First Nat. Bank v. First Utah Nat. Bank

• Decision Date: 12 November 1926
• Docket Number: No. 6927.,6927.
• Citation: 15 F.2d 913
• Parties: FIRST NAT. BANK OF RIGBY, IDAHO, v. FIRST UTAH NAT. BANK OF OGDEN, UTAH.
• Court: U.S. Court of Appeals — Eighth Circuit

15 F.2d 913 (1926)

FIRST NAT. BANK OF RIGBY, IDAHO, v. FIRST UTAH NAT. BANK OF OGDEN, UTAH.

No. 6927.

Circuit Court of Appeals, Eighth Circuit.

November 12, 1926.

COPYRIGHT MATERIAL OMITTED

J. H. Peterson and T. C. Coffin, both of Pocatello, Idaho, for plaintiff in error.

J. H. De Vine, J. A. Howell, David L. Stine, and R. C. Gwilliam, all of Ogden, Utah, for defendant in error.

Before STONE and VAN VALKENBURGH, Circuit Judges, and WILLIAMS, District Judge.

WILLIAMS, District Judge (after stating the facts as above).

Under controlling authority in federal courts upon the deposit of paper unrestrictedly indorsed and credit of the amount to the depositor's account, the bank becomes the owner of the paper, notwithstanding a custom or agreement to charge such paper back to the depositor in event of dishonor; such agreement evidenced by following indorsement on the deposit or credit slip: "Outside checks credited subject to payment." City of Douglas v. Federal Reserve Bank of Dallas, 271 U. S. 489, 46 S. Ct. 554, 70 L. Ed. 1051, decided by Supreme Court of United States June 1, 1926, and Federal Reserve Bank v. Malloy, 264 U. S. 166, 167, 44 S. Ct. 296, 68 L. Ed. 617, 31 A. L. R. 1261. The defendant bank, in receiving the checks for collection, was itself bound, not only to use due care, but was also liable to plaintiff for a failure to collect, resulting from negligence of any bank to which it transmits the checks for collection, in effect being responsible for proper diligence on part of correspondent employed by it to effect such collection. City of Douglass v. Federal Reserve Bank of Dallas, supra. The acceptance of the draft on Walker Bros., of Salt Lake City, by the First National Bank of Blackfoot, Idaho, acting for the defendant, had effect of releasing drawer as well as indorsers of said three checks, resulting in a transfer of the drawer's funds and surrender of his right of action against the drawee bank; previous rights and obligations by the owner of the check and drawer being superseded and released to the drawee, the checks being thereby paid, and the drawer and indorsers discharged. City of Douglas v. Federal Reserve Bank of Dallas, supra; Id. (C. C. A. 5th Cir.) 2 F.(2d) 818, 44 A. L. R. 1425; Id. (D. C.) 300 F. 573; Malloy v. Fed. Reserve Bank, supra; Id. (C. C. A. 4th Cir.) 291 F. 763; Id. (D. C.) 281 F. 997.

A bank, as collecting agent, is without authority to accept for the debt of the principal anything but that which the law declares to be a legal tender, or which is by common consent considered and treated as money, and passes as such at par; the rule applying to a bank receiving commercial paper for collection. If such bank accepts the check of the party bound to make payment and surrenders the paper, it is responsible to the owner for any resulting loss. The acceptance by the bank as collecting agent of anything else rendered it liable...