First Nat. Bank v. Commercial Bank & Trust Co.

• Decision Date: 12 January 1926
• Docket Number: 19291.
• Citation: 242 P. 356,137 Wash. 335
• Court: Washington Supreme Court
• Parties: FIRST NAT. BANK OF BREWSTER v. COMMERCIAL BANK & TRUST CO.

242 P. 356

137 Wash. 335

FIRST NAT. BANK OF BREWSTER v. COMMERCIAL BANK & TRUST CO.

No. 19291.

Supreme Court of Washington, En Banc.

January 12, 1926

Appeal from Superior Court, Douglas County; Jeffers, Judge.

Action by the First National Bank of Brewster, a national banking association, against the Commercial Bank & Trust Company, a corporation. From a judgment for plaintiff, defendant appeals. Affirmed.

Hughes & Wallace and C. B. Hughes, all of Wenatchee, for appellant.

Johnson & O'Connor, of Okanogan, for respondent.

FULLERTON J.

The respondent, First National Bank of Brewster, and the appellant, Commercial Bank & Trust Company, are banking corporations; the banking house of the first being at the town of Brewster, in Okanogan county, and that of the second at the city of Wenatchee, in Chelan county. At the times of the transactions giving rise to the present controversy, the Bridgeport State Bank was likewise a banking corporation, having its banking house at the town of Bridgeport, in the county of Douglas. Both the Brewster bank and the Bridgeport bank were correspondents of the Wenatchee bank, but were not correspondents of each other, and each carried a deposit account with the Wenatchee bank.

On and immediately prior to September 24, 1922, the Brewster bank cashed a number of checks drawn by depositors of the Bridgeport bank on that bank, and, on the date given forwarded the checks to the Wenatchee bank for clearance and collection, charging the total thereof ($1,014.14) to its account with the Wenatchee bank. The Wenatchee bank received the checks on September 26, 1922, and gave the Brewster bank credit for the amount thereof 'subject to payment' of the checks. On the same day it forwarded the checks directly to the Bridgeport bank for payment and remittance. The checks were in due course received by the Bridgeport bank, and that bank immediately charged the amount of the checks to the drawers thereof severally, and remitted the total sum so charged to the Wenatchee bank by drafts drawn on a Seattle bank in which it had a deposit sufficient in amount to meet the drafts. The drafts were forwarded to the Seattle bank by the Wenatchee bank, but before they reached that bank the Bridgeport bank was taken over by the state supervisor of banking as an insolvent concern. Knowledge of this fact reached the Seattle bank before it paid the drafts, and thereupon it refused to pay them, returning them to the Wenatchee bank. The Wenatchee bank thereupon charged the amount of the drafts to the Brewster bank and thereafter refused to recognize liability on account of the transaction.

The present action was brought by the Brewster bank against the Wenatchee bank to recover the amount of the checks; its contention being that as between itself and the Wenatchee bank the checks were paid by the Bridgeport bank. A recovery was had in the court below, and this appeal is from the judgment evidencing the recovery.

In addition to the facts before recited, it was shown that the respondent (Brewster bank) had consented that paper of this sort might be sent direct to the Bridgeport bank by the appellant (Wenatchee bank) for payment, and that such had been the long course of dealing with reference to such paper. It was also understood between the appellant and respondent that any paper so forwarded which the Bridgeport bank did not recognize as a liability would be charged back to the respondent. But we find in the record nothing to indicate an agreement between the appellant and the respondent as to the manner in which payment of checks or other paper could be made by the Bridgeport bank to the appellant after it had been so forwarded; that is to say, there is nothing to indicate that the appellant had the right to accept as payment anything other than lawful money, or that which is by common consent and usage considered and treated as lawful money. There is, moreover, in the record nothing of the custom or common usage of banks in this vicinity as to the manner of making payments of checks or other forms of commercial paper drawn upon them. Nor is it shown that the respondent bank had notice or knowledge of the manner of dealing between the appellant and the Bridgeport bank with respect to such paper. All that appears is that the respondent knew that it was the custom of the appellant to send such paper as it received for collection on the Bridgeport bank direct to such bank, and that for its own paper it consented that it might do so.

The question before us then is a somewhat narrow one. It is: Did the failure of the appellant to exact payment of the checks in lawful money, and its acceptance of an exchange draft found to be worthless, instead of lawful money, render it liable to answer over to the respondent for the amount of the checks.

The general rule is well settled that a collecting agent is without authority to accept for the debt of his principal anything but that which the law declares to be legal tender. This rule seems to be not only sound in principle but is sustained by the almost universal authority. As was said in Anderson v. Gill, 79 Md. 312, 29 A. 527, 25 L. R. A. 200, 47 Am. St. Rep. 402:

'Now, a check on a bank or banker is payable in money, and in nothing else. Morse, Banks & Banking (2d Ed.) p. 268. The drawer having funds to his credit with the drawee has a right to assume that the payee will, upon presentation, exact in payment precisely what the check was given for, and that he will not accept, in lieu thereof, something for which it had not been drawn. It is certainly not within his contemplation that the payee should upon presentation, instead of requiring the cash to be paid, accept at the drawer's risk a check of the drawee upon some other bank or banker. The holder had a right to make immediate demand for payment upon receipt of Anderson's check, though she was not bound to do so. When her agent, the Old Town Bank, the collecting bank being the agent of the holder ( Dodge v. Freedman's Sav. & Tru. Co., 93 U.S. 379 ), did make demand it was only authorized to receive money ( Ward v. Smith, 74 U.S. [7 Wall.] 451 ); and the acceptance by the collecting agent of anything else rendered it as liable to the holder as though it had collected the cash. Fifth Nat. Bank of Pittsburgh v. Ashforty, 123 Pa. 212 2 L. R. A. 491.'

See, also, Ward v. Smith, 7 Wall. 447, 19 L.Ed. 207; Federal Reserve Bank v. Malloy, 264 U.S. 160, 44 S.Ct. 296, 68 L.Ed. 617, 31 A. L. R. 1261.

There are, of course, exceptions to the general rule as thus stated. The rule may be modified by agreement, and there are wellconsidered cases which hold, and we...