First State Bank of Hugo v. Federal Reserve Bank of Minneapolis
| Decision Date | 08 June 1928 |
| Docket Number | 26,640 |
| Citation | 219 N.W. 908,174 Minn. 535 |
| Parties | FIRST STATE BANK OF HUGO v. FEDERAL RESERVE BANK OF MINNEAPOLIS |
| Court | Minnesota Supreme Court |
Defendant appealed from an order of the district court for Hennepin county, Montgomery, J. denying its alternative motion for judgment or a new trial. Reversed.
Action for damages on ground of coercion.
1. To sustain an action for damages on the ground of coercion there must be some wrongful or unlawful act, acts or conduct on the part of the defendant sufficient to constrain the plaintiff against his will, to do or refrain from doing something which he has a legal right to do or refuse to do, and resulting in damage to him.
Duty of federal reserve bank in respect to receiving checks for collection.
2. A federal reserve bank is required to receive on deposit for collection at par, from member banks of the federal reserve system, checks payable on presentation drawn upon any member bank in its district. It is authorized but not required so to receive checks upon nonmember banks within its district. Federal reserve banks are not authorized to pay exchange on checks collected by them.
Federal reserve act does not prevent nonmember state banks charging exchange.
3. State banks, not members of the federal reserve system, are not affected by the provisions of the federal reserve act against charging exchange, and may continue to demand exchange on remittances made by them.
Under what circumstances reserve bank may present checks on nonmember bank at its counter for payment.
4. Where a nonmember bank declines to remit at par, the federal reserve bank may present checks for payment at the counter of such bank and employ proper agencies for so doing, subject to the limitations that it may not delay presentation so as to accumulate checks in a body in a large amount for presentation at one time for the purpose of coercing or injuring the bank, or employ other unreasonable and oppressive means or threats in the collection thereof.
Publication of par list by reserve bank.
The publication of a list, known as a par list, stating that defendant reserve bank will receive for credit and collection checks upon all banks in Minnesota, held not wrongful or oppressive, although not all banks in the state had consented to remit at par.
Finding of coercion not sustained by evidence.
5. Held that there is no evidence to sustain a finding of coercion in the present case.
Banks and Banking, 7 C.J. p. 910 n. 40.
See 9 R.C.L. 711; 2 R.C.L. Supp. 861; 4 R.C.L. Supp. 621; 6 R.C.L. Supp. 517; 7 R.C.L. Supp. 306
See note in 30 A.L.R. 647; 31 A.L.R. 1269.
A. Ueland, Ueland & Ueland, and Newton D. Baker, for appellant.
Sullivan & Neumeier and Charles T. Murphy, for respondent.
Defendant appeals from an order denying its alternative motion for judgment or a new trial.
The action was brought to recover damages from the defendant for the alleged coercion of plaintiff thereby compelling and forcing plaintiff against its will to agree to and remit to defendant for all checks sent to plaintiff by mail, drawn upon plaintiff bank, without making any exchange charge.
The defendant is a federal reserve bank located at Minneapolis in this state. Plaintiff is a small state bank with a capital of $10,000, located in the village of Hugo about 25 miles from Minneapolis, and the only bank in that village. It is not a member of the federal reserve system but is located in defendant's district.
Plaintiff recovered a verdict. Defendant contends that there was no evidence presented justifying the submission of the question of coercion to the jury; that there was no evidence of any wrongful or unlawful conduct on its part; and no evidence that plaintiff acted under coercion or duress in the matter, hence defendant was entitled to a verdict and judgment in its favor.
1. The term "coercion" is somewhat difficult to define with sufficient exactness to apply to all cases. It is said to be compulsion, force or duress. It is said to exist where one, by the unlawful act of another, is induced to do or perform some act under circumstances which deprive him of the exercise of his free will. 11 C.J. 946, 947. This definition is adopted in State ex rel. Young v. Ladeen, 104 Minn. 252, 116 N.W. 486, 16 L.R.A.(N.S.) 1058. In State ex rel. Smith v. Daniels, 118 Minn. 155, 136 N.W. 584, coercion is stated to be either physical force, used to compel a person to act against his will, or implied legal force, where one is so under subjection of another that he is constrained to do what his free will would refuse, and that coercion is usually accomplished by indirect means, such as threats or intimidation. Coercion as a misdemeanor is defined by G.S. 1923, § 10431, which provides that every person who, with intent to compel another to do or abstain from doing an act which such other person has a legal right to do, or abstain from doing, shall wrongfully and unlawfully attempt to intimidate such person by threats or force shall be guilty of a misdemeanor.
