of yours of February 20th. The Court is at present engaged in the trial of civil jury cases and following which it is expected that the criminal cases will be tried. If there is time enough following that to get the case into this term's assignment, we will do so and advise you promptly. It may, however, have to go over until April."

On February 23d, Powell wrote plaintiff's attorney as follows:

"I have your letter of the 22nd inst. in the above matter, and I will appreciate it greatly if you will give me as much notice in advance as possible of when this case is to be set down for hearing. I shall be very glad to have it go over to the April term, as having been away from the office for a month, it is a little difficult for me to give it attention now."

Plaintiff's attorney sent no further communications to either Mr. Powell or to the Federal Reserve Bank, or to anyone representing them. On March 15, 1929, Mr. Powell dropped dead in Chicago. He was buried at Panora, Iowa, where he was born and reared. He had practiced law in Des Moines for a number of years prior to his going to Chicago. He was well known to the Iowa bar, and the news of his death received much more than usual publicity in all the leading papers in the state of Iowa.

Eleven days prior to the first day of the April term, March 30, 1929, plaintiff's attorney filed a trial notice in the district court of Jasper County in this and other cases. On April 10, 1929, at a regular assignment of causes, the case was assigned for trial for May 1, 1929. On April 30, 1929, plaintiff filed a reply, denying each and every allegation contained in defendant's answer. The cause was not reached for trial until Monday, May 6, 1929, at 2 o'clock in the afternoon. Neither the defendant nor any attorney representing it had received any communication of any sort, verbal or otherwise, from plaintiff's counsel or from any other source, that this cause was to be assigned for trial without any notice to the defendant or its counsel from plaintiff's attorney. As a consequence, no one appeared in court on May 6th. Plaintiff's attorney appeared, waived a jury, and submitted the case. He had an ex-parte hearing, and had an entry made for judgment for the full amount. He prepared an enrolled judgment entry, which was signed and filed on May 6, 1929.

It clearly appears from the record that Charles L. Powell was a member of the firm of Mayer, Meyer, Austrian & Platt, attorneys in Chicago, with offices in the Continental & Commercial National Bank Building. The business of the Federal Reserve Bank, the defendant, was, however, handled entirely by Mr. Powell. After Mr. Powell's death, the business of the Federal Reserve Bank passed to the said firm of Mayer, Meyer, Austrian & Platt.

On June 19, 1929, Mayer, Meyer, Austrian & Platt telegraphed plaintiff's attorney at Newton, saying:

"Our Mr. Powell died suddenly March fifteenth stop Please wire our expense present status of suit First National Bank of Newton versus Federal Reserve Bank of Chicago stop Our files show nothing since your letter to Powell of February twenty-second."

On June 25th, plaintiff's attorney wrote Mayer, Meyer, Austrian & Platt a letter, containing the following:

"This cause was noticed for trial by the plaintiff for the April term. The court made assignment for the term the second day thereof, and said cause was assigned for trial Wednesday, May 1st, 1929, at 9 A. M. It was not reached for trial until May 6th, when it was called in its regular order and tried, judgment being entered for the plaintiff in the sum of $ 4,133.83 and costs."

The defendant, through its attorneys, immediately made an investigation; and on July 9th, it still being the same April, 1929, term of the district court of Jasper County, Iowa, in which the judgment of May 6, 1929, was rendered against the defendant, the defendant filed its sworn application to vacate the judgment, asking for a trial on the merits. This application contained a complete recital of the facts and circumstances in the case up to that time. Attached to the application were copies of all correspondence passing between plaintiff's attorney and Powell. It definitely stated that Powell's former address was that of Mayer, Meyer, Austrian & Platt, defendant's attorneys in Chicago; that plaintiff's attorney had never given any notice directed to Powell in reference to the assignment of the cause for trial; and that, if he had sent any such notice, the same would have been received by Mayer, Meyer, Austrian & Platt, into whose hands, immediately upon the death of Powell, the whole business of the Federal Reserve Bank passed. The application stated that any notice which might have been sent to Powell would have received prompt attention by Mayer, Meyer, Austrian & Platt.

The application, among other things, stated that Mayer, Meyer Austrian & Platt relied fully upon the agreement and understanding which existed between plaintiff's attorney and Powell, attorney for defendant, relative to a trial of this cause, and that the entering of judgment against the defendant was in violation of the agreement and the good-faith...