Graham v. The National Bank of Smyrna

• Decision Date: 05 April 1923
• Citation: 32 Del. 264,122 A. 85
• Court: Delaware Superior Court
• Parties: SAMUEL T. GRAHAM v. THE NATIONAL BANK OF SMYRNA, a corporation of the United States of America

122 A. 85

32 Del. 264

SAMUEL T. GRAHAM v. THE NATIONAL BANK OF SMYRNA, a corporation of the United States of America

Superior Court of Delaware, New Castle County

April 5, 1923

Superior Court, New Castle County, March Term, 1923.

Action of assumpsit, No. 69, March Term, 1921.

The plaintiff's evidence tended to show that on Friday, July 23rd, 1920, he left with the National Bank of Smyrna for collection, and to be deposited to his account when collected, a check drawn by one William H. Jones on the Farmers' Bank at Dover, dated July 24th, 1920, and payable to the order of the plaintiff and one William E Rash, as partners, by the name of Graham & Rash, for $ 700.00, which said check had been duly endorsed; that while the said defendant bank reported to the plaintiff on Saturday, July 24th, that said check was not good, on Monday July 26th, it reported that it had been paid, and that it had the money arising therefrom; that an officer of the defendant bank, at the request of the plaintiff, then filled out a check, payable to the order of William E. Rash, for a one-half part of the amount of the Jones check, which said check was then deposited to Rash's credit in the defendant bank, and the check marked paid; that the defendant's officers later notified the plaintiff not to draw on said deposit for a few days because of some trouble between the Smyrna Bank and the Farmers' Bank about the payment of said check; that said officers, after the notice repeatedly stated to the plaintiff that the defendant bank had the money arising from the payment of said check, and believed that the matter would eventually be settled, so that he could draw his money; that the amount of said check, after being credited to plaintiff's account, was subsequently charged against it by the defendant bank; that said check was eventually returned to him by the defendant, though not until August 1st, 1922; that the defendant bank cleared directly with the Farmers' Bank and the $ 700.00 item was in July, 1920, and for a long time thereafter, charged against the Farmers' Bank in their settlements; that the amount of said check was never paid to the plaintiff, the amount due thereon being $ 700.00 with interest from August 1st, 1920.

The defendant's evidence tended to show that it never collected the Jones check from the Farmers' Bank; that the statement made to the plaintiff on Monday, July 26th, 1920, was based on the receipt of credit memorandum from the Farmers' Bank, which the defendant construed to mean that said Jones check had been paid to that bank; that by a later mail, on the same day, said check was returned to the defendant bank by the Farmers' Bank for nonpayment; that on the receipt of this memorandum the amount of said check was credited to plaintiff's account, but such credit was reversed on the books of the defendant bank and charged against plaintiff's account on Tuesday, July 27th, 1920, and on Wednesday, July 28th, his book was balanced and delivered to him, and he was notified not to draw on the credit arising from the deposit of said check; that on Wednesday, July 28th, Rash was also notified of the return of said check to the Smyrna Bank for non-payment; that while there was delay in returning said check to the plaintiff he never requested its return and such delay was due to its having been sent back and forth between the defendant bank and the Farmers' Bank, owing to the contention between them and to the effort of the defendant bank to assist the plaintiff in its collection; that in July, 1920, and for some time thereafter, the amount of the Jones check was charged against the Farmers' Bank in its settlement with the defendant bank; that the Farmers' Bank did not collect this check and denied that it did more than merely acknowledge its receipt for collection; that the charge of the amount of this check in the settlement between these banks was, therefore, against the consent of the Farmers' Bank, and the defendant was finally forced to reverse such charge as the Farmers' Bank denied its correctness, and refused to pay said check because it had not collected it from Jones, and that the credit to plaintiff's account was, therefore, due to an error.

The plaintiff declared on the common counts, including money had and received, an account stated, money due and payable from the defendant to the plaintiff, and for interest thereon.

Thomas C. Frame, Jr., of Dover, and David J. Reinhardt for plaintiff.

Aaron Finger and James I. Boyce for defendant.

HARRINGTON and RICHARDS, J. J., sitting.

OPINION

HARRINGTON, J., charging the jury:

The plaintiff contends:

1st. That the Jones check for $ 700.00 was collected by the defendant bank;

2d. That even if the defendant bank did not collect said check it was estopped to deny that it had collected it.

The defendant denies that it collected said check or that the law of estoppel applies.

It is admitted by the plaintiff that the check was deposited in the defendant bank for collection. Where money is deposited in a bank the relation of debtor and creditor arises, and the bank, like any other debtor, owes the depositor the amount of its deposit. National Dredging Co. v. Farmers' Bank, 22 Del. 580, 6 Penne. 580, 589, 69 A. 607, 16 L. R. A. (N.S.) 593, 130 Am. St. Rep. 158; People's National Bank, etc., v. Rhoades, 28 Del. 65, 5 Boyce 65, 90 A. 409.

Where, however, a check is deposited for collection, the bank merely becomes the agent of the depositor, and the relation of debtor and creditor does not arise until the check so deposited shall have been collected by the bank.

It is admitted by the plaintiff that if a check, deposited for collection, is not collected, that a bank may, as a general rule, reverse or cancel a credit given on such check, whether such credit be given because of an error, or provisionally.

Michie on Banks and Banking, at page 1374, Section 156(1), in discussing this subject, says:

"It is a well established rule that where negotiable paper is deposited with a bank for the purpose of collection, the relation of principal and agent is thereby created...