To sustain an action for damages on the ground of coercion, there must be some wrongful or unlawful act, acts or conduct on the part of the defendant sufficient to constrain the plaintiff, against his will, to do or refrain from doing something which he has a legal right to do or refuse to do, and resulting in damage to him. The acts or conduct complained of need not be unlawful in the technical sense of that term. It is sufficient if same is wrongful in the sense that it is so oppressive under given circumstances as to constrain one to do what his free will would refuse.
2. Federal reserve banks are required to receive on deposit at par from member banks and reserve banks checks and drafts upon any of its member banks. They are authorized so to receive checks, payable on presentation, upon any bank within their respective districts, whether such bank is a member bank or not. No exchange charge can be made against the reserve banks by member banks, and the reserve banks are not to pay exchange. The result is a system of par clearance of checks and items among member banks and between such banks and the reserve banks.
3. These provisions as to exchange are held not to apply to nonmember state banks, and such banks are not compelled to forego any rights they may have under state laws and may continue to charge exchange. Where checks on a nonmember bank were presented to a reserve bank for deposit and collection, the reserve bank could not accept or clear such checks unless either the nonmember bank agreed to remit therefor at par, without charging exchange, or the reserve bank, at its own expense, employed other agencies to collect same by presentation for payment at the banking house of the nonmember bank. In this situation the federal reserve board and reserve banks sought to have a system of par clearance agreed to and adopted by the nonmember state banks so as to include all banks and banking institutions in the United States. Letters and circulars were sent out by the board and the reserve banks explaining the system and urging nonmember banks to agree to remit to reserve banks without exchange charge. Many state banks agreed; others refused. Par lists were prepared and sent out by the board through the reserve banks showing towns and cities where all banks remitted at par; and, where not all so remitted, the names of banks not so doing were given. Where all banks in a state so remitted, the name of the state was given.
4. Negotiations were carried on by defendant by correspondence with plaintiff in the matter. On July 31, 1919, defendant sent plaintiff a circular letter stating that it was making a final appeal and that if no reply was received it would be assumed that plaintiff preferred to have checks drawn on it and received by defendant presented at plaintiff's counter for payment in cash. On March 30, 1920, defendant wrote to plaintiff stating that as it had received no reply to a letter of March 10 it assumed that plaintiff would remit at par, and that on April 15 it would commence sending regular remittances with the understanding that plaintiff would remit in payment without exchange charges. A par list was issued by the reserve board under date of April 1, 1920, stating that the reserve bank would receive for collection and credit items on all banks in Minnesota.
Upon receipt of defendant's letter of March 30, plaintiff wrote on the bottom thereof the statement that it did not wish to be on the par list and would continue to charge exchange, and returned such letter and statement to defendant. The exact date when this was received by defendant does not appear. On April 12 the defendant wrote to plaintiff acknowledging receipt and expressing regrets. In this letter defendant called attention to the fact that the reserve bank was prohibited from paying exchange, and stated that where a nonmember bank refused to remit at par the reserve bank would be forced to seek some other method and through some agency present checks and drafts at the bank's counter for payment in cash. The letter further stated that it had been said that it was defendant's practice to hold back items until they amounted to a considerable sum and then, for the purpose of embarrassing the bank, present them on one day. It assured plaintiff that this was not the case and that it had no desire to cause any unnecessary inconvenience; that it might be possible, if it received items amounting to less than $100 on one day, that it would hold such items for a day or two to save unnecessary expense.
The defendant then, on or about April 17, adopted the method of turning over checks in its hands on the plaintiff bank to the ...
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